GAO Identifies Weak Links in IRS' Internal Controls
by Terri Eyden on
By Ken Berry
It hasn't been a very good week for the IRS. First, a firestorm has erupted over its efforts to target conservative "tea party" groups applying for tax-exempt status. Now the Government Accountability Office (GAO) has released a new report saying that the IRS has to improve its internal controls.
The GAO examined financial statements of the IRS for fiscal year 2012 (FY 2012) spanning October 1, 2011, through September 30, 2012. It concluded that IRS controls for estimating federal tax receivables and other unpaid tax assessments weren't effectively implemented to ensure proper accounting. The GAO also identified six lower-profile internal control "deficiencies" found in FY 2012:
1. The internal controls don't ensure that deceased taxpayers are identified in a timely manner and that refunds are properly issued. In a sample of refunds sent to deceased taxpayers, the GAO found 88 percent were invalid, many of them resulting from the ongoing problem of identity theft.
2. Policies and procedures aren't effectively designed to ensure that individuals who can authorize the issuance of manual refunds were properly appointed to do so.
3. Policies and procedures don't appropriately restrict the IRS technicians' system providing access to change taxpayer account information.
4. The internal controls don't adequately ensure the IRS fully allocated costs or correctly classified all user fee exchange revenue within its Integrated Financial System (IFS). The IRS uses the IFS to prepare its Statement of Net Cost.
5. The controls can't ensure IRS personnel have recorded an obligation for goods and services prior to taking delivery of them from a contractor or a federal agency.
6. Policies and procedures aren't effectively implemented for calculating quarterly excise tax revenues to be distributed to the Airport and Airway Trust Fund and the Highway Trust Fund.
The new GAO report revealed the IRS had completed corrective action on twenty-three of the sixty-nine recommendations from prior financial audits and related work by the end of FY 2012. So now the IRS must address a total of sixty recommendations (the "open" forty-six recommendations plus fourteen new recommendations included in the new report).
And what does the IRS have to say about the report? It agreed with all fourteen of the GAO recommendations with an explanation: "We continue to make significant progress in addressing internal control deficiencies and financial management as evidenced by thirteen consecutive years of clean audit opinions on our financial statements," said IRS Acting Commissioner Steven T. Miller in his response to the report. "During fiscal year 2012, IRS strengthened controls over information security, refund disbursements, and release of federal tax liens." But there's more work that has to be done.
- GAO Takes IRS to Task on Information Security Control Lapses
- TIGTA to IRS: Get Tough on Noncash Charitable Contributions
- IRS Told to Improve Controls over Refundable Tax Credits
You may like these other stories...
Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...
IRS chief: New rule on the way for tax-exempt groupsIRS Commissioner John Koskinen told the USA Today on Monday that the agency will likely rewrite a proposed rule regulating the political activities of nonprofit groups to...
Upcoming CPE Webinars
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.