MADISON, Ind. (AP) — An external audit of the problems that caused Indiana to lose track of more than a half billion dollars will have to wait a while.
State Budget Committee members agreed Friday that an outside audit of the state's budgeting and tax collection systems is needed. But they won't have an audit request ready until their next meeting.
Gov. Mitch Daniels meanwhile replaced two people who ended their work with the state last week after the tax error was discovered. He named Mike Alley revenue commissioner and Mike Ashley chief financial officer
Alley was chairman and CEO of the Evansville-based Integra Bank for two years before it was seized by the Federal Deposit Insurance Corp. last July because it was struggling under the weight of souring loans for commercial real estate and land development. He had been brought in to straighten out the troubled bank. Before that, he was president at Fifth Third Bank of central Indiana in Indianapolis from 1989 through 2002.
Ashley was the deputy director and chief financial officer for Indiana Department of Child Services. Before that, he was an executive at Eli Lilly.
They are being brought in to try to fix problems at the troubled Revenue Department. The state lost track of $320 million over four years. An investigation into that mistake uncovered a second massive error that cost Indiana counties $206 million.
An external audit of problems inside Indiana's tax collection agency will have to wait for a while, although state lawmakers generally agreed Friday the state needs more stringent financial safeguards to keep from losing track of hundreds of millions of dollars again.
Members of the State Budget Committee agreed Friday to draw up a request for an external audit and said they will consider it at their next meeting, which could come as soon as May.
Meanwhile, Daniels appointed two officials to lead the embattled Department of Revenue: former Integra bank executive and Fifth Third President Mike Alley will run the department and former Eli Lilly executive Mike Ashley will be its new chief financial officer.
Three top aides left the department last week after it was discovered that $206 million was kept from Indiana's counties because of a programming error. That error was found only after the Department of Revenue's lone internal auditor discovered in December that $320 million in corporate tax money had been gathering, untouched, in a state holding account for more than four years.
Outgoing Commissioner John Eckart spoke briefly at Friday's meeting of the State Budget Committee, letting lawmakers know he was working closely with a state auditor and budget director Adam Horst to discover the root cause of the problems. Afterward he said he resigned on his own, even though Daniels asked him to stay on.
"I feel like the department needs to have someone come in who can clearly talk without having a cloud of people who view them being there when the issue occurred," Eckart said. "I think it's a clean fresh start."
The state won't be able to get to that fresh start just yet. A detailed review of the state's tax system is ongoing and early results show an "indication" of other errors, Horst said, while adding that he wants to see the final results of his agency's investigation to put any other problems in context.
Meanwhile the independent audit requested for the latest foul-up could take months to conclude.
"I did not come here today to hire an outside auditor, I came here today to hear the need for an outside auditor," said Budget Chairman Jeff Espich, Uniondale Republican.
The problems first cropped up at the end of last year the when the Revenue Department's sole internal auditor discovered $320 million corporate tax money that was being gathered but never reported. At the time, Democrats on the budget panel requested an independent audit of the state's tax collections but were rebuffed by Republicans who called the external probe premature.
The broader investigation of that mistake turned up a second error that withheld $206 million from the state's counties because of a similar programming error.
Indiana counties lobbyist David Bottorff estimated the real impact at more than $335 million for his members, however. While the state only shorted the counties by $206 million, it caused most of them to draw budgets using inaccurate numbers, thus cutting much more money (and jobs) out of their budgets than necessary, said Bottorff, executive director of the Association of Indiana Counties.
State Board of Accounts examiner Bruce Hartman conducted a review of the $320 million error for the budget pane but said his resources and expertise are limited. He noted his office does one broad-sweeping financial review of state government each year and investigates only complaints and allegations of fraud and abuse, neither of which would have resulted in his team finding the $526 million.
"I think there are some deficiencies within the overall system," Hartman said.