The Internal Revenue Service needs to enhance its internal control over financial reporting, according to a new
The GAO audited the IRS’s fiscal years 2015 and 2014 financial statements and identified several deficiencies in IRS’s internal control over financial reporting. While the flaws are not considered to be material weaknesses or significant deficiencies, either individually or collectively, they nonetheless warrant IRS management’s attention, according to the GAO. The control deficiencies relate to the following:
• verification of manually classified unpaid tax assessments,
• adjudication approval for applicants,
• accountability over duress alarms,
• oversight at taxpayer assistance centers,
• initiation and monitoring of manual refunds,
• certification of manual refunds,
• quality review over input corrections,
• accounting for missing and unverified assets,
• accuracy and completeness of tangible property and equipment,
• accounting for assets in the general ledger,
• authorization of asset disposals,
• accuracy of future lease payment amounts for noncancelable operating leases, and
• verification of payroll adjustments.
The GAO made 17 new recommendations to address the additional deficiencies found in the IRS’s internal control over financial reporting. The IRS has completed corrective actions on 17 of the 42 previous recommendations from the GAO’s prior financial audits that remained open at the beginning of the GAO’s fiscal year 2015 audit.
As a result, the IRS currently has 42 GAO recommendations that need to be addressed, according to the report, including the 25 prior open recommendations along with the 17 new ones that the GAO made in the latest report.
“We continue to make significant progress in addressing internal control deficiencies and financial management as evidenced by 16 consecutive years of clean audit opinions on our financial statements,” wrote IRS Commissioner John Koskinen in response to the report. “During fiscal year 2015, IRS strengthened its processes and controls over service organizations, timecards, receipt and acceptance, installment agreement user fees, courier trips, unpaid assessments, and transmittals of unprocessable items with receipts, allowing for the closure of several older recommendations. … We are committed to implementing appropriate improvements to ensure that the IRS maintains sound financial management practices.”
