Financial Management

Important IRS Revenue Information Is Unavailable or Unreliable Gao ID: AIMD-94-22 December 21, 1993

As the nation's primary tax collector, the Internal Revenue Service (IRS) reported about $1.1 trillion in tax revenues for fiscal year 1992. This report discusses deficiencies and internal control weaknesses in the systems that account for this money. GAO identified these shortcomings during its audit of IRS' fiscal year 1992 financial statements. GAO recommends that IRS (1) develop a way to capture information on the specific taxes collected for trust funds so that the difference between amounts assessed and amounts collected is readily determinable and tax receipts can be distributed as required by law, (2) determine the trust fund revenue information needs of other agencies and provide such information, and (3) identify the information needed for revenue reporting and related sources and develop written policies and procedures for compiling this information.

GAO found that: (1) although IRS accounts for specific types of taxes assessed, it does not obtain and adequately account for payment information to determine specific taxes collected; (2) IRS cannot precisely determine the amount of subsidies provided to the social security trust fund because it does not separately account for the specific amount of social security taxes collected; (3) trust fund recipients receive little or no information relating to tax revenues; (4) IRS revenue information is unreliable because IRS systems are not designed to generate needed revenue information; (5) IRS does not adequately analyze its transactions to determine how they should be reported and classified; (6) IRS has omitted or misclassified over $150 billion in transactions and has overstated tax distributions by $113 billion by not reducing collections for refunds; (7) IRS does not calculate interest on certain types of accounts receivable; (8) IRS does not consistently review certain manual accounting entries to prevent erroneous or unauthorized entries; (9) IRS is planning to improve its system to account for and report on tax revenues; and (10) IRS intends to provide its Chief Financial Officer a larger role in overseeing revenue-related operations and reporting policies.

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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