U.S. Department of the Treasury

(Archived Content)

FROM THE OFFICE OF PUBLIC AFFAIRS

Mr. Chairman and members of the Subcommittee, good morning and thank you for inviting me here today to discuss financial management in the Department of the Treasury and the Internal Revenue Service (IRS). Throughout the fiscal year (FY) 1999 financial reporting cycle senior Treasury officials, from the Department's Assistant Secretary for Management and Chief Financial Officer (ASM/CFO) to the IRS' Deputy Commissioner, have provided critical oversight to improve the audit results at the Internal Revenue Service (IRS) -- a commitment we made to you a year ago.

While we are pleased with the continued progress that has been made across the Treasury Department, both in the timeliness and quality of our FY 1999 audit results, the remaining financial reporting deficiencies on the IRS administrative accounts have resulted in the sole qualification of opinion on the Department's FY 1999 Accountability Report. That said, we are encouraged by the General Accounting Office's (GAO's) reported findings of progress in seven areas of financial reporting at IRS, particularly the progress made on the balance sheet. Working closely with IRS, and our audit partners in the GAO, the Treasury Inspector General, and Treasury Inspector General for Tax Administration (TIGTA) offices, we intend to build on these positive, albeit incremental, results and strive for unqualified opinions at both the IRS and the Department as a whole for the FY 2000 financial reporting cycle. It should be noted, however, that the path to improved, short-term audit results will remain labor intensive for the next few years, until core financial and management systems can be reconfigured and/or replaced.

Department management fully recognizes the leadership role Treasury must play in sound financial reporting and will continue to support the IRS efforts to sustain the progress made during FY 1999, strengthen the CFO structure and management team within the IRS, and build the financial systems needed to improve both financial reporting and, more importantly, management of IRS resources.

To that end, the Department is actively engaged with the IRS on the longer-term, systems solution that will have the precision and automated capabilities to sustain the financial reporting gains of FY 1999 and the next few years. Further, needed changes were made in CFO leadership at IRS over the course of the FY 1999 reporting cycle, installing a highly qualified Treasury executive, my colleague Larry Rogers, as the Acting CFO at IRS. Mr. Rogers has a demonstrated track record in leading other Treasury organizations including the Treasury OIG and TIGTA until permanent leadership was in place, and the Department, IRS, and GAO recognized his capabilities during the FY 1999 IRS audit. Going forward, our collective goal is to win the war for top financial talent at the IRS, both by installing a strong, permanent CFO and strengthening the CFO office to optimize financial reporting and management.

While freely acknowledging the continuing financial reporting problems at the IRS and the negative impact on the Department's FY 1999 opinion, we would like to point out the steady progress made across Treasury. This progress has been made both on the timeliness and quality of results.

First, in terms of timeliness, we are proud of meeting the March 1 deadline for the first time this year, delivering the FY 1999 Treasurywide and three required standalone bureau reports from our revenue bureaus, IRS, Customs, and Alcohol, Tobacco, and Firearms, to the Office of Management and Budget by the statutory due date. This achievement demonstrates Treasury's continued commitment to timely, accurate financial reporting, having incrementally improved the delivery date each year, since preparing our first Accountability Report for FY 1995.

Second, since FY 1997 and continuing through FY 1999, Treasury has received unqualified opinions on its primary governmentwide functions -- collecting revenue and managing the public debt. GAO is again rendering an unqualified opinion for the third year in a row on IRS' revenue collection activities of $1.9 trillion dollars and the Bureau of Public Debt's federal debt management activities of $5.7 trillion dollars. Further, with the aforementioned, notable exception of IRS' administrative accounts, the rest of the Treasury bureaus custodial and administrative accounts had no Departmental level audit qualifications.

Finally, it should be noted that the non-payroll, IRS administrative accounts that are the focus of the FY 1999 reporting problems, have a largely negligible impact on the status or opinion of the Governmentwide financial statements -- due to the relatively low materiality level vis--vis the aggregate Federal Government activities.

That concludes my testimony and I would be pleased to respond to any questions you may have now or later. Thank you.