The Government Accountability Office (GAO) released a report yesterday detailing results of an audit of the Internal Revenue Service's (IRS) financial statements of the previous fiscal year. The audit identifies several internal control and management issues not addressed by previous audits. The report contains 16 recommendations for improving internal controls at IRS.

Some of the issues raised by the report include:

• Insufficient controls over computer programs affecting penalty assessments.
  
• Procedures for the absence of staff from manual refund monitoring services for an extended period do not require the assignment of backup staff.
  
• Policies covering IRS couriers at service center campuses lack criteria to identify the possible misuse of taxpayer receipts and information.
  
• Procedures do not exist for tracking, summarizing, and reporting the total number and dollar amount of taxpayer receipts collected at Taxpayer Assistance Centers (TACs) .

GAO summarizes the need to address these issues thusly:

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.

In a June 3 letter from the IRS to GAO, Douglas H. Shulman, director of the IRS, acknowledged the 16 recommendations, stating that the agency agrees with all but one of them and that most of the recommendations have either been implemented or are in the process thereof. GAO will evaluate the progress of IRS towards implementing the recommendations in a future report.

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