Nearly six of 10 Kansas retail businesses inspected by state regulators to determine accuracy of point-of-sale electronic price scanners failed the test.

Full scope of the problem exposed by the Kansas Legislature's auditing division couldn't be fully assessed because the Kansas Department of Agriculture inspected only 365 of an estimated 10,000 retailers during the 2018 fiscal year. That represented under 4 percent of Kansas retailers the U.S. Census Bureau estimated were in operation.

Of the retailers tested by the agriculture department, state auditors said, 215 of the business, or 59 percent, were red-flagged for too frequently charging customers something other than the advertised price.

Justin Stowe, lead auditor at the Legislature's nonpartisan Division of Post Audit, said the audit showed the Department of Agriculture had too few personnel to deal with retail store scanning inspections. The agriculture department also is responsible for the accuracy testing of gasoline pumps and scales for big trucks.

"They're spread pretty thin and as a result they only allocate a small portion of their staff to conducting these electronic inspections," Stowe during the Capitol Insider podcast of The Topeka Capital-Journal.

 

The retail inspection audit released in March was among projects assigned by a bipartisan committee of House and Senate members responsible for choosing audit topics from among recommendations by state lawmakers.

"They are the ones who direct our work," said Chris Clarke, deputy post auditor. "They are the ones who select the topics and then they release us to go do the analysis and report back to them."

The 24-person auditing staff of attorneys and specialists in economics, political science and public administration is charged with exploring government programs and agencies to assess efficiency or effectiveness. These dives into complex issues become public record, with the exception of information security audits.

Stowe said there was an effort to collaborate with subjects of audits, but the job also created a necessary tension between auditors and government entities.

Not all state agencies, local agencies receiving state dollars or organizations contracting with the state welcome inquiries by audit teams, he said.

"There's some concern, some legislative concern, that government isn't operating as well as it could be either in how it's using its resources or how it's actually completing its mission," Stowe said.

In addition to the new report on retail scanning, the auditing arm of the Legislature completed work in February on an examination of whether Kansas could expand reach of its sales tax to online retailers competing with bricks-and-mortar businesses in the state. The review was motivated by a U.S. Supreme Court decision upholding South Dakota's assessment of sales tax on online businesses.

Clarke said the audit concluded Kansas sales tax law could be amended to generate $40 million more annually from businesses, such as eBay, serving as a retail coordinator to bring together buyers and sellers.

"Kansas is already collecting about 90 percent or more of the taxes that are out there," she said. "So, it's not going to be a huge wave of new money. But we did find a few laws that Kansas could tweak."

The 2019 Legislature passed a tax bill that included reform of the internet sales tax and lowered the sales tax on food by 1 percentage point to 5.5 percent. The bill also created an income tax exemption for multinational corporations bringing foreign revenue to Kansas and would have allowed wealthy individuals to itemize income tax deductions on state forms while securing the newly expanded standard deduction for federal taxes.

Gov. Laura Kelly vetoed the bill after lauding the effort to lower the sales tax on food and objecting to the income tax avoidance pieces.

Legislative Post Audit makes reports available online at http://www.kslpa.org of audits dating as far back as 1972.

In the past year, the auditors completed work on an audit of the Osawatomie State Hospital, state oversight of pet animal facilities, K-12 special education funding, Kansas Juvenile Detention Facility management, Medicaid reimbursement rates, lobbying by local governments, management of wildfires, mental health services in local jails and the state problem-gambling fund.