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Auditor says Alaska is concealing oil tax credit records, but officials disagree

JUNEAU — Alaska’s independent financial auditor found lapses in data security, major gaps in accounting for aid to needy families and a 3-year-old with 14 state-paid dental crowns.

But she says the biggest problems with the state’s financial records are things she didn’t find.

“Department of Revenue management denied auditors access to relevant financial records,” auditor Kris Curtis wrote in an official filing last month.

Specifically, the state denied auditors permission to examine records associated with a discontinued tax credit program for oil drillers.

“That type of behavior causes us grave concern, because from an audit perspective, you wonder: Are they providing all the information?” she said by phone.

In addition, former Department of Revenue commissioner Bruce Tangeman, who resigned late last year, failed to sign a statement verifying that the state’s financial records are accurate.

“From an auditor perspective, that raises a lot of red flags,” Curtis said.

Curtis was so concerned that her office issued what’s known as a “qualified” opinion on the state’s finances for the fiscal year that ended July 1, in effect certifying that the audit is accurate only as far as it can tell.

That could have significant implications for the state going forward. The federal government requires states to have their financials independently audited each year in order to stay eligible for aid. Credit-rating agencies use audits to determine whether a state is worthy of a loan.

Curtis works for the state Division of Legislative Audit, which by law is the independent auditor for the executive branch. State law requires the division to have access to all needed documents.

Tangeman and current state officials said most of the issues relate to legal disputes that began under the administration of Gov. Bill Walker and have continued under Gov. Mike Dunleavy. For example, auditors and the executive branch have disagreed for years about the appropriate way to handle some deposits into the state’s Constitutional Budget Reserve, an issue with hundreds of millions of dollars at stake.

Tangeman said his failure to certify the state’s finances is because he was out of state before leaving office in early December and wasn’t aware of the progress of the audit. By the time a state official called him about it, he had already left office and didn’t think it would be appropriate to sign.

Mike Barnhill, who replaced Tangeman on an interim basis, did sign a letter, but said it applied only to his term in office.

When it comes to the tax credit program, state officials say they did provide information about legal settlements sought by Curtis, but information about negotiations before those settlements is protected by attorney-client privilege. Curtis said that’s a new change, but the Alaska Department of Law disagreed.

In a written statement, the department said it is “disappointed that the Legislative Auditor has decided to cast aspersions on the Department of Law. Contrary to her statements, the Department of Law is not aware of any change in advice or new memo referred to by the Legislative Auditor.”

The department’s statement goes on to say that the state provided copies of tax settlements to auditors, but “for at least the past two administrations," files covering the negotiations leading to those settlements have been covered by attorney-client privilege, and relaxing that would “violate our ethical rules."

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