Management Report: Improvements Needed in Controls over IRS's Excise Tax Certification Process Page: 1 of 25
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AGAO
Accountability * Integrity * Reliability
United States General Accounting Office
Washington, DC 20548
July 23, 2003
The Honorable Mark W. Everson
Commissioner of Internal Revenue
Subject: Management Report: Improvements Needed in Controls over IRS's
Excise Tax Certification Process
Dear Mr. Everson:
The Internal Revenue Service (IRS), along with other components of the Department
of the Treasury, collects and distributes excise tax receipts to government trust
funds. As the nation's tax collector, IRS plays a critical role in this process.
Consequently, trust funds and their administrators depend on IRS to have sound
procedures and controls over this process to ensure that excise taxes are
appropriately distributed.
This report is a follow-up to two reports we recently issued discussing procedures we
performed to assist the Department of Transportation's Office of Inspector General
(Transportation IG) in ascertaining whether the net excise tax collections and excise
tax certifications reported by IRS for the fiscal year ended September 30, 2002, were
supported by underlying records.' The agreed-upon procedures, along with our audit
of IRS's fiscal year 2002 financial statements,2 provided a sufficient basis to assist the
Transportation IG in forming an opinion on the departmentwide financial statements
and the financial statements of the trust funds administered by the department,
including the Highway Trust Fund and the Airport and Airway Trust Fund.3
In our reports discussing the results of the agreed-upon procedures we performed in
fiscal year 2002, we described errors we identified in the certification and distribution
process. However, we did not discuss the underlying internal control weaknesses
'U.S. General Accounting Office, Applying Agreed-Upon Procedures: Highway Trust Fund Excise
Taxes, GAO-03-360R (Washington D.C.: Jan. 23, 2003) and Applying Agreed-Upon Procedures: Airport
and Airway Trust Fund Excise Taxes, GAO-03-361R (Washington D.C.: Jan. 23, 2003).
2U.S. General Accounting Office, Financial Audit: IRS's Fiscal Years 2002 and 2001 Financial
Statements, GAO-03-243 (Washington D.C.: Nov. 15, 2002).
3Because GAO is responsible for auditing IRS's financial statements, we performed agreed-upon
procedures to assist the Transportation IG in assessing whether the net excise tax revenues
distributed to the two trust funds for fiscal year 2002 were supported by underlying records. These
agreed-upon procedures, in conjunction with additional testing by the Transportation IG, provided
Transportation's IG sufficient basis to opine on the department's financial statements.GAO-03-687R IRS Excise Tax Management Report
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United States. General Accounting Office. Management Report: Improvements Needed in Controls over IRS's Excise Tax Certification Process, text, July 23, 2003; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc298150/m1/1/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.