Funny Business with Jane Wells

A Taxing Time—IRS Audited!


The Internal Revenue Service, famous for its audits, has itself been audited by the Government Accountability Office. Let's just say that if you did your books the way the IRS does its own, you'd probably be calling a lawyer.

"In GAO's opinion, IRS's fiscal years 2008 and 2007 financial statements are fairly presented in all material respects," the report starts with a note of optimism. "However, serious internal control and financial management systems deficiencies continued to make it necessary for IRS to rely on resource-intensive compensating processes to prepare its balance sheet. Because of these and other deficiencies, IRS did not, in GAO's opinion, maintain effective internal control over financial reporting or compliance with laws and regulations, and thus did not provide reasonable assurance that losses, misstatements, and noncompliance with laws and regulations material in relation to the financial statements would be prevented or detected on a timely basis."

Man, who teaches these people to write?

Basically, the GAO found that the IRS is having to spend a lot of time and money trying to balance its books and the numbers can't be fully trusted. But, things have gotten better! The GAO says the IRS has improved its efforts to collect unpaid taxes and is no longer sending out so many refunds to people who didn't deserve them! Hurray!

Remaining challenges include "material weaknesses" in things like "information security." Furthermore, the report says, "GAO found that IRS was not always in compliance with the law concerning the timely release of tax liens."

Finally, The GAO says the IRS continues to use "obsolete financial management systems" that do not conform to federal financial management requirements. Yes, the IRS is not yet complying with 12-year-old federal standards on financial management. "These challenges adversely affect IRS's ability to fulfill its responsibilities as the nation's tax collector because it is unable to routinely obtain comprehensive, timely, accurate, and useful information for day-to-day decision making."

So, what does the GAO suggest? The agency has already made 147 recommendations on improving internal controls and compliance--66 of those are related to problems in information security. But don't worry. "IRS stated that it was dedicated to improving financial management and cited several initiatives and related benefits," the report says. "It (the IRS) noted that it has a solid management team in place to address remaining financial management challenges, and is committed to improving information security as an ongoing priority."

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