By Mike Kaszuba
Acting state Revenue Commissioner Dan Salomone was chastised Friday by a legislative audit panel following criminal charges that accuse a former department auditor of stealing nearly $2 million by creating bogus tax refunds.Appearing before the state Legislative Audit Commission, Salomone was the target of harsh remarks from Sen. Ann Rest, DFL-New Hope, the panel's outgoing chair."You're the folks that take in all of our tax funds," said Rest. "The notion that your department did not have, or apparently did not have, sufficient internal controls to prevent fraud is just appalling – is just appalling."Pamela Marie Dellis,58, of Lindstrom, Minn., was charged in federal court earlier this month with conspiracy to commit mail fraud and money laundering. Dellis allegedly created more than 200 false tax refunds worth more than $1.9 million as a department auditor that she then sent to her sister and niece.Salomone was appointed by Gov. Mark Dayton to continue as state revenue commissioner until Myron Frans, Dayton's permanent choice for commissioner, takes over the job this spring.The charges against Dellis came just days after Dayton announced he would have Salomone, the outgoing revenue commissioner, continue to lead the department until Frans took over."I share your view," Salomone told Rest on Friday. "Gov. Dayton takes this very seriously." Salomone said Friday that the department was working toward having "significantly better techniques for detecting fraud."Salomone's department also came under criticism Friday from the state Legislative Auditor's office.Cecile Ferkul, a deputy legislative auditor, said in a letter Friday that "this fraud was possible because of weaknesses in the taxpayer accounting system's access controls and in the department's refund authorization processes."Although the department has many internal controls in place," Ferkul added, "it has not taken a comprehensive approach to the design of its controls or monitored their effectiveness. In short, a long term, trusted employee who had extensive knowledge of a legacy computer system was able to exploit its weaknesses and issue nearly $2 million of fraudulent refunds over a period of five years before detection."In addition, the legislative auditor's office said Friday that, despite warnings to state departments and agencies concerning the lack of internal controls, "some agencies continue to process large amounts of financial activity without adequately determining that sufficient controls are in place."
