Financial Audit: Examination of IRS' Fiscal Year 1997 Custodial Financial
Statements (Letter Report, 02/26/98, GAO/AIMD-98-77).
Pursuant to a legislative requirement, GAO examined the Internal Revenue
Service's (IRS) custodial financial statements for fiscal year (FY)
ending September 30, 1997.
GAO noted that: (1) the IRS custodial financial statements were reliable
in all material respects; (2) IRS management's assertion about the
effectiveness of internal controls stated that except for the material
weaknesses in internal controls presented in the agency's FY 1997
Federal Managers' Financial Integrity Act (FIA) report, internal
controls were effective in satisfying the following objectives: (a)
safeguarding assets from material loss; (b) assuring material compliance
with laws governing the use of budget authority and with other relevant
laws and regulations; and (c) assuring that there were no other material
misstatements in the custodial financial statements; (3) however, GAO
found that IRS' internal controls, taken as a whole, were not effective
in satisfying these objectives; (5) due to the severity of the material
weaknesses in IRS' financial accounting and reporting controls, all of
which were reported in IRS' FY 1997 FIA report, extensive reliance on ad
hoc programming and analysis was needed to develop financial statement
line item balances, and the resulting amounts needed material audit
adjustments to produce reliable custodial financial statements; and (6)
one reportable noncompliance with selected provisions of laws and
regulations GAO tested, and that IRS' financial management systems do
not substantially comply with the requirements of the Federal Financial
Management Improvement Act of 1996.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-98-77
TITLE: Financial Audit: Examination of IRS' Fiscal Year 1997
Custodial Financial Statements
DATE: 02/26/98
SUBJECT: Financial statement audits
Tax administration
Financial management
Internal controls
Federal agency accounting systems
Financial records
Accounting procedures
IDENTIFIER: Hospital Insurance Trust Fund
U.S. Government Standard General Ledger
Joint Financial Management Improvement Program
IRS Revenue Accounting Control System
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Cover
================================================================ COVER
Report to the Secretary of the Treasury
February 1998
FINANCIAL AUDIT - EXAMINATION OF
IRS' FISCAL YEAR 1997 CUSTODIAL
FINANCIAL STATEMENTS
GAO/AIMD-98-77
IRS Financial Audit
(901755)
Abbreviations
=============================================================== ABBREV
EIC - Earned Income Credit
FDIC - Federal Deposit Insurance Corporation
FFMSR - Federal Financial Management System Requirements
FFMIA - Federal Financial Management Improvement Act
FICA - Federal Insurance Contributions Act
FIA - Federal Managers' Financial Integrity Act
HI - Hospital Insurance Trust Fund
IRS - Internal Revenue Service
JFMIP - Joint Financial Management Improvement Program
OMB - Office of Management and Budget
RTC - Resolution Trust Corporation
SFFAS - Statement of Federal Financial Accounting Standards
SGL - U.S. Government Standard General Ledger
SMI - Supplemental Medical Insurance Trust Fund
SSA - Social Security Administration
Letter
=============================================================== LETTER
B-277373
February 26, 1998
The Honorable Robert E. Rubin
The Secretary of the Treasury
Dear Mr. Secretary:
This report presents the results of our audit of the Custodial
Financial Statements of the Internal Revenue Service (IRS) for the
fiscal year ending September 30, 1997, which we performed in
accordance with the Government Management Reform Act of 1994. The
IRS' Custodial Financial Statements report the assets, liabilities,
and results of activities related solely to IRS' custodial
responsibilities for implementing federal tax legislation, including
collecting federal tax revenues, refunding overpayments of taxes, and
pursuing collections of amounts owed.
Accordingly, these Custodial Financial Statements do not report on
the financial position and results of operations related to the
administration of IRS funded by appropriations and reimbursements
from other agencies, state and local governments, and the public.
Such activity is reported in IRS' fiscal year 1997 Administrative
Financial Statements, which are being audited by the Inspector
General of the Department of the Treasury.
This report contains our (1) opinion on IRS' Custodial Financial
Statements, (2) opinion on IRS management's assertion about the
effectiveness of its internal controls, and (3) conclusions on IRS'
compliance with significant provisions of laws and regulations we
tested and on whether its systems comply with requirements of the
Federal Financial Management Improvement Act (FFMIA) of 1996. This
report also discusses significant matters that we considered in
performing our audit and in forming our conclusions, including
identified weaknesses in IRS' internal controls, noncompliance with
laws and regulations and requirements of FFMIA, and other significant
matters that represent important issues that should be brought to the
attention of IRS' management and users of IRS' Custodial Financial
Statements and other reported financial information. We will be
separately reporting in more detail on the results of our testing of
IRS' internal controls and compliance with laws and regulations
discussed in this report, along with our related recommendations.
We are sending copies of this report to the Commissioner of Internal
Revenue; the Director of the Office of Management and Budget; the
Chairmen and Ranking Minority Members of the Senate Committee on
Appropriations and its Subcommittee on Treasury and General
Government; Senate Committee on Finance and its Subcommittee on
Taxation and IRS Oversight; Senate Committee on Governmental Affairs;
and Senate Committee on the Budget; the Chairmen and Ranking Minority
Members of the House Committee on Appropriations and its Subcommittee
on Treasury, Postal Service, and General Government; House Committee
on Ways and Means; House Committee on Government Reform and Oversight
and its Subcommittee on Government Management, Information and
Technology; and House Committee on the Budget; and other interested
congressional committees. Copies will be made available to others
upon request.
This report was prepared under the direction of Gregory D. Kutz,
Associate Director, Governmentwide Accounting and Financial
Management Issues, who may be reached at (202) 512-9505. Other major
contributors to this report are listed in appendix III.
Sincerely yours,
Gene L. Dodaro
Assistant Comptroller General
Letter
=============================================================== LETTER
B-277373
To the Commissioner of Internal Revenue
In accordance with the Government Management Reform Act of 1994, this
report presents the results of our audit of the Custodial Financial
Statements of the Internal Revenue Service (IRS) for fiscal year
1997. The Custodial Financial Statements report the assets,
liabilities, and results of activities related solely to IRS'
custodial responsibilities for implementing federal tax legislation,
including collecting federal tax revenues, refunding overpayments of
taxes, and pursuing collection of amounts owed.\1
In our audit of IRS' fiscal year 1997 Custodial Financial Statements,
we found the following:
-- The Custodial Financial Statements were reliable in all material
respects.
