SUMMARY OF: A Performance Audit of the Department Of Commerce, Community, and Economic Development and Department Of Revenue Commercial Passenger Vessel (CPV) Tax Program

Why DLA Performed This Audit

In accordance with Title 24 of the Alaska Statutes and a special request by the Legislative Budget and Audit Committee, we have conducted a performance audit of the Department of Commerce, Community, and Economic Development’s and the Department of Revenue’s Commercial Passenger Vessel Tax Program.

Report Conclusions

The State has received approximately $271 million of CPV tax receipts since the program began in 2007 through FY 15. Of those receipts, $99 million (37 percent) was distributed back to port communities as part of the shared tax program. Another $130 million (48 percent) was appropriated as grants to communities or other recipients, and
$35 million (13 percent) was appropriated as grants to the Department of Transportation and Public Facilities and the Department of Natural Resources.

The audit concluded that the CPV tax structure could allow CPV tax receipts to fall short of the amounts to be distributed. To date, CPV receipts have been sufficient to fund the amounts required to be distributed to port communities. However, significant increases to the number of passengers that visit a high number of ports would threaten the solvency of the CPV fund.

The audit also concluded that shared tax revenues spent by communities to improve port facilities and harbor infrastructure were spent in compliance with State law. However, CPV funds expended by communities for services other than port facilities and harbor infrastructure often lacked the documentation necessary to verify the expenditures complied with State law. One instance was found where CPV shared taxes were spent on unallowable activities.

Additionally, the unspent balance of shared taxes was determined to be reasonable based on community efforts to initiate or complete CPV projects. Furthermore, the audit concluded that unexpended CPV grants are supported by ongoing projects. However, the audit noted grants have been provided to ineligible recipients.

Findings and Recommendations

  1. Municipality of Skagway Borough management should only use CPV shared tax revenues for allowable purposes.
  2. Ketchikan Gateway Borough management should ensure CPV shared tax revenues are only used for allowable purposes.
  3. City and Borough of Sitka management should ensure CPV shared tax revenues are only used for allowable purposes.