Nearly 80 Oklahoma cities and towns are paying a price for failing to file their annual financial audit reports from two years ago.
More than $90,000 in gasoline excise taxes will be forfeited by the cities and towns, the state auditor and inspector's office said Monday.
The money instead will be distributed to the counties where the cities and towns are located, state Auditor and Inspector Gary Jones said.
The annual reports are for the 2010 fiscal year, which ended June 30, 2010. The deadline to file the reports was Dec. 31, 2010.
If the reports are a year overdue, the state Tax Commission begins withholding the gasoline excise tax Jan. 1 and then distributes the money to the appropriate counties if the reports still haven't been filed by two years from the end of the fiscal year covered in the report, Jones said.
State law requires cities and towns to file an annual financial audit report with the state auditor's office within six months from the end of the fiscal year, he said. For most municipalities, the fiscal year ends June 30, and the period to timely file an audit report is through Dec. 31.
Jones said 76 cities and towns have failed to file their 2010 fiscal year annual reports. That represents about 13 percent of the 593 incorporated cities and towns in the state.
As a result, those cities and towns have lost their gasoline excise tax revenues for the first six months of this year, Jones said. The dollar amounts vary, ranging from $50.07 for the town of Fallis in Lincoln County to $35,337.73 for the city of Bethany in Oklahoma County.
Cities and towns were sent letters reminding them of the consequences of failing to file the reports, he said.
“We send them ample notice this is going to happen, so it's not like it catches them by surprise,” Jones said. “We send them a couple of letters.”
The forfeited earnings will continue until the reports are submitted to the auditor's office.
“The Legislature implemented this penalty many years ago as a way to encourage the timely filing of annual audit reports,” Jones said. “Unfortunately, for many small towns, the penalty is considerably less than the cost of an audit.
“It creates a real problem because you essentially have no one reviewing a town's financials. Most people who commit fraud think they're not going to get caught. If you're not doing even the most basic annual financial audit, the fraudster becomes that much bolder because he or she knows that nobody's looking.”
The primary purpose of the financial audits is to determine whether a town or a city is presenting its financial reports in compliance with federal guidelines and to determine whether a system of checks and balances is in place to help reduce the risk of fraud, Jones said.
“If you don't have good accounting records and you don't get your audits done, then if you're making mistakes and doing things wrong, then those things will continue to be made,” Jones said. “It's a safeguard to show them to correct errors and also to possibly uncover any fraud or misspent funds.”