    Major Management Challenges and Program Risks: Department of the Treasury
    (Letter Report, 01/01/2001, GAO/GAO-01-254).

    This report, part of GAO's high risk series, discusses the major
    management challenges and program risks facing the Department of the
    Treasury. The primary challenges that Treasury faces include (1)
    modernizing the Internal Revenue Service's tax administration systems,
    (2) improving Customs Service's regulation of commercial trade, (3)
    achieving sound financial management, (4) improving the Bureau of
    Alcohol, Tobacco, and Firearms' performance measures, and (5) improving
    the management of Treasury's asset forfeiture program.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  GAO-01-254
         TITLE:  Major Management Challenges and Program Risks: Department
    	     of the Treasury
          DATE:  01/01/2001
       SUBJECT:  Risk management
    	     Accountability
    	     Financial management
    	     International trade regulation
    	     Performance measures
    	     Customs administration
    	     Internal controls
    	     Tax administration systems
    IDENTIFIER:  GAO High Risk Program
    	     High Risk Series 2001
    	     Earned Income Tax Credit
    	     Treasury Asset Forfeiture Fund
    	     IRS Information Technology Investments Account
    	     Customs Service Automated Commercial Environment System
    	     EIC
    	     Treasury Offset Program
    	     FBI National Instant Criminal Background Check System
    	     Custom Service Seized Assets and Case Management Tracking
    	     System

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    GAO-01-254

    Performance and Accountability Series

    January 2001 Major Management Challenges and Program Risks

    Department of the Treasury

    GAO- 01- 254

    Letter 3 Overview 6 Major

    13 Performance and Accountability Challenges

    Related GAO 59

    Reports Performance

    63 and Accountability Series

    Lett er

    January 2001 The President of the Senate The Speaker of the House of
    Representatives

    This report addresses the major performance and accountability challenges
    facing the Department of the Treasury (Treasury) as it seeks to carry out
    certain aspects of its economic, financial, enforcement, and

    management missions. It includes a summary of actions that Treasury has
    taken and that are under way to address these challenges. It also outlines
    further actions

    that GAO believes are needed. This analysis should help the new Congress and
    administration carry out their responsibilities and improve government for
    the benefit of the American people. This report is part of a special series,
    first issued in January 1999, entitled the Performance and Accountability
    Series: Major Management Challenges

    and Program Risks. In that series, GAO advised the Congress that it planned
    to reassess the methodologies and criteria used to determine which federal
    government operations and functions should be highlighted and which should
    be designated as “high risk.” GAO completed the assessment,
    considered comments provided on a publicly available exposure draft, and
    published its guidance document ,

    Determining Performance and Accountability Challenges and High Risks (GAO-
    01- 159SP), in November 2000. This 2001 Performance and Accountability
    Series contains separate reports on 21 agencies- covering each cabinet
    department, most major independent agencies, and the U. S. Postal Service.
    The series also includes a governmentwide perspective on performance

    and management challenges across the federal government. As a companion
    volume to this series, GAO is issuing an update on those government
    operations and programs that its work identified as “high risk”
    because of either their greater vulnerabilities to waste, fraud, abuse, and
    mismanagement or major challenges associated with their economy, efficiency,
    or effectiveness.

    David M. Walker Comptroller General of the United States

    Overview The Department of the Treasury is responsible for a broad scope of
    activities that touch the lives of all Americans, including collecting
    taxes, managing the

    government's finances, securing U. S. borders, controlling firearms- related
    crime, and managing seized assets. To carry out its responsibilities,
    Treasury has a

    workforce of about 143,000 employees, most of whom work for Treasury's 13
    bureaus. Treasury faces a variety of performance and accountability
    challenges that affect successful execution of its broad and complex
    responsibilities. This report discusses the primary challenges that have
    surfaced on the basis of our work at Treasury and several of its bureaus and
    describes the progress made since we issued our last performance and
    accountability report in 1999. 1 1 Performance and Accountability Series:
    Major Management Challenges and Program Risks: Department of the Treasury
    (GAO/ OCG- 99- 14, Jan. 1999).

    Modernize the Internal Revenue Service to better help taxpayers meet their
    tax responsibilities and to increase overall compliance with tax laws

    ? Improve the U. S. Customs Service's regulation of commercial trade while
    ensuring that it protects against the entry of illegal goods at U. S.
    borders

    ? Achieve sound financial management through significant management
    attention and priority

    ? Improve the Bureau of Alcohol, Tobacco and Firearms' performance measures
    to better determine its progress in reducing criminals' access to firearms

    ? Improve the management of Treasury's asset forfeiture program

    Internal Revenue IRS' ability to balance its goals of helping taxpayers

    Service (IRS) comply with tax laws and improving overall compliance
    Modernization

    depends on successfully modernizing IRS. This modernization effort
    encompasses changes to every facet of IRS' operations, including its
    organizational structure, its performance management system, and its
    technology. IRS is about 3 years into the modernization process, which is
    likely to take a decade or more to complete. Over the past 3 years, IRS has
    developed and

    committed to an integrated modernization strategy, which is a significant
    achievement. It has implemented a new organizational structure with four
    customerfocused operating divisions to meet the needs of the taxpayer
    segments they serve. It has also made progress in implementing our
    recommendations aimed at establishing key management controls needed to

    effectively build and implement modern information systems. Substantial work
    remains for IRS' modernization, however, before expected results are

    achieved. This work includes ? revamping business practices to better meet
    taxpayers' needs, ? implementing a balanced approach to performance
    management to better assess progress in achieving goals and improving
    operations,

    ? addressing financial management weaknesses to develop reliable cost- based
    performance information, and ? institutionalizing effective management
    controls for information systems modernization. We have classified four
    areas of IRS' operations as highrisk: financial management, systems
    modernization, the collection of unpaid taxes, and noncompliance with the
    Earned Income Credit (EIC). Two of these areas-

    financial management and systems modernization- were first designated as
    high- risk in 1995. In all four areas, billions of dollars are at risk
    because IRS lacks requisite management controls. Specifically:

    ? Because IRS lacks reliable cost accounting information, it is difficult
    for IRS and Congress to determine the cost of various tax collection and
    enforcement activities. If IRS had such cost accounting information, it
    could also use it to manage these activities more efficiently. ?
    Modernization of IRS' systems that support critical IRS business functions
    has inherent risks because it is extremely complex and costly. In addition,
    IRS has not yet fully corrected long- standing and serious modernization
    management and technical weaknesses that were the focus of our past
    recommendations. If these weaknesses are not fully addressed, modernization
    projects are at risk of not

    performing as intended, costing more, and taking longer to complete. ? IRS
    lacks reliable and timely financial, operational,

    and compliance data to help target its effort in collecting billions of
    dollars in unpaid taxes. As a result, the federal government is exposed to
    significant losses of tax revenue, and compliant taxpayers bear an undue
    burden of financing the government's activities. ? IRS lacks data to
    demonstrate that it has effective controls over noncompliance with the EIC-
    a tax credit that is available to low- income working people. According to
    IRS data, taxpayers are

    inappropriately claiming billions of dollars for this credit. IRS has made
    good progress in establishing managerial

    controls in its financial management and systems modernization areas, but
    concerted follow- through with modernization plans and substantial
    implementation is

    needed to more fully address our recommendations and reduce the risk level.
    Customs' Regulation Customs faces significant performance challenges in of
    Commercial Trade balancing its responsibilities for enforcing laws to
    safeguard U. S. borders against the illegal entry of goods and regulating
    legitimate commercial activity efficiently. Customs has made some progress
    in implementing modernization initiatives that are designed to improve

    its regulation of commercial activities and the effectiveness of personal
    searches of passengers, but the following challenges remain: ? completing an
    assessment of new trade compliance initiatives as we recommended; ? fully
    implementing mature and effective system acquisition capabilities as we
    recommended so that it can effectively acquire a large, complex import
    processing system known as the Automated

    Commercial Environment that is to help facilitate the movement of goods into
    the United States and the collection of revenues; ? continuing to address
    our recommendation to obtain better data to improve the process of searching

    airline passengers who may be carrying contraband, such as illegal drugs,
    while respecting the rights of American citizens and the traveling public;
    and

    ? using reliable data to address our recommendation to determine its staff
    resource needs for all of its operations and ensure that personnel are
    located where they are most needed.

    Financial Treasury faces many challenges in its ongoing efforts to
    Management improve the accuracy and reliability of its financial and

    information management systems and correct internal control weaknesses that
    we and the Treasury Office of Inspector General (OIG) identified at several
    of its bureaus and offices. Treasury received a qualified opinion on its
    fiscal year 1999 Department- wide financial statements because of financial
    management

    problems at IRS and the inability of IRS' administrative systems to produce
    timely, auditable data to support certain IRS financial statements.
    Treasury's ability to effectively fulfill its financial management
    responsibilities has also been adversely affected by the lack of substantial
    compliance with the financial management systems requirements detailed in
    the Federal Financial Management Improvement Act of 1996 (FFMIA) and
    weaknesses in Customs' internal controls over data in its automated systems.

    Certain significant financial systems weaknesses; problems with fundamental
    recordkeeping and financial reporting; incomplete documentation; and weak
    internal controls, including computer controls, have undermined the U. S.
    government's ability to obtain an opinion on the reliability of its
    financial statements for the 3 years that we have reported on these
    statements. As preparer of

    the Financial Report of the United States Government, Treasury's Financial
    Management Service (FMS) has a key responsibility to provide leadership and
    work with agencies to address some of these problems, in particular the lack
    of sufficient systems, controls, and procedures to properly prepare the
    government's financial statements. Further, in performing much of Treasury's
    role as primary fiscal agent for the federal government, FMS continues to
    experience challenges in addressing financial management issues related to
    implementing the requirements of the Debt Collection Improvement Act of 1996
    and improving its computer security controls over systems used to help it
    process hundreds of billions of dollars of collections and disbursements
    made on behalf of most federal agencies.

