Management reporting: improvements are needed to strengthen the tax administration’s internal control over financial reporting

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What the GAO found

During its audit of the Internal Revenue Service (IRS) fiscal year 2019 and 2018 financial statements, GAO identified new deficiencies in IRS internal control over financial reporting that, although not not considered a material weakness or a material deficiency, nevertheless merit the attention of IRS management. These control gaps concern the IRS

  • carry taxpayer receipts,
  • review taxpayer accounts for duplicate refunds,
  • record acceptance of goods and services, and
  • calculate future rents for non-cancellable operating leases.

The GAO provided IRS management with detailed information regarding these four new control gaps and made four recommendations to address them. In addition, for 11 of 37 recommendations from previous GAO reports regarding control deficiencies in the IRS’s internal control over financial reporting, GAO found that the IRS had implemented corrective actions during the year. fiscal year 2019 that resolved the related control deficiencies and, therefore, these recommendations We are closed. As a result, the IRS currently has 30 GAO recommendations to address – the previous 26 open recommendations and the four new recommendations that GAO is making in this report. The GAO makes four recommendations to address the new control gaps identified in its audit. These recommendations are intended to improve the IRS’ internal controls over financial reporting as well as to bring the IRS into compliance with its own internal control policies and standards within the federal government. Commenting on a draft of this report, the IRS said it is committed to implementing appropriate improvements to ensure it maintains sound financial management practices. The IRS has accepted the four new GAO recommendations and outlines planned actions to address each recommendation.

Why GAO Did This Study

The purpose of this report is to present the internal control deficiencies identified during GAO’s audit of the 2019 and 2018 IRS Financial Statements for which GAO did not yet have outstanding recommendations. This report provides new recommendations to address these internal control deficiencies. This report also includes the results of GAO’s follow-up on the status, as of September 30, 2019, of corrective actions taken by the IRS to address recommendations contained in previous years’ GAO reports that remained open as of September 30, 2018.

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