Financial Management

IRS Lacks Accountability Over Its ADP Resources Gao ID: AIMD-93-24 August 5, 1993

The Internal Revenue Service (IRS) has not adequately stressed the need for controls to ensure the accuracy of inventory records for computer equipment and software. As a result, information needed to manage and report on these assets is not readily available. In addition, IRS lacks a system of controls to ensure the accurate accounting of large acquisitions of hardware and software and the in-house development of software it has planned under its Tax Systems Modernization effort. IRS officials, responding to the Chief Financial Officers Act's emphasis on developing more useful financial management information, plan to improve the reliability of automated data processing asset records. Having IRS' Chief Financial Officer account for and report on the agency's fixed assets would help ensure that adequate controls are implemented, further improving the reliability of information needed for managing and reporting on these assets.

GAO found that: (1) IRS ADP inventory records are incomplete and inaccurate primarily due to the lack of control over information maintained in the Computer Resources Management System (CRMS); (2) controls are not in place to ensure that additions and deletions to the ADP inventory system are recorded accurately or promptly, accounting and inventory records are reconciled, and physical inventories are effectively performed; (3) ADP assets included in CRMS are not valued in accordance with IRS valuation policy or any other authoritative basis; (4) IRS is not able to capture the costs associated with in-house software development, since it does not have a cost accounting system for tracking actual software development expenditures; (5) IRS managers lack readily available information needed to make ADP-related staffing decisions, monitor maintenance contracts, and prepare financial statements; and (6) the IRS Chief Financial Officer (CFO) does not have the authority to ensure that IRS ADP records are accurate and developed in accordance with applicable accounting standards.

Recommendations

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