    At the end of fiscal year 1998, the unified budget of the federal government
    was in surplus for the first time in almost 30 years and surpluses are
    projected to continue over the next decade. As we have stated in previous
    reports, the transition from annual budget deficits to surpluses presents
    challenges to Treasury for managing the maturity profile of federal debt
    held by the public consistent with Treasury's objectives and strategies for
    achieving these three debt management objectives of sound cash management,
    lowest financing costs, and the

    promotion of efficient capital markets. Bureau of Alcohol,

    Significant technological advances have given the Tobacco and Bureau of
    Alcohol, Tobacco and Firearms (ATF) more Firearms'

    investigative information to enforce the federal laws and Performance

    regulations relating to firearms and firearms- related Measures violent
    crime. However, as we observed in our June 2000 report, 2 it is difficult to
    determine ATF's progress

    2 Observations on the Department of the Treasury's Fiscal Year 1999
    Performance Report and Fiscal Year 2001 Performance Plan (GAO/ GGD/ AIMD-
    00- 231R, June 30, 2000).

    because its performance measures are generally output measures (e. g.,
    number of firearm traces made, average trace response time, and number of
    persons trained), rather than outcome measures (e. g., reductions in
    firearms- related crimes). Treasury officials have said that until Treasury
    is better able to determine the causeand-

    effect relationships between its programs and the outcomes they are intended
    to influence, it will continue to rely on output measures.

    Asset Forfeiture Another challenge for Treasury deals with the separate

    Program but similar seized asset programs operated by Treasury and Justice
    that were first designated as high risk in 1990. Neither department had
    adequately focused on

    managing and accounting for seized assets nor formed a plan to consolidate
    the two programs, as was mandated by Congress. As of September 30, 1999, the
    combined value of assets in these two programs was more than

    $1 billion, of which about $625 million were assets under Treasury's
    management. We have noted improvements in the management of both programs
    over the last decade. However, the Treasury Inspector General continues to
    identify weaknesses in the areas that were the subject of our past
    recommendations, such as implementing accountability control over seized
    property at Customs. Further, Treasury and Justice have not addressed our
    recommendation to consolidate their two programs to eliminate duplication of
    resources and reduce administrative costs. However, they are conducting a
    study of opportunities for cooperation in

    the administration of their programs. We will consider the results of this
    study along with actions to address internal control weaknesses in
    determining whether to remove the high- risk designation for the asset
    forfeiture program in the future.

    Major Performance and Accountability Challenges

    This report discusses the performance and accountability challenges that
    have surfaced on the basis of our work at Treasury and several of its
    bureaus. Those challenges affect Treasury's ability to carry out its
    critical enforcement and financial responsibilities which include ensuring
    compliance with tax and trade laws, protecting U. S. borders against the
    illegal entry of goods, managing the finances of the government, and
    reducing firearms- related crimes. Although Treasury and its bureaus have
    made progress in each of these areas, longstanding

    challenges, some of which rise to the level of high risk, remain. These
    challenges and high- risk areas are discussed below. Modernize IRS to IRS'
    ability to balance its goals of helping taxpayers

    Better Help meet their tax responsibilities and improving overall

    Taxpayers Meet compliance with the tax laws depend on its successful

    Their Tax completion of a major modernization effort. This effort
    Responsibilities

    is multifaceted and encompasses changes to IRS' and to Increase
    organizational structure, business practices,

    Overall performance management system, and information Compliance With

    systems. IRS' organizational restructuring is proceeding reasonably well;
    however, substantial work remains Tax Laws

    before expected results are achieved. This work includes ? revamping
    business practices to better meet taxpayers' needs, ? implementing a
    balanced approach to performance management to better assess progress in
    achieving goals and improving operations,

    ? addressing financial management weaknesses to develop reliable cost- based
    performance information, and ? institutionalizing effective management
    controls for information systems modernization.

    IRS is now about 3 years into its modernization effort, but improvements in
    taxpayer service have not yet materialized. 1 Taxpayers continue to be
    frustrated with IRS' inability to provide telephone customer service.
    Although the telephone answer rate for the 2000 filing season improved
    compared to 1999, it was still well below the performance level achieved in
    1998. IRS data

    showed that the answer rate for the 2000 filing season was 62 percent, which
    is lower than the 72 percent IRS achieved in the 1998 filing season. The
    answer rate was lower than in 1998 even though IRS, since 1999, has invested
    heavily in technology to route telephone calls from taxpayers to the
    location where the wait is shortest and has made telephone assistance
    available 24 hours a day, 7 days a week. Once taxpayers do get through to
    IRS, they are often frustrated when employees cannot quickly and accurately
    answer questions and resolve problems.

    Improvements in telephone customer as well as other service improvements
    should result if IRS is successful at its modernization effort. Figure 1
    shows how IRS plans to achieve its mission through five modernization
    components. 1 IRS Modernization: Long- Term Effort Under Way, but
    Significant Challenges Remain (GAO/ T- GGD/ AIMD- 00- 154, May 3, 2000).

    Figure 1: Modernization Promises to Align IRS With Service- oriented Mission
    and Goals

    Mission Statement

    Provide America's taxpayers top- quality service by helping them understand
    and meet their tax responsibilities and by applying the tax law with
    integrity and fairness to all.

    Goals

    Service to each taxpayer ? Service to all taxpayers ? Productivity through a
    quality work environment

    Modernization Components

    Revamped Customer

    Management Balanced

    New Business

    Focused Roles With

    Measurement Technology

    Practices Operating

    Clear of

    Divisions Responsibility

    Performance

    Source: IRS.

    IRS' development of and commitment to an integrated modernization strategy
    is a significant achievement, but implementation of the modernization
    strategy may take 10 years or more. Progress thus far has been made in
    laying a foundation for change. The initial aspects of the modernization
    effort- the reorganization of IRS' structure, with four customer- focused
    operating divisions organized around the taxpayer segments they serve- has
    proceeded reasonably well. The operating divisions are up and running, as of
    October 2000. Executive leadership teams, which are made up of a combination
    of career IRS employees and outside hires, have been selected for the
    divisions; and IRS has been shifting employees to the new organizational
    structure

    in phases. Within each operating division, IRS has identified the key
    processes- prefiling, filing, and postfiling- that are its primary
    interactions with taxpayers. Each operating division is to have
    responsibility for all of the key processes for its

    respective taxpayer segment. However, the following key challenges remain.
    Revamping Business For the future, IRS must focus on revamping business

    Practices to Meet practices to better meet taxpayer needs. Within the new
    Taxpayers' Needs

    operating divisions, teams must take a fresh look at how to enforce the tax
    laws and meet taxpayer needs in new and better ways. This will be a
    challenge in both overcoming cultural barriers to “thinking outside
    the box” as well as in coordinating the requisite human

    capital, data, and information systems support across IRS. One example of
    this rethinking is IRS' fresh look at how it provides face- to- face
    customer service. On the basis of the conclusion that from a taxpayer's
    perspective, a single point of contact for resolving issues is a good way

    of doing business, IRS is creating a new position- tax resolution
    representative. This position is to be staffed with permanent employees at
    IRS walk- in sites who perform traditional prefiling duties, such as
    answering tax law questions and helping taxpayers prepare their

    returns, as well as handling postfiling compliance duties, including
    installment agreements, account adjustments, and simple audits.

    Implementing a According to our past studies of human capital Balanced
    Approach

    management, systems for motivating employees and to IRS' Performance
    managing their performance must be aligned to support Management System
    agencies' missions and expectations. 2 At the heart of a to Better Assess
    performance management system is a set of balanced Progress measures that,
    if properly used, helps organizations assess progress toward achieving
    strategic goals and improving operations. IRS has implemented a new balanced
    measurement system that seeks to develop

    discrete, corresponding performance measures for each of its three strategic
    goals- providing top- quality customer service, ensuring taxpayer
    compliance, and ensuring employee productivity through a quality work
    environment. Each goal will have measures for customer satisfaction,
    business results, and employee satisfaction. IRS is aligning its individual
    performance

    evaluation systems with its balanced measurement system to clearly link the
    work of individual managers and employees to the mission and goals of the
    agency. According to IRS officials, the alignment has been accomplished for
    managers and executives, and IRS is now in the process of expanding the
    alignment for its core workforce. IRS lacks one of its important business-
    results measures- a measure of taxpayers' voluntary compliance. This measure
    is a prerequisite to understanding current compliance levels and whether

    IRS' initiatives will lead to improved compliance. IRS has lacked a
    voluntary compliance measure for several years and is working to develop
    one. In the past, IRS

    used detailed random audits to develop estimates for the level of voluntary
    compliance, but these audits were the subject of much criticism. In 1995,
    due to the additional 2 Human Capital: A Self- Assessment Checklist for
    Agency Leaders (GAO/ GGD- 99- 179, Sept. 1999); and Human Capital: Key
    Principles From Nine Private Sector Organizations (GAO/ GGD- 00- 28, Jan.
    31, 2000).

    costs and burden that such audits placed on taxpayers, IRS formally
    cancelled its plans to continue them. We have said that a modified version
    of the past audits,

    which reduces burden on taxpayers, could be useful in assessing voluntary
    compliance. The Commissioner has acknowledged the need for a voluntary
    compliance measure and has said that in the absence of such a measure, it
    would be impossible to make informed decisions on the effectiveness of
    various strategies to encourage voluntary compliance. Accordingly, IRS is
    working to develop a method for assessing compliance,

    and we are monitoring IRS' efforts in this regard. In addition to developing
    a compliance measure, the next steps for IRS in the area of performance
    management are to (1) align the balanced measures that it has developed to
    the employee performance

    evaluation system, clearly linking the work of individual employees and
    managers to the mission and goals of the agency; and (2) determine what
    performance data needs to be collected to track progress. IRS is working on
    both of these steps. IRS' human capital problems can be seen as part of a

    broader pattern of human capital shortcomings that have eroded mission
    capabilities across the federal government. See our High- Risk Series: an
    Update (GAO- 01- 263, Jan. 2001) for a discussion of human capital as a
    newly designated governmentwide high- risk area.

