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Part 3. Submission Processing

Chapter 0. General

Section 257. Management Accountability Review (Cont. 1)

3.0.257  Management Accountability Review (Cont. 1)

3.0.257.8 
Reports

3.0.257.8.2  (10-01-2002)
Annual Assurance/Conformance Report

  1. The Comptroller General requires the Service to provide a report on whether the agency's accounting system conforms to the principles, standards, and related requirements, and if management has internal controls in place.

  2. The purpose of this section is to provide specific guidelines, instructions, and report formats for the preparation and submission of the Annual Assurance/Conformance Report. There will not be a separate report for the subsystems reviewed.

  3. The MAR review and the Annual Assurance Process will consist of the following:

    • Index

    • Statement of Assurance/Conformance

    • Enclosure A — Annual Assurance Process

    • Enclosure B — Revenue Accounting Subsystem Compliance

    • Enclosure C — Deficiencies

  4. Enclosure A — Annual Assurance Process

    1. Part 1 — Description of Methodology Used (Description of Validation Process and Assessment of Overall Operations)

    2. Part 2 — Directives, if applicable

  5. Enclosure B — Revenue Accounting Subsystem Compliance

    1. Part 1 — Narrative of MAR Review Process

    2. Part 2 — Staff Hours Used

    3. Part 3 — Not in Compliance Statement, if applicable

  6. Enclosure C — Deficiencies

    1. Part 1 — Summary of Deficiencies

    2. Part 2 — Deficiency Reports

    3. Part 3 — Deficiency Completion Certificates

    4. Part 4 — Systems Change Requests/On-line Resources

3.0.257.8.2.1  (10-01-2005)
Statement of Assurance/Conformance

  1. The Statement of Assurance/Conformance (Exhibit 3.0.257–17) MUST be supported by solid documentation. It will state whether there is reasonable assurance the center complies with regulations. Such assurance may be provided even though limited exceptions are cited.

    Note:

    This may be used as your cover memorandum.

  2. Prepare the heading:

    1. Agency/Campus — Internal Revenue Service/e.g., Kansas City Submission Processing Center

    2. Process — Annual Assurance Process

    3. Accounting System — Revenue Accounting System

    4. Subsystem — (e.g., Integrated Data Retrieval System)

  3. Provide a brief narrative using the appropriate assurance level (See Exhibit 3.0.257–17).

  4. Signed and dated statement by one of the following:

    • Campus Director(s)

    • HQ

    • NHQ

  5. Type the name and title of the appropriate official on the line provided below the signature.

3.0.257.8.2.2  (10-01-2002)
Enclosure A — Annual Assurance Process

  1. Enclosure A consists of two parts:

    • Narrative of Process

    • Directives

    Note:

    Directives will only be addressed if requested in the Call Memo.

3.0.257.8.2.2.1  (10-01-2002)
Part 1 — Narrative of Process

  1. Briefly describe the process used to verify that adequate management controls are in place and functioning effectively to protect resources. The self-assessment should also include any field operations which report directly to you. Narrative should describe:

    • Methodology Used

    • Validation Process

    • Overall Operation

    • Indicate that you have considered the information systems environment operated or used by your organization

    • Statement on the status of function's management controls

3.0.257.8.2.2.2  (10-01-2002)
Directives

  1. Managers will conduct and document operational reviews on matters highlighted in the directives.

3.0.257.8.2.3  (10-01-2002)
Enclosure B — Revenue Accounting Subsystem Compliance

  1. Enclosure B consists of three parts:

    • Narrative of MAR

    • Staff Hours Used

    • Not in Compliance Statement (if applicable)

3.0.257.8.2.3.1  (10-01-2002)
Part 1 — Narrative of Review Process

  1. Prepare a narrative which describes the organization and structure of the review process.

    • Team members, grades, assignments, prior background

    • Training, risk assessment, testing, interviewing

    • List major management controls

    • Financial systems accomplishments

    • Problems

    • State commitment to future improvements

3.0.257.8.2.3.2  (10-01-2002)
Part 2 — Staff Hours Used

  1. Staff hours used:

    1. Identify number of staff hours used by agency personnel who have participated in the review process.

    2. Hours should be taken from the Work Planning and Cost Report (WP&C) OFP 990–80360.

      Note:

      In order to accurately account for the time spent on the MAR, training, files research, and deficiency must be reported under this OFP.

