IRS Financial Audits: Status of Efforts to Resolve Financial Management Weaknesses

GAO discussed the Internal Revenue Service's (IRS) efforts to prepare reliable financial statements and improve its financial management, focusing on: (1) IRS implementation of GAO recommendations to correct financial management weaknesses; (2) IRS progress in addressing major problems that have prevented GAO from expressing an opinion on its financial statements; (3) IRS problems in developing Tax Systems Modernization (TSM); and (4) how IRS financial management weaknesses affect Department of the Treasury and governmentwide financial statements. GAO noted that: (1) IRS is implementing some short-term interim strategies to resolve financial management problems in time for its fiscal year 1996 financial statement audit; (2) IRS will need to make more sweeping changes and devise long-term solutions to fully address problems in its accounting for administrative operations, reporting accounts receivable, and accounting for revenue; (3) many IRS actions for correcting management and technical problems in developing TSM are incomplete and do not fully respond to the recommendations; (4) IRS financial information provides significant input to and greatly affects the preparation and audit of Treasury and governmentwide financial statements; and (5) it will be essential for IRS to follow through on its short-term and long-term efforts to improve its financial statements and financial management systems.