TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
The Philadelphia Collection Field Function Office Properly Controlled Form 809 Receipt Books and Timely Transmitted Remittances for Processing
July
30, 2007
Reference Number: 2007-30-126
This
report has cleared the Treasury Inspector General for Tax Administration
disclosure review process and information determined to be restricted from
public release has been redacted from this document.
Phone Number | 202-927-7037
Email Address | Bonnie.Heald@tigta.treas.gov
Web Site |
http://www.tigta.gov
July 30, 2007
MEMORANDUM FOR DIRECTOR, COLLECTION, SMALL BUSINESS/SELF-EMPLOYED DIVISION
FROM: Daniel R. Devlin /s/ Daniel R. Devlin
Assistant Inspector General for Audit (Small Business and Corporate Programs)
SUBJECT: Final Audit Report – The Philadelphia Collection Field Function Office Properly Controlled Form 809 Receipt Books and Timely Transmitted Remittances for Processing (Audit # 200730IE031)
This report presents the results of our review of the internal controls over the Receipt for Payment of Taxes (Form 809) within the Philadelphia Collection Field function[1] (CFf) office. The overall objective of this audit was to determine whether internal controls for collecting and depositing remittances within the Philadelphia CFf office were effective. We initiated this review because the Form 809 is classified as a security item, and its use is strictly controlled and limited to only certain employees.
Impact on the Taxpayer
CFf employees are required to issue a Form
809 whenever cash is received from a taxpayer.
All remittances secured by CFf employees must be transmitted to the
appropriate designated Submission Processing site[2] on the day collected or as soon as possible
on the next business day. The Philadelphia
CFf office properly issued and accounted for Form 809 receipt books and timely
transmitted remittances to the Submission Processing site for processing. Effective
controls over Form 809 issuance and processing are important to ensure the
accurate and timely deposit of taxpayer payments.
Synopsis
Each Form 809 receipt book is assigned for the exclusive use of the intended employee, who is allowed to have only one assigned receipt book at a time. To request the initial assignment of a Form 809 receipt book for an employee, the employee’s group manager must prepare a memorandum authorizing the employee to receive the book. All remittances secured by CFf employees must be transmitted to the Submission Processing site on the day collected or as soon as possible on the next business day to meet Internal Revenue Service (IRS) goals for timely deposit and to avoid unnecessary delays in processing. Group managers must review all receipt books assigned to their employees at least once per year to verify that all receipts have been accounted for.
We reviewed the Form
809 receipt books issued to 28 revenue officers assigned to 3 groups at the
Philadelphia CFf office.
Overall, the Form 809 receipt books were properly issued to and
maintained by the revenue officers, the annual reconciliation of issued receipt books was timely completed,
segregation of duties was adequately maintained within the groups, remittances
were timely transmitted to the Submission Processing site for processing, and receipt books were properly returned to the
Submission Processing site when revenue officers separated from the
Philadelphia CFf office groups. However,
revenue officers transferring between field offices were not required to return
their receipt books. In addition, we
identified 6 receipt books that had not been returned as required because no
receipts had been issued within the last 3 years.
While these conditions
are not in accordance with established procedures, based on the results of our
other control tests, we considered them to be of minor significance and
risk. While we made no specific
recommendations, we did suggest management take the actions deemed necessary to
correct the conditions. We did not
identify any employee misuse of remittances intended for the IRS.
Response
Because this is a positive report and we made no recommendations, comments from the IRS were not required. However, key IRS management officials reviewed the report prior to issuance.
Copies of this report are also being sent to the IRS managers affected by the report results. Please contact me at (202) 622-5894 if you have questions or Philip Shropshire, Director, Special Tax Matters, (215) 516-2341.
Form 809 Receipt Books
Were Properly Controlled by the Collection Field Function Groups
Remittances Were
Timely Transmitted to the Submission Processing Site for Processing
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Abbreviations
|
CFf |
Collection Field function |
|
IDRS |
Integrated Data Retrieval System |
|
IRS |
Internal Revenue Service |
Collection Field function
employees are required to issue a Form 809 receipt when cash is received from a
taxpayer or when a receipt is requested by the taxpayer.
