TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
The Kansas City Collection Field Function Office Properly Controlled Form 809 Receipt Books and Timely Transmitted Remittances for Processing
August
2, 2007
Reference Number: 2007-30-138
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
August 2, 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 Kansas City Collection Field Function Office Properly Controlled Form 809 Receipt Books and Timely Transmitted Remittances for Processing (Audit # 200730IE039)
This report presents the results of our review of the internal controls over the Receipt for Payment of Taxes (Form 809) within the Kansas City, Missouri, 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 Kansas City 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 receipt when 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 Kansas
City 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 15 Form
809 receipt books issued to the 15 revenue officers assigned to the 2 groups at
the Kansas City 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 Kansas City
CFf office groups. However, revenue
officers transferring between field offices were not required to return their
receipt books. In addition, 2 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 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, at (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 15 Form 809 receipt books issued
to the 15 revenue officers assigned to the 2 groups at the Kansas City 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 Covington Submission Processing site. Figure 1 shows a total of 19 receipts had
been issued from the Form 809 receipt books that had been issued to the 15 revenue
officers. In addition, we reviewed the
annual reconciliations performed by the managers of the two 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 Revenue Officers Issued a Form 809 Receipt Book |
Number
of |
|
Group 17 |
6 |
16 |
|
Group 32 |
9 |
3 |
|
Totals |
15 |
19 |
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 two
Kansas City CFf groups. For example, the
two CFf group managers had properly prepared
authorization memoranda for the 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 15 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 Form 809 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 15 Form 809 receipt books
showed (1) unissued receipts were sequential and contained all four parts and (2)
the last issued receipt corresponded with the Submission Processing site
records.
Form 809 receipt books must 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 also must 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 Kansas City CFf groups, one revenue officer
transferring between field offices was not required to return the receipt book. In addition, 2 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 Kansas City 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 Kansas
City 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 15 revenue
officers who had been issued Form 809 receipt books within the 2 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 Kansas City CFf office groups were recording the remittances on Form 795 and timely transmitting them to the Submission Processing site for processing. To assess the timeliness of remittance processing, we researched 12 remittances[6] on the IDRS and found that all (100 percent) had posted to the taxpayers’ accounts within 48 hours of receipt. We also reviewed all Forms 5919 issued by the Submission Processing site that were associated with the 19 Form 809 receipts and determined none of the remittances transmitted by the 2 Kansas City 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 Kansas City, Missouri, 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 Kansas City 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 Kansas City
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 15 receipt books assigned
to the 15 revenue officers in the 2 groups at the Kansas City CFf office.
2.
Determined whether the revenue officers assigned
receipt books had IDRS adjustment capabilities.
E.
Conducted a field visitation at the Submission
Processing site in Covington, Kentucky, and verified whether the Form 809
receipts (in the receipt books selected in Step I.D.1) submitted by the revenue
officers in the Kansas City CFf office had been received and accounted for
properly.
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 Processing sites process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.
[3] The Submission Processing sites process paper and electronic submissions, correct errors, and forward 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 19 Form 809 receipts issued, 7 receipts were voided.
[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 Processing sites process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.