    Addressing Financial Although a balanced measurement system could provide

    Management it with information on the results of its programs to Weaknesses
    to improve customer service and increase compliance, IRS Develop Reliable
    also needs to know the cost of achieving these results. Cost- Based

    Reliable cost information is critical for IRS management Performance

    and Congress to determine whether IRS has the Information appropriate levels
    of funding and staff and is effectively using them. However, serious
    financial management

    weaknesses- a high- risk area since 1995- impair IRS' ability to develop
    reliable, cost- based performance information. For example, our audit of
    IRS' fiscal year 1999 financial statements identified substantial weaknesses
    in accounting, reporting, and budgetary controls that rendered IRS unable to
    reliably report how it spent the $8. 5 billion that Congress appropriated
    for it. IRS' lack of cost accounting information has rendered it unable to
    develop cost- based performance information to measure the effectiveness of
    its tax collection and

    enforcement programs and to judge whether it is appropriately allocating
    available resources among competing management priorities. Consequently, IRS
    cannot measure the extent to which it is achieving its mission of promoting
    compliance with federal tax laws. We also found many instances in which
    expenditures were not promptly charged against related appropriations, and
    obligations were not deobligated when appropriate. 3 These weaknesses
    seriously

    impaired IRS' ability to ensure that resources were spent only in accordance
    with laws, regulations, and management policy. To address these issues, we
    have provided IRS with detailed management and operational recommendations.
    IRS' senior management has been proactive in addressing these issues and has
    played a

    major role in the progress IRS has achieved to date. However, resolving many
    of IRS' most serious problems will require a sustained, long- term
    commitment of resources, continued involvement of senior management, and
    sustained progress in systems

    modernization. 3 IRS Internal Audit also reported weaknesses in IRS'
    controls over deobligations in its report entitled Review of the Need to
    Deobligate Unliquidated Obligations (Internal Audit Report No. 084602, June
    26, 1998).

    Reliable cost- based performance information helps support managerial
    decisions. IRS has concerns that in view of the congressional and public
    sensitivity about IRS' collection and enforcement activities, Congress may
    not be receptive to developing this type of information and including it in
    the annual budget submission. However, reliable cost- benefit performance

    information related to these activities is necessary to better assist
    Congress in making informed funding decisions concerning the appropriate
    levels and uses of IRS' resources. Consequently, we have recommended that
    IRS develop this information. We also presented a matter for congressional
    consideration that Congress should consider requiring IRS to include in any
    budget request for additional resources for its collection and

    enforcement activities reliable cost- based performance indicators and other
    relevant aggregate cost- benefit data that demonstrate the benefits of
    providing for such resources. 4 Institutionalizing

    The final challenge associated with IRS' modernization Effective Systems
    effort is institutionalizing effective systems Modernization modernization
    management controls for its information Management technology (IT) systems-
    a long- standing challenge that Controls we have designated as a high- risk
    area since 1995. Over a decade ago, IRS began modernizing its inefficient
    and

    outdated systems that are used to process tax returns and respond to
    taxpayer inquiries. Until IRS' antiquated information systems are replaced,
    they will continue to hinder efforts to better serve taxpayers through

    revamped business practices. IRS has made progress over the last several
    years, particularly since June 2000, in establishing some key management
    controls. However, to fully address our recommendations and solve the
    underlying issues, IRS will need to establish all

    4 Internal Revenue Service: Recommendations to Improve Financial and
    Operational Management (GAO- 01- 42, Nov. 17, 2000).

    of our recommended controls and ensure that they are implemented. Until this
    work is completed, IRS' systems modernization will continue to be designated
    a high- risk area. Beginning in 1995 and continuing since then, we have made
    recommendations to correct serious and

    pervasive management and technical weaknesses, and we concluded that until
    these weaknesses were corrected, IRS was not ready to invest billions of
    dollars

    in building modernized systems. 5 In general, these weaknesses fall into
    four interrelated and interdependent IT management categories- investment
    management, system life- cycle management, enterprise

    architecture management, and software acquisition management (see fig. 2).

    5 Tax Systems Modernization: Management and Technical Weaknesses Must Be
    Corrected If Modernization Is to Succeed (GAO/ AIMD- 95- 156, July 26,
    1995).

    Figure 2: Categories of IRS' Systems Modernization Weaknesses

    System Life- Cycle Management

    Source: GAO analysis of IRS data.

    Immediately following our 1995 report, IRS made limited progress in
    strengthening its modernization management capability. As a result, we
    suggested in 1996 that the Congress limit IRS' IT spending to certain cost-
    effective categories. In the fiscal year 1997 Omnibus Consolidated
    Appropriations Act, 6 Congress directed IRS to develop a plan to correct its
    weaknesses, including developing and submitting to Congress, by May 1997, an
    enterprise architecture (or agencywide

    blueprint for the modernization). In response, IRS took several actions to
    address congressional direction and implement our recommendations. For
    example, IRS developed the first two levels of a four- level enterprise 6
    Public Law 104- 208.

    architecture, which IRS refers to as the Modernization Blueprint. In
    September 1997 briefings and a subsequent report in early 1998, we reported
    that the blueprint was a good first step and made recommendations for
    completing and implementing it. Subsequently, Congress established

    a multiyear capital account- the IT Investments Account (ITIA)- to fund IRS
    systems modernization initiatives and limit IRS' ability to obligate these
    funds

    until it met certain conditions. 7 Specifically, IRS was to submit to
    Congress for approval an expenditure plan that, among other things, (1)
    implements the blueprint, (2) complies with requirements of the Office of
    Management and Budget's (OMB) system investment guidelines, (3) passes
    reviews and approvals by OMB and Treasury's IRS Management Board, and (4) is
    reviewed by us. Between May 1999 and October 2000, IRS submitted three
    expenditure plans and two interim “stop gap” plans, totaling
    about $477 million, for multiple program and project- level modernization
    initiatives. This series of plans was consistent with our position that IRS
    incrementally modernize its systems and submit incremental expenditure plans
    for release of ITIA funds. 8 Although we found that these expenditure plans

    generally complied with the legislative conditions and our open
    recommendations, we also reported that IRS' plans to build systems (i. e.,
    perform detailed design and software development activities) before
    correcting its long- standing weaknesses introduced a high risk of 7 See the
    fiscal year 1998 Treasury and General Government

    Appropriations Act (P. L. 105- 61) and the fiscal year 1999 Omnibus
    Consolidated and Emergency Supplemental Appropriations Act (P. L. 105- 277).
    8 Tax Systems Modernization: Results of Review of IRS' Initial Expenditure
    Plan (GAO/ AIMD/ GGD- 99- 206, June 15, 1999).

    failure. (Program and project reviews by the Treasury Inspector General for
    Tax Administration (TIGTA) also found that modernization management controls
    were lacking.) In response, IRS appropriately restructured its modernization
    program by scaling back its system development activities and giving
    priority to putting in place modernization management capabilities and

    controls. Since it restructured the program, IRS has made important progress
    in implementing modernization management capabilities and addressing our
    recommendations. For example, we reported that IRS had largely defined its
    system life- cycle methodology that incorporated software acquisition and
    investment management processes as well as the program roles and

    responsibilities of IRS and its modernization contractor, and it made
    progress in producing the first release of its enterprise architecture.
    Despite important progress, IRS has more work to do

    before it will have fully implemented our recommendations and addressed
    long- standing modernization weaknesses. These efforts include (1) making
    the program office fully operational, (2) implementing the processes for
    software acquisition and IT investment management, and (3) completing and
    implementing its enterprise architecture. IRS has plans and initiatives
    under way in these areas, but until this work is completed, key
    modernization management controls are missing, which increases the risk that
    projects will not perform as intended and will cost more and take longer
    than they should. As we have consistently stated, these risks are not as
    severe early in the projects' life cycles, when they are being planned

    (project definition and design), but they escalate as projects begin to be
    built (detailed design and software development). Accordingly, we have
    recommended that IRS refrain from building systems until these controls

    are in place and functioning.

    In addition to institutionalizing effective systems modernization management
    controls, IRS needs to continue to address the long- standing weaknesses in

    security controls over its current information systems. Over the past 7
    years, we have provided IRS numerous recommendations to assist it in
    addressing weaknesses

    in its computer security controls. Major issues addressed by these
    recommendations include weaknesses in physical security and logical
    security, data communications management, risk analysis, quality assurance,
    internal audit and security, security awareness, and contingency planning.
    Although IRS has made significant progress in

    improving computer security weaknesses that we have identified over the last
    several years, much remains to be done to resolve the serious weaknesses
    within IRS' computing environment that place its automated systems and
    taxpayer data at serious risk to both internal and external threats. Despite
    IRS' extensive reliance on its information systems, IRS continues to have
    serious weaknesses with general controls designed to protect computing
    resources, such as networks, computer equipment, software programs, data,
    and facilities, from unauthorized use, modification, loss, and disclosure.
    During our audit of IRS' fiscal year 1999

    financial statements, we also found that computer security controls over
    IRS' key applications that manage tax return input and receipt processing do
    not provide assurance that only authorized personnel have access to the
    application and related data, that the data are complete and accurate, and
    that application and data integrity is maintained.

    These weaknesses in controls increase the risk that data processed by IRS'
    information systems are not reliable and continue to expose IRS' tax
    processing operations to disruption. If IRS does not adequately mitigate
    these weaknesses, unauthorized individuals could gain access to critical
    hardware and software, where they may

    intentionally or inadvertently add, alter, or delete sensitive data or
    computer programs. Such individuals could also obtain personal taxpayer
    information and use it to commit financial crimes in the taxpayer's name,
    such as fraudulently establishing credit and running up debts.

    IRS Faces Challenges Successful modernization should help IRS address

    in Collecting Unpaid aspects of another high- risk area- collection of
    unpaid Taxes taxes. Unpaid taxes include (1) delinquent taxes that IRS is
    attempting to collect, (2) taxes that IRS knows are due but has decided not
    to pursue collecting, and (3) an unknown amount of unpaid taxes that IRS has
    not identified. While IRS has proceeded with its

    modernization effort, some key collection actions such as levies and
    seizures have declined since 1997. 9 These declines may increase the
    incentives for taxpayers to either not report or underreport their tax
    obligations. Because IRS lacks a measure of voluntary compliance, it does
    not know the impact of recent declines in collection actions. As a result,
    we have expanded and renamed the former high- risk area, 10 which
    encompassed only unpaid taxes known to IRS, to include unpaid taxes that IRS
    does not know about. As

    of September 30, 1999, IRS' inventory of known unpaid assessments totaled
    $231 billion. Of this amount, $127 billion were write- offs that by
    definition have no future 9 For example, the number of levies has decreased
    dramatically from fiscal years 1997 to 2000-- from about 3.7 million to
    about 220, 000. 10 The former high- risk area was called IRS receivables and
    unpaid tax assessments. Unpaid tax assessments consist of (1) taxes due from
    taxpayers for which IRS can support the existence of a receivable through
    taxpayer agreement or a favorable court ruling (federal taxes receivable);
    (2) compliance assessments in which neither the taxpayer

    nor the court has affirmed that the amounts are owed; and (3) writeoffs,
    which represent unpaid assessments for which IRS does not expect further
    collections due to such factors as the taxpayer's death, bankruptcy, or
    insolvency.

