Additional Travel Reimbursement and Accounting System Computer Program Controls Would Enhance Travel Voucher Processing and Program Administration

 

November 2003

 

Reference Number:  2004-20-014

 

 

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.

 

November 19, 2003

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT

 

FROM:     Gordon C. Milbourn III /s/ Gordon C. Milbourn III

                 Assistant Inspector General for Audit (Small Business and

                 Corporate Programs)

 

SUBJECT:     Final Audit Report – Additional Travel Reimbursement and Accounting System Computer Program Controls Would Enhance Travel Voucher Processing and Program Administration (Audit # 200220045)

 

This report presents the results of our review of the Travel Reimbursement and Accounting System (TRAS).  The overall objective of this review was to determine whether the TRAS has sufficient controls to ensure management can effectively administer travel expenses and travel advances.  The Internal Revenue Service (IRS) budget for travel and transportation of persons was approximately $192 million in Fiscal Year 2003.  The Chief Financial Officer (CFO), Chief Information Officer (CIO), and Chief, Agency-Wide Shared Services (AWSS), are responsible for administering the travel reimbursement program. 

In summary, the TRAS does an adequate job processing travel vouchers and travel advances.  However, the TRAS does not comply with 6 of the 21 travel system requirements established by the Joint Financial Management Improvement Program (JFMIP).  For example, the TRAS does not process amended vouchers.  As a result, the IRS implemented less efficient manual procedures to process amended vouchers.

We reviewed TRAS travel voucher data for 159,494 vouchers totaling $151,545,232 approved between August 27, 2001, and September 30, 2002, and identified several computer program and program administration controls that need improvement.  For example, 261 vouchers containing duplicate subsistence expenses totaling $25,047 were paid to employees.  The IRS corrected the computer program problems, but has not yet implemented a debt collection process to collect the overpayments because of union negotiations.

In addition, long-term taxable travel expenses were not always identified on vouchers.  Our travel voucher review determined that 13 of 24 employees that traveled for more than 1 year did not report any of the long-term travel expense as taxable, as required.  The inaccurate reporting of long-term taxable travel resulted in the employees potentially underreporting income totaling $595,658 and Federal taxes estimated at $180,485.

Travel vouchers were also not always submitted within 5 workdays after the completion of travel, as required.  Our review determined that 45,869 vouchers were submitted from 8 to 387 days after the last day of travel.  We also determined that 24,057 travel vouchers were not approved within 7 calendar days after the employee signed the voucher, as required.  When travel vouchers are not submitted and approved timely, the IRS risks overspending travel budgets and incorrectly reporting travel expenses on financial statements.

In June 2002, the Beckley Finance Center (BFC) began researching outstanding advances to determine the actions to be taken (e.g., pursue collection, write-off). The BFC’s research identified 214 advances over 6 years old, totaling $350,381, at risk of being uncollectible because there was no documentation with which to initiate collection action against the employee.  The BFC obtained approval from the IRS General Legal Services to write-off 62 of the 214 advances, totaling $254,702.  The remaining 152 advances, totaling $95,679, continue to be at risk of being uncollectible because a debt collection process has not been implemented.  Furthermore, travel advances may be for amounts larger than necessary because the TRAS computer program does not consider whether the advance applicant has a Government credit card, the temporary post of duty, or the length of travel.  Without effective travel advance application controls and a debt collection process, the IRS is at risk of having excessive amounts of advances outstanding that may not be recoverable.

Finally, our analysis of the database of 68,891 authorized users with access to the TRAS as of September 26, 2002, determined that 2,795 of the users were former employees that should have been removed from the system.  By not effectively maintaining the TRAS user database, the IRS increases the risk of unauthorized access to the system and the potential filing of unauthorized travel vouchers. 

We recommended that the CFO coordinate with the General Services Administration’s (GSA) e-Travel initiative to ensure the IRS’ travel voucher processing system meets all JFMIP requirements; use the planned TRAS long-term travel authorization enhancements to assure managers are periodically reassessing employee travel plans and ensuring compliance with long-term taxable travel requirements; reemphasize to employees the requirements for timely filing travel vouchers; and monitor the timeliness of travel advance settlement to identify travel vouchers that have not been filed.  The CFO should also coordinate with the Chief, AWSS, and the CIO to ensure the TRAS sends an e-mail to managers advising of vouchers needing approval and stating that receipts should be obtained and reviewed prior to approval.  The CFO should also ensure that the Travel Handbook or Interim Travel Handbook is modified to be consistent with the Federal Travel Regulation (FTR); the TRAS limits the advance amount as required; a debt collection process is implemented; and the TRAS database is periodically reviewed for accuracy. The Chief, AWSS, should ensure former employees are removed from the TRAS user database.

