As of December 31, 1993, division records showed that the amounts due for taxes and State agency accounts totaled approximately $1.38 billion ($451 million classified by the division as collectible) and $324 million ($239.4 million classified by the division as collectible), respectively. For fiscal year 1992-93, the division expended approximately $15.4 million to collect $197.1 million of delinquent taxes and $23.4 million of unpaid accounts. The division's staff consisted of 133 employees as of April 30, 1994.

Conclusion: We concluded that the division had made substantial progress since the prior audit in controlling the rapid increase in uncollected taxes. However, the division needs to increase its collection efforts to more effectively collect amounts due the State (Finding 1). Also, the division could enhance the effectiveness of its collection efforts for installment agreements by establishing dollar limits on allowable costs considered by the division to be reasonable and necessary living expenses and establishing a reasonable length of time for the full repayment of debts through installment agreements (Finding 2). In addition, the division should ensure that the Detroit district office complies with employee performance standards relating to collection efforts (Finding 3) and maximize the collection efforts on State agency accounts (Finding 4).

Audit Objective: To assess the division's compliance with applicable statutes, rules, regulations, and department policies and procedures as they relate to recording, collecting, canceling, and adjusting assessments; the use of tax warrants and levies; and the reporting requirements on collection activity.

Conclusion: We concluded that the division complied with applicable laws and regulations.

Audit Objective: To assess the adequacy of internal controls for handling district office mail receipts.

Conclusion: We concluded that the district offices did not have proper internal controls over mail receipts (Finding 5).

Our methodology included interviewing various personnel and reviewing reports and procedures to gain an understanding of central office and field operations and to form a basis for selecting certain operations for audit. We conducted tests of records related to tax and State agency accounts to determine the effectiveness and efficiency of the division's collection efforts. We tested for compliance with applicable statutes, rules, policies, and procedures for collecting delinquent taxes and unpaid debts due the State, and for referring accounts to the private collection agency and the Department of Attorney General.

We tested accounts assigned to and reimbursements made to the private collection agency and determined compliance with the contract provisions and division policies and procedures. We also tested tax accounts involving the use of tax warrants and determined the disposition of the warrants and tax proceeds. In addition, we examined records related to tax clearance certificates to determine that clearance requests were processed on a timely basis allowing a smooth transition of a business from seller to buyer.