United States General Accounting Office GAO February 2000 Report to the Secretary of the Treasury_part2 pdf

B-282441
Page 10 GAO/AIMD-00-76 IRS’ Fiscal Year 1999 Financial Statements
•the
U.S. Government Standard General Ledger
(SGL) at the transaction
level.
In its fiscal year 1999 Federal Managers’ Financial Integrity Act of 1982
(FIA) assurance statement to the Treasury, IRS also concluded that its
financial management systems do not comply with FFMIA. The objective of
our audit was not to provide an opinion on overall compliance with laws
and regulations. Accordingly, we do not express such an opinion.
Material Weaknesses
During our audit of IRS’ fiscal year 1999 financial statements, we identified
seven material weaknesses
7
in internal controls that may adversely affect
any decision by IRS’ management that is based, in whole or in part, on
information that is inaccurate because of these deficiencies. Similar to our
findings and reports from previous audits, we were unable to obtain
reasonable assurance that IRS’ program costs, budgetary balances, and
components of net position were reliable. In addition, unaudited financial
information reported by IRS, including budget and performance
information, may also contain misstatements resulting from these
deficiencies. Some of these material weaknesses have also allowed
inappropriate refunds to be paid, reduced IRS’ effectiveness in its
enforcement of the tax code, and resulted in errors in taxpayer accounts
and increased taxpayer burden. The material weaknesses we have
identified relate to IRS’ controls over (1) the financial reporting process,
(2) management of unpaid assessments, (3) refunds, (4) fund balance with
Treasury, (5) property and equipment, (6) budgetary activities, and
(7) computer security. With the exception of the issue involving budgetary

controls, we reported on these issues last year.
8
We discuss these
weaknesses in the following sections and plan to provide more details on
them, as well as recommendations for corrective actions, in a subsequent
report. We will separately report in a management letter to IRS on other
less significant matters involving IRS’ system of internal controls and its
operation.
7
A material weakness is a condition that precludes the entity’s internal control from
providing reasonable assurance that material misstatements in the financial statements
would be prevented or detected on a timely basis. Reportable conditions are matters coming
to our attention that, in our judgment, should be communicated because they represent
significant deficiencies in the design or operation of internal controls that could adversely
affect IRS’ ability to meet the objectives described in this report.
8
See GAO/AIMD-99-75, March 1, 1999.
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