An audit of Connecticut’s Department of Revenue Services (DRS) found the department behind on mandatory reports and employee performance evaluations, in violation of Freedom of Information requirements, and carrying $22 million in unaccounted-for funds, among other issues.
“We identified an account within the Funds Awaiting Distribution with an ending balance that DRS did not reconcile and could not explain,” reads the audit. “There were unresolved items in the reconciliation as far back as 2008 that the department continuously carried forward into the current period.”
The Connecticut Auditors of Public Accounts (APA) released their findings last week, evaluating DRS from the period of June 2022 to June 2023. Their report contained six findings, four of which were repeats, meaning they were issues identified in previous audits.
On the issue of unreconciled funds, the APA explained that any time a state agency receives funds for which they cannot identify the proper source, agency officials must place them in a “Funds Awaiting Distribution” account. At the end of each fiscal year, agency officials must issue a report to the Office of the State Comptroller (OSC) to show they have reconciled these funds, or notify the OSC of any accounting errors and request corrections. The APA found that DRS official’s did not submit any reconciliation report, and the auditors noted that DRS’s “Funds Awaiting Distribution” account contained $21,346,879 at the end of fiscal year 2022, and $22,011,226 at the end of fiscal year 2023.
“The department did not ensure that it promptly identified the activity after posting it to the temporary account,” reads the audit. “It appears that some of the activity may be from the department’s transition to its Integrated Tax Administration System. The failure to promptly identify and reconcile the Funds Awaiting Distribution Fund activity could result in the improper use and recording of cash receipts.”
The auditors noted that this issue has been reported in its last three audits, from the fiscal years of 2015 through 2021. They recommended that DRS officials “continue to consult” with the State Comptroller to “investigate, identify, promptly reconcile, and report” these funds, a recommendation that DRS said it is already in the process of acting upon.
“The Department is aware of this issue and is working with the Office of the State Comptroller toward resolving it,” DRS responded.
DRS officials claimed that, as of 2025, the agency’s “Funds Awaiting Distribution” account has a balance of $2.8 million, and that DRS has “identified $1.8 million that will be moved into an appropriate account once it has been established.”
On the issue of missing reports, APA explained that of the 15 reports that DRS was statutorily required to complete and submit throughout the audited period, DRS officials failed to complete and submit three of them. Additionally, the auditors found that DRS failed to submit a sales tax collection and remittance plan and related piece of draft legislation, which the General Assembly asked the agency to complete by Feb. 5, 2020.
“It appears the Department of Revenue Services did not provide the resources necessary to implement legislative requirements,” reads the audit. “Report recipients may not have the information necessary to implement legislative requirements. The Department of Revenue Services should comply with applicable statutory reporting requirements.”
DRS officials responded by claiming that no legislators have reached out to ask for any of the reports.
“As such, it does not appear that said reports are relevant to ‘implement[ing] legislative requirements’ as posited by the APA,” reads DRS’s response. “That said, the Department will inquire of the General Assembly as to its need for these reports.”
The auditors also docked DRS officials for failing to publicly post meeting minutes, schedules or agendas for its Penalty Review Committee, which meets to approve penalty waivers over $5,000, in violation of the state’s Freedom of Information laws. The APA noted the Committee was its “only active committee” during the audited period.
“Noncompliance with freedom of information requirements may affect public engagement and the committee’s transparency,” reads the audit. “A lack of management oversight contributed to this condition.”
DRS officials said the issue was “one of statutory interpretation,” stating that since public discussion of private taxpayer information would be illegal, the public portions of the Committee’s meetings would “consist solely of motions to go into and out of executive sessions.” DRS officials said to post minutes, schedules or agendas for these meetings “seems meaningless and an unnecessary use of limited state resources.”
“That said, if the APA believes that this issue is worthy of a finding in an agency that employs over 500 people and collects more than $26 billion annually, the Department will seek an opinion from the Office of the Attorney General as to the applicability of Conn. Gen. Stat. § 1-225 [FOIA law] to the Penalty Waiver Review Committee,” the DRS replied.
The auditors found this reasoning insufficient and responded that other state committees, which “discuss and review confidential information routinely post their minutes and agendas without revealing that information.”
The auditors also noted that DRS officials were “unable” to provide them with documentation proving that the agency had completed performance evaluations for “all ten managers and confidential employees” whose salary increases depend upon these evaluations. The auditors noted that this finding had been previously reported in the APA’s last three DRS audits.
“The department had inadequate administrative controls to ensure the completion of PARS [Performance Assessment and Recognition Systems] managerial performance evaluations,” reads the audit. “When performance evaluations are not prepared, there is less formal feedback for management to measure performance goals, the attainment of such goals, and productivity expectations.”
DRS officials did not deny the finding, but asserted that the agency’s “senior management has significant interaction with its managers” through which they monitor and discuss manager performance.
“Moreover, the Department’s Bureau Chiefs and Directors meet regularly with their managers and are in the process of developing key performance indicators specific to each unit and manager with the goal of using this information to monitor and evaluate the progress and work of each manager and unit,” DRS continued. “That said, the Department will make a more concerted effort to utilize the PARS form.”
In addition to these findings, the APA found DRS to have outdated agency regulations — a finding with which DRS officials took issue — and to have failed to complete a physical inventory for fiscal year 2022, a finding with which DRS officials agreed.
