TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
The Baltimore Collection Field Function Office Properly Controlled Form 809 Receipt Books and Timely Transmitted Remittances for Processing
February 20, 2008
Reference Number: 2008-30-072
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
Redaction Legend:
1 = Tax Return/Return Information
3(d) = Identifying Information - Other Identifying Information of an Individual or IndividualsPhone Number |
202-622-6500
Email Address | inquiries@tigta.treas.gov
Web Site |
http://www.tigta.gov
February 20, 2008
MEMORANDUM FOR DIRECTOR, COLLECTION, SMALL BUSINESS/SELF-EMPLOYED DIVISION
FROM: Margaret E. Begg /s/ Margaret E. Begg
Acting Assistant Inspector General for Audit (Small Business and Corporate Programs)
SUBJECT: Final Audit Report – The Baltimore Collection Field Function Office Properly Controlled Form 809 Receipt Books and Timely Transmitted Remittances for Processing (Audit # 200830IE026)
This report presents
the results of our review of internal controls over the Receipt for Payment of
Taxes (Form 809) within the Baltimore Collection Field function (CFf)[1] office. The overall objective of this audit was to
determine whether internal controls for collecting and depositing remittances
within the Baltimore CFf office were effective.
We initiated this review because the Form 809 is classified as a
security item, and its use is strictly controlled and limited to only certain
employees.
Impact on the Taxpayer
CFf employees are required to issue a Form 809 receipt when
cash is received from a taxpayer. All
remittances secured by CFf employees must be transmitted to the appropriate
designated Submission Processing site[2] on the day
collected or as soon as possible on the next business day. The Baltimore CFf office properly issued and
accounted for Form 809 receipt books and timely transmitted remittances to the
Submission Processing site for processing.
Effective controls over Form 809 issuance and processing are important
to ensure the accurate and timely deposit of taxpayer payments.
Synopsis
Each Form 809 receipt book is assigned for the exclusive use of the intended employee, who is allowed to have only one assigned receipt book at a time. To request the initial assignment of a Form 809 receipt book for an employee, the employee’s group manager must prepare a memorandum authorizing the employee to receive the book. All remittances secured by CFf employees must be transmitted to the Submission Processing site on the day collected or as soon as possible on the next business day to meet Internal Revenue Service (IRS) goals for timely deposit and to avoid unnecessary delays in processing. Group managers must review all receipt books assigned to their employees at least once per year to verify that all receipts have been accounted for properly.
We reviewed the 22 Form 809 receipt books
issued to the 22 revenue officers assigned to the 3 groups at the Baltimore CFf
office.
Overall, the Form 809 receipt books were properly issued to and
maintained by the revenue officers, the annual reconciliation of issued receipt books was timely completed,
segregation of duties was adequately maintained within the groups, remittances
were timely transmitted to the Submission Processing site for processing, and receipt books were properly returned to the
Submission Processing site when revenue officers separated from the Baltimore
CFf office groups.
However, ****1, 3(d)**** In addition, 9 receipt books had not been
returned as required because no receipts had been issued within the last 3
years. While these conditions are not in
accordance with established procedures, based on the results of our other
control tests, we considered them to be of minor significance and risk. We made no specific recommendations but did suggest
management take the actions deemed necessary to correct the conditions. We did not identify any employee misuse of
remittances intended for the IRS.
Responding to This Report
Because this is a positive report and we made no recommendations, comments from the IRS were not required. However, key IRS management officials reviewed the report prior to issuance.
Copies of this report are also being sent to the IRS managers affected by the report results. Please contact me at (202) 622-5959 if you have questions or Frank Dunleavy, Director, Special Tax Matters, at (213) 894-4470 extension 129.
Form 809 Receipt Books
Were Properly Controlled by the Collection Field Function Groups
Remittances Were
Timely Transmitted to the Submission Processing Site for Processing
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Abbreviations
|
CFf |
Collection Field function |
|
IDRS |
Integrated Data Retrieval System |
|
IRS |
Internal Revenue Service |
The Receipt for Payment of Taxes (Form
809) is an official document for receipt of cash payments from taxpayers. Effective
controls over Form 809 issuance and processing are important to ensure the
accurate and timely deposit of taxpayer payments. Each Form 809 receipt book contains 50
receipts consisting of four parts (Part 1, Posting Voucher; Part 2, Receipt for
Payment of Taxes; Part 3, Memo Copy; and Part 4, Receipt Book Copy). When a Form 809 is issued, Parts 1 and 3 are
submitted with the payment on a Daily
Report of Collection Activity (Form 795/795A) to the appropriate Submission
Processing site[3] Teller Unit.