-- IRS management's assertion about the effectiveness of internal
controls stated that except for the material weaknesses in
internal controls presented in the agency's fiscal year 1997
Federal Managers' Financial Integrity Act (FIA) report, internal
controls were effective in satisfying the following objectives:
(1) safeguarding assets from material loss, (2) assuring
material compliance with laws governing the use of budget
authority and with other relevant laws and regulations, and (3)
assuring that there were no other material misstatements in the
Custodial Financial Statements. However, we found that IRS'
internal controls, taken as a whole, were not effective in
satisfying these objectives. Due to the severity of the
material weaknesses in IRS' financial accounting and reporting
controls, all of which were reported in IRS' fiscal year 1997
FIA report, extensive reliance on ad hoc programming and
analysis was needed to develop financial statement line item
balances, and the resulting amounts needed material audit
adjustments to produce reliable Custodial Financial Statements.
-- One reportable noncompliance with selected provisions of laws
and regulations we tested, and that IRS' financial management
systems do not substantially comply with the requirements of the
Federal Financial Management Improvement Act of 1996 (FFMIA).
The following sections outline our conclusions in more detail and
discuss (1) significant matters considered in performing our audit
and in forming our conclusions, (2) the Overview of the Reporting
Entity (Overview) and other supplemental information, (3) the scope
of the audit, and (4) our evaluation of IRS' comments on this report.
We will separately report on IRS' progress in implementing our
previous recommendations and present additional recommendations to
address the findings in this report.
--------------------
\1 These Custodial Financial Statements do not report on activities
related to IRS' administrative costs as funded by appropriations and
reimbursements from other agencies, state and local governments, and
the public. The annual financial results relating to these
administrative costs and funding are reported separately in IRS'
Administrative Financial Statements.
SIGNIFICANT MATTERS
------------------------------------------------------------ Letter :1
This section discusses significant matters that we considered in
performing our audit and in forming our conclusions. These matters
include (1) six material weaknesses in IRS' internal controls, (2)
one reportable condition representing a significant weakness in IRS'
internal controls, (3) one instance of noncompliance with laws and
regulations and noncompliance with the requirements of FFMIA, and (4)
two other significant matters that represent important issues that
should be brought to the attention of IRS management and other users
of IRS' Custodial Financial Statements and other reported financial
information.
MATERIAL WEAKNESSES
---------------------------------------------------------- Letter :1.1
During our audit of IRS' fiscal year 1997 Custodial Financial
Statements, we identified six material weaknesses\2 that adversely
affected IRS' ability to safeguard assets from material loss, assure
material compliance with relevant laws and regulations, and assure
that there were no material misstatements in the financial
statements. These weaknesses relate to IRS' inadequate
-- general ledger system,
-- supporting subsidiary ledger for unpaid assessments,
-- supporting documentation for unpaid assessments,
-- controls over refunds,
-- revenue accounting and reporting, and
-- computer security.
These material weaknesses were consistent in all significant respects
with the material weaknesses cited by IRS in its fiscal year 1997 FIA
report. Although we were able to apply substantive audit procedures
to verify that IRS' fiscal year 1997 Custodial Financial Statements
were reliable, the six material weaknesses discussed in the following
sections significantly increase the risk that future financial
statements and other IRS reports may be materially misstated.
--------------------
\2 A material weakness is a reportable condition in which the design
or operation of one or more of the internal control elements does not
reduce to a relatively low level the risk that losses, noncompliance,
or misstatements in amounts that would be material to the financial
statements may occur and not be detected within a timely period by
employees in the normal course of performing their duties.
Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation of
the internal controls that in our judgement, could adversely affect
IRS' ability to record, process, summarize, and report financial
data.
IRS' GENERAL LEDGER DOES
NOT SUPPORT THE
PREPARATION OF FINANCIAL
STATEMENTS
-------------------------------------------------------- Letter :1.1.1
The IRS' general ledger system\3 is not able to routinely generate
reliable and timely financial information for internal and external
users. The IRS' general ledger does not
-- capture or otherwise produce the information to be reported in
the Statement of Custodial Assets and Liabilities;
-- classify revenue receipts activity by type of tax at the detail
transaction level to support IRS' Statement of Custodial
Activity and to make possible the accurate distribution of
excise tax collections to the appropriate trust funds;
-- use the standard federal accounting classification structure to
produce some of the basic documents needed for the preparation
of financial statements in the required formats, such as trial
balances; and
-- provide a complete audit trail for recorded transactions.
As a result of these deficiencies, IRS is unable to rely on its
general ledger to support its financial statements, which is a core
purpose of a general ledger. These problems also prevent IRS from
producing financial statements on a monthly or quarterly basis as a
management tool, which is standard practice in private industry and
some federal entities.
The U.S. Government Standard General Ledger (SGL) establishes the
general ledger account structure for federal agencies as well as the
rules for agencies to follow in recording financial events.
Implementation of the SGL is called for by the Core Financial System
Requirements of the Joint Financial Management Improvement Program
(JFMIP),\4 and is required by the Office of Management and Budget
(OMB) in its Circular A-127, Financial Management Systems.
Implementation of financial management systems that comply with the
SGL at the transaction level is also required by FFMIA. However,
because of the problems discussed above, IRS' general ledger does not
comply with these requirements.
As we previously reported,\5 IRS' general ledger was not designed to
support financial statement preparation. To compensate for this
deficiency, IRS utilizes specialized computer programs to extract
information from its master files--its only detailed database of
taxpayer information--to derive amounts to be reported in the
financial statements. However, the amounts produced by this approach
needed material audit adjustments to the Statement of Custodial
Assets and Liabilities to produce reliable financial statements.
Although we were able to verify that the adjusted balances were
reliable as of and for the fiscal year ended September 30, 1997, this
approach cannot substitute for a properly designed and implemented
general ledger as a tool to account for and report financial
transactions on a routine basis throughout the year.
--------------------
\3 The Interim Revenue Accounting Control System provides IRS'
general ledger capabilities and thus is the primary source of summary
accounting data for IRS' custodial activities.
\4 JFMIP is a joint and cooperative undertaking of the Office of
Management and Budget, the Department of the Treasury, the Office of
Personnel Management, and GAO, working in cooperation with each other
and with operating agencies to improve financial management
practices.
