Summary: GAO audited the Internal Revenue Service's (IRS) administrative financial statements for fiscal year 1996. Because IRS could not provide GAO with supporting documentation for its reported administrative accounts receivable balances, GAO could not determine if the presentation of accounts receivable and net position was reliable. In addition, because property and equipment have not been capitalized and reported, GAO could not determine the effect that capitalization would have on net position. Otherwise, in GAO's opinion, the statement of financial position presents fairly IRS' administrative assets, liabilities, and net financial position. GAO agrees with IRS' assertion that internal controls were ineffective in (1) safeguarding assets, such as administrative accounts receivable and fund balances with Treasury, from material loss; (2) ensuring material compliance with laws governing the use of budget authority and with other relevant laws and regulations; and (3) ensuring that there were no material misstatements in amounts reported in the financial statements. IRS failed to report, however, a material weaknesses GAO found in the computer security controls at IRS' Detroit Computing Center. Material weaknesses in internal control and recordkeeping systems precluded the test necessary to provide a basis for any report on compliance with laws and regulations.
