TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
THE INTERIM REVENUE ACCOUNTING CONTROL SYSTEM IS RELIABLE
Reference No. 2000-10-012
The Internal Revenue Service (IRS) is dependent on its accounting system to effectively record and monitor accounting transactions and to document the $1.7 trillion in tax revenues collected each year. The General Accounting Office (GAO) started reporting in 1996 that the IRS revenue accounting system did not provide detailed financial data for assessments and did not comply with standard government accounting guidelines. The Interim Revenue Accounting Control System (IRACS) partially addresses these weaknesses.
The IRS has planned several initiatives to correct the weaknesses identified by the GAO. The first phase of the IRSí efforts was implementing the IRACS at all 10 IRS service centers in 1996. Additional enhancements to the IRSí revenue accounting system will be made as part of a new accounting system planned for implementation in April 2000 and the IRSí efforts to modernize its computer systems.
Our objective was to evaluate the internal controls for IRACS to ensure they provide accurate financial management information and data integrity.
Although IRACS does not address all the weaknesses identified by the GAO, the System is operating as intended, and manual and system controls have provided IRS management with reasonable assurance that data processed, stored, and reported by the system are reliable.
System Requirements For the Interim Revenue Accounting Control System, Problem Identification Procedures, and System Security Are Satisfactory
We judgmentally sampled 24 system requirements in the IRACS Requirements Analysis Package that are critical to the maintenance of accurate IRS financial records. Our analysis of IRACS documentation indicated these requirements were met.
The Posting of Journal Entries To the General Ledger Is Accurate
We tested 550 transactions totaling $10 billion to determine that data are accurately posted to the general ledger. We also evaluated the reconciliation of the general ledger and the subsidiary ledgers of detailed accounts to the Masterfile, a file containing tax information for taxpayers filing tax returns and related documents. All 550 transactions were posted accurately to the general ledger.
Management Information Reports Used to Monitor Internal Revenue Service Transactions Are Accurate and Useful
Accounting employees were generally satisfied with the overall performance of the interim accounting system. All 17 manual assessments totaling $2.7 million that we reviewed were recorded correctly and were accurately reflected on IRS managementís reports.
Managementís Response: Management responded that the success of the IRACS implementation was attributable to the partnership between the business and information systems organizations. The project goal was to develop an accounting system with accurate general ledger posting, and provide Information Systems with a platform to assist them in timely delivering future enhancements or legislative changes.