GAO Report Finds Flaws in IRS Auditing of Tax-Exempt Organizations

More than two years later, the IRS is feeling the effects of a major scandal. A Government Accountability Office report issued last week found that the agency has, and perhaps still does, unfairly target which nonprofits it chooses to audit.

The Government Accountability Office (GAO) issued a report last week detailing deficiencies in the IRS’s audit processes for tax-exempt organizations.

The report followed a year-long GAO investigation, requested by the House Ways and Means Committee after the IRS was lambasted two years ago for its targeting of conservative groups applying for tax-exempt status. GAO found “several areas” where the IRS Exempt Organizations Division’s (EO) internal controls for selecting groups for examination were not well designed or implemented.

If the agency wants to restore public confidence, the American people need to see concrete reforms to ensure that they will never again be targeted.

“The control deficiencies we found increase the risk that EO could select organizations for examination in an unfair manner,” GAO said.

The report asserts that IRS processes could allow staff to deviate from standard procedures for selecting organizations for examination, and that EO management does not consistently monitor selection decisions to ensure fairness.

Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-IL) held a hearing last week to examine the GAO findings and give IRS Commissioner John Koskinen an opportunity to respond to the report. Roskam said the report “exposes a new and more egregious frontier of potential targeting in the agency’s audit selection process.”

“If the agency wants to restore public confidence, the American people need to see concrete reforms to ensure that they will never again be targeted,” Roskam said.

Koskinen testified at the hearing that the GAO report found no evidence of organizations being selected in an unfair or biased manner, but that the agency welcomes suggestions for improving its processes. The IRS is working to update the Internal Revenue Manual that EO employees use in the audit selection process, expand its monitoring procedures on audit selection decisions, and provide additional training to employees who select returns for audit.

“During my tenure as IRS Commissioner, one of my top priorities has been and continues to be making sure the public understands that anyone—any individual, business or organization – dealing with the IRS will be treated fairly, no matter what their political affiliation, their position on contentious political issues, or whom they supported in the last election,” Koskinen said.

IRS Commissioner John Koskinen. (Brookings Institution/Flickr)

Chris Vest, CAE

By Chris Vest, CAE

Chris Vest, CAE is vice president, corporate communications and public relations at ASAE. MORE

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