Financial Management: IRS' Self-Assessment of Its Internal Control and Accounting Systems Is Inadequate

Highlights

Pursuant to a legislative requirement, GAO reviewed the Internal Revenue Service's (IRS) efforts to identify, report, and correct material weaknesses in its internal control and accounting systems, focusing on: (1) the IRS process for evaluating its internal control and accounting systems; and (2) IRS plans for correcting reported material weaknesses.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Internal Revenue Service	To ensure accurate reporting to the Secretary of the Treasury on the effectiveness of IRS internal control and accounting systems, the Commissioner of Internal Revenue should direct the Senior Management Council to coordinate and oversee activities to establish and implement proper written procedures that provide for the identification, documentation, and correction of material weaknesses.	Closed – Implemented IRS completed its final action regarding this recommendation by issuing improved internal control procedures and guidance.
Internal Revenue Service	To ensure accurate reporting to the Secretary of the Treasury on the effectiveness of IRS internal control and accounting systems, the Commissioner of Internal Revenue should direct the Senior Management Council to coordinate and oversee activities to provide classroom training and guidance materials to all review staff.	Closed – Implemented The Office of Management Controls has developed a Service-wide training strategy to educate management staff on their internal control responsibilities. IRS selected a contractor to develop the training course materials.
Internal Revenue Service	To ensure accurate reporting to the Secretary of the Treasury on the effectiveness of IRS internal control and accounting systems, the Commissioner of Internal Revenue should direct the Senior Management Council to coordinate and oversee activities to develop effective corrective action plans that address the fundamental causes of the weaknesses.	Closed – Implemented The IRS Senior Management Council meets periodically with the IRS executives to review their identified material weaknesses and corrective action plans to ensure that fundamental causes are addressed. Further, one objective of the training strategy is to develop the skills needed to develop effective corrective action plans that address the root causes of material weaknesses.
Internal Revenue Service	To ensure accurate reporting to the Secretary of the Treasury on the effectiveness of IRS internal control and accounting systems, the Commissioner of Internal Revenue should direct the Senior Management Council to coordinate and oversee activities to verify the effectiveness of corrective actions before removing reported weaknesses from IRS records.	Closed – Implemented As part of IRS' annual process, the Senior Management Council instituted the practice of meeting with IRS executives to review the effectiveness of their corrective action plans. IRS developed written policies requiring testing of corrective actions to determine if the corrective actions are effective in resolving the weakness.

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Topics

Auditing and Financial Management

Accounting proceduresAgency evaluationFederal agency accounting systemsFinancial management systemsFunds managementInternal auditsInternal controlsReporting requirementsSystems evaluationTax administration