TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
THE INTERNAL REVENUE SERVICE HAS IMPROVED REVENUE ACCOUNTING CONTROLS OVER DEPOSIT DISCREPANCIES
Reference No. 2000-10-027
Deposit discrepancies occur when the Internal Revenue Service (IRS) service centersí daily deposits do not reconcile with the information sent by the depository bank. We previously reported these deposit discrepancies to the IRS and it effectively implemented our recommendations for corrective action. As a result, the IRS has reduced the risks associated with the deposit process, and has provided reasonable assurance that the IRS is effectively managing deposit discrepancies at the service centers.
This audit is a follow-up to our prior report, Review of Revenue Accounting Controls Over Deposit Discrepancies (Reference Number 081705, dated January 9, 1998). Our primary objective was to evaluate the effectiveness of IRS managementís corrective actions to resolve deposit discrepancies, obtain management approval for reversing erroneous accounting entries, and ensure only authorized employees had access to the accounting system.
The IRS has effectively established and implemented procedures to timely resolve deposit discrepancies at the IRSí service centers. National Office personnel appropriately issued, and field offices implemented, procedures to require management approval for reversing erroneous accounting entries to the general ledger and managerial review of the accounting system security reports to verify only authorized employees had access to the system. In addition, management continues to emphasize the verification of unconfirmed deposit tickets.
Internal Revenue Service Guidelines Were Adequately Revised
Internal Revenue Manual and Program Evaluation changes were issued to timely resolve deposit discrepancies, as well as requiring management review and approval of general ledger reversing entries and employee access to the accounting system.
Service Center Personnel Timely Reviewed Daily and Monthly Reports to Resolve Deposit Discrepancies
Our review of 300 discrepancies totaling $77.7 million showed that 275 had been reviewed timely. Of the 25 that were over 9 days old, 5 included required documentation for actions taken. The 20 discrepancies totaling $3.9 million without adequate documentation were in 1 Service Center. These omissions occurred because the required procedures were not effectively communicated to service center employees. Service Center Accounting management took immediate corrective action after we notified them of the problem. In addition, service center employees followed up to ensure the receipt of all 61 deposits, totaling $56.1 million, in which a confirmation had not been timely received.
Service Center Management Properly Approved Reversing Entries to the General Ledger and Effectively Conducted Reviews of Accounting System Security Reports
Service Center management properly approved and documented the 98 reversing entries totaling $401 million that were made during the period September through November 1998. Service Center management also reviewed the accounting system security reports to ensure only authorized persons could access the system and there were no improper accesses.
Managementís Response: IRS management said that they appreciated the validation of their efforts to resolve deposit discrepancies, obtain management approval for reversing erroneous accounting entries, and ensure only authorized employees had access to the accounting system. These efforts, along with the implementation of the Interim Revenue Accounting Control System, have improved the accuracy and integrity of the revenue accounting operations.