Sloppy bookkeeping is no excuse for any
taxpayer who lands on the Internal Revenue Service hot seat. But
the IRS itself continues to have serious, chronic accounting
problems of its own, according to congressional auditors.
The General Accounting Office reported Tuesday that the IRS
still frequently gives improper refunds, is sluggish to correct
errors against taxpayers, is vulnerable to computer security
problems and can't assure that its property or budget is properly
"This audit shows that IRS doesn't know how much money is
coming in or where that money is going," said Sen. Fred Thompson,
R-Tenn., chairman of the Senate Governmental Affairs Committee.
"It shows that IRS sends money back to people who owe taxes and
makes erroneous assessments against those who don't."
Other lawmakers said Americans should expect the tax collector
to be just as careful as millions of taxpayers must be as they
prepare this year's income tax returns.
"An agency that is charged with collecting our nation's taxes
should have strong internal controls to safeguard cash, checks and
taxpayer information," Senate Finance Committee Chairman William
Roth, R-Del., said.
While acknowledging the scope of the problems, IRS officials
said they are working to improve on all fronts. They pointed out
that the GAO once again gave the agency a clean bill of health on
the way it actually collected $1.9 trillion in taxes during fiscal
The audit identified these main problems:
Inadequate controls over payment of refunds, and ineffective
follow-up investigation on tax returns with potential underreported
tax liability. Last year, the IRS investigated only 26 percent of
12 million such returns, which had a total potential tax due of $15
Weaknesses in computer security that could result in
"unauthorized use, modification, loss and disclosure" of
sensitive taxpayer information.
Difficulties in the safeguarding of cash, checks and other hard
taxpayer data and documents. The GAO found once again that a
sluggish fingerprinting system last year resulted in the hiring of
65 people whose backgrounds were later considered questionable
enough to warrant firing. There were 37 allegations of employee
theft totaling more than $1 million.
Ineffective management of unpaid tax assessments. For instance,
one individual got a $15,000 refund just as the IRS found that the
person owed $350,000 in back taxes. Many installment agreements
fall far short of the full taxes due, and delays sometimes more
than 10 years frequently occur in the time it takes the IRS to
record payments people have made.
Agency officials laid much of the blame on the IRS' antiquated
main computer system, which is gradually being replaced in a
multiyear project expected to cost tens of billions of dollars.
They said agency changes ordered by Congress in 1998 eventually
will resolve other problems.
"The long-term inadequacies in and solutions to our financial
reporting systems must be addressed through the broader efforts ...
to modernize both the systems and the organization of the IRS,"
said Lawrence Rogers, acting IRS chief financial officer.
GAO auditors agreed that progress was being made in overhauling
the computer systems and attempting to fix many of these chronic
management troubles, many dating to at least 1992.
"These efforts appear to be headed in the right direction,"
said Gregory Kutz, who oversaw the GAO audit.