County Uses Fraud Solution to Unearth $1.5 Million

County Uses Fraud Solution to Unearth $1.5 Million

Check out the following article from “Government Technology” about TMA’s and LexisNexis’ recent success in Delaware County, Indiana. Original source:

March 8, 2012 By 

A fraud solution that combines analytics technology and investigative research has helped Delaware County, Ind., uncover$1.5 million in lost property tax revenue.

Developed by LexisNexis and Tax Management Associates Inc. (TMA), the program pinpointed homeowners in the county who shouldn’t have claimed a homestead exemption benefit on their property taxes. Background data on the individuals in question was gathered by LexisNexis and reviewed by the county auditor’s office. A bill was then issued for the unpaid taxes along with a 10 percent penalty on the amount.

Homestead exemption laws protect the value of a person’s home against creditors and property taxes in certain situations by exempting a certain amount off a home’s assessed value, requiring the owner to pay less in taxes. The law varies depending on the state, but in general, it applies only to a person’s primary residence, not multiple properties — and that’s where fraud becomes an issue.

The companies’ solution is called the Homestead Exemption Fraud Detection program. The Delaware County project was started last September. TMA — an auditing firm that specializes in local and state government taxes — investigated the property tax records from every homeowner in the county that had filed a homestead exemption for possible fraud.

The company went through the county database, comparing the records to information found about the property owners using LexisNexis’ analytic and research technology. TMA notated property owners that had a homestead exemption filed in Indiana or anywhere else in the U.S., had a home in a trust or similar red flags.

A questionnaire was then sent to the individuals in question for additional details to determine their tax status. Based on the answers, TMA would either consider the person approved for the exemption or denied. Denials and information on those property owners would then go back to the county so it could bill the fraudulent individuals for the additional taxes they owed.

Tara Shinn, correction of error clerk in the Delaware County Auditor’s Office, said the county has known for a long time that it has a “big problem” with homestead fraud. But while states like Florida authorize auditors to go back 10 years and assess 50 percent penalties to fraudulent property owners, Indiana has taken a much more reserved approach.

“Indiana has just now finally decided to get on the bandwagon as well, but we’re only going back three years and doing a one-time, 10 percent penalty on the total,” Shinn said. “So [the state] is not quite up there in realizing how much money we can get back.”

Paying Up

Can information in a questionnaire really be viewed as honest responses from those being questioned? Shinn believed the fear of being caught motivates the majority of people to answer truthfully.

She said 95 percent of people will be straightforward and admit they have another home, primarily due to the data that the program uncovers. Shinn explained that TMA and the county don’t have the resources to find out whether someone had an additional license or utility bill in another location — evidence of another residence. But LexisNexis does, which gives the county much surer footing in identifying fraud.

“It’s nice to now have that capability to be 100 percent sure,” Shinn said. “When you’re asking someone to pay back $10,000, you want to have yourself covered.”

In its first round of the billing cycle, Delaware County sent notices to 91 property owners seeking just under $264,000. Forty-five of those have already paid in full, while the remaining 46 have until mid-April to pay up. If they don’t, then the amount will be put on their tax bill as a special assessment and be subject to an additional 10 percent penalty if not paid by May 10.

Shinn said the properties can also be subjected to a tax lien sale if the balance remains unpaid for three consecutive taxing periods. As for the total amount of fraudulent properties, she said the number is close to 1,000, but didn’t have the exact count handy to verify.

So what do TMA and LexisNexis get out of the deal? Shinn said that while $1.5 million was identified in extra property tax revenue for the county, 40 percent of what is collected will go to TMA, which has a separate arrangement with LexisNexis.

Shinn added that the county didn’t have the technology or capability to do in-depth fraud research, so making the investment to have access to a national database for more data was a no-brainer.

“It’s well worth it,” she said. “This is money we didn’t have to begin with.”