The employee provides Part 2 to the taxpayer; Part 4 remains with the
Form 809 receipt book.
Collection
Field function employees are required to issue a Form 809 receipt when cash is
received from a taxpayer or when a receipt is requested by the taxpayer.
Each Form 809 receipt book is assigned for
the exclusive use of the intended employee, who is allowed to have only one
assigned receipt book at a time. To
request the initial assignment of a Form 809 receipt book for an employee, the
employee’s group manager must prepare a memorandum authorizing the employee to
receive the book. Collection Field
function (CFf)
[4] employees are required to issue a Form 809
receipt when cash is received from a taxpayer or when a receipt is requested by
the taxpayer for payment made by any means other than cash (i.e., check, money
order, or draft). All remittances
secured by CFf employees must be transmitted to the Submission Processing site
on the day collected or as soon as possible on the next business day to meet Internal
Revenue Service (IRS) goals for timely deposit and to avoid unnecessary delays
in processing. Group managers must
review all receipt books assigned to their employees at least once per year to
verify that all receipts have been accounted for properly.
This review was performed in the Small
Business/Self-Employed Division CFf office in
Form 809 Receipt
Books Were Properly Controlled by the Collection
Field Function Groups
We reviewed the 22 Form 809 receipt books
issued to the 22 revenue officers assigned to the 3 groups at the Baltimore CFf
office. Specifically, we inventoried the
receipt books that had been issued to the revenue officers, inspected the books
for issued and unissued receipts, and reconciled the books and receipts to the
inventory list maintained by the Ogden Submission Processing site. Figure 1 shows a total of 112 receipts had
been issued from the Form 809 receipt books issued to the 22 revenue officers.[5] In
addition, we reviewed the annual reconciliations performed by the managers of
the three CFf groups and evaluated the segregation of duties within the
groups. Overall, the Form 809 receipt
books were properly controlled by the CFf groups.
Figure 1: Count of Form 809 Receipt Books and Issued
Receipts
|
|
Number
of |
Number
of |
|
Group 11 |
7 |
68 |
|
Group 13 |
11 |
28 |
|
Group 17 |
4 |
16 |
|
Totals |
22 |
112 |
Source: Auditor analysis of the issued
Form 809 receipt books.
Form
809 receipt books were properly issued to and maintained by the CFf groups
The Form 809 receipt book is classified as a security item, and its use
should be strictly controlled and limited to only certain employees. Form 809 receipt
books were properly issued to and maintained by the revenue officers assigned
to the three Baltimore
CFf groups. For example, the three CFf group managers had properly
prepared authorization memoranda for initial issuance of the Form 809 receipt
books, and 19 (86 percent) of the 22 revenue officers who were issued books had
returned the signed acknowledgments of receipt to the Submission Processing
site Teller Unit as required. While we
could not locate the remaining three acknowledgements of receipt at the Teller
Unit, we considered this to be of minor significance. Our comparison of the serial numbers from the
Form 809 receipt books assigned to each of the 22 revenue officers to the list of
issued Form 809 receipt books maintained by the Submission Processing site
reflected that all books were properly accounted for. Each employee was assigned only one Form 809
receipt book at a time, each receipt book was assigned for the exclusive use of
the intended employee, and employees maintained strict control of their receipt
books.
When a Form 809 is issued, Parts 1 and 3 are
submitted with the payment to the
appropriate Submission Processing site, Part 2 is provided to the taxpayer, and
Part 4 remains with the receipt book.
