IRS a Model of Inefficiency, Report Finds

It sounds like a taxpayer’s dream: The IRS was audited, and struggled to explain its own financial records.

“The IRS cannot do some of the basic accounting and record-keeping tasks that it expects American taxpayers to do,” said Gregory Kutz, who oversaw the audit released Monday by the congressional General Accounting Office.

The GAO said chronic Internal Revenue Service problems resulted last year in millions of dollars in fraudulent refunds, failure to keep track of such basic assets as cars and computers, and substandard computer security controls.

“Think of this as not balancing your checkbook with the monthly bank statement, and at the same time having a system prone to error,” Kutz told the House Government Reform Committee’s panel on government management at a Monday hearing.

The GAO said the IRS is unable to keep track of unpaid taxes properly, which means it cannot concentrate collection efforts on the taxpayers most likely to pay. The upshot is that only about $26 billion of the $222 billion in unpaid taxes as of October are likely to be collected, with $119 billion--a whopping 54%--to be written off.

“It’s a national scandal,” said Rep. Stephen Horn (R-Long Beach), chairman of the government management subcommittee. “It seems to me you shouldn’t let people off the hook like that.”

IRS officials were quick to take responsibility for the problems, which they said were largely rooted in the agency’s antiquated computer systems, which date as far back as the Kennedy administration. They were clearly embarrassed by the report.

“I am deeply disappointed that we failed to meet our obligations,” said Donna Cunningham, the IRS’ new chief financial officer.

Many of the problems are chronic, and some lawmakers were frustrated that they have continued to surface annually since 1992.

“I don’t see that there’s been a real significant effort to deal with these financial management issues,” said Rep. Jim Turner (D-Texas). “The problems seem to be running pretty deep.”