Management’s Response:  Management concurred with six of our recommendations, partially agreed with two recommendations, and disagreed with the remaining two recommendations.  IRS management plans to take the following actions:  coordinate with the GSA to ensure that the e-Travel product meets IRS operational requirements; complete an optimization study regarding the responsibility for oversight of long-term taxable travel; reemphasize to employees the importance of timely filing vouchers; and develop a per-trip authorization and travel advance liquidation process.  IRS management also plans to complete union negotiations and issue a new Internal Revenue Manual in accordance with the FTR; implement TRAS computer application limits for the amount of travel advance based on travel conditions cited in the FTR; and conduct periodic reviews of the authorized user database. 

IRS management also completed the following actions: commenced use of the TRAS e-mail notification feature advising managers that a voucher awaits approval; reached an agreement with the union on a debt collection process; and removed separated employees from the TRAS user database.  Management’s complete response to the draft report is included as Appendix VI.

Office of Audit Comment:  Management disagreed with our recommendation that the CFO should coordinate with the GSA e-Travel initiative to ensure the IRS’ travel voucher processing system meets all JFMIP requirements.  They stated that the GSA is selecting a JFMIP compliant product.  However, we believe the IRS should incorporate the JFMIP requirements into its operational requirements when working with the GSA and the Department of the Treasury to implement the e-Travel system.  For the three remaining recommendations with which IRS management disagreed or partially agreed, their alternative corrective actions will address the recommendations.

While we still believe our recommendation with which management did not concur is worthwhile, we do not intend to elevate our disagreement concerning it to the Department of the Treasury for resolution.

Copies of this report are also being sent to the IRS managers who are affected by the report recommendations.  Please contact me at (202) 622-6510 if you have questions or Margaret E. Begg, Assistant Inspector General for Audit (Information Systems Programs), at (202) 622-8510.

 

Table of Contents

Background

The Travel Reimbursement and Accounting System Does an Adequate Job Processing Travel Vouchers and Travel Advances, but Additional System Requirements Need to Be Met

Recommendation 1:

Additional Computer Program Controls and Operating Procedures Would Improve Travel Voucher Processing

Recommendations 2 and 3:

Recommendations 4 through 6:

Travel Advances Are Not Effectively Administered

Recommendations 7 and 8:

Former Employees Are Included in the Travel Reimbursement and Accounting System User List

Recommendation 9:

Recommendation 10:

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Outcome Measures

Appendix V – Mandatory Joint Financial Management Improvement Program Requirements Not Included in the Travel Reimbursement and Accounting System

Appendix VI – Management’s Response to the Draft Report

 

Background

Employee travel and transportation spending is a significant expense in the Internal Revenue Service (IRS). The IRS budget for travel and transportation of persons was approximately $192 million in Fiscal Year (FY) 2003.  The Chief Financial Officer’s (CFO) Office of Policies and Procedures (OPP) and the Beckley Finance Center (BFC); the Chief Information Officer’s (CIO) Charlotte Development Center (CDC); and the Chief, Agency-Wide Shared Services’ (AWSS) Office of Customer Support are responsible for administering the travel reimbursement program.

The OPP’s responsibilities include overseeing the Travel Reimbursement and Accounting System (TRAS), providing assistance to IRS employees on travel, developing and maintaining directives on travel, and reviewing and interpreting Government travel regulations.

The BFC’s responsibilities include accurately and timely processing all Government administrative accounts payable, accounts receivable and collections, manual travel and relocation vouchers; preparing reports and reconciliations for general ledger accounts, the Department of the Treasury, and IRS Headquarters; and ensuring the integrity of IRS financial statements by coordinating the fiscal and calendar year-end audits.

The CDC’s responsibilities include maintaining the TRAS computer program and resolving TRAS systemic problems. 

The Office of Customer Support’s responsibilities include providing guidance to personnel regarding travel policies and guidelines; authorizing, administering, and removing TRAS users; performing the TRAS administrative duties; and providing technical assistance to end users.

