YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

March 22, 2001

Report No. 2001-23

Governor Mel Carnahan appointed Rebecca McDowell Cook as the thirty-sixth Secretary of State and she was sworn in on December 16, 1994.  Secretary of State Cook was elected to a four year term of office in November 1996.  Her term expired on January 8, 2001.  On that date, Matt Blunt was inaugurated as the thirty-seventh Secretary of State of Missouri. 

The following report of the Office of Secretary of State reflects audited financial statements dating from July 1, 1998, until the electoral transfer of  Secretary of State authority which occurred on January 8, 2001.  Some areas of concern were noted as a result of our audit. 

Pursuant to state law the responsibility for franchise tax was transferred to the Department of Revenue from the Office of Secretary of State, effective January 1, 2000.  However, the Office of Secretary of State is still responsible for administratively dissolving corporations based on notification from the Department of Revenue of those corporations that fail or refuse to pay franchise tax (including interest and penalties) after the assessment becomes final. 

The Department of Revenue has not notified the Office of Secretary of State of any delinquencies since assuming responsibility for the collection of franchise taxes.  Therefore, the Office of Secretary of State has not administratively dissolved corporations for failure to pay franchise taxes for filing dates after January 1, 2000.  Based on the office’s past experience with administratively dissolving corporations, it is likely that some corporations have been allowed to remain active with delinquencies.  Allowing corporations to remain active with delinquencies provides no incentive for corporations to pay their taxes when due.  This increases the likelihood that taxes, interest, and penalties will not be collected, and results in lost revenue to the state. 

As discussed in prior audit reports, fixed asset records and procedures are not adequate. Because adequate records and/or procedures have not been in place for several years, assets have not been properly accounted for and safeguarded from theft or misuse.  At June 30, 2000, the Office of Secretary of State estimated that the total cost of general fixed assets maintained by the office was approximately $4 million.