GAO: IRS procedural flaws leave taxpayer materials vulnerable

By Jenny Mandel

May 17, 2006

Taxpayer receipts and other sensitive materials were left out in open areas where they were vulnerable to loss or theft, and auditors found various problems with financial and security procedures at Internal Revenue Service facilities during an annual review.

As part of a fiscal 2005 audit, Government Accountability Office employees visited a sampling of service centers, taxpayer assistance centers, field offices, financial institutions serving as agents of the government and a finance center, to evaluate how they followed financial and internal controls designed to ensure the appropriate handling of materials.

In a report (GAO-06-543R) released last week, GAO described a litany of security problems.

At a taxpayer assistance center, auditors repeatedly entered secure areas without challenge by walking from public into controlled areas through an unmarked, unlocked door. At assistance centers newly reconfigured to incorporate security features, reviewers found the same open access and were told that unauthorized people occasionally appeared in secure areas.

At service centers where tax returns were opened and processed, reviewers found that procedures for "candling" envelopes -- passing them over a light source or using other methods to ensure the contents had been removed -- were not routinely followed before the envelopes were marked to be destroyed.

At a bank that processed tax remittances, procedures calling for the immediate deposit of large checks also were not followed. In one case, reviewers found six checks totaling $1.25 million that had not been processed before a shift change, and new shift leaders were not aware of their existence.

GAO also found that references were not verified when individuals under age 18 were hired to handle taxpayer receipts and information. Underage employees routinely had access to taxpayer information beyond what they were cleared to handle, and those who were no longer in school, but without a work history, were not required to submit a standard character assessment form.

The report recommended that the IRS improve its procedural guidelines, enhance periodic facility reviews, enforce existing rules and monitor adherence to regulations.

In response to a report draft, IRS officials accepted all but one of GAO's recommendations, which they said the agency had already met. "The issues you presented in your report will help us to take the necessary steps to strengthen our controls over property and equipment, safeguarding tax receipts, and improving financial management," Commissioner Mark Everson wrote.

He noted that the IRS had acted on and closed 33 outstanding recommendations during fiscal 2005, and developed corrective action plans for others.


By Jenny Mandel

May 17, 2006

http://www.govexec.com/management/2006/05/gao-irs-procedural-flaws-leave-taxpayer-materials-vulnerable/21836/