FINANCIAL AUDIT Examination of IRS’ Fiscal Year 1993 Financial Statements_part9 ppt

Financial Statements INTERNAL REVENUE SERVICE Supplemental Financial and Management Information for the Fiil Ye;lrs Ended September 30,1993 and 19!U Tax System Modernbtion (Continued) ISD-10 Corporate Systems Modernization and Transition: A project to implement TSM-driven changes in the Detroit and Martinsburg Computing Centers. ISD-14 !hvice Center Recognitionhmge Processing: A project to replace the two existing non-compliance systems at each Service Center with one integrated system. ISD-21 Communications Modernhtion: Includes projects to complete installation of the AMA System+ cover services received through the Consolidated Data Network, and meet other TSM data communications requirements. Additional activities include GOSIP, Universal Whing and PBX AcquisitioniMaintenance. ISM-35 Tax Systems Modernization Transition: Tax Systems Modernization software development environment. R-06 Full Unitization/Electronic Filing System: Includes projects for the Electronic Filing System and TeleFile. The amounts in Figures 21 and 22 are estimated based on a combination of obligation data and allocations of TSM cost data, Page 111 GAO/AIMD-94120 IRS’ Fiscal Year 1BW Financial Strtements This is trial version www.adultpdf.com Financial Statementa INTERNAL REiVJJNUE SERVICE Sllppkmner Fbmndal and MMagement rneonnalion for the Nscal Yars Ended September XI,1993 and 1992 I* expanded filing and I payment options l one4op customer service, including easier accemlothelRSand expmded hours . earlier issue detection and resolution of isues to prevent pyramiding liabilities l reduetloltin IRS contxts, including 1 fewer notices l clecmadinterestowed by the taxpnyer, and les time and representation costs when dealing with IheIRs . more focused compliance checks l empowerment of employees to dlow greater flexibility in resolving issues BUSINESS VISMN PROJECTED BENEFITS BY BUSfNRSS OBJEff IVE Table 1 l expanded filing and payment options . one-stop customer service. including easier zacxess to the IRS and expanded hours l earlier issue detection nod resolution of issues to prevent pyramiding liabilities . more focused compliance checks . improved methods of identifying and addressing noncompliance . improved work systems * redirection of staff yeam to front-lie ccmpliance activities . faster refunds redllctioll in IRS contacts, including fewer notices deaeased interest owed by the taxpayer and less time and representation costs when dealing with the IRS more efficient operating environment more diversified w&jobs elimination of functio biNfiefS job satisfaction from the level of service provided to taxpayers more productive work environment because of the ability to resolve cases on-line with WYm increased span of conlrol for managers at all levels, and leaner, flatter organization enhanced training to provide employees with skills they need ability to work from home or altemative work sites Page 112 GAOMMiD-94-120 m’ F&al Year 1992 Financial Statementa This is trial version www.adultpdf.com Financial Statements JNTERNALa REVENUE SERVICE Supplemental Financial and Management Informntion for the Fiscal Years Ended September 39,1993 and 1992 Federal Manager’s Financial Integrity Ad StatIstical Summary of Performance Internal Contrds Table 2 Financial Manaeement Svstems 1992 Repcnl 2 1 1 1993 Repoll 3 0 3 TOhI 172 165 7 Page 113 GAO/AIMD-94-120 IRS’ Fbcal Year 1993 Financhl Statemetttm This is trial version www.adultpdf.com Financial Statements INTERNAL REVJWUE SERVICE Supplemental Financial ad Mnnqement fnformation for the Fiil Years Ended September 39,1993 and 1992 Federal Manager’s Financial Integrity Act Material Weaknesses . . Management of IRS Detinquent Deb Management of IRS Detinquent Deb . Tax Data Security . Deterrence and Detection of Return Filing Fraud Table 3 Improve the accuracy of the inventory of receivable Slow the growth of receivables through increased USI of installment agreements, offers-in-compromise, ant consideration of collectibility in selecting returns for audit. Apply financial reporting standards to receivables accounting. Modify the methodology for assessing collectibility. Increase management oversight for detecting inappropriate access to tax data. Increase employee awareness through employee orientations and CPE proms. Redesign the security system to emphasii a proactive approach. Implement additional systematic approaches to early identification of fraud for both paper and electronic rctums. Establish Return Freparerflransmitter Team to develop recommendations to strengthen applicant suitability procedures. ELxtronic Return Originator (ERO) monitoring activity, and removal action for non-compliant EROS. Recommendations will be reviewed and accept&rejected by the ELF Fraud Control Group. ELF Strategy Steering Committee will monitor and report on ELF Fraud initiatives Page 114 GAO/ MD-94-120 lRS’ Fiscal Year 1993 Fhclal Statemeute This is trial version www.adultpdf.com Financial Statements INTERNAL REVENUE SERVICE Supplemental Financial and Mauagemcnt Information for the Fiscal Years Eudcd September 39,1993 and 1992 Federal