\5 See Financial Audit: Examination of IRS' Fiscal Year 1996
Custodial Financial Statements (GAO/AIMD-98-18, December 24, 1997).
IRS LACKS A SUBSIDIARY
LEDGER FOR UNPAID
ASSESSMENTS
-------------------------------------------------------- Letter :1.1.2
As we have reported in our previous financial audits, IRS does not
have a detailed listing, or subsidiary ledger, which tracks and
accumulates unpaid assessments\6 on an ongoing basis. To compensate
for the lack of a subsidiary ledger, IRS runs computer programs
against its master files to identify and classify the universe of
unpaid assessments. However, this approach required numerous audit
adjustments to produce reliable balances. The lack of a detailed
subsidiary ledger impairs IRS' ability to effectively manage the
unpaid assessments.
For example, IRS' current systems precluded it from ensuring that all
parties liable for certain assessments get credit for payments made
on those assessments. Specifically, payments made on unpaid payroll
tax withholdings\7
for a troubled company, which can be collectible from multiple
individuals, are not always credited to each responsible party to
reflect the reduction in their tax liability. In 53 of 83 cases we
reviewed involving multiple individuals and companies, we found that
payments were not accurately recorded to reflect the reduction in the
tax liability of each responsible party. In one case we reviewed,
three individuals had multimillion dollar tax liability balances, as
well as liens placed against their property, even though the tax had
been fully paid by the company.
While we were able to determine that the amounts reported in the
fiscal year 1997 financial statements pertaining to taxes receivable,
a component of unpaid assessments, were reliable, this was only after
significant adjustments totaling tens of billions of dollars were
made. The extensive reliance IRS must place on ad hoc procedures
significantly increases the risk of material misstatement of unpaid
assessments and/or other reports issued by IRS in the future. A
proper subsidiary ledger for unpaid assessments, as recommended by
the JFMIP Core Financial Systems Requirements, is necessary to
provide management with complete, up-to-date information about the
unpaid assessments due from each taxpayer, so that managers will be
in a position to make informed decisions about collection efforts and
collectibility estimates. This requires a subsidiary ledger that
makes readily available to management the amount, nature, and age of
all unpaid assessments outstanding by tax liability and taxpayer, and
that can be readily and routinely reconciled to corresponding general
ledger balances for financial reporting purposes. Such a system
should also track and make available key information necessary to
assess collectibility, such as account status, payment and default
history, and installment agreement terms.
--------------------
\6 Unpaid assessments consist of (1) taxes due from taxpayers for
which the IRS can support the existence of a receivable through
taxpayer agreement or a favorable court ruling, (2) compliance
assessments where neither the taxpayer nor the court has affirmed
that the amounts are owed, and (3) write-offs, which represent unpaid
assessments for which IRS does not expect further collections due to
factors such as the taxpayer's death, bankruptcy, or insolvency.
\7 Payroll tax withholdings consist of individual income tax
withholdings and employer and employee withholdings for the Federal
Insurance Contribution Act, which include Social Security and
Hospital Insurance taxes.
DOCUMENTARY SUPPORT FOR
UNPAID ASSESSMENTS IS
INADEQUATE
-------------------------------------------------------- Letter :1.1.3
In our audit of IRS' fiscal year 1996 Custodial Financial
Statements,\8 we reported that IRS could not locate sufficient
supporting documentation to (1) enable us to evaluate the existence
and classification of unpaid assessments or (2) support its
classification of reported revenue collections and refunds paid.
During our fiscal year 1997 audit, IRS was able to locate and provide
sufficient supporting documentation for fiscal year 1997 revenue and
refund transactions we tested. However, IRS continued to experience
significant problems locating and providing supporting documentation
for unpaid assessments, primarily due to the age of the items.
Documentation for transactions we reviewed, such as tax returns or
installment agreements, had often been destroyed in accordance with
IRS record retention policies or could not be located. In addition,
the documentation IRS provided did not always include useful
information, such as appraisals, asset searches, and financial
statements. For example, estate case files we reviewed generally did
not include audited financial statements or an independent appraisal
of the estate's assets, information that would greatly assist in
determining the potential collectibility and potential underreporting
of these cases. Additionally, the lack of documentation made it
difficult to assess the classification and collectibility of unpaid
assessments reported in the financial statements as federal tax
receivables.
Through our audit procedures, we were able to verify the existence
and proper classification of unpaid assessments and obtain reasonable
assurance that reported balances were reliable. However, this
required material audit adjustments to correct misstated unpaid
assessment balances identified by our testing.
--------------------
\8 GAO/AIMD-98-18, December 24, 1997.
WEAKNESSES EXIST IN
CONTROLS OVER REFUNDS
-------------------------------------------------------- Letter :1.1.4
IRS did not have sufficient preventive controls over refunds to
assure that inappropriate payments for tax refunds are not disbursed.
Such inappropriate payments have taken the form of refunds improperly
issued or inflated, which IRS did not identify because of flawed
verification procedures, or fraud by IRS employees. For example, we
found three instances where refunds were paid for inappropriate
amounts. This occurred because IRS does not compare tax returns to
the attached W-2s (Wage and Tax Statements) at the time the returns
are initially processed, and consequently did not detect a
discrepancy with pertinent information on the tax return. As we have
reported in prior audits,\9 such inconsistencies generally go
undetected until such time as IRS completes its document matching
program,\10 which can take as long as 18 months. In addition, during
fiscal year 1997, IRS identified alleged employee embezzlement of
refunds totaling over $269,000. IRS is also vulnerable to issuance
of duplicate refunds made possible by gaps in IRS' controls. IRS
reported this condition as a material weakness in its fiscal year
1997 FIA report.
The control weaknesses over refunds are magnified by significant
levels of invalid Earned Income Credit (EIC) claims. IRS recently
reported that during the period January 1995 through April 1995, an
estimated $4.4 billion (25 percent) in EIC claims filed were
invalid.\11 This estimate does not reflect actual disbursements made
for refunds involving EIC claims.\12 However, it provides an
indication of the magnitude of IRS' and the federal government's
exposure to losses resulting from weak controls over refunds. While
we were able to substantiate the amounts disbursed as refunds as
reported on the fiscal year 1997 Custodial Financial Statements, IRS
needs to have effective preventive controls in place to ensure that
the federal government does not incur losses due to payment of
inappropriate refunds. Once an inappropriate refund has been
disbursed, IRS is compelled to expend both the time and expense to
attempt to recover it, with dubious prospect of success.
