**GAO-09-513R**                      Published: Jun 24, 2009. Publicly Released: Jun 24, 2009.                  

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## Highlights

	In November 2008, we issued our report on the results of our audit of the Internal Revenue Service's (IRS) financial statements as of, and for the fiscal years ending, September 30, 2008, and 2007, and on the effectiveness of its internal controls as of September 30, 2008. We also reported our conclusions on IRS's compliance with significant provisions of selected laws and regulations and on whether IRS's financial management systems substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA). Additionally, in January 2009, we issued a report on information security issues identified during our fiscal year 2008 audit, along with associated recommendations. The purpose of this report is to discuss issues identified during our audit of IRS's financial statements as of, and for the fiscal year ending, September 30, 2008, regarding internal controls that could be improved for which we currently do not have a specific recommendation outstanding. Although not all of these issues were discussed in our report on the results of our fiscal year 2008 financial statement audit, they all warrant IRS management's attention.

	During our audit of IRS's fiscal year 2008 financial statements, we identified several internal control and other management issues not addressed by previous recommendations. These issues concern the following: (1) Controls over computer programs affecting penalty assessments did not ensure that the programs always functioned in accordance with IRS's policies and procedures. (2) Policies and procedures did not require that back up staff be assigned to manual refund monitoring activities when staff assigned to those functions were absent from work for an extended period of time. (3) Procedures for monitoring whether service center campus couriers entrusted with taxpayer receipts and information adhered to courier service requirements lacked adequate criteria for identifying potential deviations from those requirements. (4) Procedures did not exist for tracking, summarizing, and reporting the total number and dollar amount of taxpayer receipts collected at Taxpayer Assistance Centers (TACs). (5) Procedures governing IRS's quarterly duress alarm tests did not specifically require that all duress alarms be tested and that the emergency history report be reviewed to appropriately address reported security breaches or concerns. (6) Procedures did not exist for regularly monitoring the timeliness of purchase card approvals and following up on instances of non-compliance. (7) Controls over the use of appropriated funds did not always prevent the improper use of expired appropriations to fund current year obligations. (8) Controls over the recording of undelivered order transactions (e.g., receipt and acceptance of goods and services, adjustments to estimated obligations, or similar transactions that impact the undelivered order accounts) did not always prevent or detect errors in these accounts. (9) Full cost information to manage specific programs and activities was not readily accessible by program managers. (10) Outcome-based performance measures did not exist to assist in evaluating the effectiveness of IRS's enforcement programs and activities. These issues increase the risk that IRS may fail to prevent or timely detect (1) errors in computer-generated penalty assessments and undelivered order accounts; (2) issuance of erroneous tax refunds; (3) loss, theft, or misuse of taxpayer receipts and information; (4) improper purchase card transactions; and (5) improper use of expired funds. In addition, the lack of detailed cost and related performance measures limits management's ability to assess the effectiveness of programs and determine how best to allocate limited resources.

## Recommendations

## Recommendations for Executive Action

See All 16 Recommendations

## Full Report

Full Report (38 pages)

Accessible Text 

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## Topics

Tax Policy and Administration

Appropriated fundsEvaluation criteriaFederal regulationsFinancial statement auditsFinancial statementsInformation security managementInternal controlsMonitoringNoncompliancePerformance measuresReporting requirementsRequirements definitionTax administration systemsTax information confidentialityTax refundsTaxpayersVoluntary compliancePolicies and proceduresFines and penalties