Summary
In November 2008, we issued our report on the results of our audit of the Internal Revenue Service's (IRS) financial statements as of, and for the fiscal years ending, September 30, 2008, and 2007, and on the effectiveness of its internal controls as of September 30, 2008. We also reported our conclusions on IRS's compliance with significant provisions of selected laws and regulations and on whether IRS's financial management systems substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA). Additionally, in January 2009, we issued a report on information security issues identified during our fiscal year 2008 audit, along with associated recommendations. The purpose of this report is to discuss issues identified during our audit of IRS's financial statements as of, and for the fiscal year ending, September 30, 2008, regarding internal controls that could be improved for which we currently do not have a specific recommendation outstanding. Although not all of these issues were discussed in our report on the results of our fiscal year 2008 financial statement audit, they all warrant IRS management's attention.
During our audit of IRS's fiscal year 2008 financial statements, we identified several internal control and other management issues not addressed by previous recommendations. These issues concern the following: (1) Controls over computer programs affecting penalty assessments did not ensure that the programs always functioned in accordance with IRS's policies and procedures. (2) Policies and procedures did not require that back up staff be assigned to manual refund monitoring activities when staff assigned to those functions were absent from work for an extended period of time. (3) Procedures for monitoring whether service center campus couriers entrusted with taxpayer receipts and information adhered to courier service requirements lacked adequate criteria for identifying potential deviations from those requirements. (4) Procedures did not exist for tracking, summarizing, and reporting the total number and dollar amount of taxpayer receipts collected at Taxpayer Assistance Centers (TACs). (5) Procedures governing IRS's quarterly duress alarm tests did not specifically require that all duress alarms be tested and that the emergency history report be reviewed to appropriately address reported security breaches or concerns. (6) Procedures did not exist for regularly monitoring the timeliness of purchase card approvals and following up on instances of non-compliance. (7) Controls over the use of appropriated funds did not always prevent the improper use of expired appropriations to fund current year obligations. (8) Controls over the recording of undelivered order transactions (e.g., receipt and acceptance of goods and services, adjustments to estimated obligations, or similar transactions that impact the undelivered order accounts) did not always prevent or detect errors in these accounts. (9) Full cost information to manage specific programs and activities was not readily accessible by program managers. (10) Outcome-based performance measures did not exist to assist in evaluating the effectiveness of IRS's enforcement programs and activities. These issues increase the risk that IRS may fail to prevent or timely detect (1) errors in computer-generated penalty assessments and undelivered order accounts; (2) issuance of erroneous tax refunds; (3) loss, theft, or misuse of taxpayer receipts and information; (4) improper purchase card transactions; and (5) improper use of expired funds. In addition, the lack of detailed cost and related performance measures limits management's ability to assess the effectiveness of programs and determine how best to allocate limited resources.
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.
Director:
Team:
Phone:
Steven J. Sebastian
Government Accountability Office: Financial Management and Assurance
(202) 512-9521
Recommendations for Executive Action
Recommendation: The IRS should direct the appropriate IRS officials to correct the Integrated Data Retrieval System (IDRS) computer program for identifying individual taxpayers who have entered into an installment agreement so that except in situations where the taxpayer did not file the tax return timely, failure-to-pay (FTP) penalty assessments made after the date of the installment agreement are calculated using the monthly one-quarter of one percent penalty rate on all of the taxpayer's accounts covered by the installment agreement.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to add specific requirements to the Internal Revenue Manual (IRM) to require that manual refund units assign back up staff to perform manual refund monitoring activities whenever a manual refund initiator is absent for an extended period of time.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to document in the IRM minimum requirements for establishing criteria for time discrepancies or other inconsistencies, which if noted as part of the required monitoring of Form 10160, Receipt for Transport of IRS Deposit, would require off-site surveillance of couriers.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to document in the IRM minimum requirements for conducting off-site surveillance of couriers entrusted with taxpayer receipts and information.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct appropriate IRS officials to establish procedures to track and routinely report the total dollar amounts and volumes of receipts collected by individual TAC location, group, territory, area, and nationwide.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to establish procedures to ensure that an inventory of all duress alarms is documented for each location and is readily available to individuals conducting duress alarm tests before each test is conducted.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to establish procedures to periodically update the inventory of duress alarms at each (Taxpayer Assistance Center) TAC location to ensure that the inventory is current and complete as of the testing date.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to provide instructions for conducting quarterly duress alarm tests to ensure that IRS officials conducting the test (1) document the test results for each duress alarm listed in the inventory including date, findings, and planned corrective action and (2) track the findings until they are properly resolved.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to establish procedures requiring that each physical security analyst conduct a periodic documented review of the Emergency Signal History Report and emergency contact list for its respective location to ensure that (1) appropriate corrective actions have been planned for all incidents reported by the central monitoring station and (2) the emergency contact list for each location is current and includes only appropriate contacts.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to develop, document, and implement procedures to regularly monitor the timeliness of purchase card approvals. This should include establishing procedures and responsibility for identifying and following up on instances of non-compliance with required approval timeframes.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to revise the IRM section related to the limited use of expired appropriations to provide additional guidance to help employees distinguish between procurement actions that constitute new obligations and those that merely adjust or liquidate prior obligations that the IRS incurred during an expired appropriation's original period of availability.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to reiterate IRS's existing policy requiring that transactions be recorded accurately to the undelivered orders obligation accounts.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to perform existing reviews of transactions recorded in undelivered orders obligation accounts in a more timely manner in an effort to detect and correct errors, such as duplicate receipt and acceptance charges, earlier in the process.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To facilitate routine collaboration between Chief Financial Officer (CFO) and business operating division officials, including program managers in achieving the goal of making appropriate full cost information readily available to managers and executives to support informed decision-making, the IRS should direct the appropriate IRS officials to establish a formal, documented process for identifying over time the full range of IRS's programs and underlying activities, outputs, and services for which IRS believes full cost information would be useful to executives and program managers. Such a process should (1) be formally established and documented through policies, procedures, guidance, meeting minutes, and other appropriate means; (2) define the roles and responsibilities of the CFO and other business units in the process; and (3) be focused on the goal of determining what cost information would be useful and the most appropriate means of developing and reporting it for both existing programs and new programs as they are initiated.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To facilitate routine collaboration between Chief Financial Officer (CFO) and business operating division officials, including program managers in achieving the goal of making appropriate full cost information readily available to managers and executives to support informed decision-making, the IRS should direct the appropriate IRS officials to complete the development of full cost methodologies to routinely accumulate and report on their full costs, including down to the activity level where appropriate For each of the IRS programs, activities, outputs, and services identified for which full cost information would be useful to IRS executives and program managers. Such full cost data should be readily accessible to IRS program managers whenever they are needed and should include both personnel costs based on time spent on specific activities as well as all associated non-personnel costs and be drawn from or reconcilable to IRS's financial accounting system.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: The IRS should direct the appropriate IRS officials to develop outcome-oriented performance measures and related performance goals for IRS's enforcement programs and activities that include measures of the full cost of, and the revenue collected from, those programs and activities (return on investment) to assist IRS's managers in optimizing resource allocation decisions and evaluating the effectiveness of their activities.
Agency Affected: Department of the Treasury: Internal Revenue Service
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