--------------------
\9 Financial Audit: Examination of IRS' Fiscal Year 1993 Financial
Statements (GAO/AIMD-94-120, June 15, 1994).
\10 This program involves matching tax return information with
information provided by third parties (e.g., 1099, W-2) to identify
any differences for further investigation.
\11 Invalid EIC claims do not always result in invalid refunds. They
may also result in inappropriate reductions in tax assessments or be
caught and corrected by IRS.
\12 See IRS report, Study of EITC Filers for Tax Year 1994 (April
1997).
REVENUE ACCOUNTING AND
REPORTING DOES NOT MEET
USER NEEDS
-------------------------------------------------------- Letter :1.1.5
IRS is unable to currently determine the specific amount of revenue
it actually collected for the Social Security, Hospital Insurance,\13
Highway, and other relevant trust funds. As we previously
reported,\14 the primary reason for this weakness is that the
accounting information needed to validate the taxpayer's liability
and record the payment to the proper trust fund is not provided at
the time that taxpayers remit payments. Information is provided on
the tax return, which can be received as late as 9 months after a
payment is submitted. However, the information on the return only
pertains to the amount of the tax liability, not the distribution of
the amounts previously collected. As a result, IRS cannot report
actual revenue collected for Social Security, Hospital Insurance,
Highway, and other trust funds on a current basis nor can it
accurately report revenue collected for individuals. Because of this
weakness, IRS had to report Federal Insurance Contributions Act
(FICA) and individual income tax collections in the same line item on
its Statement of Custodial Activity for fiscal year 1997. However,
requirements for the form and content of governmentwide financial
statements\15 require separate reporting of Social Security, Hospital
Insurance, and individual income taxes collected. Beginning in
fiscal year 1998, federal accounting standards\16 will also require
this reporting.
Taxes collected by IRS on behalf of the federal government are
deposited in the general revenue fund of the Department of the
Treasury (Treasury), where they are subsequently distributed to the
appropriate trust funds. Amounts representing Social Security and
Hospital Insurance taxes are distributed to their respective trust
funds based on information certified by the Social Security
Administration (SSA).\17 In contrast, for excise taxes, IRS certifies
the amounts to be distributed based on taxes assessed, as reflected
on the relevant tax forms. However, by law, distributions of excise
taxes are to be based on taxes actually collected.\18
The manner in which both FICA and excise taxes are distributed
creates a condition in which the federal government's general revenue
fund subsidizes the Social Security, Hospital Insurance, Highway, and
other trust funds. The subsidy occurs primarily because a
significant number of businesses that file tax returns for Social
Security, Hospital Insurance, and excise taxes ultimately go bankrupt
or otherwise go out of business and never actually pay the assessed
amounts. Additionally, with respect to Social Security and Hospital
Insurance taxes, a significant number of self-employed individuals
also do not pay the assessed amounts. While the subsidy is not
necessarily significant with respect to excise taxes, it is
significant for Social Security and Hospital Insurance taxes. At
September 30, 1997, the estimated amount of unpaid taxes and interest
in IRS' unpaid assessments balance was approximately $44 billion for
Social Security and Hospital Insurance, and approximately $1 billion
for excise taxes.\19 While these totals do not include amounts no
longer in the unpaid assessments balance due to the expiration of the
statutory collection period, they nevertheless give an indication of
the cumulative amount of the subsidy.
--------------------
\13 The Hospital Insurance Trust Fund (HI) is one of two trust funds
comprising the accumulated funds of the Medicare program. The other
Medicare trust fund is the Supplemental Medical Insurance Trust Fund
(SMI). Of these trust funds, only HI receives distributions from the
Treasury's general revenue fund.
\14 Financial Management: Important IRS Revenue Information is
Unavailable or Unreliable (GAO/AFMD-94-22, December 21, 1993).
\15 OMB's Format and Instructions for the Form and Content of the
Financial Statements of the U.S. Government (September 2, 1997).
\16 The Federal Accounting Standards Advisory Board recommends
accounting standards, and OMB, Treasury, and GAO decide whether to
adopt the recommended standards; if they are adopted, the standards
are published by OMB and GAO.
\17 Social Security and Hospital Insurance taxes are required to be
distributed based on a certification by the Commissioner of SSA.
This certification is based on wage information maintained by SSA,
which may be augmented by IRS assessed amounts. However, generally
this certification is based on IRS assessed amounts.
\18 We have reported this condition as a noncompliance with laws and
regulations later in this report.
\19 We included interest accrued in these amounts because assessments
distributed to the trust funds earn interest at Treasury-based
interest rates, similar to IRS' interest accruals.
CONTROLS OVER COMPUTER
SECURITY ARE INADEQUATE
-------------------------------------------------------- Letter :1.1.6
IRS places extensive reliance on computer systems to process tax
returns, maintain taxpayer data, calculate interest and penalties,
and generate refunds. Consequently, it is critical that IRS maintain
adequate internal controls over these systems. We previously
reported that IRS had serious weaknesses in the controls used to
safeguard its computer systems, facilities, and taxpayer data.\20 Our
review of these controls as part of our audit of IRS' fiscal year
1997 Custodial Financial Statements found that although many
improvements have been made, overall controls continued to be
ineffective. IRS' controls over automated systems continued to
exhibit serious weaknesses in (1) physical security, (2) logical
security, (3) data communications management, (4) risk analysis, (5)
quality assurance, (6) internal audit and security, and (7)
contingency planning. Weaknesses in these areas can allow
unauthorized individuals access to critical hardware and software
where they may intentionally or inadvertently add, alter, or delete
sensitive data or programs.
IRS recognized these weaknesses in its fiscal year 1997 FIA report
and has corrected a significant number of the computer security
weaknesses identified in our previous reports. Additionally, IRS has
centralized responsibility for security and privacy issues and added
staff in this area. IRS is implementing plans to mitigate the
remaining weaknesses by June 1999. In our fiscal year 1997 audit, we
were able to verify the accuracy of the financial statement balances
and disclosures originating in whole or in part from automated
systems primarily through review and testing of supporting
documentation. However, the absence of effective internal controls
over IRS' automated systems makes IRS vulnerable to losses, delays or
interruptions in service, and compromising of the sensitive
information entrusted to IRS by taxpayers.