The Receipt for Payment of Taxes (Form
809) is an official document for receipt of cash payments from taxpayers. Effective
controls over Form 809 issuance and processing are important to ensure the
accurate and timely deposit of taxpayer payments. Each Form 809 receipt book contains 50
receipts consisting of four parts (Part 1, Posting Voucher; Part 2, Receipt for
Payment of Taxes; Part 3, Memo Copy; and Part 4, Receipt Book Copy). When a Form 809 is issued, Parts 1 and 3 are
submitted with the payment on a Daily
Report of Collection Activity (Form 795/795A) to the appropriate Submission
Processing site[3] Teller Unit.
The employee provides Part 2 to the taxpayer; Part 4 remains with the
Form 809 receipt book.
Each Form 809 receipt book is assigned for
the exclusive use of the intended employee, who is allowed to have only one
assigned receipt book at a time. To
request the initial assignment of a Form 809 receipt book for an employee, the
employee’s group manager must prepare a memorandum authorizing the employee to
receive the book. Collection Field
function (CFf)[4] employees are required to issue a Form 809 receipt
when cash is received from a taxpayer or when a receipt is requested by the
taxpayer for payment made by any means other than cash (e.g., check, money
order, or draft). All remittances
secured by CFf employees must be transmitted to the Submission Processing site
on the day collected or as soon as possible on the next business day to meet Internal
Revenue Service (IRS) goals for timely deposit and to avoid unnecessary delays
in processing. Group managers must
review all receipt books assigned to their employees at least once per year to
verify that all receipts have been accounted for.
This review was performed in the Small
Business/Self-Employed Division CFf office in
Form 809 Receipt Books
Were Properly Controlled by the Collection
Field Function Groups
We reviewed the Form 809 receipt books issued
to 28 revenue officers assigned to 3 groups at the Philadelphia CFf office. Specifically, we inventoried the receipt
books that were issued to the revenue officers, inspected the books for issued
and unissued receipts, and reconciled the books and receipts to the inventory
list maintained at the Ogden Submission Processing site. Figure 1 shows a total of 62 receipts had
been issued from the Form 809 receipt books that had been issued to the 28 revenue
officers. In addition, we reviewed the
annual reconciliations performed by the managers of the three CFf groups and
evaluated the segregation of duties within the groups. Overall, the Form 809 receipt books were
properly controlled by the CFf groups.
Figure 1: Count of Form 809 Receipt Books and Issued
Receipts
|
|
Number
of |
Number
of |
|
Group 12 |
7 |
13 |
|
Group 17 |
9 |
7 |
|
Group 33 |
12 |
42 |
|
Totals |
28 |
62 |
Source: Auditor analysis of the issued
Form 809 receipt books.
Form
809 receipt books were properly issued and maintained by the CFf groups
The Form 809 receipt book is classified as a security item, and its use
should be strictly controlled and limited to only certain employees. We
found the Form 809 receipt books were properly issued to and
maintained by the revenue officers assigned to the three Philadelphia CFf groups. For example, the three CFf group managers had properly prepared
authorization memoranda for initial issuance of the receipt books, and the revenue
officers who were issued the books had returned the signed acknowledgments of
receipts to the Submission Processing site Teller Unit as required. Our comparison of the serial numbers from the
Form 809 receipt books assigned to each of the 28 revenue officers to the list
of issued receipt books maintained by the Submission Processing site reflected
that all books were properly accounted for. Each employee was assigned only one Form 809
receipt book at a time, each receipt book was assigned for the exclusive use of
the intended employee, and employees maintained strict control of their receipt
books.
When a Form 809 is issued, Parts 1 and 3 are
submitted with the payment to the
appropriate Submission Processing site, Part 2 is provided to the taxpayer, and
Part 4 remains with the receipt book. Revenue
officers should ensure Form 809 receipts are issued in numerical sequence;
unissued receipts should consist of all four parts. Our review of the 28 Form 809 receipt books
showed unissued receipts were sequential, contained all four parts, and the
last issued receipt corresponded with the Submission Processing site records.
