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Tax administration manages finances for governments, non-profits, and public service entities. Tax policies are set by leaders to develop budgets, and reports are used to adjust future tax decisions. Fiduciary responsibility requires responsible handling and recording of all activities involving money. Errors in tax administration are common in government and private sectors, but public reporting documents help identify problems faster in non-profits and public universities.
Tax administration is the act of managing incoming and outgoing money transactions and budgets for governments, educational institutions, non-profit organizations, and other public service entities. For example, the local tax administration of a city or municipality involves the receipt, budgeting and dispersion of funds to support local infrastructure. In terms of government administration, fiscal accountability requires numerous departments or divisions to handle the large task of financing government operations. Each division or department is responsible for different aspects such as budgeting, reporting, collecting revenue in the form of taxes and duties or purchases.
Constituents mandate leaders, both governmental and organizational, to set tax policy as part of their duties to accountable tax administration. Tax policies are tools for developing tax planning budgets, based on the receipt of upfront financing. When disbursement of funds occurs in the form of payroll, purchases or other expenses, management reports the appropriate accounting information to the organization’s executives. Historical data, future revenue projections, and current budget requests determine the necessary adjustments. The entire process forms the basis for future tax decision-making.
Leaders of government, nonprofits, and other public service entities have a fiduciary responsibility to those who put them in office, individuals better known as constituents. Effectively managing an entity’s tax administration contributes to its overall financial health and ability to continue to serve constituents. Therefore, the laws dictate much of the details of preparing financial statements, recording transactions, and balancing budget requests for such organizations. Fiduciary responsibility requires that these reports demonstrate the responsible handling and recording of all activities involving monies paid or spent by the organization.
Government tax administration, especially federal tax administration, creates many opportunities for error. By their very nature, government organizations are large and complex, requiring numerous divisions, departments, committees, and other bodies. While revenue streams follow only a few paths through these many departments, disbursements and expenses come from all areas. With so many sources of information about money transactions, errors and omissions can easily go unnoticed, creating compromising and difficult to decipher problems. The complexity and sheer volume of information required to find such errors explains how corruption often goes undetected in some government sectors.
Even private sector organizations, such as non-profit agencies and post-secondary public schools, have difficulty deciphering errors in tax administration. While these organizations are also large and complex, public reporting documents require much less time to analyze. For this reason, problems with financial management at a public or nonprofit university usually arise faster than government agencies.
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