--------------------
\20 See Financial Audit: Examination of IRS' Fiscal Year 1996
Custodial Financial Statements (GAO/AIMD-98-18, December 24, 1997)
and IRS Systems Security: Tax Processing Operations and Data Still
at Risk Due to Serious Weaknesses (GAO/AIMD-97-49, April 8, 1997).
REPORTABLE CONDITION
---------------------------------------------------------- Letter :1.2
In addition to the material weaknesses discussed above, we identified
one reportable condition that although not a material weakness,
represents a significant deficiency in the design or operation of
internal controls and could adversely affect IRS' ability to meet the
internal control objectives described in this report. This condition
concerns weaknesses in IRS' controls over its manually processed tax
receipts.
VULNERABILITIES EXIST IN
CONTROLS OVER MANUAL TAX
RECEIPTS
-------------------------------------------------------- Letter :1.2.1
IRS' controls over the receipt of cash and checks it manually
receives from taxpayers are not adequate to assure that these
payments will be properly credited to taxpayer accounts and deposited
in the Treasury. To ensure that appropriate security over these
receipts is maintained, IRS requires that lock box\21 depositories
receiving payments on its behalf use a surveillance camera to monitor
staff when they open mail containing cash and checks. However, we
found that payments received at the four IRS service centers where we
tested controls over manual cash receipts were not subject to
comparable controls. We found at these locations that (1) IRS
allowed individuals to open mail unobserved, and relied on them to
accurately report amounts received, and (2) payments received were
not logged or otherwise recorded at the point of receipt to
immediately establish accountability and thereby deter and detect
diversion.
In addition, at one service center, we observed payments being
received by personnel who should not have been authorized to accept
receipts. As a result of these weaknesses, IRS is vulnerable to
losses of cash and checks received from taxpayers in payment of taxes
due. In fact, between 1995 and 1997, IRS identified instances of
actual or alleged employee embezzlement of receipts totaling about
$4.6 million. These actual and alleged embezzlements underscore the
need for effective internal controls over the IRS' service center
receipts process.
--------------------
\21 A lock box is a cash management service provided by banks under
contract to IRS. Using this service, taxpayers mail payments to a
post office box or a lock box facility where the contract banks
collect the receipts, deposit them in Treasury's general revenue
fund, and report the receipts to IRS.
NONCOMPLIANCE WITH LAWS AND
REGULATIONS AND FFMIA
REQUIREMENTS
---------------------------------------------------------- Letter :1.3
Our tests of compliance with selected provisions of laws and
regulations disclosed one instance of noncompliance that is
reportable under generally accepted government auditing standards and
OMB Bulletin 93-06 Audit Requirements for Federal Financial
Statements. This concerns IRS' noncompliance with a provision of the
Internal Revenue Code concerning certification of excise taxes. We
also noted that IRS' financial management systems do not
substantially comply with the requirements of FFMIA, which is
reportable under OMB Bulletin 98-04.\22
--------------------
\22 On January 16, 1998, OMB issued Bulletin 98-04 as an addendum to
OMB Bulletin 93-06, which generally revised the Bulletin's reporting
requirements and implemented the reporting requirements of the
Federal Financial Management Improvement Act of 1996 (P.L. 104-208).
IRS' CERTIFICATION OF
EXCISE TAXES DID NOT
COMPLY WITH LEGAL
REQUIREMENTS
-------------------------------------------------------- Letter :1.3.1
IRS policies and procedures for certification to Treasury of the
distribution of the excise tax collections to the designated trust
funds do not comply with the Internal Revenue Code. The Code
requires IRS to certify the distribution of these excise tax
collections to the recipient trust funds based on actual collections.
However, as we have reported previously,\23 and as discussed earlier
in this report, IRS based its certifications of excise tax amounts to
be distributed to specific trust funds on the assessed amount, or
amount owed, as reflected on the tax returns filed by taxpayers. IRS
has studied various options to enable it to make final certifications
of amounts to be distributed based on actual collections and to
develop the underlying information needed to support such
certifications. IRS was in the process of finalizing its proposed
solution at the conclusion of our fiscal year 1996 audit; however,
through the end of our fiscal year 1997 audit, IRS still had not
implemented its proposed solution. For example, in December 1997,
IRS certified the third quarter of fiscal year 1997 based on
assessments rather than collections.
--------------------
\23 See GAO/AIMD-98-18, December 24, 1997.
IRS' SYSTEMS DID NOT
COMPLY WITH FFMIA
REQUIREMENTS
-------------------------------------------------------- Letter :1.3.2
As the auditor of IRS' Custodial Financial Statements, we are
reporting under FFMIA on whether IRS' financial management systems
substantially comply with the Federal Financial Management System
Requirements (FFMSR),\24 applicable federal accounting standards, and
the SGL at the transaction level. As indicated by the material
weaknesses we discussed earlier, IRS' systems do not substantially
comply with these requirements. For example, as noted previously,
IRS does not have a general ledger that conforms with the SGL.
Additionally, IRS lacks a subsidiary ledger for its unpaid
assessments, and lacks an effective audit trail from its general
ledger back to transaction source documents. These are all
requirements under FFMSR. The other three material weaknesses we
discussed above--controls over refunds, revenue accounting and
reporting, and computer security--also are conditions indicating that
IRS' systems do not comply with FFMSR. In addition, the material
weaknesses we noted above mean that IRS' systems cannot produce
reliable financial statements and related disclosures that conform
with applicable federal accounting standards. Since IRS' systems do
not comply with FFMSR, applicable federal accounting standards, and
the SGL, they also do not comply with OMB Circular A-127, Financial
Management Systems.
We have previously reported on many of these issues and made
recommendations for corrective actions.\25 IRS has drafted a plan of
action intended to incrementally improve its financial reporting
capabilities, which is scheduled to be fully implemented during
fiscal year 1999. This plan is intended to bring IRS' general ledger
into conformance with the SGL and would be a step toward compliance
with FFMSR. However, the plan falls short of fully meeting FFMSR
requirements. For example, the plan will not provide for (1) full
traceability of information through its systems (i.e., lack of an
audit trail), (2) a subsidiary ledger to assist in distinguishing
federal tax receivables from other unpaid assessments, and (3)
reporting of revenue by tax type. As discussed later in this report,
the latter example has implications for IRS' ability to meet certain
federal accounting standards required to be implemented in fiscal
year 1998. IRS also has a longer-range plan to address the financial
management system deficiencies noted in prior audits and in IRS' own
self-assessment.\26 During future audits, we will monitor IRS'
implementation of these initiatives, and assess their effectiveness
in resolving the material weaknesses discussed in this report.