    collection potential. The remaining $104 billion has some collection
    potential and, thus, is at risk. 11

    The former high- risk area was originally designated such in 1990, in part
    due to serious deficiencies in IRS' information systems. The deficiencies
    resulted in the lack of sound, reliable information, which hindered IRS'
    ability to focus collection efforts on those accounts that had the greatest
    collection potential. These conditions

    persist. IRS' systems are not integrated; thus, they continue to create high
    rates of error in taxpayer accounts, which in some cases have led to
    instances of taxpayer burden and lost revenue to the federal government. IRS
    attempts to identify taxpayers who have not paid the

    taxes they owe through its various enforcement programs. In making decisions
    about the number and types of enforcement cases to pursue, IRS considers its
    resources as well as the potential for collection. IRS attributes its
    inability to fully pursue such cases to a decrease in staff, reassignment of
    collection employees to support customer service activities, and additional

    staff time needed to implement certain taxpayer protections that were
    included in the IRS Reform and Restructuring Act. However, as we previously
    noted, inadequate financial and operational information has rendered IRS
    unable to develop cost- based performance information for its tax collection
    and enforcement programs to judge whether it is appropriately allocating
    available resources among competing management priorities. These weaknesses
    continue to expose the federal government to significant losses of tax
    revenue and increase the burden on compliant taxpayers who 11 The $104
    billion that has collection potential and, thus, is at risk consists of (1)
    $27 billion in compliance assessments and (2) $77 billion in taxes
    receivable--$ 21 billion of which is net taxes receivable and $56 billion of
    which is an allowance for doubtful accounts.

    finance the government's activities. Resolving this highrisk area will
    require a long- term commitment of resources by IRS and sustained progress
    in systems

    modernization. Noncompliance With The final IRS high- risk area is
    noncompliance with EIC. 12 EIC

    Noncompliance with EIC exposes the federal government to billions of dollars
    of risk. According to IRS studies, billions of dollars have been overclaimed
    for this credit. Congress provided IRS with additional funding and
    enforcement tools to improve EIC compliance. However, IRS does not yet have
    sufficient data to demonstrate that it has effective controls over EIC
    noncompliance. Subsequent to an April 1997 IRS study showing billions of
    dollars of EIC noncompliance, Congress passed

    legislation that gave IRS new enforcement tools and additional funding that
    was specifically designated for EIC- related activities. With those new
    tools and funds, IRS, in 1998, began implementing a 5- year EIC compliance
    initiative that involved several components directed at the major sources of
    EIC noncompliance. For example, IRS initiated enforcement efforts that
    focused on (1) cases in which an EIC- qualifying child's

    Social Security number (SSN) was used on more than one tax return for the
    same tax year and (2) returns filed by certain EIC claimants who used the
    head- ofhousehold filing status. IRS' efforts have, among other things,
    reduced the number of EIC- related errors involving SSNs and enabled IRS to
    stop millions of dollars in erroneous EIC claims.

    12 We have narrowed the focus of the former high- risk area called IRS tax
    filing fraud that was designated in 1995. It has been renamed
    “noncompliance with EIC” to better describe the scope of our
    current concern- billions of dollars for EIC claims that IRS paid but should
    not have. An unknown portion of erroneous EIC claims is likely attributable
    to factors other than fraud.

    In September 2000, IRS reported the results of a compliance study involving
    tax year 1997 returns, that is pre- compliance initiative returns. 13 The
    study showed that of the estimated $30. 3 billion in EIC claims made by
    taxpayers who filed tax year 1997 returns in 1998, an estimated $9. 3
    billion were invalid (should not have been claimed) and $7. 8 billion was
    actually paid out in improper refunds. These study results generally would

    not reflect the effect of IRS' 5- year initiative to improve EIC compliance

    In July 1998, we recommended that IRS develop evaluation plans for each
    initiative component to provide timely data for decisionmakers on the
    interim results of the initiative. 14 IRS is collecting some data on
    initiative results; however, it is not yet sufficient to determine whether
    projects have reduced the overall noncompliance rate.

    IRS is doing an EIC compliance study of tax year 1999 returns and plans to
    study tax year 2001 returns. IRS plans to analyze the results of those
    studies, along with the results of the tax year 1997 study, to measure
    changes in taxpayer behavior and to determine the effectiveness of the EIC
    initiative. IRS officials did not know when the results of the tax year 1999
    study would

    be finalized. Until sufficient data are available through these studies or
    from other sources to demonstrate that IRS has implemented effective
    controls over EIC noncompliance and the erroneous refunds that result,

    this will remain a high- risk area. 13 Compliance Estimates for Earned
    Income Tax Credit Claimed on 1997 Returns, Department of Treasury, Internal
    Revenue Service, September 2000. 14 Earned Income Credit: IRS' Tax Year 1994
    Compliance Study and Recent Efforts to Reduce Noncompliance (GAO/ GGD- 98-
    150, July 28, 1998).

    Key Contact James R. White, Director Tax Issues (202) 512- 9110 whitej@ gao.
    gov Randolph C. Hite, Director

    Information Technology Systems Issues (202) 512- 3870 hiter@ gao. gov Steven
    J. Sebastian, Acting Director

    Financial Management and Assurance (202) 512- 3406 sebastians@ gao. gov
    Improve Customs'

    Customs performs the dual missions of enforcing laws Regulation of

    to safeguard U. S. borders against the illegal entry of Commercial Trade
    goods and of regulating legitimate commercial activity.

    While Ensuring As such, Customs is challenged to balance its security

    That It Protects measures with the need to facilitate the flow of cargo

    Against the Entry of and people into the United States. Specifically, the

    Illegal Goods at agency's responsibilities include (1) collecting over U. S.
    Borders

    $20 billion in revenue from imports and enforcing over 400 laws governing
    international trade, (2) preventing the smuggling of drugs into the country,
    and (3) overseeing export compliance and money- laundering issues. To carry
    out these responsibilities, Customs has a workforce totaling almost 20, 000
    employees at locations around the world.

    An overarching challenge for Customs as well as other law enforcement
    agencies is assessing progress on its key mission areas through outcome-
    oriented rather than output- oriented performance measures (i. e.,
    succeeding in reducing crime versus making more arrests and convictions).
    Treasury has said that until it has better

    data to determine the cause- and- effect relationship between its various
    programs and the outcomes it is intended to influence, it will continue to
    use outputoriented performance measures. Accordingly, Customs assesses
    progress in reducing the flow of illegal drugs by establishing goals for the
    number of seizures and

    pounds of illegal substances seized and other output measures. The quantity
    of narcotics seized in fiscal year 1999 set a record, and Customs met its
    performance goals for cocaine and marijuana but not for heroin. Customs also
    reported that its officers processed over 21 million import entries with a
    value of $977 billion; 137 million conveyances; 15 and 480 million land,
    sea, and air passengers in fiscal year 1999. However, the degree to which
    these actions have an impact on safeguarding the

    borders is uncertain. In addition to identifying a need for Customs to
    develop sound output- oriented performance measures, our recent work has
    identified other performance and management challenges that directly or
    indirectly affect Customs' efforts to improve security at U. S. borders to
    safeguard against the illegal entry of goods, including drugs. Although
    Customs has made some progress in

    implementing initiatives that are designed to improve the efficiency of its
    regulation of commercial activities and the effectiveness of personal
    searches of passengers, the following challenges, all of which have been the
    subject of our past recommendations, remain: (1) completing an assessment of
    new trade compliance

    15 Conveyances include aircraft, trucks, trains, buses, privately owned
    vehicles, and ocean vessels.

    initiatives; (2) acquiring a new import processing system; (3) continuing to
    improve the process of searching airline passengers who may be carrying
    contraband, such as illegal drugs, while respecting the rights of American
    citizens and the traveling public; and (4) using reliable data to determine
    its staffing needs for all of its operations and ensure that personnel are
    located where they are most needed.

    Impact of New Trade Tremendous growth in the world economy creates
    Compliance

    profound challenges for Customs to facilitate and Initiatives Unclear

    enforce U. S. trade laws and regulations. The United States is in the midst
    of a booming era of global trade; and, according to the Commissioner of
    Customs, the surge in imports and exports will nearly double Customs'
    workload in the next 5 years alone (see fig. 3). To speed the processing of
    imports and improve compliance with trade laws, Customs has developed a new
    strategy in response to the Customs Modernization and Informed Compliance
    Act of 1993 (Mod Act). 16 16 Public Law 103- 182.

    Figure 3: Projected Growth in Entry Summaries for Customs

    40 Entry summaries (in millions)

    35 30 25 20 15 10

    5 0

    1999 2000 2001 2002 2003 2004 2005 Fiscal years

    Actual Projected

    Source: Customs data.

    The Mod Act fundamentally altered the relationship between importers and
    Customs by shifting from Customs to the importer the legal responsibility
    for declaring the value, classification, and rate of duty applicable to
    merchandise being imported into the United States. Customs is responsible
    for determining

    the final classification and value of the merchandise. The Mod Act also gave
    Customs and importers a shared responsibility for ensuring compliance with
    trade laws. To implement these new responsibilities, Customs

    developed an “informed compliance strategy.”

    Our review of output statistics indicated that the informed compliance
    strategy had not yet produced the benefits that were expected. 17 As shown
    in figure 4, trade compliance rates have remained static at about 81
    percent, short of Customs' 90- percent goal. We also found that although
    Customs had monitored and

    evaluated certain aspects of the key initiatives and actions, it had not
    evaluated, nor did it have a plan to evaluate, the impact of the overall
    informed compliance strategy on compliance with trade laws. Consequently, we
    recommended that Customs develop and implement an evaluation of the
    effectiveness of its informed compliance strategy.

    17 Customs Service Modernization: Impact of New Trade Compliance Strategy
    Needs to Be Assessed (GAO/ GGD- 00- 23, Dec. 15, 1999).

    Figure 4: Trade Compliance Rates Have Remained Static Between Fiscal Years
    1995 and 1999

    Percentage rate of compliance 100

    95

    90

    90 84 82 83 84 80 81 81

    80 70 60 50 40 30 20 10

    a 0

    1995 1996 1997 1998 Fiscal years

    Primary focus industries Overall rate

    a Customs did not assess compliance rate for PFIs in FY 95. Note: Entry
    summaries are required documentation filed with Customs to secure release of
    imported cargo from Customs. Source: Customs data.