Revenue officers should ensure Form 809 receipts are issued in numerical
sequence. Unissued receipts should
consist of all four parts. Our review of
the 22 Form 809 receipt books showed unissued receipts were sequential, unissued
receipts contained all four parts, and the last issued receipt corresponded
with the Submission Processing site records.[6]
Form 809 receipt books must be returned to
the issuing Submission Processing site within 10 business days of discontinued
use due to employee actions such as separation, transfer to another field
office, or change of position. The
receipt books also must be returned if no receipts have been issued within the
last 3 years. While Form 809 receipt
books were being properly returned to the Submission Processing site when revenue
officers transferred or separated from the Baltimore CFf groups,
****1, 3(d)**** In addition, 9
receipt books had not been returned as required because no receipts had been
issued within the last 3 years. While
these conditions are not in accordance with established procedures, based on
the results of our other control tests, we considered them to be of minor
significance and risk. Therefore, we are
making no specific recommendations; rather, we suggest management take the
actions deemed necessary to correct the conditions. We did not identify any employee misuse of
remittances intended for the IRS.
The
annual reconciliation of issued Form 809 receipt books for the CFf groups was
conducted
At least once a year, group managers must
review all receipt books assigned to their employees to verify that all
official receipts have been accounted for. As part
of the yearly review, referred to as the Annual Reconciliation of Official
Receipts, the Submission Processing site will transmit to the appropriate CFf
office an Annual Listing of Form 809 Receipt Book Report with a cover
memorandum requesting a response within 30 calendar days. The Report will contain (by group) the name
of each employee to whom a receipt book is assigned, the serial number and
receipt numbers of each receipt book assigned to the employee, and the receipt
numbers submitted through the end of the year from each book.
The Baltimore CFf office timely completed the
annual reconciliation of Form 809 receipt books. As part of the reconciliation, each group
manager verified the numerical sequence of all remaining Form 809 receipts in
each assigned receipt book and ensured all receipts issued subsequent to the
last receipt on the list were reflected on the employee’s appropriate Form
795. The responses prepared by the
managers included the name of each employee to whom a Form 809 book is
currently assigned, the serial number of each receipt book assigned to an
employee, the numbers of the individual receipts in the book, and the numbers
of the individual receipts submitted through the closeout date noted on the
memorandum.
Segregation
of duties was adequately maintained for issued Form 809 receipt books within
the CFf groups
The issuance of Form 809 receipt books should be strictly limited to only certain
employees due to the nature of use and security classification of these
documents. Managers should ensure only
appropriate employees are issued receipt books and the employees have research
only command codes in their Integrated Data Retrieval System (IDRS)[7] profiles.
Group managers adequately maintained segregation of duties in the
Baltimore CFf office by ensuring only appropriate employees had been issued
Form 809 receipt books and those employees issued receipt books had research
only command codes in their profiles.
For example, clerical personnel were not issued Form 809 books due to
the inclusion of sensitive (nonresearch) command codes in their IDRS profiles
and their duties relevant to the completion of Forms 809. In addition, a review of the IDRS profiles
for each of the 22 revenue officers who had been issued Form 809 receipt books
within the 3 CFf groups showed the employees had research only command codes in
their profiles.
Remittances Were Timely Transmitted to the Submission Processing Site for Processing
In general, any employee receiving a remittance from a taxpayer must transmit the remittance on Form 795 via overnight, traceable mail the same day it was received or as soon as possible the next business day, to ensure receipt in the appropriate Submission Processing site within 48 hours of receipt from the taxpayer. Because cash payments must be converted to check or money order, 1 additional day is allowed for cash conversion. Accordingly, remittances are due at the Submission Processing sites within 3 business days from the date the IRS received the funds. If receipts are not received timely, the Remittance Processing Unit at the Submission Processing site will issue a Submission Processing Center Teller’s Error Advice (Form 5919) to the originating employee’s group manager for correction.
Overall,
the Baltimore CFf groups were recording the remittances on Form 795 and timely transmitting
the remittances to the Submission
Processing site for processing. To
assess the timeliness of remittance processing, we researched the 110
remittances received on the IDRS and found 89 (81 percent) had posted to the
taxpayers’ accounts within 3 business days of receipt.[8] All
of the remaining 21 remittances had posted within 4 business days to 8 business
days of receipt. We also reviewed all
Forms 5919 issued by the Submission Processing site that were associated with
the 110 Form 809 receipts and determined only 1 of the remittances transmitted
by the 3 Baltimore CFf groups was identified as not being received timely by
the Remittance Processing Unit.
