Curbing Film Tax Credit Fraud in Louisiana
April 20, 2015 Leave a comment
Since the inception of the film tax credit in Louisiana there have been about a baker’s dozen fraud charges against local film producers. The newspapers love to rage about the illegal goings-on, of how many years the perpetrators can get in jail and of the madness of Louisiana politics. However, nobody thanks the poor auditor who discovered and ultimately exposed the fraud.
TWO WAYS SUGGESTED TO CURB FRAUD
In an article dated April 6, 2015, the Secretary of the Louisiana Economic Development, Stephen Moret, suggested there were two ways that the state could curb fraud and abuse: regulate accountants who audit the film industry and eliminate related-party payments.
DON’T REGULATE, EDUCATE
I would suggest replacing the word “regulate” with “educate”. Get those CPA’s educated before they even get a chance to audit – that’s what California has done successfully for some time now. It is safe to say that Louisiana already has the most comprehensive set of film audit guidelines for Related Party Transactions in America. However, there seems to be a disconnection between the written rules and the way they’re applied in the Film Industry. Click here to download the 8 page guidelines from the LED web site. See pages 3, 4 and 5.
FILM INDUSTRY PRACTICES
The second suggestion of eliminating related party transactions is like telling Americans not to drive cars because the pollution is killing the planet – it’s true, but just not workable. Simply bring the auditor to an understanding of the internal forms, practices and control points accepted as standard in the industry BEFORE the audit.
THANKS TO THE FORGOTTEN HEROES
So let’s remind ourselves who brought the fraudulent activity to light – the film state tax credit auditor. Okay, sometimes it was found a little late, but found it was … and, here’s a big THANK YOU.
I sincerely hope that you got paid in full before the Producer’s accounts were seized!
Cheers / John
For more information on Film Accounting see my Film Accounting 101 Workshop coming up.