Financial Management

Significant weaknesses exist in the systems that the Internal Revenue Service (IRS) uses to manage, spend, account for, and report on its operating funds; GAO was unable to audit $4.3 billion of the $6.7 billion in operating funds that IRS reported spending in fiscal year 1992 because IRS could not account for all of the money. Significant control weaknesses included the following: (1) managers lacked current, reliable information on available budget authority, (2) some types of expenditures were recorded only after lengthy delays, and (3) reports used to monitor compliance with laws governing the use of budget authority contained unauthorized adjustments. In addition, IRS reports misclassified expenditures. Further, IRS did not periodically review and adjust its records to reflect changes in obligations and remove canceled appropriations or resolve billions of dollars in discrepancies between its records and those of the Treasury Department. Also, IRS could not ensure that outlays for goods and services were proper because of fundamental control weaknesses in its payment processes, including a lack of proper review and approval of payments.

GAO found that: (1) only the IRS national office and central region use the Automated Financial System (AFS), while six other regions use the outdated Automated Accounting and Budget Execution System (AABES); (2) IRS systems cannot provide current information on available appropriations; (3) IRS does not promptly record expenditures against appropriations, resolve differences between its own records and Treasury balances, or review and adjust obligations to appropriate amounts; (4) IRS does not have adequate systems and controls to ensure proper approval and entry of journal vouchers; (5) IRS lacks controls for ensuring the proper approval and documentation of payments to vendors, resulting in duplicate payments and overpayments; (6) IRS has frequently made late or unnecessarily early payments to vendors, and underpaid interest due on late payments; (7) IRS has not integrated its payment and procurement systems and does not reconcile data to identify duplicate payments or overpayments; (8) IRS cannot reasonably ensure that AABES general ledger balances are complete and accurate and cannot resolve differences between detailed spending information and summary records; (9) IRS systems do not identify the budget category for expenditures; (10) IRS reported FY 1992 obligations by management activity rather than budget activity; and (11) IRS relies on managers' informal records to satisfy reporting requirements for information system costs.

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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