As of July 31, 2003, the TRAS had 66,865 active users.  According to the IRS, all travel regulations, rules, limitations, and computations are automated into the process.  Vouchers and advances are signed and approved through computer access. Approved vouchers and advances are electronically transmitted daily to the Automated Financial System (AFS) for processing and disbursement.  As of January 31, 2003, the IRS had 2,841 travel advances outstanding, totaling $2.58 million.

The IRS is currently developing the Integrated Financial System (IFS) to replace the AFS.  The IFS implementation has been rescheduled to begin in early 2004.  The IFS development relating to travel reimbursement and advances includes the interface between the IFS and the TRAS.

In addition, the General Services Administration (GSA) is developing the e-Travel initiative.  The new system will provide a Government-wide, web-based, end-to-end travel management system for Federal employees. The system aims to automate and consolidate travel processes from planning to reimbursement and reconciliation across agencies.  The GSA’s proposed amendment to the Federal Travel Regulation (FTR) for use of the e-Travel system would require agencies to submit migration plans by March 31, 2004, begin implementing the e-Travel Service no later than December 31, 2004, and complete migration for full agency-wide use by September 30, 2006. IRS management advised us that during FY 2005 they plan to implement the e-Travel initiative, which will replace the TRAS.  On August 15, 2003, the GSA selected two contractors to develop the e-Travel Service.  However, the contract award is currently being protested.

Audit work was performed from January through August 2003 at the CFO offices in Bethesda, Maryland, and Beckley, West Virginia.  The audit was conducted in accordance with 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 Travel Reimbursement and Accounting System Does an Adequate Job Processing Travel Vouchers and Travel Advances, but Additional System Requirements Need to Be Met

The Joint Financial Management Improvement Program (JFMIP) established travel system requirements for Government agencies.  The IRS complies with most of the mandatory travel voucher and travel advance requirements (summarized in Table 1).

Table 1: Summary of Compliance With JFMIP Travel Voucher and Travel Advance Requirements

JFMIP Requirements

Yes

No

Partial

13

6

2

Source:  JFMIP Travel System Requirements, IRS documentation, and the TRAS.

For example, the TRAS provides the capability to:

·        Calculate authorized mileage allowances and per diem amounts (including reduced per diem rates) based on temporary duty location and other related information.

We tested and confirmed the TRAS’ ability to meet the requirements by entering incorrect travel voucher and advance information into the system and analyzing the results. The system properly identified the incorrect information and returned various error messages to the user.

However, the IRS does not comply with 6 of the 21 mandatory requirements.  For example, the TRAS does not process amended vouchers.  As a result, the IRS implemented less efficient manual processes for processing amended or supplemental travel vouchers.  The JFMIP requirements have not been met because the TRAS was implemented prior to the requirements being established and management did not intend for TRAS to be JFMIP compliant.  In addition, with the foreseeable implementation of the GSA e-Travel initiative, only limited enhancements to the TRAS (e.g., IFS interface development) will be funded.

Recommendation

1.      The CFO should coordinate with the GSA e-Travel initiative to ensure the IRS’ travel voucher processing system meets all JFMIP requirements. 

Management’s Response:  Management disagreed with the recommendation.  They stated that the GSA is selecting the e-Travel system, which will replace the IRS’ travel voucher processing system.  The GSA can only acquire a Commercial Off-The Shelf product that has a valid JFMIP certificate.  The IRS will work with the GSA and the Department of the Treasury to ensure the GSA product meets the IRS operational requirements.

Office of Audit Comment:  We acknowledge that the IRS is not responsible for the selection of the GSA product.  The GSA is responsible for the selection of a JFMIP compliant product.  However, the IRS should incorporate the JFMIP requirements into its operational requirements when working with the GSA and the Department of the Treasury to implement the e-Travel system.

Additional Computer Program Controls and Operating Procedures Would Improve Travel Voucher Processing

We reviewed TRAS travel voucher data for 159,494 vouchers, totaling $151,545,232, approved between August 27, 2001, and September 30, 2002.  Our analysis identified several computer program and program administration controls that need improvement.

Duplicate travel expenses have been paid to employees and have not been recovered

The Office of Management and Budget Circular A-127, Financial Management Systems, indicates that financial information on Federal Government operations should:

·        Be complete, reliable, consistent, timely, and useful to enable management to carry out their fiduciary responsibilities.

·        Deter fraud, waste, and abuse of Federal Government resources.

·        Facilitate efficient and effective delivery of programs through relating financial consequences to program performance.

