Audit finds Minnesota overcharged, undercharged many vehicle registrations

Minnesotans have not only been waiting too long for applications to be processed by the state's vehicle registration system, they're also too often being charged the wrong amounts.

A state report released Tuesday found "significant inaccuracies" in transactions carried out through the Minnesota Licensing and Registration System (MNLARS), with problems found in new registrations for both passenger and commercial vehicles.

The report by Minnesota's legislative auditor said MNLARS overcharged some state residents and undercharged others, and the technology fixes the state has been pursuing to address chronic delays in paperwork processing won't address the billing errors. Instead, it will require policy changes and extensive work by the Department of Public Safety, according to a list of 23 recommendations.

"While MNLARS generally calculated certain types of transactions correctly, inaccurate vehicle registration data within MNLARS and user errors resulted in some owners of similar vehicles being charged different tax amounts," the report said. It did not estimate total figures for undercharges and overcharges, but in reviewing eight types of transactions, the auditors found there were potentially more than $144,000 in overcharges and more than $2.7 million in undercharges.

The auditor's review was prompted by frustration from the public, state lawmakers and others over the troubled rollout of the new MNLARS system, which debuted in July 2017 and was immediately bogged down in glitches that in many cases caused long delays at licensing offices or waits for new license plates and tabs. More than $90 million has already been spent on the new system, with many more fixes still needed.

"Too many Minnesotans have been getting fleeced for months by a system that has been broken for far too long," said Rep. Paul Torkelson, R-Hanska, chairman of the House Transportation Finance Committee. "This audit finally gives us an idea of the dollars and cents literally taken from the pockets of thousands of Minnesotans."

The auditors analyzed transactions in the MNLARS system between July 24, 2017, and Feb. 28, 2018. They found many of the issues were a result of the same type of vehicles being assigned different base values. People who own a vehicle of the same make, model and year should have the same registration tax, the audit says. But differences often occur because there is not one source to determine a vehicle's base value.

For example, there were 2,055 2018 Ford F-150s entered in the system, and the pickup trucks had 130 different base values. That could result in some owners paying thousands of dollars more in taxes over the course of 10 years.

"Where system gaps remain, we are committed to making enhancements to MNLARS accordingly," Minnesota IT Services and the Minnesota Department of Public Safety said in a statement Tuesday.

"But," the agencies added, "let's be clear: the vast majority of inaccuracies asserted in this report are not the result of a malfunctioning MNLARS IT system. Rather, they largely reflect differences in interpretation of statute, human error in data entry, and the misalignment between unique Minnesota laws and automotive industry practices."

In addition, Minnesota IT Services and the Department of Public Safety raised concerns with the way the audit tallies some of the figures, such as nonpassenger vehicle registration taxes.

Of those registration transactions, nearly 98 percent were accurate based on MNLARS data, according to the audit. But 9,957 transactions did not match the total expected amount, and the audit said the state may have undercharged vehicle owners by a total of nearly $2 million — the biggest estimated undercharge mentioned in the report.

State agencies responded that there are exceptions that could result in the deviations from the expected amount. More than $1.3 million of that undercharge estimate could be accurate transactions, but the auditors weren't able to do the analysis to verify that, the agencies said.

Instead of criticizing the report, the agencies should have responded to each of the recommendations and talked about how to address them moving forward, said Sen. Mary Kiffmeyer, a Transportation Finance and Policy Committee member.

One of the audit's ideas that legislators could take up this session is refunding people who were overcharged. Rep. Rick Hansen, DFL-South St. Paul, drafted a bill Tuesday that would appropriate general fund dollars for reimbursements. It did not include a total amount.

"We'll definitely consider that," Kiffmeyer, R-Big Lake, said of refunds.