GAO reports on IRS lapses

GAO report: "Recommendation to Improve Financial and Operational Management"

The Internal Revenue Service received failing grades in 1999 for providing

insufficient controls on internal security and collections, the latest General

Accounting Office report said.

The Nov. 17 report, part of a continuing review of the tax agency's

financial and management operations, said the IRS made significant improvements

in 1999 in several areas, including courier security. But the tax agency

has a long way to go to provide efficient and accurate service, the report

said.

The report cited the IRS' inability to determine exactly how much money

it had collected for three of the federal government's largest fiscal programs — Social Security, Medicare hospital coverage and individual tax returns.

It also noted the IRS' failure to keep a running tab on how much its

modernization program is costing.

GAO reported there was a "continued existence of serious financial and

operational systems deficiencies and internal control weaknesses, some of

which resulted in losses to the federal government and an unnecessary burden

to taxpayers."

Among the problems:

* Error rates of nearly 50 percent on trust fund recovery penalties.

* Insufficient tracking of unpaid assets and their statuses on an ongoing

basis.

* Inability to focus on collection efforts that could be successful.

* Inability to correct errors in taxpayers' accounts.

The GAO report comes at a time when the IRS is working to modernize

its computer systems. Led by Computer Sciences Corp., the 15-year IRS Prime

project is expected to provide e-filing and other consumer-friendly services

within the next five years, as well as create a data system to replace a

17-year-old tape-based record-keeping system.

The report recommended that the IRS develop a system to make sure it

knows exactly how much it is spending on the project, which is expected

to cost billions of dollars.

"This is particularly of interest to congressional oversight committees

who are closely monitoring [the] IRS' systems modernization," the report

said.

In responding to the report's recommendation, Bob Wenzel, deputy commissioner

of operations for the IRS, said the tax agency is working hard to improve

financial management of the IRS and its security problems. He also established

a new subcommittee to coordinate responses to GAO and improve IRS security

work.

Many of the criticisms should be addressed in the next month when the

IRS issues its blueprint for modernization — a road map for developing the

new system.