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GAO-25-107930 1 (March 18, 2025)

handle is hein.gao/irsfnclrpt0001 and id is 1 raw text is: c A U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 March 18, 2025 Ms. Melanie Krause Acting Commissioner of the Internal Revenue Service IRS Financial Reporting: Improvements Needed in Information System and Other Controls Dear Ms. Krause: On November 7, 2024, we issued our auditor's report that included the results of our audits of the Internal Revenue Service's (IRS) fiscal year 2024 financial statements and of its internal control over financial reporting as of September 30, 2024, including information system controls (fiscal year 2024 audits).1 As we reported in connection with our audit of IRS's internal control over financial reporting, although it could improve certain internal controls, IRS maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024. Those controls provided reasonable assurance that misstatements material to IRS's financial statements would be prevented, or detected and corrected, on a timely basis. Our fiscal year 2024 audits identified a continuing significant deficiency2 in internal control over financial reporting concerning IRS's unpaid assessments.3 We also identified other deficiencies in IRS's internal control over financial reporting that we do not consider to be material weaknesses or significant deficiencies. Nevertheless, these deficiencies warrant IRS management's attention. This report is intended for IRS management's use and presents the new control deficiencies we identified during our fiscal year 2024 audits. Specifically, this report presents detailed information on the new nonsensitive control deficiency we identified and our associated nonsensitive recommendation to address it. This report also presents the results of our follow- up on IRS's corrective actions to address recommendations from our prior reports related to 1Our audit report also included the results of our audit of IRS's fiscal year 2023 financial statements and our report on compliance with laws, regulations, contracts, and grant agreements. See GAO, Financial Audit: IRS's FY2024 and FY 2023 Financial Statements, GAO-25-107202 (Washington, D.C.: Nov. 7, 2024). 2A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 3An unpaid assessment is an enforceable claim against a taxpayer for which specific amounts are due, have been determined, and the person(s) or entities from which a tax is due have been identified. See implementing guidance in the Internal Revenue Manual 1.34.4.1.6(1) p, Terms/Definitions (Aug. 25, 2015). GAO-25-107930 IRS Financial Reporting Page 1

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