Collection Agency Making Good on $2.4 million Error

A collector for 250 Alabama municipalities is working with a city and a county in the state to make right the accidental misappropriation of $2.4 million that occurred over four years.

RDS/AlaTax, a Birmingham-based subsidiary of Portfolio Recovery Associates, is the tax collection agency for Elmore County in Alabama. Four years ago, Elmore and the City of Pratville in neighboring Autauga County added a penny tax and used AlaTax as the distributor of the revenues. The funds were to be split among three agencies: half would go to the Elmore County school district and the other half would be split between Elmore County and the City of Pratville.

AlaTax failed to send the collected tax revenue to the appropriate agencies.  “There was a miscommunication about the distribution rates, and how the distributions should be made,” Stephen Morris, executive vice president of AlaTax, told insideARM.com.  “We didn’t know that the board of education was part of the plan.”

After a March audit revealed the school board’s shortfall, AlaTax changed its distribution rates, Morris said. “We now have several checks and balances instituted to make sure that something like this never happens again.”

Elmore County has begun a payment agreement with AlaTax and the school district.  It has started paying $100,000 a month for 12 months.  The City of Pratville has yet to make any type of arrangement and, at least according to a story running today in the Montgomery County Advertiser, has not ruled out seeking damages from the company that collected the tax.

RDS/AlaTax will continue to collect Elmore County’s taxes, according to Morris.  “Elmore County is a wonderful client of ours,” he said.

Pratville’s mayor didn’t return a call.