    Customs agreed with our recommendation and stated that it would evaluate the
    effectiveness of all the initiatives that we assessed, including account
    management, compliance assessment, compliance measurement, and the informed
    and enforced compliance programs. Customs said that this extensive study
    should be completed by February 2001.

    Acquisition of New Building and deploying a new import processing system
    Import Processing is a key component to modernizing how Customs

    System Remains assesses and collects taxes and fees totaling over $20

    Challenging billion annually at over 300 ports. This large and complex
    planned system, known as the Automated

    Commercial Environment (ACE), which is expected to cost over $1 billion, is
    to replace Customs' antiquated existing system and improve the performance
    and accountability of Customs' import mission. In short, ACE is to be used
    to collect, analyze, and disseminate import- related data in a way that will
    facilitate the trade communities' movement of goods into the United States.
    In February 1999, we reported on pervasive management and technical
    weaknesses facing Customs in building ACE, and we made a series of
    recommendations that Customs agreed to implement. Specifically, we
    recommended that before building ACE, Customs (1) have a complete and
    enforced enterprise architecture; (2) know that ACE was a cost- effective
    solution and explore alternative system solutions to

    mission needs, such as another system Treasury was developing known as the
    International Trade Data System (ITDS); and (3) employ software engineering

    rigor and discipline. Customs has taken several important actions to
    implement our recommendations. For example, Customs has addressed our
    recommendation for completing and enforcing an enterprise architecture to
    provide an agencywide business and technological context within which ACE's
    business value and mission performance can be optimized. Similarly, Treasury
    and Customs have addressed our concern about possible duplication and
    incompatibilities between ACE and

    ITDS by combining the two efforts. To be successful with ACE, Customs needs
    to fully implement our recommendations. Customs agrees and

    plans additional actions to do so. For example, Customs has committed to
    seeing that the fundamental acquisition and investment management
    capabilities

    that we recommended are in place before investing huge sums of money in ACE.
    Also, Customs' plans call for investing in ACE incrementally on the basis of
    a realistic and supportable cost estimate and benefit expectation for each
    increment. Once an increment is completed, Customs plans to validate that
    actual costs and benefits are meeting expectations and to use this
    information in deciding whether to invest in future system increments.
    Further, Customs still needs to fully implement mature and effective system
    acquisition capabilities. Because these challenges remain, combined with
    ACE's mission criticality, we plan to continue monitoring Customs'

    management of ACE. Balancing Travelers' Congress, in exercising its power to
    protect the nation's Rights With Customs' borders, gave Customs broad
    authority to conduct Responsibility to

    searches of persons and their luggage. Customs Interdict Contraband

    regulations provide that persons, such as passengers coming into the United
    States, are subject to inspection and search by a Customs officer in order
    to detect the

    smuggling of contraband, such as illegal drugs. Concerns have been raised
    about Customs' policies and procedures for selecting or
    “targeting” certain passengers for examinations and conducting
    personal searches, including strip- searches and X- rays.

    Inspectors are to select passengers for further examination on the basis of
    Customs' policies and procedures and their professional judgment and
    experience. When making a decision to search, inspectors are to consider all
    the circumstances. Some or mere suspicion is the minimal level required to
    conduct a patdown search. By policy, Customs requires

    at least one articulable fact before conducting a patdown search.
    Supervisory approval is required for any personal search conducted other
    than a search related to an officer's safety. From our analysis of 102,000
    arriving passengers in fiscal years 1997 and 1998 who were subjected to some
    sort of personal search, we reported that generally, searched passengers of
    particular races and gender were more likely than other

    passengers to be subjected to more intrusive types of personal searches
    (being strip- searched or X- rayed). However, in some cases, the types of
    passengers who were more likely to be subjected to more intrusive personal
    searches were not as likely to be found carrying contraband. 18

    We recommended that Customs compare the characteristics of passengers
    subjected to personal searches with the results of those searches to better
    target passengers carrying contraband. Customs agreed with our
    recommendation and said it had already taken

    steps to develop better data on the results of its searches. By developing
    improved data and continuing its other management controls, we believe
    Customs

    could better safeguard the rights of U. S. citizens and the traveling public
    while meeting the major challenge of effectively carrying out its drug
    interdiction mission. During our review of airline passenger targeting,
    Customs developed additional policies and procedures 18 U. S. Customs
    Service: Better Targeting of Airline Passengers for Personal Searches Could
    Produce Better Results (GAO/ GGD- 00- 38, Mar. 17, 2000).

    for personal searches that include new requirements for supervisory review
    and approval and procedures intended to ensure that passengers subjected to
    personal searches know their rights. We also identified management controls
    that Customs uses to help ensure that inspectors use their search authority
    fairly and judiciously. These controls included training for inspectors and
    supervisors on conducting personal searches and more systematic evaluation
    of passenger complaints. Customs reported in October 2000 that reforms
    initiated to tighten oversight of the searches, such as revising the
    personal search handbook, have resulted not only in far fewer people being
    searched but also in the seizure of more contraband. For example, Customs
    reported that Customs inspectors searched 9, 008 airline passengers in

    fiscal year 2000, a steep reduction from the 23, 108 who were searched the
    previous year. As searches decreased, the seizures of heroin, cocaine, and
    ecstasy increased from 533 to 665 between fiscal years 1999 and 2000.
    Overall, drug seizures increased from 1,164 to 1,174 during the same period,
    according to Customs. The Commissioner of Customs said that the new
    statistics indicate that Customs is searching fewer innocent

    travelers while doing a better of job of catching those carrying contraband.
    The Commissioner acknowledged, however, that the efforts are still in
    progress and that much more needs to be done.

    Using Reliable Data In 1998, we reported on selected aspects of Customs' to
    Determine Staffing process for determining its need for inspectors and

    Needs canine enforcement officers to process commercial cargo or land and
    sea passengers at all of its 301 ports of entry. 19 We concluded and
    recommended that for

    19 Customs Service: Process for Estimating and Allocating Inspectional
    Personnel (GAO/ GGD- 98- 107, Apr. 30, 1998).

    Customs to successfully implement the Government Performance and Results
    Act, which requires it to link performance to results, it had to determine
    its needs for personnel for all of its operations and ensure that personnel
    are allocated where they are most needed.

    In response to our recommendation, Customs awarded a contract for the
    development of a resource allocation model to estimate the number of
    inspectors and other personnel needed to process passengers and inspect
    cargo at all ports of entry. The contractor delivered a prototype to Customs
    in March 1999.

    This was a promising first step, but we continued to monitor the development
    of the model. In April 2000, we testified that during a review conducted
    earlier in the year, we found the accuracy and reliability of some input
    data- such as the estimated time that Customs personnel spent on air and sea
    passenger processing activities- to be questionable. 20 We concluded that
    although the model is a potentially viable tool for Customs to use in
    estimating its personnel needs for now and in the future as imports into the
    country

    continue to rise, we believe that more verification needs to be performed on
    some questionable input data. Customs said that it is still in the early
    stages of analyzing the model results and fully understanding its
    capabilities. The original contractor was retained to do additional work to
    make the model's results more understandable and easier to use. According to
    Customs

    officials, the model continues to be reviewed and will be modified as needed
    to ensure accuracy and validity. Key Contacts Laurie E. Ekstrand, Director

    Justice Issues 20 U. S. Customs Service: Observations on Selected Operations
    and Program Issues (GAO/ T- GGD/ AIMD- 00- 150, Apr. 20, 2000).

    (202) 512- 8777 ekstrandl@ gao. gov Randolph C. Hite, Director

    Information Technology Systems Issues (202) 512- 6256 hiter@ gao. gov
    Achieve Sound A key to Treasury's ability to effectively carry out its

    Financial mission both at the Department level and as fiscal agent

    Management for the U. S. government is sound financial management,

    Through Significant including preparing information about the government's

    Management finances that is routinely available, accurate, and Attention and

    reliable. Treasury faces many challenges in its ongoing Priority efforts to
    improve the accuracy and reliability of its financial and information
    management systems and correct internal control weaknesses that we and the
    Treasury OIG identified at several of its bureaus and offices. Without
    accurate and reliable financial systems and information, as well as sound
    internal controls, Treasury cannot be sure that the information it has is

    sufficient to manage day- to- day operations, measure the results of agency
    and governmentwide operations, account for resources, collect taxes and
    other debts owed the government, or safeguard assets. Significant top
    management attention and priority will be required for Treasury to fully
    address its significant financial

    management challenges. Treasury received a qualified opinion on its fiscal
    year 1999 Department- wide financial statements because of financial
    management problems at IRS and the inability of IRS' administrative systems
    to produce timely,

    auditable data to support certain IRS financial statements. Treasury's
    ability to effectively fulfill its financial management responsibilities has
    also been adversely affected by the lack of substantial compliance with the
    financial management systems requirements

    detailed in FFMIA and weaknesses in Customs' internal controls over data in
    its automated systems.

    Certain significant financial systems weaknesses; problems with fundamental
    recordkeeping and financial reporting; incomplete documentation; and weak
    internal control, including computer controls, have prevented

    the U. S. government from obtaining an opinion on the reliability of the
    government's financial statements for the 3 years that we have reported on
    these statements.

    As preparer of the Financial Report, FMS has a key responsibility to work
    with agencies to address some of these problems, in particular the lack of
    sufficient systems, controls, and procedures to properly prepare the
    government's financial statements. Further, in performing much of Treasury's
    role as primary fiscal agent for the federal government, FMS continues to
    experience challenges in addressing financial management issues related to
    implementing the requirements of the Debt Collection Improvement Act (DCIA)
    of 1996 and improving its computer security controls over systems used to
    help it process collections and disbursements made on behalf of most federal
    agencies.

    At the end of fiscal year 1998, the unified budget of the federal government
    was in surplus for the first time in almost 30 years, and surpluses are
    projected to continue over the next decade. As we have stated in previous
    reports, the transition from annual budget deficits to surpluses presents
    challenges to Treasury for managing the maturity profile of federal debt
    held by the public consistent with Treasury's objectives and strategies for
    achieving these three debt management objectives of sound cash management,
    lowest financing costs, and

    promoting efficient capital markets.

