Report on Audit of Billing System Internal Controls
Reference Number:† 2003-1C-058
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.
March 4, 2003
MEMORANDUM FOR DAVID A. GRANT
†††††††††††††††††††††††††††††††††††††††† DIRECTOR OF PROCUREMENT
†††††††††††††††††††††††††††††††††††††††† INTERNAL REVENUE SERVICE
FROM:†††† Daniel R. Devlin /s/ Daniel R. Devlin
†††††††††††††††† Assistant Inspector General for Audit (Headquarters Operations and
††††††††††††††† †Exempt Organizations Programs)
SUBJECT:†††† Report on Audit of Billing System Internal Controls (Audit #200310002.022)
The Defense Contract Audit Agency (DCAA) examined the Civil Groupís billing system as of June 19, 2002.† The purpose of this examination was to assure that the Civil Groupís system of billing controls is adequate to provide billed costs that are reasonable, compliant with applicable laws and regulations, and subject to applicable financial control systems.† The DCAA also evaluated the Civil Groupís compliance with the billing systemís internal control requirements.
The DCAA opined that the billing system and related internal control policies and procedures of the Civil Group are inadequate.† The examination disclosed significant internal control deficiencies in the Civil Groupís billing system that could result in an overpayment on United States Government contracts.† The DCAA noted that these deficiencies could adversely affect the organizationís ability to prepare billings in accordance with applicable laws, regulations, and contract terms.† In addition, the DCAA also indicated that these deficiencies could adversely affect the organizationís ability to prevent or detect material misstatements and correct them in a timely manner.
Specifically, the DCAA listed nine significant issues that formed the basis of its opinion, including:† lack of consistent ďformalĒ policies and procedures; provisional billing rates not properly adjusted; lack of written policies and procedures for preparing manual bills; lack of separate written policies for Internal Revenue Service billing procedures; lack of written policy for reviewing the adequacy of subcontractorsí systems; inadequate written policies for processing contract overpayments, refunds, and offsets; and, no management reviews or internal audits of the billing system.
The DCAA was unable to determine the precise cost impact of these deficiencies.† However, during Fiscal Year 2001, the Civil Groupís billing system processed over $990 million of invoices to the government.† The DCAA made numerous recommendations to resolve the deficiencies.
The information in this report should not be used for purposes other than that intended without prior consultation with the Treasury Inspector General for Tax Administration regarding its applicability.
If you have any questions, please contact me at (202) 622-8500 or John R. Wright, Director at (202) 927-7077.
The Office of Inspector General for Tax Administration has no objection to the release of this report, at the discretion of the contracting officer, to duly authorized representatives of the contractor.
The contractor information contained in this report is proprietary information.† The restrictions of 18 USC 1905 must be followed in releasing any information to the public.
This report may not be released without the approval of this office, except to an agency requesting the report for use in negotiating or administering a contract with the contractor.
The TIGTA seal was removed due to its size.