--------------------
\24 FFMSR is a series of requirements produced by the JFMIP to
improve federal financial management through uniform requirements for
financial information, financial systems, and financial organization.
\25 GAO/AIMD-98-18, December 24, 1997.
\26 Tax Systems Modernization: Blueprint Is A Good Start But
Insufficiently Complete to Build Systems (GAO/AIMD/GGD-98-54,
February 24, 1998).
OTHER SIGNIFICANT MATTERS
---------------------------------------------------------- Letter :1.4
In addition to the material weaknesses and other reportable
conditions and noncompliance with laws and regulations and FFMIA
requirements discussed in the previous sections, we identified two
other significant matters that we believe should be brought to the
attention of IRS management and other users of IRS' financial
statements and other financial reports. These concern (1) the
composition and collectibility of IRS' unpaid assessments and (2) the
importance of IRS successfully preparing its automated systems for
the year 2000.
MOST UNPAID ASSESSMENTS
ARE NOT RECEIVABLES AND
ARE LARGELY UNCOLLECTIBLE
-------------------------------------------------------- Letter :1.4.1
As reflected in the supplemental information to IRS' fiscal year 1997
Custodial Financial Statements, the unpaid assessments balance was
about $214 billion as of September 30, 1997. This unpaid assessments
balance has historically been referred to as IRS' taxes receivable or
accounts receivable. However, a significant portion of this balance
is not considered a receivable. Also, a substantial portion of the
amounts considered receivables is largely uncollectible.
Under federal accounting standards, unpaid assessments require
taxpayer or court agreement to be considered federal taxes
receivable. Assessments not agreed to by taxpayers or the courts are
considered compliance assessments and are not considered federal
taxes receivable. Assessments with little or no future collection
potential are called write-offs.
Figure 1 depicts the components of the unpaid assessments balance as
of September 30, 1997.
Figure 1: Components of IRS'
$214 Billion of Unpaid
Assessments (Dollars in
Billions)
(See figure in printed
edition.)
Of the $214 billion balance of unpaid assessments, $76 billion
represents write-offs. Write-offs principally consist of amounts
owed by bankrupt or defunct businesses, including many failed
financial institutions resolved by the Federal Deposit Insurance
Corporation (FDIC) and the former Resolution Trust Corporation (RTC).
As noted above, write-offs have little or no future collection
potential. In addition, $48 billion of the unpaid assessments
balance represents amounts that have not been agreed to by either the
taxpayer or a court. Due to the lack of agreement, these compliance
assessments are likely to have less potential for future collection
than those unpaid assessments that are considered federal taxes
receivable.
The remaining $90 billion of unpaid assessments represent federal
taxes receivable. About $62 billion (70 percent) of this balance is
estimated to be uncollectible due primarily to the taxpayer's
economic situation, such as individual taxpayers who are unemployed
or have other financial problems. However, IRS may continue
collection action for 10 years after the assessment or longer under
certain conditions. Thus these accounts may still ultimately have
some collection potential if the taxpayer's economic condition
improves. About $28 billion, or about 30 percent, of federal taxes
receivable is estimated to be collectible. Components of the
collectible balance include installment agreements with estates and
individuals, as well as relatively newer amounts due from individuals
and businesses who have a history of compliance.
It is also important to note that of the unpaid assessments balance,
about $136 billion (over 60 percent) represents interest and
penalties, as depicted in figure 2, which are largely uncollectible.
Figure 2: Unpaid Taxes and
Interest and Penalty Components
of $214 Billion in Unpaid
Assessments (Dollars in
Billions)
(See figure in printed
edition.)
Interest and penalties are such a high percentage of the balance
because IRS continues to accrue them through the 10-year statutory
collection date, regardless of whether an account meets the criteria
for financial statement recognition or has any collection potential.
For example, interest and penalties continue to accrue on write-offs,
such as FDIC and RTC cases, as well as on exam assessments where the
taxpayers have not agreed to the validity of the assessments. The
overall growth in unpaid assessments during fiscal year 1997 was
wholly attributable to the accrual of interest and penalties.
SUCCESS OF IRS' YEAR 2000
EFFORTS IS CRITICAL
-------------------------------------------------------- Letter :1.4.2
It is critical that IRS successfully prepare its automated systems in
order to overcome the potential problems associated with the year
2000. The Year 2000 problem is rooted in the way dates are recorded
and calculated in many computer systems. For the past several
decades, systems have typically used two digits to represent the year
in order to conserve on electronic data storage and reduce operating
costs. With this two-digit format, however, the year 2000 is
indistinguishable from the year 1900. As a result, system or
application programs that use dates to perform calculations,
comparisons, or sorting may generate incorrect results when working
with years after 1999.
IRS has underway one of the largest conversion efforts in the
civilian sector. IRS has established a schedule to renovate its
automated systems in five segments, with all renovation efforts
scheduled for completion by January 1999 in order to allow a full
year of operational testing. However, with less than 2 years
remaining until the year 2000 arrives, the task of completing the
conversion on time is formidable. If IRS is unable to make its
automated systems Year 2000 compliant, IRS could be rendered unable
to properly process tax returns, issue refunds, correctly calculate
interest and penalties, effectively collect taxes, or prepare
accurate financial statements and other financial reports. We are
working with the Congress and the executive branch to monitor
progress made by federal agencies and identify specific
recommendations for resolving the Year 2000 problem, which we
reported as a governmentwide high risk area\27 and which the
President has designated as a priority management objective.
In addition to the weaknesses discussed above, we noted other, less
significant matters involving IRS' system of accounting controls and
its operations which we will be reporting separately to IRS.
--------------------
\27 High-Risk Series: Information Management and Technology
(GAO/HR-97-9, February 1997).
OPINION ON CUSTODIAL FINANCIAL
STATEMENTS
------------------------------------------------------------ Letter :2
The Custodial Financial Statements, including the accompanying notes,
present fairly, in all material respects, and in conformity with a
comprehensive basis of accounting other than generally accepted
accounting principles, as described in note 1, IRS'
-- custodial assets and liabilities and
-- custodial activity.
Although the weaknesses described above precluded IRS' internal
controls from achieving the internal control objectives discussed
previously, we were nevertheless able to obtain reasonable assurance
that the Custodial Financial Statements were reliable through the use
of substantive audit procedures. However, misstatements may
nevertheless occur in other financial information reported by IRS as
a result of the internal control weaknesses described above.
