Connecticut Audit Flags $22 Million in DRS Funds Awaiting Distribution

A Connecticut state audit found that the Department of Revenue Services (DRS) had not reconciled or explained an account in its “Funds Awaiting Distribution” system, where the balance reached about $22 million at the end of fiscal year 2023.

The finding raises questions about the department’s accounting controls and how quickly it identifies the proper destination for money it receives. The audit documents a balance that auditors said DRS could not reconcile or explain during the review.

The Auditors of Public Accounts issued the report on September 30. It examined DRS operations for fiscal years 2022 and 2023.

What the auditors found

The Funds Awaiting Distribution account is a temporary holding place for receipts that cannot immediately be posted to the correct funding source. State accounting procedures require agencies to identify the proper coding, distribute the funds and reconcile the account.

Auditors said one DRS account had unresolved items dating back to 2008. The department also had not submitted the required year-end reconciliation report to the Office of the State Comptroller.

The overall balance in the fund was $21,346,879 on June 30, 2022, and $22,011,226 on June 30, 2023. Auditors warned that failing to identify and reconcile the activity promptly could result in cash receipts being improperly used or recorded.

The audit recommended that DRS continue working with the Comptroller’s office to investigate, identify, reconcile and report the balance.

DRS says the later balance was lower

In its response included in the audit, DRS said it was working with the Comptroller’s office. The department said a journal entry to distribute funds came from a different account, leaving a net balance of $2.8 million across all Funds Awaiting Distribution accounts at the end of fiscal year 2025.

DRS said it had identified $1.8 million of that later balance to move into an appropriate account once that account was established. This update is the department’s response; the audit itself focused on fiscal years 2022 and 2023. The report does not provide a later independent reconciliation of the $2.8 million figure.

That distinction matters: the audit’s $22 million figure describes the fund’s total balance in 2023, while DRS says the net balance across related accounts was $2.8 million two years later. The report does not establish that the entire 2023 balance was lost or remains unresolved.

Other oversight issues

The audit made six recommendations, four of them repeated from earlier audits. Auditors also found missed statutory reports, incomplete documentation of management performance reviews, outdated agency regulations and gaps in DRS’s property inventory procedures.

The report further found that the department did not file or post schedules, agendas and minutes for its Penalty Review Committee during the audited period. DRS disputed the auditors’ interpretation of the public-notice requirements, saying the committee’s work involved confidential taxpayer information. Auditors responded that public portions of the committee’s records—including attendance and discussion of procedures—could be posted without disclosing confidential taxpayer information.

The audit points to accounting and transparency problems that deserve follow-up, while leaving important questions open: Has DRS completed the reconciliation with the Comptroller? What items make up the $2.8 million figure reported for 2025? When will the department document that the remaining funds have been properly identified and distributed?