	Significant Matters

The overriding problem in providing an opinion on IRS’ financial statements, reporting on its internal controls, and reporting on its compliance with laws and regulations is that IRS has not yet been able to provide support for major portions of the information presented in its financial statements and, in some cases where it was able to do so, the information was found to be in error. The following discusses the five material weaknesses we found. However, IRS has not been able to make these amounts agree to the amounts included in its financial management systems and Treasury records. IRS’ accounting records were in total disarray, and it could not substantiate large portions of the reported amounts. For fiscal year 1995, IRS had a core accounting system in place that tracked its financial management activity. In our assessment this year, we determined that IRS had completed 17 of these recommendations. (continued)
Financial Audit: Examination of IRS’ Fiscal Year 1993 Financial Statements  (GAO/AIMD-94-120, June 15,1994)
Ensure that system development efforts provide reliable, complete, timely, and comprehensive information with which to evaluate the effectiveness of its enforcement and collection programs; Establish and implement procedures to analyze the impact of abatements on the effectiveness of assessments from IRS’ various collection programs; and Reconcile detailed revenue transactions for individual taxpayers to the master file and general ledger. Comments From the Internal Revenue Service

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Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Internal Revenue Service's (IRS) financial statements for fiscal years 1995 and 1994.

What GAO Found

GAO found that: (1) it could not express an opinion of the 1995 IRS financial statement due to limitations in the scope of its work; (2) the information in the 1995 statement may be unreliable; (3) ongoing financial management problems include IRS inability to verify or reconcile taxpayer revenue and refunds to accounting records, substantiate amounts reported for various types of taxes collected, verify nonpayroll operating expenses, and reconcile reported appropriations with Department of the Treasury records, and determine the unreliability of estimated accounts receivable balances; (4) IRS has not resolved many of its financial management problems, but it has developed software to capture detailed revenue and refund transactions and is completing documentation of its financial management systems to aid in system improvements; (5) significant material weaknesses in IRS controls over recordkeeping exist, including lax computer security; (6) it could not test IRS compliance with applicable laws and regulations; and (7) IRS has completed 17 of 59 recommendations for improving its financial management systems.