Our efforts to audit IRS accounting records have resulted in disclaimers of opinion each year. IRS’ inability to account for tax collections in total and by type of tax collected reduces the Congress’ and others’ ability to (1) fully assess the effectiveness of tax policies to achieve their intended goals, (2) know the amount the general revenue fund is subsidizing the Social Security Trust Fund, (3) determine whether excise taxes are being collected and distributed in accordance with legislation, and (4) assess IRS’ collection efforts on unpaid taxes. While IRS is making interim efforts to increase its capability to account for tax collections, longer term solutions will be needed before IRS will be able to provide this information in an accurate and timely manner. Right now, IRS does not have the capacity to account for its costs and outcomes in a manner consistent with good financial management. Finally, IRS needs to have good financial management to show that it does not have a double standard for financial management—one that taxpayers must adhere to and another that applies to itself. IRS has made progress on addressing some of these problems, and we have worked closely with it to identify interim solutions to address the problems that can be fixed quicker and partially address the problems that will require longer term solutions. IRS has developed an action plan, with specific timetables and deliverables, to attempt to address the reasons for our audit disclaimer.
Why GAO Did This Study

GAO discussed the Internal Revenue Service's (IRS) financial management challenges.

What GAO Found

GAO noted that: (1) GAO efforts to audit IRS accounting records have resulted in a disclaimer of opinions each year; (2) IRS' inability to account for tax collections in total and by type of tax collected reduces the Congress' and others' ability to fully assess the effectiveness of tax policies to achieve their intended goals, know the amount the general revenue fund is subsidizing the Social Security Trust Fund, determine whether excise taxes are being collected and distributed in accordance with legislation, and assess IRS' collection efforts on unpaid taxes; (3) while IRS is making interim efforts to increase its capability to account for tax collections, longer term solutions will be needed before IRS will be able to provide this information in an accurate and timely manner; (4) right now, IRS does not have the capacity to account for its costs and outcomes in a manner consistent with good financial management; (5) IRS needs to have good financial management to show that is does not have a double standard for financial management--one that taxpayers must adhere to and another that applies to itself; (6) IRS has made progress on addressing some of these problems, and GAO has worked closely with it to identify interim solutions to address the problems that can be fixed quicker and partially address the problems that will require longer term solutions; and (7) IRS has developed an action plan, with specific timetables and deliverables, to attempt to address the reasons for GAO's audit disclaimer.