Form 809 receipt
books are required to be returned to the issuing Submission Processing site within
10 business days of discontinued use due to employee actions such as separation,
transfer to another field office, or change of position. The receipt books are also required to be
returned if no receipts have been issued within the last 3 years. While Form 809 receipt books were being properly
returned to the Submission Processing site when revenue officers separated from
the Philadelphia CFf groups, revenue officers transferring between field
offices were not required to return their receipt books. In addition, 6 receipt books had not been
returned as required because no receipts had been issued within the last 3
years. While these conditions are not in
accordance with established procedures, based on the results of our other
control tests, we considered these conditions to be of minor significance and
risk. Therefore, we are making no
specific recommendations; rather, we suggest management take the actions deemed
necessary to correct the conditions. We
did not identify any misuse of remittances intended for the IRS.
The
annual reconciliation of issued Form 809 receipt books for the CFf groups was
conducted
At least once a year, group managers must
review all official receipt books assigned to their employees to verify that
all official receipts have been accounted for. As part
of the yearly review, referred to as the Annual Reconciliation of Official
Receipts, the Submission Processing site will transmit to the appropriate CFf
office an Annual Listing of Form 809 Receipt Book Report with a cover
memorandum requesting a response within 30 calendar days. The Report will contain (by group) the name
of each employee to whom a receipt book is assigned, the serial number and
receipt numbers of each receipt book assigned to an employee, and the receipt
numbers submitted through the end of the year from each book.
The Philadelphia CFf office timely completed
the annual reconciliation of Form 809 receipt books. As part of the reconciliation, each group
manager had verified the numerical sequence of all remaining Form 809 receipts
in each assigned receipt book and ensured all receipts issued subsequent to the
last receipt on the list were reflected on the employee’s appropriate Form 795. The responses prepared by the managers
included the name of each employee to whom a Form 809 book is currently
assigned, the serial number of each receipt book assigned to an employee, the
numbers of the individual receipts in the book, and the numbers of the
individual receipts submitted through the closeout date noted on the
memorandum.
Segregation
of duties was adequately maintained for issued Form 809 receipt books within the
CFf groups
The issuance of Form 809 receipt books should be strictly limited to only certain employees
due to the nature of use and security classification of these documents. Managers should ensure only appropriate
employees are issued receipt books and the employees have research only command
codes in their Integrated Data Retrieval System (IDRS)[5] profiles.
Group managers adequately maintained segregation of duties in the
Philadelphia CFf office by ensuring only appropriate employees had been issued Form
809 receipt books and those employees issued receipt books had research only
command codes in their profiles. For
example, clerical personnel were not issued receipt books due to the inclusion of
sensitive (nonresearch) command codes in their IDRS profiles and their duties
relevant to the completion of Forms 809. In addition, a review of the IDRS profiles for
each of the 28 revenue officers who had been issued Form 809 receipt books within
the 3 CFf groups showed the employees had research only command codes in their
profiles.
Remittances Were Timely Transmitted to the Submission Processing Site for Processing
In general, any employee receiving a remittance from a taxpayer must transmit the remittance on Form 795 via overnight, traceable mail the same day it was received or as soon as possible the next business day, to ensure receipt in the designated Submission Processing site within 48 hours of receipt from the taxpayer. Because cash payments must be converted to check or money order, 1 additional day is allowed for cash conversion. Accordingly, remittances are due at the Submission Processing sites within 3 business days from the date the IRS received the funds. If receipts are not received timely, the Remittance Processing Unit at the Submission Processing site will issue a Submission Processing Center Teller’s Error Advice (Form 5919) to the originating employee’s group manager for correction.
Overall,
the Philadelphia CFf office groups were recording the remittances on Forms 795
and timely transmitting them to the Submission
Processing site for processing. To
assess the timeliness of remittance processing, we researched 55 remittances[6] on the IDRS and found 47 (85 percent) had posted
to the taxpayers’ accounts within 48 hours of receipt. The remaining 8 remittances had posted within
3 calendar days to 8 calendar days of receipt.
