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GAO-03-562R 1 (2003-05-20)

handle is hein.gao/gaobaameu0001 and id is 1 raw text is: I Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 May 20, 2003 The Honorable Mark W. Everson Commissioner of Internal Revenue Subject: Management Report: Improvements Needed in IRS's Internal Controls Dear Mr. Everson: In November 2002, we issued our report on the results of our audit of the Internal Revenue Service's (IRS) financial statements as of and for the fiscal years ending September 30, 2002 and 2001, and on the effectiveness of its internal controls as of September 30, 2002.' We also reported our conclusions on IRS's compliance with significant provisions of selected laws and regulations and on whether IRS's financial management systems substantially comply with requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA). A separate report on the implementation status of recommendations from our prior IRS financial audits and related financial management reports will be issued shortly. The purpose of this report is to discuss issues identified during our fiscal year 2002 audit regarding accounting procedures and internal controls that could be improved for which we do not presently have any recommendations outstanding. Although not all of these issues were discussed in our fiscal year 2002 audit report, they all warrant management's attention. Results in Brief During fiscal year 2002, IRS had a number of internal control issues that affected financial reporting, which includes safeguarding of assets. These issues concern policies and procedures related to (1) employee fingerprint records, (2) enforcement of courier service standards, (3) taxpayer receipt processing areas, (4) candling,; (5) acceptance of tax payments in cash, and (6) structuring of installment agreements. Each of these control weaknesses posed added risks of losses, nonpayment of taxes, or potential burden to taxpayers. 'U.S. General Accounting Office, Financial Audit: IRS's Fiscal Years 2002 and 2001 Financial Statements, GAO-03-243 (Washington D.C.: Nov. 15, 2002). 2Candling is a process used by IRS to determine whether any contents remain in open envelopes before their destruction. Candling is generally performed by placing open envelopes in front of a light source. GAO-03-562R IRS Management Report

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