Report of Investigation of an Error in Tax Revenue Numbers

Inland Revenue and Treasury have taken immediate steps to implement changes following the investigation into last month’s error in tax revenue in the Crown accounts.

Secretary to the Treasury John Whitehead and Inland Revenue Commissioner Robert Russell today released the report of the investigation they commissioned when the error was discovered.

The investigation identified the cause of the error in the accounts and identified improvements to processes in both Inland Revenue and Treasury to reduce the risk of errors occurring in the future.

The investigation identified that:

• Inland Revenue used the wrong data calculation and its systems had not picked  up the error
• The error which had occurred since the start of the 07/08 financial year, was not detected until January 2008 because initially it did not lead to any material variances
• The Treasury should provide a more formal guidance on the circumstance and judgements that may need to be balanced before publishing the monthly Accounts. 

Mr Russell said that Inland Revenue and Treasury had taken the error very seriously, and that he and Mr Whitehead agreed with all of the recommendations of the investigation report.  

Mr Russell said that Inland Revenue makes no excuses for the error. 

"We did not use precisely the accrual calculation method that we had agreed with Treasury, and we used data that was out-of-date.

"Today we’ve released a detailed report describes the cause of the error and makes a number of workable recommendations.

"I accept the investigation’s finding that Inland Revenue needs tighter control systems and better communication to avoid an error like that,” Mr Russell said.

"As the investigation notes, we had identified the need to strengthen our Crown accounts capability before the error occurred and had taken steps to improve this part of our operation.

"The bottom line is, we will implement all the recommendations of the report which will give us a well documented process for our part of the Crown accounts preparation."

Mr Whitehead said that Treasury was treating the implementation of the recommendations as a priority.  "I am pleased that my staff have already developed new guidance to respond to one of the recommendations for Treasury around the release of information", he said.

Mr Whitehead noted that the Treasury would be releasing the Financial Statements for the eight months to February 2008 on Friday, and that the new guidance on the circumstances and judgements that need to be balanced before publishing the Accounts had been used to inform that release.

"Our staff are professional and committed individuals who take pride in the quality of their work.  The error uncovered in the January accounts was serious and unfortunate, but I do believe that we have learned from it as a result, and that our systems and processes have been improved accordingly", he said.

Mr Russell and Mr Whitehead thanked the investigation team for their swift, professional work in producing a report which Inland Revenue and Treasury can act on.

ENDS