A clean opinion means the GAO has audited IRS financial statements and can attest to the agency's total revenue collections of more than $2 trillion, refunds of more than $190 billion and total appropriations of more than $8.3 billion. The financial statements report the assets, liabilities, net position, net cost, changes in net position, budgetary resources, reconciliation of net costs to budgetary obligations and custodial activity related to the IRS' administering the federal tax law.

In an accompanying letter to Secretary of the Treasury Paul H. O'Neill, U.S. Comptroller General David M. Walker said that the unqualified opinion was due to the efforts of IRS senior management to compensate for "serious internal control and systems deficiencies."

"Such efforts will be needed to sustain this result in future years until lasting solutions to IRS' internal controls and systems deficiencies are fully achieved," Walker stated.

While the IRS received a clean opinion, the GAO did warn that the IRS did not have "timely, accurate, and useful information and sound controls with which to make informed decision and to ensure accountability on an ongoing basis." The GAO will release its recommendations for corrective actions in a separate report at a later date.

In general, IRS officials said they agreed with the GAO's concerns in the agency's internal controls and will address the weaknesses in the coming year. Other weaknesses will be addressed through the IRS' continued modernization effort where outdated systems will be replaced with systems that provide comprehensive management information.

"This is a significant accomplishment and an important milestone in the progress of the IRS," said Commissioner Charles O. Rossotti. "We appreciate GAO's suggestions, and we realize that we must maintain the same momentum of effort and continue to address identified problems and focus on our modernization efforts."

As a result of last year's audit, the IRS said it has made significant improvements. According to the IRS, it has:

• Implemented reconciliation procedures for IRS fund balances and ensured prompt review and reconciliation was performed.
• Revised reporting and disclosure for the statement of net cost to properly classify IRS programs.
• Improved management of property and equipment inventories.
• Improved review and management of administrative "suspense" accounts.
• Reduced the number of computer security weaknesses. 
• Addressed issues related to safeguarding taxpayer data. 
• Improved IRS ability to substantiate unpaid assessments.

The GAO is the investigative arm of Congress that examines the use of public funds, evaluates federal programs and activities, and provides analyses, options, and recommendations to help Congress make oversight, policy and funding decisions.

-- By SmartPros News Staff

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