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Wednesday, November 16, 2005

GAO Finds Serious Flaws in IRS Controls

The Internal Revenue Service has had serious shortcomings in its internal controls and financial management systems that caused it to sap its resources in the preparation of its financial statements in the fiscal years of 2004 and 2005, according to a recent report by the U.S. Government Accountability Office.

As a result of the controls and systems flaws, the IRS didn't keep effective watch over its financial reporting or legal and regulatory compliance, according to the GAO. Thus, the revenue service didn't 'provide reasonable assurance that losses, misstatements, and noncompliance with laws material in relation to the financial statements would be prevented or detected on a timely basis,' the report concluded.

In fact, for fiscal 2005, the GAO credited the tax service with successfully implementing the first phase of its new Integrated Financial System (IFS).The system is intended to replace the outdated financial management systems the IRS used in recent years to process and report administrative (nontax) transactions.

"This first phase of IFS provides for improved audit trails and more timely information for such activities and transactions as travel, purchases of goods and services, and budgetary activities," the GAO report asserted. Further, the IRS continued to progress in terms of addressing its "weaknesses in controls over hard-copy taxpayer receipts and data and over property and equipment."

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