Manager’s Financial Integrity Act Material wepkn- (continued) Table 3 Program in future MIS planning. - Revise the IRM to assign responsibilities of the ETA program to appropriate functional managers. l Distribute valid Tax Year 1992 transcripts. l Strengthen assurance process with improved guidance and emphasis on validaling effectiveness of corrective actions. (Criminal Investigation) document all asset seizures and disposals. nt a centralized system for tracking ADP Page 116 GAO/AND-94-120 IRS’ Fiscal Year 1999 Financial Statements This is trial version www.adultpdf.com Financial Statenkenta INTERNAL REVENUE SERVICE Supplemerhl Fhancial and Managemmt Infommtion for the Fiscal Years Ended September 36,193 and 1992 Federal Manager’s Financial Integrity Act Material Non-Confommnces Table 4 to develop rehble data on sts using budget categories electronically receiving and processing employer payments aad accounting data (tax return) prior to the long-term Tax Systems Modernization (TSM) * Review and update manual refund authorizations. Page 116 GAO/AIMD-94120 IRS’ Fiacal Year 1993 FinmU Statements This is trial version www.adultpdf.com Flnauchl Statements INTERNAL REVENUE SERVICE supplemental Flnandal and Management hlfonnation for the Fiscal Yam Ended September 39,1993 and 1992 Other Funds The Payment Where Earned Incowte 0eaY.t Exceeds Uabi& for Tar Fund, authorized by the Revenue Adjustment Act of 1978 provides funding for those instances where the earned income credit will exceed the amount of tax due, resulting in an additional payment to the taxpayer. The Heabh Insumme Supphamt to Ebwd I?mnna Cndil Fund. authorized by the Omnibus Budget Reconciliation Act of 1990 is used for those instances where the health income supplement to the earned income credit will exceed the amount of tax liability owed, resulting in an additional payment to the taxpayer. Refmdimg RUmal Rewwe CoIkctihns, Mdpd Fund, authorized by law. is used to refund overpayments of taxes. Refunding Intemal Revenue CoUec~~s, htemst Fund. authorized by law, is used to pay interest on certain Internal Revenue collections that must be refunded. Fedeml Tcrr l&n Rrdving Fulrd, authorized by Section 112(a) of the Federal Tax Lien Act of M6, is used to finance the redemption of real property by the United States when it is in the government’s interest to do so (i.e. during a forecbsore sale where the govermnent’s Lien is subordinate to the original indebtedness). Reimbursement to State ami IAUUI Law Enfonmmt Agerrcies Fund, authorized by the Anti-Dnrg Act of 1988, is used to reimburse state or local iaw enforcement agencies for certain investigative costs when they have substantially contributed to the recovery of federal taxes imposed with respect to illegal drug-related activities. Page 117 GAOfAIMD-94-120 IES’ Fkal Year 1993 Financial Statements This is trial version www.adultpdf.com Financial Statements INTERNAL REVENUE SERVICE Supplemental Fiincial sod Management information For the Fil Years Ended September 3@,1993 and 1992 Major Contributors Mike Noble, Chief, Office of Financial Reports toTbecF0 Annual Report Lee Gross. Chief, Financial Reports Section IRS Ellen Waterhowe, Accountant Washington, D.C. Mark Brey, Accountant Racbelie Harris Coleman, Accountant Anthony Mamsco, Analyst Victor Onorato, Analyst Page 118 GAO/AIMD-94-120 IRS’ Fiscal Year 1993 Financial Statements This is trial version www.adultpdf.com Status of Fiscal Year 1992 Financial Audit Recommendations The results of our efforts to audit IRS’ fiscal year 1992 Principal Financial Statements were presented in our report entitled Financial Audit: Examination OfIRS'~CdYe~ 1992FinaIWid %ZhXm?ntS(GAO/AIMD-93-2, June 30,1993). The system and internal control weaknesses identified in that report and recommendations to correct them were discussed in more detail in the six reports listed below. We determined the status of the following recommendations based on our audit work at IRS during fiscal year 1993 and on our discussions with IRS officials. Our assessments of I& actions for the most significant recommendations are discussed under the significant matters section of this report. However, we have not fully assessed the appropriateness or effectiveness of all of the responses identified in the following table. We plan to update our assessment of IRS’ responses as part of our fiscal year 1994 audit. Page 119 GAfI/AlMP94-120 IRS’ Fiscal Year 1993 Financial Statements This is trial version www.adultpdf.com Appendix I Status of Fisml Year 1992 Financial Audit Recommendations Reports/recommendations Financial Audit: IRS Significantly bverstated Its Accounts Heceivable w/AFMD-93-42. May 6, 1993) Action complete Action in planning or planning No specific action Action in progress complete planned Provide the IRS Chief Financial Officer authority to ensure that IRS accounting system development efforts meet its financial reporting needs. At a minimum, the Chief Financial Officer’s approval of related system designs should be required. Take steps to ensure the accuracy of the balances reported in IRS financial statements. In the long term, this will require modifying IRS systems so that they are capable of (1) identifying which assessments currently recorded in the Master File System represent valid receivables and (2) designating new assessments that should be included in the receivables balance as they are recorded. Until these capabilities are implemented, IRS should rely on statistical sampling to determine what portion of its assessments represent valid receivables. Clearly designate the Chief Financial Officer as the official responsible for coordinating the development of performance measures relatelzl to receivables and for ensuring that IRS financial reports conform with applicable accountina standards. X Page 120 GAO/AIMJ&94-120 IRS’ Fiscal Year 1993 Financial Statements (continued) This is trial version www.adultpdf.com [...]