April 15, 2025
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The Internal Revenue Service (IRS) continues to make significant improvements in the reliability and integrity of its financial data,
according to Dawn Simpson, Director of Financial Management and Assurance at the Government Accountability Office (GAO). In conversation with Francis Rose, Simpson explains how the IRS is strengthening its internal controls and building confidence in its financial reporting processes — not just at year-end, but at any point in time.
Simpson begins by highlighting the IRS’s progress in addressing deficiencies in its information systems. In fiscal year 2024, the agency successfully resolved 21 prior-year issues GAO had identified. These included weaknesses in key areas like access controls — which ensure only authorized personnel can access sensitive financial systems — and configuration management, which governs how systems are set up and changed to maintain security. Because of this progress, GAO no longer considers the IRS’s information system controls to have a “significant deficiency,” a classification that typically demands elevated attention from senior oversight bodies.
“We’re focused specifically on the controls necessary to ensure reliable financial information,” Simpson says. “That includes both system-based controls and manual ones.”
She emphasizes that while the IRS still has some work to do, the agency’s efforts in recent years are paying off. In 2024, the number of newly identified deficiencies is relatively low — just four related to information systems and one concerning the property and equipment transaction cycle. This balance between resolving old issues and uncovering new ones is expected, according to Simpson. “That is normal,” she explains. “You’ll see certain things get addressed, and at the same time, new findings surface.”
One of the most important points Simpson makes is the role of internal control in building trust in financial data throughout the year. While agencies traditionally focus on producing accurate year-end statements, effective internal controls provide ongoing assurance. “If you have good internal controls and you know those processes are working, then you have more comfort that your financial data is reliable at any point in time,” she notes.
Simpson also touches on a key GAO recommendation stemming from a manual reconciliation issue. In one instance, the IRS’s depreciation calculations did not align with agency policy, and there was no process in place to detect the discrepancy. The takeaway? Monitoring manual controls is just as important as automated checks. “They need to be comfortable that the data coming from the systems is what they expect it to be,” Simpson says.
Looking ahead, GAO will continue to assess the IRS’s corrective actions during the fiscal year 2025 audit. This includes reviewing not just whether recommendations were implemented, but whether the actions were effectively designed and are operating as intended.
Overall, Simpson’s insights underscore the importance of strong, adaptive internal controls in maintaining financial integrity — and show that the IRS is on the right path toward continuous improvement.
You can read Dawn’s full report here
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