We also reviewed all Forms 5919 issued by the Submission Processing site
that were associated with the 62 Form 809 receipts and determined none of the remittances
transmitted by the 3 Philadelphia CFf office groups were identified as not being
received timely by the Remittance Processing Unit.
Appendix I
Detailed Objective, Scope, and Methodology
Our overall objective was to
determine whether internal controls for collecting and depositing remittances
within the Philadelphia CFf[7] office
were effective. Specifically, we
reviewed internal controls over the Receipt for Payment of Taxes (Form 809). To accomplish this objective, we:
I.
Determined
whether employees in the Philadelphia CFf office were effectively following the
proper controls and procedures for processing remittances received and using Form
809 receipt books.
A.
Identified
and discussed with management procedures and guidelines for processing
remittances received, including the timely processing of remittances and use of
receipt books.
B.
Conducted
a walkthrough of the Philadelphia CFf office to determine whether controls for
processing remittances were followed and remittances were properly safeguarded.
C.
Evaluated
the timeliness of processing remittances.
D.
Performed
a physical verification of assigned Form 809 receipt books to determine whether
they were properly controlled and used.
1.
Selected
and reviewed all 28 receipt books from 3 groups at the Philadelphia CFf office.
2.
Determined
whether the revenue officers assigned receipt books had IDRS adjustment
capabilities.
3.
Secured receipt books from the revenue officers and copied all
issued receipts.
4.
Determined
whether the unissued receipts were still in numerical sequence and all four
parts were intact.
5.
Determined
whether any clerical personnel were issued receipt books.
6.
Obtained
copies of the authorization memoranda for the initial receipt book issuances
and the signed receipt pages for the current receipt books.
7.
Determined
whether receipt books were returned to the issuing Submission Processing site[9] if receipts had not been issued within 3
years.
8.
Identified
employees who had recently transferred, separated, or no longer required use of
receipt books and determined whether the books had been returned to the issuing
Submission Processing site.
9.
Determined
whether the Philadelphia CFf office timely completed the annual reconciliation
of receipt books and compared the results with the reconciliation completed in Step
D.1., to determine whether discrepancies were identified and properly resolved.
E.
Conducted
a field visitation to the Submission Processing site in
Appendix II
Major Contributors to This Report
Daniel
R. Devlin, Assistant Inspector General for Audit (Small Business
and Corporate Programs)
Philip
Shropshire, Director
Van
A. Warmke, Audit Manager
Richard
J. Viscusi, Senior Auditor
Mike
J. Della Ripa, Auditor
Erlinda
K. Foye, Auditor
Appendix III
Acting Commissioner C
Office of the
Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Commissioner, Small Business/Self-Employed Division SE:S
Director, Communications, Liaison, and Disclosure, Small Business/Self-Employed Division SE:S:CLD
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
RAS:O
Office of Internal
Control OS:CFO:CPIC:IC
Audit Liaison: Senior Operations Advisor, Small Business/Self-Employed Division SE:S:C
[1] The unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns. Area Offices are a geographic organizational level used by the Internal Revenue Service business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.
[2] The Submission Procession site processes paper and electronic submissions, corrects errors, and forwards data to the Computing Centers for analysis and posting to taxpayer accounts.
[3] The Submission Procession site processes paper and electronic submissions, corrects errors, and forwards data to the Computing Centers for analysis and posting to taxpayer accounts.
[4] The unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns. Area Offices are a geographic organizational level used by the Internal Revenue Service business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.
[5] IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records. Command codes are used by IRS employees to research and adjust taxpayer accounts on the IDRS.
[6] Of the total 62 Form 809 receipts issued, 7 receipts were either voided or involved a user fee payment.
[7] The unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns. Area Offices are a geographic organizational level used by the IRS business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.
[8] IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records.
[9] The Submission Procession site processes paper and electronic submissions, corrects errors, and forwards data to the Computing Centers for analysis and posting to taxpayer accounts.