GAO provided information on additional matters it identified in its audit of the Internal Revenue Service's (IRS) custodial financial statements for fiscal year 1997 regarding accounting procedures and internal controls that could be improved.

GAO noted that: (1) it found errors in deriving the financial statement balances; (2) yearend closing journal entries and schedules prepared to support the custodial financial statements did not always show evidence of supervisory review that might have detected and corrected those errors; (3) IRS' reliance on the experience of key personnel renders IRS vulnerable to loss of financial reporting institutional knowledge through normal staff attrition and creates significant risks that information supporting the financial statements will not be complete, accurate, properly authorized, and consistent; (4) inadequate review procedures allowed an error to occur in the amount of Earned Income Tax Credit disbursements reported to the Treasury; (5) data contained in IRS' master files were not always accurate; (6) pertinent transactions were not always recorded, which sometimes caused IRS' master file records to be outdated and inaccurate; (7) 55 percent of the offers-in-compromise cases it reviewed were not resolved within the 6-month time period established by IRS; (8) GAO found several instances where IRS recorded different types of transactions in the same general ledger account; (9) a worksheet that IRS used to support tax receipt and refund adjustments reported to the Treasury did not provide a detailed explanation for the reclassifications or document how the reclassified amounts were determined; (10) cash reconciliations with the Treasury and related journal entries did not always have evidence of supervisory-level review and approval; and (11) IRS did not always have readily available documentary support or evidence of supervisory review for performance measure calculations.