    3. Total the hours used each quarter and a grand total of all hours used.

3.0.257.8.2.3.3  (10-01-2002)
Part 3 — Not in Compliance Statement (if applicable)

  1. Title Part 3 as "All questions applicable to the subsystem are in compliance except as listed below." Provide a list of questions not in compliance with the statement. If all questions were in compliance, include a statement in the narrative and eliminate Part 3.

    1. Enter the complete question

    2. Reason not in compliance

    3. Corrective action plan

3.0.257.8.2.4  (10-01-2005)
Enclosure C — Deficiencies

  1. Enclosure C consists of four parts:

    • Exhibit 3.0.257 – 20, Summary of Deficiencies (current and prior)

    • Copies of Reports of Control Deficiency and Pending Deficiency Reports (Deficiency Reports not previously submitted should be included)

    • Copies of Deficiency Completion Certificates

    • Systems Change Requests/On-line Resources

3.0.257.8.2.4.1  (10-01-2005)
Part 1 — Summary of Deficiencies

  1. Provide a list of all deficiencies in numeric order with all current deficiencies identified followed by open deficiencies from prior years. See Exhibit 3.0.257–20, to ensure inclusion of all mandatory information.

3.0.257.8.2.4.2  (10-01-2002)
Part 2 — Deficiency Reports

  1. Provide a copy of each Deficiency Report identified this quarter.

  2. Control Deficiency — A deficiency within the SPC's jurisdiction. Submit an action plan to correct the deficiency. The action plan should be tentative dates for scheduled corrective action (See 3.0.257.7(2)). If dates have changed on prior reported deficiencies, these should be included in the report.

  3. Pending Deficiency — A deficiency NOT within the jurisdiction of the SPC. The action on these deficiencies will require a System Change Request/On-line Resource submitted to NHQ. These deficiencies are monitored by HQ and the SPC.

3.0.257.8.2.4.3  (10-01-2005)
Part 3 — Deficiency Completion Certificates

  1. Provide a Deficiency Completion Certificate for each deficiency completed during the review or since the last quarterly report (See Exhibit 3.0.257–16).

  2. Certificate(s) may be submitted in the quarterly or yearly report.

3.0.257.8.2.4.4  (10-01-2003)
Part 4 — System Change Requests/On-line Resources

  1. Provide a copy (paper or electronic) of all Systems Change Requests/On-line Resources submitted on deficiencies.

    1. The requests, etc., must be input to the appropriate system per individual SPC procedures. Ensure that they are annotated as being generated from the MAR process.

    2. Cross reference requests to the pending deficiency.

    3. Once a copy of the pending deficiency and request(s), etc., have been provided to HQ, the deficiency will be monitored by HQ and the SPC.

3.0.257.8.3  (10-01-2002)
Reports Submission

  1. Campus Director(s) must sign the Annual Assurance/Conformance Report.

  2. Copies of all reports (MAR Quarterly Status Reports and Annual Statement of Assurance/Conformance) must be submitted to the MAR HQ coordinator.

  3. The due date for the report is provided from HQ when the Annual Assurance Memorandum (Call Memo) is sent. Generally the date is in July. The MAR portion of the review must be completed by June 30 to be included in the Annual Assurance memo for SP.

3.0.257.9  (10-01-2002)
MAR Records

  1. MAR records should be maintained for 6 years from year of review.

  2. All MAR records must be available to Treasury, GAO, or TIGTA personnel in any subsequent managerial review of accounting practices.

  3. The records should contain:

    1. Work papers

    2. Evaluations of operations and program activities

    3. Other documentary evidence collected during review of such systemic operations to comply with mandatory reviews as established by the Department of the Treasury.

    4. Reports

3.0.257.10  (10-01-2006)
Miscellaneous

  1. To assist locating text related to specific exhibits Exhibit 3.0.257 - 22, Cross Reference-Exhibits to Text, was created and is provided.

  2. Exhibits are to be completed based on review conducted.

  3. Any suggestions or recommendations for this IRM should be provided to NHQ Analyst.

3.0.257.11  (10-01-2005)
Glossary

  1. Accounting Systems- The Comptroller General has defined a "complete accounting system " as:

    1. "…one established to assist in the financial management functions of budget formulation and execution, proprietary accounting, and financial reporting."

    2. It is the total structure of methods and procedures.

    3. Accounting systems shall be comprised of the various operations involving the authorizing, recording, classifying, and reporting of financial data related to revenues, expenses, assets, liabilities, and equity.

