By Pacific Island Times News Staff
Several nonprofit organizations on Guam could have engaged in unauthorized activities and misused their tax-exempt status, but there was no way to detect any anomalies because the Department of Revenue and Taxation lacks a proper monitoring system, according to the Office of Public Accountability.
OPA’s audit identified DRT’s challenges in monitoring active nonprofit organizations' annual reports, limitations with standard operating procedures for registration of tax-exempt organizations, significant manpower shortages, periodic audit challenges and missing required documents on file.
“The issues identified within the DRT regarding its oversight of nonprofit organizations' compliance highlight critical gaps that need to be addressed in the effectiveness of their operating procedures, resource allocation, periodic audit initiatives, and reporting requirements verification,” Public Auditor Benjamin J.F. Cruz said.
“The absence of essential registration documents and the challenges in monitoring annual reports jeopardize the standing and transparency of nonprofit organizations in Guam. The reliance on outdated filing systems and inadequate manpower magnifies these issues, potentially leading to lapses in oversight and enforcement,” he added.
DRT oversees 1,536 nonprofit organizations, of which 625 were active and
approved and 911 were inactive or revoked as of August 2023, OPA said.
The law mandates nonprofit organizations to file their financial reports within 90 days after the close of the fiscal year.
“DRT lacked enforcement for the tracking of nonprofit organizations’ annual
report postings. DRT does not have an effective monitoring system,” the OPA said.
“There is no database that can provide the agency with the ability to extract,
sort, and manipulate data to efficiently assess if a nonprofit organization is in compliance or not.”
Auditors found that no one at DRT is designated to review each nonprofit organization’s activities to ascertain if they have published their annual reports.
On June 17, 2005, DRT sent out approximately 1,000 letters to non-compliant tax-exempt organizations requesting to submit their financial statements. A month later, those that failed to comply received notices of tax-exempt status revocation.
“Upon our review of DRT’s revocations of nonprofit organizations that are not in compliance with regulatory requirements, we identified a significant lapse in DRT’s oversight procedures,” the OPA said.
“Specifically, this concern regards the infrequent revocations of non-compliant tax-exempt organizations over 17 years. The prolonged negligence has led to a
failure in ensuring that tax-exempt statuses are appropriately revoked when necessary.”
During the entrance conference meeting, the acting administrator of the Technical Research & Appeals Bureau told auditors that the department was grappling with the persistent manpower shortage.
“At the time of our interview, the team allocated their resources toward the examination of federal contracts. Unfortunately, the Examination Branch has experienced several departures this year, including the loss of a supervisor
and several staff members who have either retired or resigned,” OPA said.
“Furthermore, there is the potential for DRT to face the additional challenge of losing one or two more employees to retirement. This could result in operational inefficiency, productivity, and service delivery at DRT."
To mitigate the risks, the OPA recommended that DRT prioritize recruitment efforts, with the help of other appropriate governmental bodies, and invest in
continuous training for its employees to strengthen the workforce.
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