Report 2007-107 Recommendations

When an audit is completed and a report is issued, auditees must provide the State Auditor with information regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year. Additionally, Senate Bill 1452 (Chapter 452, Statutes of 2006), requires auditees who have not implemented recommendations after one year, to report to us and to the Legislature why they have not implemented them or to state when they intend to implement them. Below, is a listing of each recommendation the State Auditor made in the report referenced and a link to the most recent response from the auditee addressing their progress in implementing the recommendation and the State Auditor's assessment of auditee's response based on our review of the supporting documentation.

Recommendations in Report 2007-107: Nonprofit Hospitals: Inconsistent Data Obscure the Economic Value of Their Benefit to Communities, and the Franchise Tax Board Could More Closely Monitor Their Tax-Exempt Status (Release Date: December 2007)

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Recommendations to Equalization, Board of
Number Recommendation Status
1

To ensure that it provides accurate information regarding the value of property that is tax exempt, Equalization should consider including in its surveys of the county tax assessors a process for verifying the accuracy of the values reported on the annual statistical reports submitted by the county assessors.

Recommendations to Franchise Tax Board
Number Recommendation Status
2

After it identifies the staff resources that are no longer required for reviewing tax exemption applications, the tax board should implement its plan to use those resources for performing audits of tax-exempt entities, including hospitals.

3

The tax board should consider developing methodologies to monitor nonprofit hospitals? continuing eligibility for income tax exemption. These methodologies should include reviewing the financial data and other information on the Form 199 annually submitted by tax-exempt hospitals.

4

The tax board should consider developing methodologies to monitor nonprofit hospitals? continuing eligibility for income tax exemption. These methodologies should include ensuring that the annual Form 199 contains all the information required to determine eligibility for an income tax exemption in accordance with state law.

5

The tax board should consider developing methodologies to monitor nonprofit hospitals? continuing eligibility for income tax exemption. These methodologies should include tracking complaints in a manner that allows it to identify potential trends in a tax-exempt hospital?s noncompliance with the law and initiate audits of such hospitals.

6

The tax board should consider developing methodologies to monitor nonprofit hospitals? continuing eligibility for income tax exemption. These methodologies should include adequately identifying tax-exempt hospitals in its automated database so it can use the information in the database to profile those hospitals and identify any potential noncompliance with the law.

7

The tax board should gain an understanding of the frequency and depth of IRS audits of tax-exempt hospitals to identify the extent to which it can rely on IRS audits and factor that reliance into its monitoring efforts.



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