The IRS Interim Travel Handbook (ITH) provides the travel regulations and procedures for employees who perform official travel.  For example, the ITH provides instructions for preparing travel/reimbursement vouchers and submitting vouchers with required documents and receipts attached.  It is also for supervisory and administrative personnel who authorize, direct, or review such travel, or certify payments in reimbursement of travel-related expenses.  Supervisory responsibilities include informing employees of travel policies and procedures by providing them with the ITH, answering employee questions, and determining allowable travel expenses.

Our travel voucher review identified 268 travel vouchers containing $29,175 in duplicate claims of subsistence expenses (e.g., multiple trips, multiple lodging, and/or Meals and Incidental Expenses [M&IE] claimed on the same day).  Management advised us that 7 of the vouchers with duplicate claims for $4,128 were caused by a computer program problem that occurred in calendar year 2001 with the implementation of the TRAS.  The computer program was recording duplicate expenditures on the travel voucher when multiple copies of the TRAS program were open via multiple web browsers.  The duplicate expense claims on these vouchers were researched and adjustments to correct the vouchers were identified by the BFC.  However, the duplicate subsistence expense claims of $25,047 on the remaining 261 vouchers that were paid to the employees occurred because management’s review and inadequate computer program controls did not identify the duplicate claims. 

In April 2002, management began working on a TRAS update that was implemented on May 18, 2003. After the update was implemented, we tested the TRAS controls by attempting to submit travel vouchers that contained invalid information.  The TRAS correctly responded with error messages based on the information entered into the system.  Our TRAS tests determined that the computer program control weaknesses initially identified during our travel voucher review had been corrected.

In addition, the IRS does not have a debt collection process in place to collect the overpayments of travel expenses from employees.  Although the Department of the Treasury Directive 34-01 authorized the IRS to collect the overpayments from employees, implementation of the process has been in negotiations with the National Treasury Employee’s Union (NTEU) since October 2002. 

Without effective management review and approval of travel expense claims to disallow the entry of inappropriate travel expenses, the IRS cannot ensure reimbursed travel expenses are proper and accurate.  Also, without implementing an effective overpayment recovery process, the IRS cannot ensure improper payments are recovered.

Two employees approved their own travel voucher

Delegation Order Number 95 in the Internal Revenue Manual (IRM) provides that the Commissioner of Internal Revenue delegated to certain IRS officials the authority to approve vouchers claiming reimbursement for travel; however, it further states that the officials may not approve their own vouchers. The officials in the next higher-level position will approve the travel vouchers.

Our travel voucher review identified two employees who entered vouchers for travel expenses and then signed and approved their own vouchers.  One of the 2 employees edited the self-approved voucher totaling $749.88 and another manager subsequently approved the voucher before being paid.

The second employee signed and approved 2 of his own vouchers totaling $157.52.  Management advised us that the vouchers were actually approved by the employee’s secretary using the employee’s password.  We researched the IRS active directory and determined the second individual is no longer an IRS employee.  Permitting employees to approve their own vouchers increases the risk that unauthorized expenses are approved.  Management stated that they had identified, fixed, and tested this control weakness with a TRAS update in October 2002.  Management also stated that they had reviewed the TRAS data through June 2003 and found that problems with the approval process had not recurred.

Long-term taxable travel expenses are not always identified on vouchers

Internal Revenue Ruling 99-7 provides that if employment at a work location is realistically expected to last for more than 1 year or there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually exceeds 1 year.  The expense reimbursements paid by employers to employees for assignments lasting more than 1 year are wages subject to income tax.  The ITH states that all travel reimbursements for assignments lasting more than 1 year are considered to be taxable income. 

IRS employees are not always identifying travel expenses as long-term taxable travel.  This issue was previously reported in the Treasury Inspector General for Tax Administration audit report, Controls Need to Be Strengthened Over the Internal Revenue Service’s Taxable Travel Reporting (Reference Number 2002-10-107, dated June 2002).  Our travel voucher review identified 24 employees who continuously traveled to a single location for more than 1 year.  Although 11 of the employees reported their travel expense as taxable and received a Wage and Tax Statement (Form W-2) for the taxable travel, 13 of the employees did not report any of the travel expense as taxable.  Therefore, the 13 employees did not receive a Form W-2 for taxable travel. The inaccurate reporting of long-term taxable travel resulted in the employees potentially underreporting income totaling $595,658 and Federal income, Federal Insurance Contribution Act, and Medicare taxes estimated at $180,485.  

