Procedures Established to Ensure Compliance With the Rural
Development Act of 1972 Were Not Consistently Followed
August 2003
Reference Number: 2003-10-177
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.
August
20, 2003
MEMORANDUM FOR
CHIEF, AGENCY-WIDE SHARED SERVICES
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Assistant Inspector General
for Audit (Small Business and
Corporate Programs)
SUBJECT: Final Audit Report - Procedures
Established to Ensure Compliance With the Rural Development Act of 1972 Were
Not Consistently Followed (Audit
# 200310028)
This report
presents the results of our audit to determine
whether the Internal Revenue Service (IRS) established adequate policies to
comply with the Rural Development Act of 1972 (RDA) (as amended) requirements
for locating new offices and other facilities in rural areas. This audit
was conducted in compliance with the requirements of the Consolidated
Appropriations Resolution, 2003.
In
summary, the IRS has established procedures to promote compliance with the
requirements of the RDA. The procedures
were detailed in a Memorandum on Location Policy. However, while the procedures were provided to the IRS staff and
are on the IRS’ internal web site, the requirement to document the proper
consideration of RDA requirements in a checklist was not consistently followed
when space was acquired. We reviewed
the project case files for a sample of 11 of the 31 moves to new locations that
occurred between March 2002 and June 2003.
Of the 11 office relocations we reviewed, 6 were within urban areas. Of those six, only one project case file
contained documentation that the RDA had been considered. Notwithstanding, the moves within urban
areas fit the description for exemption.
In our opinion, it did not appear that the mission and purposes of those
offices could be efficiently performed in a rural area.
The
other five relocations that we reviewed were for moves to areas that qualified
as rural according to the definition stated in the Location Policy. Nonetheless, the project files for three of
these moves contained documentation as to why a move to a rural area would not
be feasible, indicating that IRS employees were not clear on the definition of
rural in the IRS’ own policy.
The
IRS issued a memorandum on May 14, 2003, which requires the Associate Directors
to review space requirement packages to ensure that they contain all required
documentation including the worksheet documenting the proper consideration of
RDA requirements. If the Area Directors
follow this policy, the IRS should improve its adherence to the documentation
and approval requirements.
During
our review, we noted that the definition of a rural area that the IRS used in
the Location Policy is not the most current.
In the Federal Management Regulation Bulletin effective January 21,
2003, the General Services Administration (GSA) formally published its
definition of a rural area. The Department of the Treasury has adopted the GSA
definition in its Interim Procedures for Treasury Directive 72-03 – Relocation
of Facilities (dated June 2003).
We
recommended that the Chief, Agency-Wide Shared Services (AWSS), revise its
definition to match the one suggested by the GSA and the Department of the
Treasury to ensure consistency with other Federal agencies and Treasury
bureaus.
Management’s
Response: AWSS management agreed with our recommendation
and revised the IRS Location
Policy. The definition of a rural area
is now consistent with the GSA and Treasury definitions. AWSS will post the change to the Policy and
Guidance Section of their web site.
Copies of this
report are also being sent to the IRS managers who are affected by the report’s
recommendation. Please contact me at
(202) 622-6510 if you have questions or Daniel R. Devlin, Assistant Inspector
General for Audit (Headquarters Operations and Exempt Organizations Programs),
at (202) 622-8500.
Procedures
Were Established but Not Consistently Followed
The Definition of a Rural Area in the Location Policy Should Be Revised
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Management’s Response to the Draft Report
The Rural Development Act of 1972 (RDA) (as amended) requires all Federal agencies to establish and maintain policies and procedures giving first priority to locating new offices and other facilities in rural areas. The intent of this provision is to help revitalize and develop rural areas by ensuring they receive adequate consideration when locating Federal offices and facilities.
The Consolidated Appropriations Resolution, 2003 requires
that Inspectors General determine the policies and procedures in place for each
department or agency to give first priority to locating new offices and other
facilities in rural areas as directed by the RDA. The results of this review are to be reported to the Senate
Committee on Appropriations by August 19, 2003.
The Department of the Treasury issued a directive, Location of New Offices and Facilities in Rural Areas (TD 72-03), in 1980 (updated in 1989) to meet the requirements of the RDA. TD 72-03 states that the policy of the Department of the Treasury (and all bureaus) is to give first priority to locating new Treasury facilities in rural areas unless there are substantial reasons for not doing so.
TD 72-03 also requires the bureaus to obtain written approval to deviate from the requirements of the directive. Treasury approval is required for a major facility acquisition, a significant organizational change involving geographic or regional adjustments, or a program activity that involves, in its entirety, 50 or more employees. In all other instances, the appropriate bureau official may approve relocation to other than a rural area. The Real Estate and Facilities Management Division (REFM) of Agency-Wide Shared Services (AWSS) is responsible for real estate acquisition and management for the Internal Revenue Service (IRS).
Last year, the Treasury Inspector General for Tax Administration (TIGTA) performed a review to determine the IRS’ compliance with the RDA. The report on the results of that review contained a recommendation that policies and procedures be established to ensure consistent consideration is given to locating new offices and other facilities in rural areas. The IRS agreed to establish such a policy by June 14, 2002.