  2. Agency - A major program, administrative activity, organization, or functional subdivision of an agency.

  3. Appropriation - A statutory authorization given to incur obligations and outlays for specified purposes.

  4. Assets - Losses to government, property acquired in payment of taxes, revenue received but not classified.

    1. Current Assets - Cash and other assets which are expected to be converted into cash, sold, or used in operations during the current accounting period.

  5. Assessments - Taxes assessed, penalty and interest charged to account.

  6. Cash - Cash, resources not part of the fund balances with the U.S. Treasury, consist of:

    1. coins, paper currency, and readily negotiable instruments, such as money orders, checks, and bank drafts on hand or in transit for deposit and

    2. unencumbered amounts on deposit with banks or other financial institutions which are readily available.

    3. amounts in imprest funds-petty cash, change funds, and custodial funds.

  7. Component - A major element of an overall agency financial system. Components may stand alone or be linked through electronic means.

  8. Contingent Liability - Possible or pending assessment of liability.

  9. Deficiency - Insufficient or inadequate procedure, guideline, system, etc. This is a finding which did not meet the established criteria.

  10. Disbursements - The amount of expenditure checks insured and cash payments made. Disbursements include advances and refunds.

  11. Events - The outcome, issue or result of anything; consequence. Something that occurs in a certain place during a particular time.

  12. Financial Management Information - All information on Federal spending, collections, assets, liabilities, equity, and related budgetary transactions and balances. This also includes data used to develop information for decision making regarding unit costs, average pay rates, user charges, etc.

  13. Financial Management System - OMB has defined a "financial management system" as: "The total of agency financial systems, both manual and automated, for planning, budget formulation and execution, program and administrative accounting and audit, as well as other systems for recording and classifying financial data and reporting financial information, including purchasing, property, inventory, etc."

  14. Financial Statements - A presentation of financial data and information, including accompanying notes, derived from accounting records to communicate (at a point in time) an entity's financial position, and (for a period of time) its results of operations and cash flows or changes in financial position.

  15. Fiscal Accounting System - An accounting system within an agency which collects/controls government-wide monies. The Service's fiscal accounting system is the Revenue Accounting System (RAS). This system controls and accounts for the collection and disbursement of taxes and other government monies through the tax processing, examination and collection systems.

  16. Fiscal Year - The period beginning October 1st and ending September 30th of the following calendar year. The fiscal year is designated by the calendar year in which it ends, e.g., Fiscal Year 2004 is the year beginning October 1, 2003 and ending September 30, 2004.

  17. Headquarters — Refers to Headquarter offices located in the field (Atlanta and Cincinnati).

  18. Internal Controls - Steps taken to provide reasonable assurance that:

    1. Revenues and expenditures applicable to agency operations are properly recorded and accounted for to permit the preparation of accounts and reliable financial and statistical reports and to maintain accountability over assets.

    2. At a minimum, internal controls should make wrongful acts extremely difficult, discourage abuses, and guard against carelessness.

    3. Good internal controls should also detect abusive or careless acts shortly after they occur and trigger necessary corrective actions.

  19. Key Attributes - Qualities pertaining to each principle and standard in the questionnaire; they provide clarification of the questions.

  20. Liabilities - This includes prepayments such as FTDs and Estimated Tax for which no tax assessment has yet been made but a tax liability is anticipated. This series of accounts records the service's liabilities for the various suspense files, inventory files and prepayment amounts. Credits in these accounts are normally in the process for application to a tax liability.

  21. Materiality— Value of an item.

  22. National Headquarters — Refers to Headquarters in Washington, D.C.

  23. Pending Deficiency - A deficiency that has not been closed due to a system change or other sent to National Headquarters for approval. These are monitored by Headquarters.

  24. Population - Total dollars in an account balance or class of transactions, or the total number of entries, documents, or subsidiary accounts about which a conclusion will be drawn.

  25. Question - Any question not identified as a test in See Exhibit 3.0.257-2. These require documentation and statements of conformance. Questions can be assigned or worked from the Task Control Log in any sequence.

  26. Reasonable Assurance - A judgment by an agency head based upon all available information that the systems of internal control are operating as intended by the Integrity Act.

  27. Risk Analysis - A systemic approach made by management to determine high risk factors of a component's susceptibility to fraud, waste, and abuse.

  28. Risk Assessment - The documented review by management of a component's susceptibility to fraud, waste, and abuse. This assessment should include all levels of management.

  29. Risk Factors - Risk factor ratings determined through risk analysis/assessment of a components susceptibility to fraud, waste, and abuse. For example, a revenue accounting component may be rated high, medium, or low risk. Extensive testing is performed on the components determined to be at the highest risk.

