IRS Audited - Major Faults
And Errors Discovered
WASHINGTON (AP) - The federal agency whose threat of an audit strikes fear in the hearts of American taxpayers did a poor job of keeping its own financial books last year, congressional investigators reported Monday.
The General Accounting Office found that the Internal Revenue Service experienced ''serious internal control and financial management issues'' that resulted in millions of dollars in fraudulent refunds, failure to keep track of assets like cars and computers, and substandard computer security controls.
''The IRS cannot do some of the basic accounting and record-keeping tasks that it expects American taxpayers to do,'' said Gregory Kutz, who oversaw the audit for GAO.
''Think of this as not balancing your checkbook with the monthly bank statement, and at the same time having a system prone to error,'' Kutz told the House Government Reform Committee's panel on government management.
IRS officials were quick to take full responsibility for the problems, which they said were largely rooted in the agency's antiquated computer systems. But they were clearly embarrassed by the report, coming as it does while the IRS attempts to become more efficient and more customer-friendly.
''I am deeply disappointed that we failed to meet our obligations,'' said Donna Cunninghame, IRS chief financial officer. ''This is unacceptable.''
The GAO found IRS did a good job of collecting $1.8 trillion in tax revenue in fiscal 1998. The problems were found in the agency's administration of an $8.1 billion annual budget. Some examples: * At least $17 million paid out in fraudulent refunds in the first nine months of 1998. Another $65 million in refunds were stopped by IRS investigators. * Improper paperwork to keep track of items such as a Chevrolet Blazer, a $300,000 laser printer, laptop computers, televisions and fax machines. Most of these were accounting errors, not thefts. * Poor computer security, including controls on access to sensitive taxpayer information. * Inadequate controls over basic financial reporting, inability to focus on accounts most likely to result in tax collection and failure to reconcile IRS balances with Treasury Department records. Many of these problems are chronic, and Cunninghame said the new management team at IRS is redoubling efforts to eliminate them. She pledged improved performance in fiscal 1999, but said the agency's computer systems must be modernized for a long-term fix.
''It will take time, and it won't be easy,'' she said. ''The IRS must replace nearly its entire inventory of computer applications.''