    Financial For fiscal year 1999, Treasury reported that six of its Management
    bureaus' financial management systems did not Challenges Affecting

    substantially comply with the requirements of FFMIA. In Certain Bureaus'
    addition, we reported that IRS continues to experience Operations
    significant ongoing deficiencies in its financial management and operational
    systems and processes. Further, Customs also faces financial management
    problems including weaknesses in its internal controls

    over data in its automated systems and developing and implementing new
    automated systems. Treasury's Financial FFMIA requires auditors performing
    financial audits of Management Systems CFO agencies to report whether
    agencies' financial Do Not Substantially management systems substantially
    comply with federal Comply With accounting standards, federal financial
    management Requirements of

    systems requirements, and the Standard General Ledger FFMIA (SGL) at the
    transaction level. In fiscal year 1999 and 1998 auditors' reports on
    compliance with laws and regulations, we and the Treasury OIG identified
    instances in which Treasury's financial management systems did not
    substantially comply with the requirements detailed in FFMIA. For fiscal
    year 1999, Treasury reported that noncompliances were identified at IRS,
    FMS, Customs, the Departmental Offices, the Office of the Comptroller of the
    Currency, and the U. S. Secret Service. Generally, the noncompliances
    involved financial systems that did not allow for the reliable preparation
    of certain financial statements and reports, lack of or unreliable
    subsidiary ledgers, general ledgers that did not conform with the SGL, and
    weaknesses in computer security controls. Under FFMIA, we are

    required to annually report on agencies' implementation of FFMIA by October
    1 of each year. Thus, we will continue to monitor Treasury's efforts to
    substantially comply with FFMIA. Financial Management

    As discussed in an earlier section of this report, IRS Challenges Continue
    at continues to experience significant deficiencies in its IRS financial
    management and operational systems and

    processes. Because of these problems, we could not render audit opinions on
    four of IRS' six financial statements, and our opinion on its balance sheet
    was qualified for fiscal year 1999. IRS' primary internal control weaknesses
    relate to its accountability over administrative accounts and budgetary
    resources,

    management of taxpayer receipts and data, and management of unpaid tax
    assessments as well as its computer security controls. To address these
    issues, we have provided IRS with detailed management and operational
    recommendations. Although progress has been made to date, resolving many of
    IRS' most serious problems will require a sustained commitment from senior
    management.

    Customs Continues to Customs continues to face financial management Face
    Financial challenges including weaknesses in its internal controls
    Management over data in its automated systems, such as systems that
    Challenges are used to account for and manage its collection

    activity. In addition, as discussed in an earlier section of this report,
    managerial and technical weaknesses have hindered progress toward developing
    Customs' planned import system- ACE- which is intended to replace the
    current system used for collecting import- related data and ensuring, among
    other things, that trade- related revenue is properly collected and
    allocated. To ensure proper implementation of important initiatives Customs

    has planned or under way to address these issues, Customs management must
    continue to provide the necessary support.

    Financial One of Treasury's primary responsibilities is managing Management
    the federal government's finances. This massive and Challenges

    complex task includes collecting almost $1.9 trillion in Affecting
    Treasury's federal tax revenues, making federal payments totaling Role as
    Fiscal Agent more than $1. 7 trillion, managing federal debt held by the
    public of about $3. 4 trillion, performing central

    accounting functions, and providing debt management services to federal
    agencies. Treasury's FMS is the

    government's financial manager, central disburser, and collections agency,
    as well as its accountant and reporter of financial information. Treasury's
    Bureau of the Public Debt (BPD) is responsible for issuing Treasury
    securities and accounting for the resulting

    debt. For the three years that we have audited BPD's Schedules of Federal
    Debt, we have rendered “clean” opinions on these schedules.

    In performing much of Treasury's role as primary fiscal agent for the
    federal government, FMS faces challenges in addressing financial management
    issues related to (1) preparing the U. S. government's financial statements,
    (2) implementing the requirements of the Debt Collection Improvement Act
    (DCIA) of 1996, and (3) improving the computer security controls used to
    help it process collections and disbursements made on behalf of most federal
    agencies. Although FMS has made progress in each of these areas, challenges
    still remain. It will take a significant and sustained commitment by FMS'
    management to fully address these challenges. In addition, budget surpluses
    present challenges to Treasury for managing the federal debt and achieving
    its

    debt management objectives. Preparing Reliable In our audit reports on the
    government's fiscal years Financial Statements

    1999, 1998, and 1997 financial statements, we reported for the Government
    certain significant financial systems weaknesses; Continues to Be a

    problems with fundamental recordkeeping and financial Challenge for FMS

    reporting; incomplete documentation; and weak internal control, including
    computer controls. These deficiencies prevented the government from
    accurately reporting a significant portion of its assets, liabilities, and
    costs and prevented us from being able to form an opinion on the reliability
    of the government's financial statements. These deficiencies also affect the
    reliability of much of the related information in the Fiscal Year 1999
    Financial Report and the underlying financial information. In addition, they
    affect the government's ability to

    accurately measure the full cost and financial performance of certain
    programs and effectively manage related operations. FMS continues to face
    challenges in working with agencies to address some of these problems, in
    particular the lack of sufficient systems, controls, and procedures to
    properly prepare the government's financial statements. Such deficiencies
    impair the government's ability to (1) properly balance the government's
    financial statements and account for billions of dollars of transactions
    between federal government entities, (2) properly and consistently compile
    the information in the financial statements, and

    (3) effectively reconcile the results of operations reported in the
    financial statements with budget results. We are working with FMS, OMB, and
    other key agencies to address these deficiencies. However, correcting them
    is a significant challenge because of the government's size and complexity
    and the discipline needed to comply with accounting and reporting
    requirements. Meeting

    these challenges will require a significant commitment from agencies' and
    FMS' management, as well as adequately trained staff and effective automated
    financial and information management systems.

    Challenges Remain in As the federal government's central debt collection
    Implementing DCIA agency, FMS 21 provides debt management services to
    federal agencies for nontax debts over 180 days delinquent owed to the
    federal government. According

    to Treasury, this debt totaled about $59. 2 billion as of September 30,
    1999, 22 with Treasury collecting about $2. 6 billion during fiscal year
    1999, most of which resulted from offsetting tax refunds of delinquent
    debtors under the Treasury Offset Program (TOP). 23 However, Congress in the
    past has raised concerns about the slow pace at which Treasury and other
    agencies have implemented DCIA. According to FMS officials, FMS' debt
    collection program is not a fully mature program. FMS is actively working to
    fully implement the provision of DCIA on a phased- in basis over the next
    few years. FMS' successful merger of the Tax Refund Offset Program with TOP
    in 1999 streamlined operations by providing a single point of contact for
    agencies to refer debts for both tax refund offset and other administrative
    offset programs. As a result, according to Treasury, offset collections for
    fiscal year 1999 increased about $570 million over the previous year.
    According to Treasury officials, system enhancements made during this merger
    also contributed to increased collections. For example, FMS can now conduct
    offset matching on

    both Social Security numbers for joint tax returns, and the system also
    allows creditor agencies to continuously add and update debt records. Even
    with these 21 The Secretary of the Treasury assigned FMS primary
    responsibility

    to fulfill Treasury's responsibilities under DCIA. 22 About $20.7 billion of
    this amount includes debt that was written off by certain agencies for
    accounting purposes, but the agencies are still attempting to collect the
    debts.

    23 In addition to delinquent nontax federal debt, FMS collects child support
    obligations on behalf of states. During fiscal year 1999, FMS collected
    about $1. 3 billion in child support obligations, representing

    about half of the collection total.

    enhancements, challenges remain for FMS to fully implement TOP. For example,
    payments for Social Security benefits and more federal salaries still need
    to be added to TOP. FMS testified in June 2000 that it plans to have such
    payments available for offset in fiscal year 2001. In addition to the offset
    programs, nontax delinquent debt can be transferred to Treasury's
    centralized collection centers for collection, known as crossservicing.
    Cross- servicing may include the use of various debt collection tools, such
    as private collection agencies (PCAs) and administrative wage garnishment.
    24 As we reported in August 2000, FMS collected a relatively small amount of
    debt through cross- servicing in part because (1) agencies did not always
    promptly refer eligible debts,

    and (2) agencies excluded debts from cross- servicing for various reasons,
    such as debt that is not legally enforceable or debt that Treasury has
    exempted or waived. At the time of our report, no requirement or process
    existed for obtaining periodic and independent verification of the accuracy,
    completeness, and validity of debts agencies reported as eligible or
    excluded from

    the DCIA cross- servicing provisions. Moreover, we reported that FMS' staff
    and some of the PCAs did not always follow established procedures and
    requirements or effectively use certain debt collection tools. In addition,
    FMS' method of distributing debts to PCAs- a major debt collection tool- did
    not fully promote competition, thus limiting the effectiveness of this tool.

    Going forward, it will be important for FMS to determine whether its current
    debt collection strategy and procedures are adequate for optimizing
    collections 24 Administrative wage garnishment is a process by which an

    employee's wages, up to 15 percent of the employee's disposable pay, can be
    withheld by an employer and paid to the federal government to fulfill an
    unpaid obligation. FMS officials stated that this tool provides significant
    opportunities for improved collections of delinquent debts.

    through its cross- servicing program and use all available debt collection
    tools when appropriate, including administrative wage garnishment.
    Accordingly, we recommended that FMS comprehensively review its cross-
    servicing process. We also recommended that FMS work with OMB and agencies'
    Inspector General offices to verify the accuracy and validity of debts
    agencies report as eligible or excluded from crossservicing

    and that it establish and implement procedures for monitoring agencies'
    written debt referral plans. Further, we recommended that FMS take specific
    actions to help ensure that a proportionate mix of debts

    is being distributed to its PCAs and that competition among them is more
    fully promoted. FMS is currently addressing these recommendations, although
    it did not agree with all of the specific aspects of our recommendation to
    comprehensively review its crossservicing process. Weaknesses in FMS' FMS
    maintains multiple financial and information Computer Security systems to
    help it process and reconcile moneys Controls Continue to disbursed and
    collected by the various federal agencies. Exist

    Our audit for fiscal year 1999 and previous years identified significant
    computer control weaknesses at each of the FMS data centers. Computer
    control problems continued to exist at FMS primarily because FMS still lacks
    an effective, entitywide, computer security management program. FMS'
    entitywide security control structure has failed to address many of the
    weaknesses and related significant risks associated with

    its current and evolving computing environment. The severity of these risks
    magnifies as FMS expands its networked environment to provide users with
    greater and easier access to larger amounts of data and system resources.
    Consequently, billions of dollars of payments and collections are at
    significant risk of loss or fraud, sensitive data are at risk of
    inappropriate disclosure, and

    critical computer- based operations are vulnerable to serious disruptions.
    We have made numerous recommendations for improvements in FMS' computer

    security controls to help reduce the exposure to these risks. Well- designed
    and effective computer security controls are essential if FMS' operations
    and computer resources are to be properly protected. However, it will take a
    significant and sustained commitment by FMS'

    management to fully address FMS' computer control weaknesses. FMS officials
    have recognized the serious nature of these problems and have reported these
    matters as a material weakness in FMS' Federal Managers' Financial Integrity
    Act report for fiscal years

    1999 and 1998. According to FMS officials, FMS has taken and will continue
    to take actions to correct the weaknesses we identified and to heighten
    management focus on security, as well as institute a more systematic and
    comprehensive computer security management program. We will follow up on
    these matters during our audit of the federal government's fiscal year 2000
    financial statements.