Long-term travel is not being properly reported as taxable because management is not enforcing long-term taxable travel requirements.  Also, the TRAS does not have any computer program controls to advise management that an employee’s travel history indicates that they may be in a long-term taxable travel situation.  In addition, long-term travel authorization processing is currently performed manually, and management plans to add this processing to the TRAS in a future enhancement.

In March 2003, the CFO issued a memorandum to the Heads of Office asking them to ensure that all employees and managers are familiar with long-term taxable requirements.  Also, the User Guide located on the TRAS Help screen contains further guidance on long-term taxable travel.

Without automated periodic assessments and management review of employee travel activities, the IRS cannot ensure employees properly report their income and Federal taxes.

Travel vouchers are not timely submitted

The FTR requires vouchers to be submitted within 5 workdays after a traveler completes a trip or period of travel, or every 30 days if the traveler is in continuous travel status, unless an agency administratively requires the travel voucher to be filed within a shorter time period.  The ITH states that vouchers must be submitted promptly at the end of the month or within 15 workdays after the completion of travel.  Travelers may submit vouchers earlier if there is reasonable certainty that there will be no additional travel during the travel period.  It further states that prompt submission of vouchers is in the best interest of the employees.  The NTEU National Agreement requires a non-recurring traveler to submit a travel voucher and liquidate the entire outstanding advance within either 15 calendar days after the completion of a trip or by the end of the voucher period. 

Our review of the travel vouchers determined that 45,869 of 159,494 travel vouchers were not submitted within 5 workdays of the completion of travel as required.  These travel vouchers were submitted from 8 to 387 days after the last day of travel listed on the travel voucher.  In addition, we could not identify the travelers that were in a continuous travel status to test whether vouchers were submitted every 30 days as required. Alternatively, we identified 10,361 vouchers with travel periods ranging from 32 days to 365 days.  These travel vouchers were not timely submitted since the travel period exceeded the required 30-day period for submitting a voucher (e.g., a 365 day travel period means only 1 voucher was submitted for the entire year).  Table 2 provides information on the timeliness of travel voucher submissions.

Table 2:  Travel Voucher Submission Timeliness

Number of Days in the Voucher Period

Number of Vouchers

> 31 Days and 46 Days

5,418

> 46 Days and 92 Days

3,982

> 92 Days and ≤ 183 Days

802

>183 Days and 273 Days

113

> 273 Days

46

TOTAL

10,361

Source:  TRAS data for travel vouchers approved between August 27, 2001, and September 30, 2002.

Travel vouchers are not being timely submitted because management is not effectively monitoring employee travel to ensure vouchers are timely submitted.  In addition, the timeliness of travel voucher submission is not reviewed to identify instances of untimely submission, and the TRAS computer program controls do not identify untimely submitted vouchers.  As a result of travel vouchers not being timely submitted, the IRS risks overspending travel budgets and incorrectly reporting travel expense on financial statements.  Employees also risk losing receipts required for reimbursement.

Travel vouchers are not timely approved and paid

The FTR allows the approving official 7 workdays for notifying an employee that his or her travel expense claim is not proper.  It also requires agencies to reimburse an employee within 30 days after the employee submits a proper travel voucher to the approving official or pay a late payment fee.  The IRS began paying late payment fees on October 1, 2002.

The IRS further restricted the notification period from 7 workdays to 7 calendar days.  Our review of travel vouchers, based on the IRS requirement, determined that 85 percent of employee travel vouchers were approved within 7 calendar days.  Table 3 provides information on the timeliness of travel voucher approvals.

Table 3:  Travel Voucher Approval Timeliness

Number of Days to Approve Voucher

Number of Vouchers

Percent Approved

 7 Days

135,437

85 percent

8 – 30 Days

22,971

14 percent

> 30 Days

1,086

1 percent

TOTAL

159,494

100 percent

Source:  TRAS data for travel vouchers approved between August 27, 2001, and September 30, 2002.

BFC management provided information reporting that $869 in late payment fees ($700 for TRAS vouchers and $169 for manual vouchers) had been paid to employees on 291 travel vouchers through July 23, 2003.  Late payment fees were paid for various reasons, but primarily for delayed approval. Travel vouchers are not being timely paid because there is a delay in approving the vouchers, the payments are reissued, or there is a delay in sending the voucher to the BFC.  The TRAS has the capability to send an e-mail to the employee’s manager advising him or her that a travel voucher is awaiting approval.  However, the e-mail reminder capability was turned off because of AWSS concerns that the manager will interpret the e-mail as instructions to approve the travel voucher without reviewing the appropriate expense receipts.

