State seeks, hires audit agency to fix tax mistakes

Gov. Mitch Daniels named Mike Alley as Indiana’s new commissioner of the Indiana Department of Revenue and Mike Ashley as the new chief financial officer of the department Friday during the middle of tax season.

Alley will replace current commissioner John Eckart, who resigned last week after the bipartisan budget committee voted to hire an outside audit agency to investigate $500 million in income tax revenue mistakes.

During the State Budget Committee meeting in Madison, Ind., on Friday, policymakers further discussed the glitches and hiring an outside auditor.

Two senior managers of the department also vacated their posts following the mistakes.

Eckart will remain with the department to assist with the transition.

Alley and Ashley will begin their duties in early May, according to a press release from the governor’s office.

Alley served as president and CEO of Fifth Third Bank of Central Indiana in Indianapolis from 1989 to 2002. He is currently chairperson and owner of Patriot Investments, LLC, a company he founded in 2002.

He is the current president of the board of trustees of Indiana State University. Alley graduated from ISU in 1978.

Ashley has more than three decades of experience in information technology and finance.

He was the deputy director and chief financial officer for the Indiana Department of Child Services during the time when the department moved the responsibility of child welfare financing from the counties to the state.

 He  was at Eli Lily for more than 29 years in multiple leadership positions.
Several weeks ago, the state announced that nearly $206 million in local option income tax money owed to counties was not distributed during a 14-month period.

In a statement last week, State Budget Director Adam Horst said the problems stemmed from programming errors in the Department of Revenue’s annual County Statistics Report provided to the Office of Management and Budget.

The error was initially discovered by the Office of Management and Budget, which has been engaged in an ongoing review of Department of Revenue reports, according to the
press release.

Beginning in January 2011, the report failed to capture the amounts due to counties from individual taxpayers who separated their state and county estimated payments when remitting quarterly income tax estimates, according to the press release.

Consequently, local option income taxes were under-distributed and State General Fund revenues were overstated.

As directed by Daniels, $206 million plus interest was distributed to 91 counties across the state April 5.

Monroe County received $4,088,788.59 plus interest. Divided among the 91 counties, interest exceeded $500,000, Horst said.

In December 2011, Daniels announced that $320 million in corporate taxes collected during a four-year period were also not distributed to the general fund.

In a press release titled “We hate to say we told you so, but…,” Rep. B. Patrick Bauer, D-South Bend, and Rep. Vi Simpson, D-Ellettsville, said Democrats called for a third-party audit last fall, “when the same administration ‘found’ $300 million in ‘lost’
corporate taxes.”

“Perhaps an independent audit at that time would have corrected this mistake and saved a lot of pain for local governments and taxpayers,” Bauer and Simpson stated. “Perhaps they can try and explain this latest mistake away by saying ‘oops’ and comparing it to finding millions of dollars stuck in the cushions of a couch, just as they did last year. But these aren’t small mistakes to be shrugged off.”

— Mark Keierleber