SAS 70 Review

GAO provided information on the results of its attempt to review the Department of the Treasury's process for distributing to various federal government trust funds the net tax revenue collected by the Internal Revenue Service (IRS), focusing on: (1) the reasons that GAO was unable to complete its review and prepare a Statement on Auditing Standards (SAS) 70 report for fiscal year (FY) 1997; and (2) actions that Treasury will need to take before such a review can be completed.

GAO noted that: (1) for several reasons, GAO concluded that the SAS 70 review for FY 1997 could not be completed; (2) certain organizations within Treasury have never undergone a review of their internal controls and consequently were not prepared for such a review to be successfully completed; (3) specifically, the Office of Tax Analysis (OTA) maintained that, as a policy office whose improvement in the initial distribution of federal tax revenue to the trust funds is a small function of its overall operations, it did not have a full understanding of what would be required to facilitate the review; (4) another factor which led to GAO's conclusion that the SAS 70 review could not be successfully completed for FY 1997 was the degree of problems it identified in performing certain agreed-upon procedures related to IRS' certification of excise taxes to the various trust funds; (5) while the initial distributions of tax receipts are based on estimates using OTA's economic models, these distributions are subsequently adjusted based on IRS' quarterly certifications; (6) GAO's review identified a number of errors that affected the amounts that were ultimately distributed to the trust funds; (7) the existence of these errors raises questions as to the effectiveness of the controls over IRS' certification process; (8) if controls over the certification process were considered effective, the process itself would be an effective compensating control for any deficiencies in the initial distributions; (9) the combination of the factors discussed above led GAO to conclude that the SAS 70 review for FY 1997 could not be successfully completed; (10) GAO also noted that no central body within Treasury oversees the entire revenue collection and distribution process; and (11) consequently, Treasury has no overall assurance that each bureau or office meets its responsibilities and thus is unable to provide assurances to the administering agencies that revenue is appropriately distributed to the trust funds.