11/13/2024 - JEFFERSON CITY, Mo.
A new report released today by Missouri State Auditor Scott Fitzpatrick finds
significant inadequacies with Missouri's Property Tax Credit that have led to incomplete
claims being approved, eligible claims being denied, and incorrect amounts
being awarded. The report, which gives the program a rating of "poor,"
also found the Department of Revenue (DOR) has failed to retain supporting
documentation in some cases, exposed the system to an increased risk of fraud,
and failed to give the General Assembly complete and accurate information for
use in budget decisions.
"This is a
program that many of our senior and disabled Missourians rely on to help offset
the cost of their property tax or rent, but it's also a program that needs to
improve if it's going to effectively allocate these credits to the individuals
who are eligible for them," said Auditor Fitzpatrick. "I'm glad to
see the Department of Revenue is taking our recommendations seriously and
working to make improvements in many of the areas we identified, but I also
think this is a program that needs to be looked at closely by the General Assembly,
and substantive changes should be considered."
The audit looked
at 59 claims that were approved by the department's Revenue Premier software
but did not receive a manual review by a human being. Only 24 of the 59 claims
were appropriately determined to be eligible and supported by required
documentation. More than half the claims (31) had insufficient documentation to
determine eligibility, 3 claims were eligible but the amount of the claim was
miscalculated, and 1 claim was ineligible for the credit and approved in error.
The report notes that for the year ended June 30, 2022, 77 percent of the 142,203
claims were processed without a manual review by DOR personnel.
For the 23
percent of claims that received a manual review (32,252 claims), the report
found that errors occurred even with a review by DOR personnel. A test of 15
approved claims with a manual review found 2 claimants were determined eligible
despite missing critical documentation to prove eligibility. The test also
found DOR personnel miscalculated the amount of the credit for one approved
claimant. A test of 10 denied claims that were manually reviewed found that 2
of the claimants were in fact eligible for the Property Tax Credit.
The report also
notes a fraudulent claim outside the test work was approved without manual
approval by DOR personnel. The DOR issued a check for the claim, which was
ultimately identified as fraudulent when the DOR's third party processer for
electronic payments identified 15 fraudulent payments associated with the same
Social Security number used on the Property Tax Credit claim.
Another finding in the report focuses
on the department's failure to retain all documentation for claims as required
by state law. In 4 of 100
claims (4 percent) reviewed, the DOR could not provide any supporting
documentation other than the DOR forms, despite additional documents being
submitted with the original return. For these 4 claims, 1 claim of $694 was
approved without a manual review, 1 claim of $1,059 was approved after a manual
review, and 2 claims were denied after a manual review. The department's online
portal allows claimants to submit supporting documents in a variety of formats,
but only documents saved as a PDF or TIF can be retrieved. The report points
out that because of the limitation, the DOR cannot always determine
claimant eligibility during a manual review.
The report also identified a control risk with the program that
provides 460 DOR employees with the authority to update or otherwise change the
payee address within the department's software system after a refund has been
approved, but before it has been disbursed. No supervisory approval is required
for such changes. During
the year ended June 30, 2022, a total of 12,854 addresses were changed for PTC
claims by a total of 147 DOR users. While no instances of inappropriate address
changes were found, the report notes that failing to
limit the number of employees with this access or establish adequate oversight
of the mailing address changes increases the risk for a refund to be
misappropriated if the payee address is changed to an inappropriate location.
Additionally, the audit notes the Property
Tax Credit program redemption amounts
reported to the General Assembly for the year ended June 30, 2022, via the tax
credit analysis form were understated by approximately $1.3 million. In fact,
the DOR has reported inaccurate Property Tax Credit program redemptions to the
General Assembly for multiple years. These reports are required by state law,
and the audit points out that accurate and complete tax credit redemptions are a
critical part of the information needed by the General Assembly to make
informed budgeting decisions.
The audit report also looked at the
overall effectiveness of the Property Tax Credit program and found it has
become less effective at fulfilling its assumed statutory purpose of providing
property tax relief for low-income, elderly, and disabled persons. Fewer low
income Missourians are now eligible for the program as the median household
income has increased by 40 percent since 2010 but the eligibility threshold for
the credit hasn't changed since 2008. The value of the credit awarded has also
diminished as it has not changed since 2008 while assessed real estate property
valuations have steadily increased by 34 percent in that same time period. While
over $119 million in credits were redeemed in 2009, that amount has steadily
decreased and redemptions for Fiscal Year 2024 were at approximately $65
million. In addition to this, the report points out the department is not adequately fulfilling its statutory
responsibility to notify taxpayers who may be eligible for the credit. The
department is not sending a deliberate and direct notification to any
one individual about potential eligibility, and is instead broadly notifying
the public of the credit through indirect methods such as social media.
According to DOR personnel, an estimated total of 188,478 taxpayers may have
been eligible for the credit in 2022, while 140,026 claims were approved for
the credit during the same time period.
The complete audit of the Property Tax Credit can be found here.
