GAO faults systems for IRS financial woes

The General Accounting Office has once again slammed the IRS for poor financial

In an audit report issued last week, GAO said the tax agency exhibits pervasive
weaknesses in the design and operation of systems management, particularly in
record-keeping and computer security.

The result of the deficiencies, the report said, is the IRS’ inability to
accurately report on tax revenue received, refunds disbursed and taxes receivable from the

“Most of these issues have plagued the IRS since we began auditing the
agency’s financial statements in fiscal year 1992,” said Gregory D. Kutz,
associate director for government accounting and financial management issues at GAO.
“The IRS has had some success in addressing these issues, but many of these problems
will take years to fully correct.”

The agency relies heavily on information systems to process tax returns, maintain
sensitive taxpayer data, calculate interest and penalties, generate refunds and perform
other functions.

Systems weaknesses could render the IRS unable to perform vital functions or result in
the unauthorized disclosure, modification or destruction of taxpayer data, said the
report, Financial Audit: IRS’ Fiscal Year 1998 Financial Statement.

“The IRS must replace nearly its entire inventory of computer applications and
convert its data on every taxpayer to new systems,” said Donna H. Cunninghame, IRS
chief financial officer. “It must be accomplished in conjunction with redesigned
business practices as part of our overall modernization program, while continuing to
provide service to taxpayers and to respond to ongoing tax law and other changes.”

According to the report, the IRS has improved computer security and has mitigated about
75 percent of the weaknesses identified in GAO’s April 1997 report. But serious
weaknesses remain, GAO said.

“While all our financial systems were not designed to meet today’s standards
and are in noncompliance in some cases, we are planning and implementing interim
solutions,” said Bob Wenzel, IRS deputy commissioner for operations, in a written
response to the GAO audit.

Cunninghame said the fragmented nature of IRS technology creates many of the problems,
such as high cost and poor quality of service to end users, lengthy projects to make
changes, poor data control and inadequate security.

“It is no secret that the IRS suffers from a number of profound and troubling
problems far beyond what GAO highlighted in its report,” Cunninghame said. “Some
of these problems can be remedied within a short period of time with procedural change or
additional resources. But most solutions will require years to plan and


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