When travel vouchers are not timely approved and paid, the IRS risks overspending travel budgets, incorrectly reporting travel expenses on financial statements, and unnecessarily paying late payment fees to employees.

Recommendations

The CFO should: 

2.      Use the planned TRAS long-term travel authorization processing enhancements to assure that managers are periodically (e.g., semi-annually) reassessing employee travel plans and ensuring compliance with long-term taxable travel requirements.

Management’s Response:  Management partially agreed with the recommendation.  The CFO has issued previous guidance on the importance of classifying long-term travel accurately; however establishing travel authorizations/obligations on a per trip basis is the only effective means of controlling travel expenditures and taxable classifications.  The ongoing Optimization Study may consolidate the responsibility for oversight of this area in the AWSS.  Once the Optimization Study is finished and the IFS is implemented, the IRS will determine the best avenue for periodically assessing compliance.

Office of Audit Comment:  The TRAS long-term travel authorization processing enhancements are being coordinated with the IFS development and implementation.  The IFS implementation plus the additional actions by management should address the issue to monitor/review compliance with long-term taxable travel requirements.

3.      Reemphasize to employees the requirements for timely filing travel vouchers.

Management’s Response:  Management agreed with the recommendation as a stop-gap measure only.  The current voucher processing system can only indicate which vouchers are not processed timely – it cannot tell which vouchers have not been filed at all.  The more permanent solution for this problem is to institute per-trip travel authorizations, which the IRS plans to do concurrent with the implementation of the IFS.

4.      Monitor the timeliness of travel advance settlements to identify travel vouchers that have not been filed.

Management’s Response:  Management disagreed with the recommendation because travel advances are currently pooled and do not represent separate advances for separate trips.  Through the implementation of the IFS, all advances will be associated with an individual travel authorization.  In addition, all advances will be liquidated each time a travel voucher is filed.  Collection activities will commence on travel advances unpaid within 30 days.  The processes have already been programmed into the version of TRAS that will go into production with the IFS.   

Office of Audit Comment:  While IRS management disagreed with the recommendation, the corrective actions they plan to take will address the recommendation.

5.      Modify the Travel Handbook or ITH to require vouchers to be filed within 5 workdays of completing a trip or every 30 days if in continuous travel status, as required by the FTR.

Management’s Response:  Management partially agreed with the recommendation.  Management has chosen to focus on publishing a new IRM, which will replace the ITH.  The FTR provisions are incorporated into the new travel IRM currently being negotiated with the NTEU.

Office of Audit Comment:  While this action will address the recommendation, the completion of NTEU negotiations and implementation of the new IRM are projected for January 15, 2005, which seems to be an extraordinarily lengthy period for the IRS to operate without current travel guidelines.

6.      Coordinate with the Chief, AWSS, and CIO to ensure the TRAS e-mail reminder feature advising managers that a travel voucher is awaiting their approval is turned on and includes a reminder in the e-mail that receipts should be obtained and reviewed before approving the voucher.

Management’s Response:  Effective October 1, 2003, the TRAS e-mail notification feature was turned on for all IRS employees. The e-mail advises managers that a voucher awaits their approval and that receipts should be reviewed prior to approval.

Travel Advances Are Not Effectively Administered

The JFMIP Travel System Requirements state that the travel advance function must provide for entry, processing, approval, tracking, aging, payment, and liquidation of travel advances.  The FTR states that for travelers with a Government charge card, the maximum amount an agency may advance for travel is limited to the estimated amount of the travelers’ cash transaction expenses (e.g., M&IE and miscellaneous transportation expense).  The IRS ITH states that the traveler should base the amount of the advance on such factors as the nature and duration of the planned travel and whether the employee has the Government charge card.

Travelers may request travel advances manually, electronically through the TRAS, or from the small cash (imprest) funds.  The supervisor who reviews the application for an advance must determine that the amount requested is not greater than the amount required to perform the planned travel.  The TRAS User Guide states that individual advances are limited to $5,000 and the total outstanding advance balance, including the advance requested, may not exceed $10,000.