Appendix I
Detailed Objective, Scope, and Methodology
Our overall objective was to
determine whether internal controls for collecting and depositing remittances
within the Baltimore CFf[9] office
were effective. Specifically, we
reviewed internal controls over the Receipt for Payment of Taxes (Form 809). To accomplish this objective, we:
I.
Determined
whether employees in the Baltimore CFf office were effectively following the
proper controls and procedures for processing remittances received and using Form
809 receipt books.
A. Identified and discussed with management
procedures and guidelines for processing remittances received, including the
timely processing of remittances and use of Form 809 receipt books.
B.
Conducted a walkthrough of the Baltimore CFf
office to determine whether controls for processing remittances were followed
and remittances were properly safeguarded.
C.
Evaluated the timeliness of remittance processing.
D. Performed a physical verification of assigned
Form 809 receipt books to determine whether they were properly controlled and
used.
1.
Selected and reviewed all 22 receipt books assigned
to the 22 revenue officers in the 3 groups at the Baltimore CFf office.
2.
Determined whether the revenue officers assigned
receipt books had IDRS adjustment capabilities.
3.
Secured receipt books from the revenue
officers and copied all issued receipts.
4.
Determined whether the unissued receipts were
still in numerical sequence and all four parts were intact.
5.
Determined whether any clerical personnel
were issued receipt books.
6.
Obtained copies of the authorization memoranda
for the initial receipt book issuance and the signed receipt pages for the
current receipt book.
7.
Determined whether receipt books were
returned to the issuing Submission Processing site[12] if receipts had not been issued within 3
years.
8.
Identified employees who recently
transferred, separated, or no longer required use of receipt books and
determined whether the books had been returned to the issuing Submission
Processing site.
9.
Determined whether the Baltimore CFf office
timely completed the annual reconciliation of receipt books and compared the
results with the reconciliation completed in Step I.D.1., to determine whether
discrepancies were identified and properly resolved.
E.
Conducted a field visitation at the Submission
Processing site in Ogden, Utah, and verified whether the Form 809 receipts (in
the receipt books selected in Step I.D.1.) submitted by the revenue officers in
the Baltimore CFf office had been received and accounted for properly.
Appendix II
Major Contributors to This Report
Margaret E.
Begg, Acting Assistant Inspector General for Audit (Small
Business and Corporate Programs)
Frank
J. Dunleavy, Director
Van
A. Warmke, Audit Manager
Mike
J. Della Ripa, Lead Auditor
Erlinda
K. Foye, Auditor
Frank
I. Maletta, Auditor
Appendix III
Acting Commissioner C
Office of the
Commissioner – Attn: Acting Chief of
Staff C
Deputy Commissioner for Services and Enforcement SE
Commissioner, Small Business/Self-Employed Division SE:S
Director, Communications, Liaison, and Disclosure, Small Business/Self-Employed Division SE:S:CLD
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
RAS:O
Office of Internal
Control OS:CFO:CPIC:IC
Audit Liaison: Commissioner, Small Business/Self-Employed Division SE:S
[1] The unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns. Area Offices are a geographic organizational level used by the Internal Revenue Service business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.
[2] The Submission Processing sites process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.
[3] The Submission Processing sites process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.
[4] The unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns. Area Offices are a geographic organizational level used by the Internal Revenue Service business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.
[5] One of the 112 Form 809 receipts had been voided, and no payment could be located for another receipt. Therefore, we were able to conduct tests on 110 of the 112 receipts issued by the 22 revenue officers.
[6] ****1, 3(d)****
[7] IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records. Command codes are used by IRS employees to research and adjust taxpayer accounts on the IDRS.
[8] One Form 809 receipt had been voided. In addition, ****1, 3(d)**** We did not consider the amount to be significant and, due to the time that has elapsed, determined it did not warrant further investigation.
[9] The unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns. Area Offices are a geographic organizational level used by the IRS business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.
[10] IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records.
[11] A total of 112 receipts had been issued from the Form 809 receipt books assigned to the revenue officers in the Baltimore CFf office. One of the 112 Form 809 receipts had been voided, and no payment could be located for another receipt. Therefore, we were able to conduct tests on 110 of the 112 receipts issued by the revenue officers.
[12] The Submission Processing sites process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.