... access activity of unit security representatives X Use the security features available in IRS’ operating systems software to enhance svstem and data intearitv X (continued) This is trial version www.adultpdf.com Page 121 GAWAIMD-94-120 IRS’ Fiscal Year 1993 Financial Statements Appendix I Status of Fiscal Year 1992 Financial Recommendations Action complete Reports/recommertdations Audit Action in progress... that address, the fundamental causes of the weaknesses, and (4) verify the effectiveness of corrective actions before removing reported weaknesses from IRS’ records X (continued) This is trial version www.adultpdf.com Page 122 GAOKlMD-BP-120 IRS’ Fiscal Year 1993 Financial Statementa Appendix I Status of Fiscal Year 1992 Financial Recommendations Reportshcommendations Financial Management: Important IRS... implementation of actions to reduce the errors in calculating and reporting manual interest, and test the effectiveness of these actions X Give a priority to the IRS efforts that will allow for earlier matching of income and withholding information submitted by individuals and third parties X (continued) This is trial version www.adultpdf.com Page 123 GAOAIMD-94-120 IRS Fiscal Year 1993 Financial Statements...Appendix I Status of Fiscal Year 1992 Financial Recommendations Action complete Reports/recommendations Mddify the IRS methodology for assessing collectibility of its receivables by Audit Action in planning or planning Action in progress Complete No specific action planned x the l including only valid... are not protected bv software access controls Financial Management: IRS’ GZiksessment of Its fnternaf Control and Accounting Systems Is Inadequate (GAOiPJMD-94-2, October 13, 1993) The Senior Management Council should coordinate, monitor, or oversee activities to (1) establish and implement proper written procedures that provide for the identification, documentation, and correction of material weaknesses,... assessments determined to have no chance of being collected; l including an analysis of individuat taxpayer accounts to assess their ability to pay; l basing group analyses on categories of assessments with similar collection risk characteristics; and l considering current and forecast economic conditions, as well as historical collection data, in analyses of groups of assessments Once the appropriate data... Year 1993 Financial Statements Appendix I St&ma bf EYscd Year 1892 Financial Uecommendatioua Actlon complets Reports/recommendstions Financial Management: IRS Does Not Adequately Manage Its Operating Funds (GAO/AIMD-94-33, Audit Action In planning or planning Action in progress complete No specific action planned l-ebruary 9, 1994) Monitor whether IRS’ new administrative accounting system effectively... records of IRS’ cash balances and adjust accounts accordingly X Promptly investigate and record suspense account items to appropriate appropriation accounts X Perform periodic reviews of obligations, adjusting the records for obligations to amounts expected to be paid, and removing expired appropriation balances from IRS records as stipulated by the National Defense Authorization Act for Fiscal Year 1991... goods or services to promptly forward receiving reports to payment offices so that payments can be promptly processed (continued) This is trial version www.adultpdf.com Page 124 GMh’ AIMD-94120 IRS’ Fiscal Year 1993 Fhawhl Statements ... conditions In the meantime, statistical sampling should be used as the basis for both individual and group analyses IRS Information Systems: Weaknesses Increase Risk of Fraud and Impair Reliability of Management Information (GAO/AIMD-93-34, September 22, 1993) x Limit access authorizations for individual employees to only those computer programs and data needed to perform their duties and periodically review . GAO/AIMD-94-120 IRS’ Fiscal Year 1993 Financial Statements This is trial version www.adultpdf.com Status of Fiscal Year 1992 Financial Audit Recommendations The results of our efforts to audit IRS’ fiscal. of our fiscal year 1994 audit. Page 119 GAfI/AlMP94-120 IRS’ Fiscal Year 1993 Financial Statements This is trial version www.adultpdf.com Appendix I Status of Fisml Year 1992 Financial Audit. (continued) GAWAIMD-94-120 IRS’ Fiscal Year 1993 Financial Statements Page 121 This is trial version www.adultpdf.com Appendix I Status of Fiscal Year 1992 Financial Audit Recommendations Reports/recommertdations