This audit was performed in the IRS National Headquarters in Washington, D.C., in the Office of REFM from June through July 2003. The audit was conducted in accordance Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
The IRS implemented the corrective action it proposed in response to our prior report. To promote compliance, the IRS established policy and procedures and documented them in a Memorandum on Location Policy. The policy is published on the AWSS web site and provides guidelines to ensure the RDA is addressed. Documentation of compliance is to be included in the project case files. Included with the Location Policy is an electronic worksheet, which is a checklist developed to help evaluate new locations for RDA compliance and requires narrative support for decisions to locate in other than rural areas. The worksheet is also published on the AWSS web site.
However, the policy
and procedures meant to ensure compliance with the RDA were not always
followed. According to the IRS’
Location Policy, if a proposed area of consideration is not in a rural area,
then it must be evaluated for adherence to the RDA. Project case files are to be documented to demonstrate compliance
with the policy.
We reviewed the project case files for a judgmental sample of 11 of the 31 moves to new locations that occurred between March 2002 and June 2003 to evaluate compliance with the IRS’ new RDA procedures. Of the 11 office relocations that we reviewed, 6 were within urban areas. Of those six, only one project case file contained documentation that the RDA had been considered. In addition, 4 of the 6 moves involved more than 50 employees. As such, these four required Department of the Treasury approval for exemption; however, the IRS did not submit written requests to the Treasury for exemption.
The other five
relocations that we reviewed were for moves to areas that qualified as rural
according to the definition stated in the Location Policy. Nonetheless, the project files for three of
these moves contained documentation as to why a move to a rural area would not
be feasible, indicating that REFM Division employees were not clear on the
definition of rural in the IRS’ own policy.
Despite not having
documentation in the project case files, we did not identify any new office
that was located improperly in an urban rather than a rural area. The relocations within urban areas fit the
description for exemption. In our opinion,
it did not appear that the mission and purposes of those offices could be
efficiently performed in a rural area.
The IRS recently reinforced the requirement to document
compliance with the RDA in a memorandum dated May 14, 2003. The memorandum was issued to Associate
Directors and Facilities Management Officers and states that Location Policy
issues are to be addressed, as part of standard operating procedures, for the
preparation, processing, review, and approval of requests for space. In addition, the IRS has developed
procedures, working with the Department of the Treasury, to streamline the
review and approval process for requests to locate facilities in other than
rural areas. If the Associate Directors follow the new policy and procedures, the IRS
should improve its adherence to the documentation and approval requirements.
During our review, we noted that the definition of a rural area that is used in the IRS’ Location Policy is not the most current. In the Federal Management Regulation Bulletin, effective January 21, 2003, the General Services Administration (GSA) recommends that Federal agencies use the following definition: “Rural area means a city, town, or unincorporated area that has a population of 50,000 inhabitants or less, other than an urbanized area immediately adjacent to a city, town, or unincorporated area that has a population in excess of 50,000 inhabitants, as specified in 7 U.S.C. 2009.”
The definition that the IRS uses in its Location Policy is the same one that was used in Treasury Directive 72-03: “An area which is outside the outer boundary of any city and its metropolitan area with a population of 50,000 or more.” However, the new Interim Procedures for Treasury Directive 72-03 – Relocation of Facilities (dated June 2003), have adopted the definition recommended by the GSA. To avoid misclassification, the IRS’ definition of a rural area should be consistent with that used by other Federal departments and agencies.
1. The Chief, AWSS, should ensure the classification of a rural area is consistent with the definition recommended by the GSA and is in adherence with the Interim Procedures for Treasury Directive 72-03 definition. In addition, the Location Policy should be revised to reflect the GSA’s definition.
Management’s Response: The Director, REFM Division, AWSS, revised the rural area definition to be consistent with the definition recommended by the GSA and Treasury Directive 72-03 interim procedures and will post this revision on the REFM Division web site.
Appendix I
Detailed Objective, Scope,
and Methodology
Our objective was to determine whether the Internal Revenue Service (IRS) has implemented corrective actions as proposed in response to our prior audit and established adequate policies to comply with the Rural Development Act of 1972 (RDA) (as amended) requirements for locating new offices and other facilities in rural areas. This audit was conducted in compliance with the requirements of the Consolidated Appropriations Resolution, 2003. To accomplish our objective, we:
A. If the IRS had submitted its procedures and policies to the Department of the Treasury for review.
B. If the IRS had submitted requests for exceptions from RDA requirements.
C. If the Department of the Treasury had conducted any reviews of the IRS with regard to compliance with the Treasury Directive, Location of New Offices and Facilities in Rural Areas (TD 72-03).
A. If the IRS complied with the RDA and TD 72-03 when establishing the new offices. We reviewed the project case files for a sample of 11 of the 31 moves to new locations that occurred between March 2002 and June 2003 to evaluate compliance with the IRS’ new RDA procedures. The cases were judgmentally selected to ensure representation from each of the five REFM Division geographic areas as well as a range of building sizes.
B. For any newly established offices that appeared not to have complied, whether the IRS had approved authority to deviate from the RDA.
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant Inspector General for Audit
(Headquarters Operations and Exempt Organizations Programs)
Michael E. McKenney, Director
Kevin P. Riley, Audit Manager
Susan A. Price, Senior Auditor
Janice M. Pryor, Senior Auditor
Appendix III
Commissioner N:C
Deputy Commissioner for Operations Support N:OS
Chief Counsel CC
Director, Real Estate and Facilities Management Division A:RE
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis N:ADC:R:O
Office of Management Controls N:CFO:AR:M
National Taxpayer Advocate TA
Audit Liaison: Agency-Wide Shared Services A
Appendix IV
Management’s
Response to the Draft Report
The response was removed due to
its size. To see the complete response,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.