Summary: This testimony discusses GAO's financial audits of the Internal Revenue Service (IRS). As part of a pilot program under the Chief Financial Officers Act of 1990, IRS began preparing annual financial statements explaining the results of its operations. GAO's audits span fiscal years 1992-95. Implementation of the act has (1) led IRS top managers to have a greater understanding of IRS' serious and pervasive accounting and reporting problems, (2) yielded information on the magnitude of IRS' tax receivables collection problems, and (3) underscored the need for stronger controls over such areas as payroll operations. The act has also provided the impetus behind efforts to improve IRS operations and address the major problems cited by GAO financial audits. However, GAO has been unable to express an opinion on the reliability of IRS' financial statements for any of the four fiscal years--from 1992 through 1995. This testimony describes in detail the fundamental, persistent problems that remain uncorrected and will prevent GAO from expressing an opinion on IRS' future financial statements.