  30. Rotation of Duties - Ensuring that each part of a task is assigned to different employees periodically, i.e., through absences/vacations, thereby adding additional controls to duties that are already separated.

  31. Separation of Duties - Breaking a task into multiple parts and assigning each part to a different employee, thereby preventing one employee from controlling the entire process.

  32. Subset — A mathematical set containing some or all of the elements of a population.

  33. Subsystem — A feeder system that furnishes essential administration and financial data to another component of the financial system.

  34. System — A complete computer installation-including peripherals, such as disk drives, a monitor, and a printer-in which all the components are designed to work with each other.

  35. Test Question — Any question identified as a test in See Exhibit 3.0.257-2. These require a sampling of the work to be tracked through the process, and/or performing a test of the system. After the test has been completed, all documentation, test results, and a statement of conformance must be prepared.

  36. Testing — Procedures to determine whether internal control systems are working in accordance with management internal control objectives.

  37. Three-Year Cycle — A schedule is established whereby detailed reviews of the various accounting subsystems are staggered in time over a three-year period. A portion of the subsystems is reviewed in detail the first year, a second set during the second year and the remaining subsystems reviewed in detail in the third year. At the end of the third year each subsystem will have been reviewed in detail. After the three-year cycle is completed, reviews of subsystems begin again.

  38. Transaction Code — A three digit code used to identify actions being taken to a taxpayer's account.

  39. Unpaid Assessments - Taxpayer accounts which contain an outstanding balance of monies due and payable to the United States Government.

  40. Variable— Capable of being varied or changed; deviation from normal usual type.

Exhibit 3.0.257-1  (10-01-2002)
Annual Assurance Process

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Exhibit 3.0.257-2  (10-01-2003)
Management Accountability Review (MAR) Review Questions (Core Financial and Other)

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Exhibit 3.0.257-3  (10-01-2003)
Management Accountability Review (MAR) Related References and Links

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Exhibit 3.0.257-4  (10-01-2003)
Management Accountability Review (MAR) Suggested Documentation Roster

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Exhibit 3.0.257-5  (10-01-2002)
Management Accountability Review (MAR) Documentation Control Log

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Exhibit 3.0.257-6  (10-01-2002)
Management Accountability Review (MAR) Test Documentation Control Log

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Exhibit 3.0.257-7  (10-01-2004)
Management Accountability Review (MAR) Risk Memo

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Exhibit 3.0.257-8  (10-01-2002)
Management Accountability Review (MAR) Risk Analysis Check Sheets

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Exhibit 3.0.257-9  (10-01-2002)
Management Accountability Review (MAR) Risk Analysis/Summarizing Risk

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Exhibit 3.0.257-10  (10-01-2002)
Management Accountability Review (MAR) Risk Analysis/Assessment Log

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Exhibit 3.0.257-11  (10-01-2002)
Management Accountability Review (MAR) Team Roster

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Exhibit 3.0.257-12  (10-01-2002)
Management Accountability Review (MAR) Task Control Log

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Exhibit 3.0.257-13  (10-01-2002)
Management Accountability Review (MAR) Risk/Deficiency Log

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Exhibit 3.0.257-14  (10-01-2002)
Management Accountability Review (MAR) Report of Pending Control Deficiency

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Exhibit 3.0.257-15  (10-01-2002)
Management Accountability Review (MAR) Report of Control Deficiency

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Exhibit 3.0.257-16  (10-01-2002)
Management Accountability Review (MAR) Deficiency Completion Certificate

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Exhibit 3.0.257-17  (10-01-2002)
Management Accountability Review (MAR) Statement of Assurance/Conformance

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Exhibit 3.0.257-18  (10-01-2002)
Management Accountability Review (MAR) Manager/Chief's Certification for Internal/Management Controls Review

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Exhibit 3.0.257-19  (10-01-2002)
Management Accountability Review (MAR) Quarterly Status Report

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Exhibit 3.0.257-20  (10-01-2002)
Management Accountability Review (MAR) Summary of Deficiencies

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Exhibit 3.0.257-21  (10-01-2002)
Management Accountability Review (MAR) Key to Questions

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Exhibit 3.0.257-22  (10-01-2005)
Management Accountability Review (MAR) Cross Reference — Exhibits to Text

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Exhibit 3.0.257-23  (10-01-2002)
Management Accountability Review (MAR) Model

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Exhibit 3.0.257-24  (10-01-2003)
MAR Calendar

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