    Treasury Faces Debt At the end of fiscal year 1998, the unified budget of
    the Management federal government was in surplus for the first time in
    Challenges in a Period almost 30 years. Budget surpluses continued in fiscal
    of Budget Surpluses

    year 1999 and 2000 and are projected to continue over the next decade. Just
    as budget deficits led to increased borrowing, surpluses over the past three
    years have resulted in Treasury retiring debt. As we have stated in previous
    reports, the transition from annual budget deficits to surpluses has
    consequences for both the profile of federal debt held by the public and
    Treasury's strategies for achieving its three debt management objectives of
    sound cash management, lowest financing cost, and promotion of efficient
    capital markets.

    Treasury has reduced debt held by the public and managed a declining stock
    of debt by redeeming maturing debt, reducing the number of auctions and size
    of new debt issues, eliminating the 3- year note, reopening existing debt
    issues rather than creating new

    issues, conducting “buybacks” of debt before its maturity date,
    and redeeming callable securities when the opportunity arose. Treasury
    acknowledges that its future challenges will include making decisions on how
    to reduce debt while considering such important factors as market
    adjustments and implications for the Federal Reserve in implementing
    monetary policy. We are currently conducting a review of how other selected
    nations have “managed down” their debt and found that these
    nations have already encountered some of the same challenges and decisions
    about the debt market facing the United States. Key Contacts Gary T. Engel,
    Director

    Financial Management and Assurance (202) 512- 3406 engelg@ gao. gov Paul L.
    Posner, Managing Director

    Strategic Issues (202) 512- 9573 posnerp@ gao. gov Improve ATF's

    Treasury's strategic plan includes an objective to deny Performance
    criminals access to firearms and reduce violent crime, Measures to Better
    including firearms- related crime. ATF is the Treasury Determine the agency
    responsible for enforcing the federal laws and Progress in regulations
    relating to firearms and reducing firearmsrelated

    Reducing violent crime. Despite significant technological Criminals' Access

    advances that have given ATF more investigative to Firearms information to
    carry out its mission, limitations in its performance measures make it
    difficult to determine its progress in reducing criminals' access to
    firearms and firearms- related crime.

    ATF recently reported that in the last decade, technology has brought its
    investigators and inspectors an enormous increase in investigative
    information. 25 For example:

    ? ATF's National Tracing Center has entered in the firearms trafficking
    information system over 1 million traces of firearms recovered by law
    enforcement officials. ? The National Integrated Ballistics Information
    Network, operated by ATF with the Federal Bureau of Investigation (FBI),
    contains a half- million

    ballistics images. ? The National Instant Check System, launched by FBI and
    ATF in 1998, has resulted in ATF receiving over 130, 000 reports of
    prohibited persons attempting to buy firearms from federal firearms
    licensees.

    Regarding progress on denying criminals access to firearms, our June 2000
    report 26 on Treasury's fiscal year 1999 performance report and fiscal year
    2001 performance plan concluded that it is difficult to determine ATF's
    progress because ATF's performance measures are generally output measures
    (i. e., number of firearm traces made, average trace response time, and
    number of persons trained), rather than outcome measures. Treasury's
    performance report includes an outcome measure for future crimes avoided,
    and the data show that Treasury exceeded its goal and increased the number
    of crimes avoided over 1998. Although this measure does not show reduction
    in the risk of violent crime, it does estimate the number of crimes
    prevented

    through the incarceration of criminals and the 25 Following the Gun:
    Enforcing Federal Laws Against Firearms Traffickers; Department of the
    Treasury; ATF (June 30, 2000). 26 Observations on the Department of the
    Treasury's Fiscal Year 1999 Performance Report and Fiscal Year 2001
    Performance Plan (GAO/ GGD/ AIMD- 00- 231R, June 30, 2000).

    elimination of crime gun sources, according to Treasury's performance
    report. In commenting on our June report, Treasury officials stated that the
    performance measures associated with the challenge of denying criminals
    access to firearms and reducing firearms- related crime will continue to be
    output- oriented until Treasury is better able to determine the cause- and-
    effect relationships between its

    programs and the outcomes they are intended to influence. They noted that
    the fiscal year 1999 performance report provides trend data from 1995
    through 1998 that is directly related to this outcome- the number of violent
    crimes committed and crimes committed with firearms. Although having the
    trend data is helpful, without also having this data for 1999, it is
    difficult to place ATF's 1999 performance in the

    appropriate context. The Treasury OIG has also identified limitations in
    measuring the impacts of ATF's programs. 27 In its August 2000 report on
    ATF's Implementation of the youth crime gun interdiction initiative, 28
    Treasury's OIG found, among other things, that ATF had not developed

    ? specific performance measures that show the actual impact on youth violent
    crime rates in cities as a result of participating in the initiative or 27
    See Final Report on the Bureau of Alcohol, Tobacco and Firearms'
    Implementation of the Youth Crime Gun Interdiction Initiative (Treasury OIG-
    00- 119, Aug. 21, 2000).

    28 The initiative began in 1996 by ATF at the direction of the President to
    strengthen enforcement efforts against traffickers who supply firearms to
    youth. Seventeen cities were initially included in the

    program and were to use ATF's Firearms Tracing System (FTS) to trace every
    firearm recovered in a crime. ATF was to work jointly with other
    investigative agencies using FTS trace information to develop investigative
    and prosecutorial strategies that target traffickers supplying firearms to
    youth.

    ? a formal process to verify certain statistics that have been reported to
    Congress about the program's results. ATF officials acknowledged that better
    measures of the initiative's impact are needed and agreed to implement the
    related recommendation.

    Treasury's OIG is currently conducting a review of enforcement performance
    measures at selected agencies, including those for ATF firearms- related
    programs, activities, and initiatives, to determine if the measures cover
    the key aspects of performance in a clear and consistent manner and support
    departmental goals and objectives. Key Contact Laurie E. Ekstrand, Director

    Justice Issues (202) 512- 8777 ekstrandl@ gao. gov Improve the

    Treasury and Justice operate similar but separate asset Management of

    forfeiture programs. 29 As of September 30, 1999, the Treasury's Asset
    combined value of assets in these two programs was Forfeiture Program more
    than $1 billion, of which about $625 million were assets under Treasury's
    management. Both programs also hold large amounts of nonvalued assets, such
    as drugs and weapons. These programs were part of our original high- risk
    list in 1990 because (1) over the years, neither Treasury nor Justice
    adequately focused on managing and accounting for seized and forfeited
    items;

    29 The asset forfeiture program involves the management of property seized
    in consequence of a violation of public law, including monetary instruments,
    real property, and tangible personal property of others in the actual or
    constructive possession of the custodial agency and forfeited property, or
    property for which the title has passed to the federal government.

    and (2) Treasury and Justice had not formed a plan to consolidate
    postseizure administration of certain properties to eliminate duplication of
    resources and reduce administrative costs. We have made several
    recommendations relating to improving Customs' accountability and
    stewardship over property seized. Specifically, we have recommended that
    Customs improve the (1) physical security at its locations used to store
    seized property,

    (2) reliability of the information maintained in its seized property
    tracking systems, and (3) controls over access to critical and sensitive
    data and computer programs maintained in its systems that account for seized
    property and law enforcement operations. In recent years, Customs has taken
    many actions to address our recommendations, such as upgrading existing
    storage facilities and implementing a new seized property inventory system.
    These improvements have helped reduce the vulnerability of seized narcotics
    and other property to theft and misappropriation. In addition,

    Treasury and Justice are undertaking a joint study to examine the
    opportunities for increased cooperation in the management of the two
    programs. However, challenges remain to address the programs' inadequate
    information systems and financial management weaknesses, including
    accountability over seized assets. In addition, the results of the joint
    study are yet to be determined.

    Weaknesses Still As we reported in January 1999, a major management

    Exist in Treasury's challenge facing Treasury's asset forfeiture program is
    Asset Forfeiture

    the need to address weaknesses in the department's Program accountability
    for and reporting of seized and forfeited property. The Treasury OIG fiscal
    year 1999 audit findings also suggest that accountability control over
    seized property needs improvement. Further, Treasury reported instances of
    material nonconformance with provisions of FFMIA involving Customs' Seized
    Asset

    and Case Tracking System (SEACATS) and the Secret Service's Seized Property
    Systems in its fiscal year 1999 Accountability Report. In January 1999, we
    reported that Customs had made significant systems enhancements and was in
    the process of further enhancing the security over seized assets and the
    reliability of information maintained in SEACATS. According to Customs'
    Fiscal Year 1999

    Accountability Report, additional functionality to enhance reporting
    functions for property and currency was added to SEACATS. However, in
    January 2000, Treasury's OIG reported that the SEACATS data could not be
    relied on for financial reporting purposes without substantial manual
    reconciliation. Consequently, SEACATS could not produce the analysis of
    changes in

    seized currency for Customs' seized and forfeited property financial
    statement disclosure. The OIG listed several recommendations to resolve this
    issue and other

    weaknesses in Customs' core financial systems, including developing a
    comprehensive plan to identify the general ledger system modifications
    needed to capture financial transactions as they occur.

    In its audit of Customs' fiscal year 1999 financial statements, Treasury's
    OIG also found that accountability controls over the inventory of seized
    property needed improvement. Specifically, the OIG reported that nine
    narcotic items could not be located or accounted for during a Customs seized
    property inventory conducted in September 1999. Furthermore, six of these
    nine items had been identified as missing during the previous fiscal year
    inventory, and Customs had not made the required notification to Internal
    Affairs. The OIG recommended that Customs (1) determine why the six seizures
    identified as missing during the fiscal year 1998 annual physical inventory
    verification were not reported to Internal Affairs and

    (2) complete the current investigation expeditiously and take appropriate
    action as a result of its findings.