Once an employee receives an advance, it is tracked and aged by the AFS.  When an employee with a travel advance does not travel for 60 days, the AFS will generate a letter to the employee advising that the advance must be returned or it will become taxable.  The notice issued after no travel for 120 days advises the employee that the travel advance has become taxable but still must be returned to the IRS.

In June 2002, the BFC began researching outstanding advances to determine the actions to be taken (e.g., pursue collection, write-off).  Our review of the AFS Outstanding Travel Advance Report identified 49 outstanding advances over 10 years old. The BFC’s review of the outstanding travel advances identified 214 advances over 6 years old totaling $350,381 at risk of being uncollectible because there was no documentation to initiate collection action against the employee.  The BFC obtained approval from the IRS General Legal Services to write-off 62 of these 214 advances, totaling $254,702, because there was no supporting documentation.  The remaining 152 advances, totaling $95,679, continue to be at risk of being uncollectible.  Management advised us that in 1998 the travel management program was centralized in the CFO office, but the documentation for the advances was not received from the former regional headquarters offices. 

The Department of the Treasury Directive 34-01 authorized the IRS to collect the outstanding advances from employees.  Management advised that a draft debt collection policy has been prepared but not yet implemented because it has been negotiating the issue with the NTEU since October 2002.

In addition, the TRAS computer program does not consider whether the advance applicant has a Government credit card, the temporary post of duty, or the length of travel.  Therefore, advances may be for amounts larger than necessary.

We also identified 2 advances over $10,000.  Our review of the TRAS advance application determined that users could not request an advance greater than the IRS $5,000 limit or have total advances greater than the IRS $10,000 limit if all of the advances are requested electronically.  However, advances requested manually are processed through the AFS and are not immediately updated in TRAS, thus allowing employees to obtain advances higher than the established limit.

Without effective travel advance application controls and a recovery process, the IRS is at risk of having excessive amounts of advances outstanding that may not be recoverable.

Recommendations

The CFO should:

7.      Ensure the travel advance computer program limits the amount of the advance based on the stated travel conditions, as required by the FTR.

Management’s Response:  The TRAS version 10.0 has been modified to include travel advance limitations and will go into production with the implementation of the IFS.

8.      Ensure a debt collection process is implemented to recover the overpayment of travel expenses and delinquent advances.

Management’s Response:  The IRS has been negotiating with the NTEU regarding collecting debts owed by bargaining unit employees since June 2002.  The IRS has reached agreement with the NTEU and is in the process of signing a letter of agreement.  Upon finalization, the IRS will pursue collection of employee debts and the subsequent referral to the Department of the Treasury Offset Program. 

Former Employees Are Included in the Travel Reimbursement and Accounting System User List

The General Accounting Office Standards for Internal Control in the Federal Government require that security access controls protect systems from inappropriate access and unauthorized use by hackers or inappropriate use by agency personnel.  Specific control activities include the deactivation of former employees’ passwords.  The IRM requires that managers of system users provide prompt notification to a system’s security administrator of changes in employee status (e.g., employee changes assignments and/or manager, leaves the IRS) and requires the security administrator to take prompt and appropriate action to change the employee’s access profile and/or remove the employee from the system.

The original TRAS, which used five separate databases (one for each of the five IRS regions), was converted to a consolidated database during the period August 2001 to December 2001.  Prior to consolidation, users were supposed to be added or removed from each TRAS when they changed regions.  However, some users were not removed from the system when they changed regions. Therefore, even though the employees were removed from their new regional system when they separated from the IRS, they were still active in their former regional system.  As a result, when the regional TRAS databases were consolidated, the separated employees with active user accounts were added to the consolidated TRAS with all the other active users.

We analyzed the database of 68,891 authorized users with access to the TRAS, as of September 26, 2002, and determined that 2,795 of the users were former employees (i.e., were on the Treasury Integrated Management Information System (TIMIS) separation database) that should have been removed from the system.  We reviewed the TIMIS information and verified that these authorized users with access to the TRAS have separated from the IRS.

Management advised us that in November 2002 they started using the TIMIS database to update the TRAS authorized user database with personnel changes each pay period. However, the complete TRAS authorized user database has not been compared to the TIMIS.  The TIMIS update appears to be working effectively for current personnel changes because all of the former employees we identified separated from the IRS before the TIMIS updates began.

By not effectively maintaining the TRAS user database, the IRS increases the risk of unauthorized access to the system and the potential filing of unauthorized travel vouchers.

Recommendations

9.      The Chief, AWSS, should ensure the identified former employees are removed from the TRAS authorized user database.

