Louisiana government rarely fails to deliver “fox in charge of henhouse” stories. The latest is the auditing of the severance tax payments by oil and gas companies.
A new report from the Legislative Auditor’s Office suggests that the state hasn’t been getting the taxes owed. The Department of Revenue said there were problems with an automated program and that it had to be shut down for repairs sometime in 2010.
“LDR cannot ensure that it is receiving all severance tax payments that it is owed,” the auditor wrote in an 11-page report on the accuracy of severance tax collections. The auditor said the revenue department identified millions of dollars in unpaid taxes before shutting down the program.
The automated program should be up and running again before the end of the current fiscal year, June 30, the department promised in reply to the legislative auditor.
So far, so good, although that seems a fix too long in the making. But there’s a footnote to the story that inspires some doubt about the diligence of state government in collecting the severance taxes.
To streamline services across state government, severance tax field audits moved from the revenue department to the state Department of Natural Resources – the department that is charged with promoting the oil and gas industry, as well as regulating it.
Turns out that DNR may not have done a very good job of collecting taxes owed by its oil charges: Auditors visit oil and gas companies to look at purchase statements, meter statements and wire transfers.
In fiscal year 2010, the revenue department completed 61 field audits and identified $26 million in severance taxes that should have been paid but were not. In three years of managing the audits, the Natural Resources folks completed 48 field audits and identified $16,582 in unpaid severance taxes.
That’s a pretty sharp drop. By way of response to this, the Revenue department says it should take the audit business back. Let’s hope that’s done quickly.
Missing out on millions isn’t a practical policy at any time, but certainly not when the state’s budgets are precariously balanced every year.