Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 19, 1994 TAG: 9402190054
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The General Accounting Office said its first-ever audit of the Internal Revenue Service disclosed "fundamental deficiencies that significantly impaired its ability to properly monitor, account for, and report on use of its operating funds."
"The irony of it is, if it were taxpayers with similar records, they would probably be given a hard time," said Gregory Holloway, the GAO's director of civil audits.
The audit, required under a 1990 law designed to improve the federal government's money management, covers the fiscal year ending Sept. 30, 1992. It was performed while the IRS was in the midst of replacing its accounting system with a new one.
"In some ways, this is old news," said IRS Chief Financial Officer Morgan Kinghorn. "We now have [the new system] in place. It's nearly 90 percent complete, and it will, over time, eliminate every problem" mentioned by the GAO.
"The old system was designed years ago. . . . It just was simply not auditable, and it was not designed to be auditable," he said. "My guess is we'll have a clean opinion next year."
However, the GAO's Holloway said, "Clearly, improvements are being made, but I don't think they've fully arrived yet. There are still some problems there."
The IRS, an arm of the Treasury Department, is the nation's largest revenue collector. It expects to process tax returns from 117 million Americans this year.
Yet, according to the GAO, the IRS system for administering its own money was so bad that auditors were unable even to review 64 percent of the $6.7 billion IRS budget in 1992.
In the 36 percent of the budget the GAO did examine, "tests identified significant control weaknesses that affected the IRS' ability to comply with laws governing the use of its budget authority."
According to the report, issued last week, Treasury Department regulations require the IRS to reconcile its cash accounts with Treasury records each month, much as bank customers reconcile their check books with their monthly bank statements.
Yet, rather than tracking down the causes of discrepancies, the IRS sometimes simply changed its financial statements to reflect the same account balances as Treasury's records. At the end of fiscal 1992, there were unresolved differences of $63 million.
The GAO also found that IRS managers did not have up-to-date and reliable information on how much of their appropriated funds were available to spend at any given point. Account balances were updated only monthly, rather than as transactions occurred.
Fifty-nine percent of all payments for goods and services checked in the audit were made either too late, forcing the IRS to pay penalty interest, or too early, resulting in lost interest income, the GAO said. The IRS spent $673,000 for interest on late payments in 1992.
by CNB