Financial Audit

Examination of IRS' Fiscal Year 1993 Financial Statements Gao ID: AIMD-94-120 June 15, 1994

An audit of the Internal Revenue Service (IRS) reveals that the agency is hampered by serious, pervasive financial management problems, including the inability of antiquated systems to generate reliable financial information needed to manage IRS operations. GAO is unable to express an opinion on the reliability of IRS' fiscal year 1993 Principal Financial Statements. Critical supporting information for seized assets, accounts payable, and collection by type of tax was unavailable, and supporting information for in-process revenue transactions, tax credit balances, and funds with the Treasury Department was not properly analyzed and recorded. Additionally, most financial statement balances were plagued by errors in revenue and operating funds transactions. This report discusses the scope and severity of IRS' financial management and control problems, the adverse impact of these problems on IRS' ability to effectively carry out its mission, and IRS' actions to remedy the problems. GAO makes recommendations to help IRS continue its efforts to resolve these long-standing and difficult problems and strengthen its financial management operations.

GAO found that: (1) critical supporting information for IRS financial statements was not available; (2) the available information was generally unreliable due to ineffective internal controls; (3) IRS internal controls did not effectively safeguard assets, provide a reasonable basis for determining material compliance with laws and regulations, or ensure that there were no material misstatements in the financial statements; and (4) although there were no instances of material noncompliance with laws and regulations during FY 1993, there were instances of noncompliance with certain Internal Revenue Code provisions.

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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