    According to Treasury's fiscal year 1999 accountability report, Treasury
    plans several short- and long- term actions to correct identified weaknesses
    in the automated systems used to track and report on seized and forfeited
    assets. Because Treasury believes that its

    annual assurance and compliance reporting for the Federal Managers'
    Financial Integrity Act and FFMIA is the proper forum for providing
    corrective actions, Treasury's fiscal year 2001 performance plan and
    Customs' fiscal year 2001 performance plan did not include goals or measures
    of progress related to the asset forfeiture program's management challenges.
    However, as we reported in June 2000, it would be useful for Treasury to
    include measures showing its progress toward correcting its material
    weaknesses in its annual performance plan. Treasury reported that it is
    working closely with its bureaus, including Customs and the Secret Service,
    on developing and executing all remediation plans to correct weaknesses
    identified in its

    asset forfeiture program. Such support and oversight should help overcome
    the deficiencies in this program. We will continue to monitor progress in
    addressing these issues.

    Seized Asset Legislation in 1988 required Treasury and Justice to Management
    develop a plan to consolidate their seized property Programs Not Yet
    management functions. In 1991 we recommended they Consolidated, but
    consolidate the postseizure management and Under Study

    disposition of noncash seized properties to reduce administrative costs.
    Although the Departments have not made plans for consolidating their
    programs, in September 2000, they contracted for a study to identify
    opportunities for increased cooperation and sharing of agency and contractor
    resources. The study is to result in recommendations for improving the
    effectiveness and efficiency of property management functions within the

    federal asset forfeiture program. Although the study is not expected to
    fully embrace the concept of consolidating the two separate, seized asset

    management and disposal functions, we believe that taking advantage of
    opportunities for cooperation and sharing of agency and contractor resources
    encompasses the spirit of the recommendation designed to reduce the
    programs' administrative costs.

    To determine whether to remove the asset forfeiture programs from the high-
    risk list, we will consider the results of Treasury's and Justice's study,
    including the implementation of any related recommendations, as well as the
    results of ongoing initiatives for resolving Treasury's and Justice's
    respective management and accountability issues. Contacts Gary T. Engel,
    Director Financial Management and Assurance

    (202) 512- 3406 engelg@ gao. gov Richard M. Stana, Director

    Justice Issues (202) 512- 8777 stanar@ gao. gov

    Related GAO Reports IRS Modernization Tax Administration: Assessment of IRS'
    2000 Tax Filing Season (GAO- 01- 158, Dec. 22, 2000).

    Internal Revenue Service: Recommendations to Improve Financial and
    Operational Management (GAO- 01- 42, Nov. 17, 2000).

    Tax Systems Modernization: Results of Review of IRS' August 2000 Interim
    Spending Plan (GAO- 01- 91, Nov. 8, 2000). Customer Service: Human Capital
    Management at Selected Public and Private Call Centers (GAO/ GGD- 00- 161,
    Aug. 22, 2000). Tax Administration: IRS Faces Several Challenges as It
    Attempts to Better Serve Small Businesses (GAO/ GGD- 00- 166, Aug. 10,
    2000). Tax Systems Modernization: Results of Review of IRS' March 7, 2000,
    Expenditure Plan (GAO/ AIMD- 00- 175, May 24, 2000). IRS Modernization:
    Long- term Effort Under Way, but Significant Challenges Remain (GAO/ T- GGD/
    AIMD- 00- 154, May 3, 2000). IRS Modernization: Business Practice,
    Performance Management, and Information Technology Challenges (GAO/ T- GGD/
    AIMD- 00- 144, Apr. 10, 2000). IRS Restructuring Act: Implementation Under
    Way but Agency Modernization Important to Success (GAO/ T- GGD- 00- 53, Feb.
    2, 2000).

    Financial Audit: IRS' Fiscal Year 1999 Financial Statements (GAO/ AIMD- 00-
    76, Feb. 29, 2000).

    IRS Employee Evaluations: Opportunities to Better Balance Customer Service
    and Compliance Objectives (GAO/ GGD- 00- 1, Oct. 14, 1999). IRS Management:
    Formidable Challenges Confront IRS as It Attempts to Modernize (GAO/ T- GGD/
    AIMD- 99- 255, July, 22, 1999).

    Tax Systems Modernization: Results of Review of IRS' Initial Expenditure
    Plan (GAO/ AIMD/ GGD- 99- 206, June 15, 1999). Tax Administration: IRS' 1999
    Tax Filing Season (GAO/ GGD- 00- 37, Dec. 15, 1999).

    Tax Administration: IRS' 1998 Tax Filing Season (GAO/ GGD- 99- 21, Dec. 31,
    1998). Tax Systems Modernization: Blueprint Is a Good Start But Not Yet
    Sufficiently Complete to Build or Acquire Systems (GAO/ AIMD/ GGD- 98- 54,
    Feb. 24, 1998).

    Customs U. S. Customs Service: Observations on Selected Operations and
    Program Issues (GAO/ T- GGD/ AIMD- 00- 150, Apr. 20, 2000).

    U. S. Customs Service: Better Targeting of Airline Passengers for Personal
    Searches Could Produce Better Results (GAO/ GGD- 00- 38, Mar. 17, 2000).

    Customs Service Modernization: Serious Management and Technical Weaknesses
    Must Be Corrected (GAO/ AIMD- 99- 41, Feb. 26, 1999). Customs Service
    Modernization: Impact of New Trade Compliance Strategy Needs to Be Assessed
    (GAO/ GGD- 00- 23, Dec. 15, 1999).

    Customs Service: Process for Estimating and Allocating Inspectional
    Personnel (GAO/ GGD- 98- 107, Apr. 30, 1998).

    Financial Financial Management Service: Significant Weaknesses

    Management in Computer Controls (GAO/ AIMD- 00- 305, Sept. 26,

    2000). Debt Collection: Treasury Faces Challenges in Implementing Its Cross-
    Servicing Initiative (GAO/ AIMD- 00- 234, Aug. 4, 2000).

    Federal Reserve Banks: Areas for Improvement in Computer Controls (GAO/
    AIMD- 00- 218, July 7, 2000). Observations on the Department of the
    Treasury's Fiscal Year 1999 Performance Report (GAO/ GGD/ AIMD- 00- 231R,
    June 30, 2000).

    Debt Collection: Treasury Faces Challenges in Implementing Its Cross-
    Servicing Initiative (GAO/ T- AIMD- 00- 213, June 8, 2000). Financial Audit:
    1999 Financial Report of the United States Government (GAO/ AIMD- 00- 131,
    March 31, 2000). Financial Audit: Bureau of the Public Debt's Fiscal Years
    1999 and 1998 Schedules of Federal Debt (GAO/ AIMD- 00- 79, March 1, 2000).

    Financial Management Service: Significant Weaknesses in Computer Controls
    (GAO/ AIMD- 00- 4, Oct. 4, 1999).

    Federal Debt: Debt Management in a Period of Budget Surplus (GAO/ AIMD- 99-
    270, Sept. 29, 1999).

    Financial Audit: Issues Regarding Reconciliations of Fund Balances with
    Treasury Accounts (AIMD- 99- 271, Sept. 17, 1999). Federal Reserve Banks:
    Areas for Improvement in Computer Controls (GAO/ AIMD- 99- 280, Sept. 15,
    1999).

    Federal Debt: Answers to Frequently Asked Questions- An Update (GAO/ OCG-
    99- 27, May 28, 1999).

    Financial Audit: 1998 Financial Report of the United States Government (GAO/
    AIMD- 99- 130, Mar. 31, 1999). ATF Observations on the Department of the
    Treasury's Fiscal Year 1999 Performance Report and Fiscal Year 2001

    Performance Plan (GAO/ GGD/ AIMD- 00- 231R, June 30, 2000).

    Asset Forfeiture Asset Forfeiture: Noncash Property Should Be Consolidated
    Under the Marshals Service (GAO/ GGD- 91- 97, June 28, 1991). Financial
    Management: Customs' Accountability for Seized Property and Special
    Operation Advances Was Weak (GAO/ AIMD- 94- 6, Nov. 22, 1993).

    Performance and Accountability Series

    Major Management Challenges and Program Risks: A Governmentwide Perspective
    (GAO- 01- 241)

    Major Management Challenges and Program Risks: Department of Agriculture
    (GAO- 01- 242)

    Major Management Challenges and Program Risks: Department of Commerce (GAO-
    01- 243)

    Major Management Challenges and Program Risks: Department of Defense (GAO-
    01- 244)

    Major Management Challenges and Program Risks: Department of Education (GAO-
    01- 245)

    Major Management Challenges and Program Risks: Department of Energy (GAO-
    01- 246)

    Major Management Challenges and Program Risks: Department of Health and
    Human Services (GAO- 01- 247)

    Major Management Challenges and Program Risks: Department of Housing and
    Urban Development (GAO- 01- 248)

    Major Management Challenges and Program Risks: Department of the Interior
    (GAO- 01- 249)

    Major Management Challenges and Program Risks: Department of Justice (GAO-
    01- 250)

    Major Management Challenges and Program Risks: Department of Labor (GAO- 01-
    251)

    Major Management Challenges and Program Risks: Department of State (GAO- 01-
    252)

    Major Management Challenges and Program Risks: Department of Transportation
    (GAO- 01- 253)

    Major Management Challenges and Program Risks: Department of the Treasury
    (GAO- 01- 254)

    Major Management Challenges and Program Risks: Department of Veterans
    Affairs (GAO- 01- 255)

    Major Management Challenges and Program Risks: Agency for International
    Development (GAO- 01- 256)

    Major Management Challenges and Program Risks: Environmental Protection
    Agency (GAO- 01- 257)

    Major Management Challenges and Program Risks: National Aeronautics and
    Space Administration (GAO- 01- 258)

    Major Management Challenges and Program Risks: Nuclear Regulatory Commission
    (GAO- 01- 259)

    Major Management Challenges and Program Risks: Small Business Administration
    (GAO- 01- 260)

    Major Management Challenges and Program Risks: Social Security
    Administration (GAO- 01- 261)

    Major Management Challenges and Program Risks: U. S. Postal Service (GAO-
    01- 262)

    High- Risk Series: An Update (GAO- 01- 263)

    GAO United States General Accounting Office

    Page 1 GAO- 01- 254 Treasury Challenges

    Contents

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    Comptroller General of the United States

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    Washington, D. C. 20548

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