As discussed in the notes to the fiscal year 1997 Custodial Financial
Statements, IRS has attempted, to the extent practical, to implement
early the provisions of Statement of Federal Financial Accounting
Standards (SFFAS) No. 7, Accounting for Revenue and Other Financing
Sources and Concepts for Reconciling Budgetary and Financial
Accounting. SFFAS No. 7 is not effective until fiscal year 1998.
However, the requirement that this standard be fully implemented in
fiscal year 1998 has significant implications for IRS and its fiscal
year 1998 Custodial Financial Statements. The significant internal
control and system weaknesses discussed earlier may affect IRS'
ability to implement this standard until corrective actions have
fully resolved these weaknesses.
For example, as discussed earlier, IRS currently does not capture
information at the time of receipt of payments from the taxpayer on
how such payments are to be applied to the various trust funds.
Consequently, IRS is presently unable to report collections of tax
revenue by specific tax type as envisioned in SFFAS No. 7 and OMB's
Format and Instructions for the Form and Content of the Financial
Statements of the U.S. Government (September 2, 1997). Other
provisions of SFFAS No. 7 will also be difficult for IRS to
implement in the short term until the significant internal control
and systems issues reported in prior audits and discussed above are
resolved.
OPINION ON MANAGEMENT'S
ASSERTION ABOUT THE
EFFECTIVENESS OF INTERNAL
CONTROLS
------------------------------------------------------------ Letter :3
We evaluated IRS management's assertion about the effectiveness of
its internal controls designed to
-- safeguard assets against loss from unauthorized acquisition,
use, or disposition;
-- assure the execution of transactions in accordance with laws
governing the use of budget authority and other laws and
regulations that have a direct and material effect on the
Custodial Financial Statements or are listed in OMB audit
guidance and could have a material effect on the Custodial
Financial Statements; and
-- properly record, process, and summarize transactions to permit
the preparation of reliable financial statements and to maintain
accountability for assets.
IRS management asserted that except for the material weaknesses in
internal controls presented in the agency's fiscal year 1997 FIA
report on compliance with the internal control and accounting
standards, internal controls provided reasonable assurance that the
above internal control objectives were satisfied during fiscal year
1997. Management made this assertion based upon criteria established
under FIA and OMB Circular A-123, Management Accountability and
Control. Our internal control work would not necessarily disclose
material weaknesses not reported by IRS.
However, we believe that IRS' internal controls, taken as a whole,
were not effective in satisfying the control objectives discussed
above during fiscal year 1997 because of the severity of the material
weaknesses in internal controls described in this report, which were
also cited by IRS in its fiscal year 1997 FIA report.
COMPLIANCE WITH LAWS AND
REGULATIONS
------------------------------------------------------------ Letter :4
Except as noted above, our tests of compliance with selected
provisions of laws and regulations disclosed no other instances of
noncompliance which we consider to be reportable under generally
accepted government auditing standards or OMB Bulletin 93-06. Under
FFMIA and OMB Bulletin 98-04, our tests disclosed, as discussed
above, that IRS' financial management systems do not substantially
comply with the requirements for the following:
-- federal financial management systems,
-- applicable federal accounting standards, and
-- the U.S. Government Standard General Ledger at the transaction
level.
However, the objective of our audit was not to provide an opinion on
overall compliance with laws, regulations, and FFMIA requirements
tested. Accordingly, we do not express such an opinion.
CONSISTENCY OF OTHER
INFORMATION
------------------------------------------------------------ Letter :5
IRS' overview and supplemental information contain various data, some
of which are not directly related to the Custodial Financial
Statements. We do not express an overall opinion on this
information. However, we compared this information for consistency
with the Custodial Financial Statements and, based on our limited
work, found no material inconsistencies.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :6
Management is responsible for
-- preparing the annual Custodial Financial Statements in
conformity with the basis of accounting described in note 1;
-- establishing, maintaining, and assessing internal controls to
provide reasonable assurance that the broad control objectives
of FIA are met; and
-- complying with applicable laws and regulations and FFMIA
requirements.
We are responsible for obtaining reasonable assurance about whether
(1) the Custodial Financial Statements are reliable (free of material
misstatements and presented fairly, in all material respects, in
conformity with the basis of accounting described in note 1), and (2)
management's assertion about the effectiveness of internal controls
is fairly stated, in all material respects, based upon criteria
established under the Federal Managers' Financial Integrity Act of
1982 and OMB Circular A-123, Management Accountability and Control.
We are also responsible for testing compliance with selected
provisions of laws and regulations,\28 for reporting on compliance
with FFMIA requirements, and for performing limited procedures with
respect to certain other information appearing in these annual
Custodial Financial Statements.
In order to fulfill these responsibilities, we
-- examined, on a test basis, evidence supporting the amounts and
disclosures in the Custodial Financial Statements;
-- assessed the accounting principles used and significant
estimates made by management in the preparation of the Custodial
Financial Statements;
-- evaluated the overall presentation of the Custodial Financial
Statements;
-- obtained an understanding of internal controls related to
safeguarding assets, compliance with laws and regulations,
including execution of transactions in accordance with budget
authority and financial reporting;
-- tested relevant internal controls over safeguarding, compliance,
and financial reporting and evaluated management's assertion
about the effectiveness of internal controls;
-- tested compliance with selected provisions of the following laws
and regulations:
Internal Revenue Code (appendix I),
Debt Collection Act, as amended {31 U.S.C. � 3720A},
Government Management Reform Act of 1994 {31 U.S.C. � 3515, 3521
(e)-(f)}, and
Federal Managers' Financial Integrity Act of 1982 {31 U.S.C. �
3512(d)}; and
-- tested whether IRS' financial management systems substantially
comply with the requirements of the Federal Financial Management
Improvement Act of 1996, including
Federal Financial Management Systems Requirements,
applicable federal accounting standards, and
the U.S. Government Standard General Ledger at the transaction
level.
We did not evaluate all internal controls relevant to operating
objectives as broadly defined by FIA, such as those controls relevant
to preparing statistical reports and ensuring efficient operations.
We limited our internal control testing to those controls necessary
to achieve the objectives outlined in our opinion on management's
assertion about the effectiveness of internal controls. As the
auditor of IRS' Custodial Financial Statements, we are reporting
under FFMIA on whether the agency's financial management systems
substantially comply with the Federal Financial Management Systems
Requirements, applicable federal accounting standards, and the U.S.
