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GAO-03-687R 1 (2003-07-23)

handle is hein.gao/gaobaamgm0001 and id is 1 raw text is: I Accountability * Integrity* Reliability United States General Accounting Office Washington, DC 20548 July 23, 2003 The Honorable Mark W. Everson Commissioner of Internal Revenue Subject: Management Report: Improvements Needed in Controls over IRS's Excise Tax Certification Process Dear Mr. Everson: The Internal Revenue Service (IRS), along with other components of the Department of the Treasury, collects and distributes excise tax receipts to government trust funds. As the nation's tax collector, IRS plays a critical role in this process. Consequently, trust funds and their administrators depend on IRS to have sound procedures and controls over this process to ensure that excise taxes are appropriately distributed. This report is a follow-up to two reports we recently issued discussing procedures we performed to assist the Department of Transportation's Office of Inspector General (Transportation IG) in ascertaining whether the net excise tax collections and excise tax certifications reported by IRS for the fiscal year ended September 30, 2002, were supported by underlying records.' The agreed-upon procedures, along with our audit of IRS's fiscal year 2002 financial statements,2 provided a sufficient basis to assist the Transportation IG in forming an opinion on the departmentwide financial statements and the financial statements of the trust funds administered by the department, including the Highway Trust Fund and the Airport and Airway Trust Fund. In our reports discussing the results of the agreed-upon procedures we performed in fiscal year 2002, we described errors we identified in the certification and distribution process. However, we did not discuss the underlying internal control weaknesses 'U.S. General Accounting Office, Applying Agreed-Upon Procedures: Highway Trust Fund Excise Taxes, GAO-03-360R (Washington D.C.: Jan. 23, 2003) and Applying Agreed-Upon Procedures: Airport and Airway Trust Fund Excise Taxes, GAO-03-361R (Washington D.C.: Jan. 23, 2003). 2U.S. General Accounting Office, Financial Audit: IRS's Fiscal Years 2002 and 2001 Financial Statements, GAO-03-243 (Washington D.C.: Nov. 15, 2002). 3Because GAO is responsible for auditing IRS's financial statements, we performed agreed-upon procedures to assist the Transportation IG in assessing whether the net excise tax revenues distributed to the two trust funds for fiscal year 2002 were supported by underlying records. These agreed-upon procedures, in conjunction with additional testing by the Transportation IG, provided Transportation's IG sufficient basis to opine on the department's financial statements. GAO-03-687R IRS Excise Tax Management Report Page 1

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