Summary: During fiscal year 1999, the Internal Revenue Service (IRS) made several improvements to address financial management issues that GAO raised in earlier reports. However, serious internal control and financial weaknesses continue to undermine the agency's ability to manage operations and produce reliable financial information. These weaknesses affect IRS' ability to, (1) manage unpaid assessments, (2) disburse taxpayer refunds, (3) safeguard manual tax receipts and taxpayer information, (4) account for property and equipment, (5) account for appropriated funds, and (6) collect and report financial data. These problems resulted from, (1) deficient operational and financial systems, (2) inadequate internal controls, and (3) policies and procedures that were not being consistently followed. The improvements that have been made so far focus on ad hoc work-arounds intended to yield immediate results for the limited purpose of reporting reliable annual financial statement information, but they have not corrected underlying long-term systems deficiencies. In addition, IRS has been unable to develop and maintain reliable and timely cost/benefit information to evaluate the relative merits of its various tax collection and enforcement activities. Until IRS undertakes more systemic, short- and long-term corrections, it will continue to lack the performance information it needs to effectively manage its operations, and losses to the federal government and the burden to the taxpayers will likely continue.