Government Standard General Ledger at the transaction level. In
making this report, we considered the implementation guidance for
FFMIA issued by OMB on September 9, 1997.
The IRS' Custodial Financial Statements do not reflect the potential
impact of any excess of taxes due in accordance with the Internal
Revenue Code, over taxes actually assessed by IRS, often referred to
as the "tax gap." SFFAS No. 7 specifically excludes the "tax gap"
from financial statement reporting requirements. Consequently, the
Custodial Financial Statements do not consider the impact of the tax
gap.
We performed our work in accordance with generally accepted
government auditing standards and OMB Bulletin 93-06.
--------------------
\28 These are laws and regulations that, we believe, have a direct
and material effect on the Custodial Financial Statements or that are
listed in OMB guidance and could have a material effect on the
Custodial Financial Statements.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :7
In commenting on a draft of this report, IRS stated that it generally
agreed with the findings and conclusions in the report. IRS
acknowledged the internal control weaknesses and noncompliance with
laws and regulations we cited, and discussed initiatives underway to
address many of the issues raised in the report. We will evaluate
the effectiveness of IRS' corrective actions as part of our audit of
IRS' fiscal year 1998 Custodial Financial Statements. However, we do
not agree with IRS' assertion that it needs a change in legislation
to obtain information from taxpayers at the time of remittance to
properly allocate excise tax payments to the various trust funds. We
recognize that resolution of many of these issues could take several
years.
IRS agreed with our conclusion that its financial management systems
do not comply with the Federal Financial Management Systems
Requirements and the U.S. Government Standard General Ledger
requirements of the Federal Financial Management Improvement Act of
1996. However, IRS believes that its current accounting and
financial reporting process complies with applicable federal
accounting standards. OMB's September 9, 1997, memorandum on
implementation guidance for FFMIA specifies two indicators that must
be present to indicate compliance with federal accounting standards.
First, the agency generally should receive an unqualified opinion on
its financial statements. Second, there should be no material
weaknesses in internal controls that affect the agency's ability to
prepare auditable financial statements and related disclosures. As
we reported, IRS received an unqualified opinion on its financial
statements. However, as discussed in this report, we identified six
material weaknesses in IRS' internal controls. As a result of these
weaknesses, IRS' financial management systems are unable to produce
reliable financial statements and related disclosures without
extensive ad hoc procedures and tens of billions of dollars in
adjustments. Consequently, IRS' financial management systems are not
in compliance with applicable federal accounting standards
requirements.
IRS' written comments are included in appendix II.
Gregory D. Kutz
Associate Director
Governmentwide Accounting and Financial
Management Issues
February 11, 1998
PRINCIPAL FINANCIAL STATEMENTS
=========================================================== Appendix 0
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
PROVISIONS OF THE INTERNAL REVENUE
CODE TESTED FOR THE FISCAL YEAR
1997 AUDIT
=========================================================== Appendix I
26 U.S.C. � 32 Earned Income Credit
26 U.S.C. � 6303 Notice and Demand for Tax
26 U.S.C. � 6321 Tax Liens
26 U.S.C. � 6402 Authority To Make Credits or Refunds
26 U.S.C. � 6501 Limitations on Assessments and Collections
26 U.S.C. � 6502 Collection After Assessment
26 U.S.C. � 6601 Assessment of Interest
26 U.S.C. � 6611 Interest on Overpayments
26 U.S.C. � 6621 Rate of Interest
26 U.S.C. � 6651 Penalty for Failure to File Tax Return or to Pay
Tax
26 U.S.C. � 6654 Penalty For Failure by Individual to Pay Estimated
Income Tax
26 U.S.C. � 6655 Penalty for Failure By Corporations to Pay
Estimated Income Tax
26 U.S.C. � 6662 Accuracy Related Penalty
26 U.S.C. � 6663 Fraud Penalty
26 U.S.C. � 9501-9511 Trust Funds
(See figure in printed edition.)Appendix II
COMMENTS FROM THE INTERNAL REVENUE
SERVICE
=========================================================== Appendix I
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Steven Sebastian, Assistant Director
Gregory Wilshusen, Assistant Director
Phyllis Anderson, Assignment Manager
West Coile, Assignment Manager
Paul Foderaro, Assignment Manager
Charles Fox, Assignment Manager
Lorraine Wang, Assignment Manager
Helen Branch, Senior Evaluator
Sharon Byrd, Senior Auditor
Philip Goulet, Senior Evaluator
Frederick Lundgren, Senior Evaluator
Meafelia Gusukuma, Auditor
Deborah Peay, Auditor
Wilfred Holloway, Senior Assistant Director
James Loschiavo, Assistant Director
James Ungvarsky, Computer Specialist
ATLANTA FIELD OFFICE
Aditi Archer, Senior Auditor
Fannie Bivins, Senior Auditor
James Douglas, Senior Auditor
Alva Archie, Auditor
Veronica Mayhand, Auditor
Angel Sharma, Auditor
DALLAS FIELD OFFICE
Thomas Barger, Jr., Senior Auditor
George Jones, Senior Auditor
Ellen Wolfe, Senior Auditor
Leonard Zapata, Senior Auditor
Michael Coy, Senior Auditor
SAN FRANCISCO FIELD OFFICE
Doreen Eng, Assistant Director
Ellen Rominger, Senior Auditor
Laurie King, Auditor
LOS ANGELES FIELD OFFICE
Charles Payton, Assistant Director
Barbara House, Senior Auditor
Ted Hu, Senior Auditor
Eric Johns, Senior Auditor
David Elder, Auditor
Stacey Osborn, Auditor
Gary Wiggins, Auditor
SEATTLE FIELD OFFICE
Susan Chin, Senior Auditor
Julianne Cutts, Senior Auditor
Alvin Finegold, Senior Evaluator
William Hanson, Senior Auditor
Richard Harada, Senior Auditor
Delores Lee, Senior Auditor
Karlin Richardson, Senior Auditor
Patricia Seaton, Senior Auditor
Tuyet-Quan Thai, Senior Auditor
Catherine Arnold, Auditor
Elizabeth Naftchi, Auditor
OFFICE OF GENERAL COUNSEL
Thomas Armstrong, Assistant General Counsel
Andrea Levine, Attorney
*** End of document. ***