The IRS financial management systems, which do not comply with federal law, are unlikely to be fixed before 2014, according to an audit report.
The Government Accountability Office (GAO) determined last year that the IRS's financial management systems do not meet the standards of the Federal Financial Management Improvement Act of 1996 (FFMIA). The law requires the systems to produce "accurate, reliable and timely" financial information.
GAO found that IRS does not post tax-related transactions properly and that its records are not adequately traceable for taxes receivable. The IRS also has material weaknesses in its internal controls over both information security and unpaid assessments.
The law requires the Treasury Inspector General for Tax Administration (TIGTA) to review the agency's efforts to become compliant. The IRS set a goal to fix the material weakness of unpaid assessments by November 30, 2014, pending successful implementation of Customer Account Data Engine Release 2, known as CADE 2. CADE 2 is designed to modernize the processes to account for records of individual taxpayers and to create one system of records. The time to process and update taxpayer account information would go from a week to a day. The inspector general report said that the IRS remediation plan left out remediation actions and costs for CADE 2 and should be updated.
"Until the IRS updates its FFMIA remediation plan with actions related to its CADE 2 strategy, TIGTA will be unable to fully assess its overall progress in resolving noncompliance with its financial management systems", the report said.
The IRS disagreed that all actions and costs associated with CADE 2 need to be included in the FFMIA remediation plan, but made other recommended updates.
The IRS response in the report notes that the FFMIA remediation plan is supposed to address actions required for IRS financial systems. "It is important to note that CADE 2 is not a financial system, but a business system modernization project used to modernize the IRS tax system for individual taxpayer account data." The IRS said it would add to the plan "milestones and costs when the financial systems will be updated to leverage the information from CADE2, as appropriate."
"The IRS's continued noncompliance with FFMIA will need to be closely monitored", said J. Russell George, the Treasury Inspector General for Tax Administration.