Financial Management

IRS' Self-Assessment of Its Internal Control and Accounting Systems Is Inadequate Gao ID: AIMD-94-2 October 13, 1993

Because of widespread material weaknesses in the Internal Revenue Service's (IRS) operations, GAO does not believe that IRS can be reasonably sure that the objectives of the Federal Managers' Financial Integrity Act of 1982 have been achieved. The act requires agencies to disclose the condition of their internal control and accounting systems. The IRS process for identifying, disclosing, and correcting material weaknesses must be substantially improved if the agency is to produce reliable information that top management can use to control costs and improve operations. Top management involvement is an essential first step in bolstering IRS operations and accurately reporting IRS internal control and accounting system weaknesses to the Secretary of the Treasury.

GAO found that: (1) the IRS fiscal year 1992 assurance statement did not accurately disclose the condition of its internal control and accounting systems; (2) IRS systems have material weaknesses in revenue accounting and reporting, operating funds management, and reporting and safeguarding of seized assets; (3) IRS has reported some weaknesses that do not focus on all related issues, which impairs management's ability to correct them; (4) the IRS self-assessment process for identifying material weaknesses is only partially effective because it fails to identify the full extent of internal control and accounting system weaknesses; (5) IRS review staff do not have adequate guidance, procedures, or training to assess system weaknesses; (6) IRS corrective actions have not fully resolved problems because they do not address the underlying cause of the weakness; and (7) IRS has established a senior management council to oversee and review the Federal Managers' Financial Integrity Act process and increase senior executive involvement.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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