July 25, 2012
The Oregon Department of Revenue said today it has demoted one employee
and taken formal disciplinary action against three others based on the
findings of an internal investigation into a fraudulent return that
resulted in an erroneous $2.1 million tax refund.
Revenue Director Jim Bucholz said the department will promptly
respond to the investigation's audit recommendations and alter its
procedures to prevent such a mistake from occurring in the future.
"Several internal controls weren't working as they should. We're
making immediate changes to our processes so we can be confident this
won't happen again," Department of Revenue Director Jim Bucholz said.
The error occurred in the Suspense Unit of the department's Personal
Tax & Compliance Division. The unit is charged with manually
reviewing tax returns that have been "suspended" by Revenue's automated
processing systems because they appear to contain errors or fraud.
Revenue has reassigned two Personal Tax & Compliance Division
employees to other positions in which they will no longer have the
authority to approve cash refunds. Two other employees in the unit
received disciplinary action but were not removed from their current
The audit found these employees did not follow departmental policy
and procedure during the initial processing and subsequent review of the
fraudulent return, which was filed by a Salem woman who claimed that
she earned $3 million in 2011 and was due a $2.1 million refund.
Of the four employees disciplined, two are line staff and two are managers.
"It's imperative we hold our organization and staff accountable to
the procedures and values necessary for us to administer Oregon's tax
laws," Bucholz said. "We must be good stewards of the public's money and
Auditors found no evidence that employees engaged in criminal
activity or colluded with the fraudulent filer, who pleaded guilty to
tax evasion Tuesday in Marion County Circuit Court.
Revenue already has modified its computer system so only high-level
officials can sign off on tax refunds that appear to be too large. The
system also now creates an audit trail to verify the manager who has
conducted the final review of such a refund.
In the wake of the audit, Revenue will further alter its procedures to prevent future errors. Steps to be taken include:
- Improving the written guidelines for the Suspense Unit.
- Assigning higher-level technical staff to double-check the initial review performed by front-line staff.
- Revamping the paper-based processes that control the release of refund cash by Revenue.
As part of its internal investigation, Revenue went back and
reviewed all refund claims of more than $50,000 received for the last
three years. The department has concluded that no other large cash
refunds were inappropriately approved.
to get tax forms, check the status of your refund or make tax payments,
or call 1-800-356-4222 toll-free from an Oregon prefix (English or
Spanish); 503-378-4988 in Salem and outside Oregon; or e-mail, firstname.lastname@example.org
For TTY (hearing or speech impaired), call 1-800-886-7204. Due to the
amount of calls the department receives during tax season, you may
experience extended waiting times.