Management’s Response:  The former employees have been removed from the user database and the current process that is in place to remove separated employees from the user database is effective for current personnel changes.

10.  The CFO should conduct periodic (e.g., annual) reviews of the authorized user database to ensure only authorized individuals have access to the TRAS.

Management’s Response:  The CFO will develop and implement procedures to conduct periodic reviews of the authorized user database.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this audit was to determine whether the Travel Reimbursement and Accounting System (TRAS) has sufficient controls to ensure management can effectively administer travel expenses and travel advances.  To accomplish this objective, we:

I.        Determined if adequate policies, procedures, and application controls were in place to ensure that travel expenses were valid and did not exceed established limitations. 

A.           Assessed the existing management controls and guidance used to develop controls for processing travel vouchers through the TRAS by interviewing managers and reviewing authoritative documentation.

B.           Determined how the Internal Revenue Service (IRS) prevented and detected duplicate claims and identified and resolved inappropriate expenses. 

II.     Determined if the existing TRAS application controls were valid and did not exceed the limits established in the Federal Travel Regulation (FTR), the Internal Revenue Manual, and the Interim Travel Handbook.

A.           Reviewed the system requirements documentation and evaluated the process and frequency through which the TRAS information was updated.

B.           Evaluated the process through which access to the TRAS was granted and revoked.  Compared the TRAS user list to the Treasury Integrated Management Information System to identify the TRAS users that were not IRS employees. 

III.   Obtained and analyzed the TRAS data for non-local travel vouchers approved between August 27, 2001, and September 30, 2002. 

A.           Performed system tests to determine whether the TRAS ensured accurate, timely preparation, approval, and processing of travel vouchers.

B.           Completed analyses to determine whether duplicate travel expenses had been submitted and paid.

C.           Determined whether employees appropriately identified their travel as long-term taxable travel.  For the cases in which the employee should have identified the travel as long-term taxable travel and did not do so, we calculated the potential underreported taxable income using the 15 percent tax rate for Federal income tax, 12.4 percent for the Federal Insurance Contribution Act (FICA) tax, and 2.9 percent for the Medicare tax.

IV.        Determined if adequate policies, procedures, and application controls were in place to ensure that travel advances were properly issued and recovered by interviewing management and performing the following tests.

A.     Assessed the management controls used to ensure that travel advances were appropriate, properly approved, timely recovered, and in accordance with the FTR.  Management controls included the Automated Financial System reports used to monitor outstanding travel advances and the collection thereof.

B.     Determined and tested application controls to ensure that the TRAS travel advances were valid, accurately prepared, and properly processed, and did not exceed established limitations.

Appendix II

 

Major Contributors to This Report

 

Margaret E. Begg, Assistant Inspector General for Audit (Information Systems Programs)

Gary Hinkle, Director

Danny Verneuille, Audit Manager

Christopher Funke, Senior Auditor

Frank Greene, Senior Auditor

Tina Wong, Senior Auditor

Linda Screws, Auditor

Layne Powell, Information Technology Specialist

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn: Chief of Staff  C

Chief Financial Officer OS:CFO 

Chief Information Officer OS:CIO

Chief, Agency-Wide Shared Services OS:A

Chief, Information Technology Services  OS:CIO:I

Director, Business Systems Development  OS:CIO:I:B

Director, Customer Support  OS:A:CS

Associate Chief Financial Officer for Internal Financial Management  OS:CFO:I

Acting Director, Portfolio Management  OS:CIO:R:PM

Chief Counsel  CC

National Taxpayer Advocate  TA

Director, Office of Legislative Affairs  CL:LA

Director, Office of Program Evaluation and Risk Analysis RAS:O

Office of Management Controls  OS:CFO:AR:M

Audit Liaisons

            Chief, Agency-Wide Shared Services  OS:A

Chief Financial Officer  OS:CFO

Manager, Program Oversight and Coordination  OS:CIO:R:PM:PO

 

Appendix IV

 

Outcome Measures

 

This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration.  These benefits will be incorporated into our Semiannual Report to the Congress.

Type and Value of Outcome Measure: 

·        Cost Savings – Questioned Costs - Actual; $25,047 (see page 5).

Methodology Used to Measure the Reported Benefit:

We reviewed Travel Reimbursement and Accounting System (TRAS) travel voucher data for 159,494 vouchers totaling $151,545,232 approved between August 27, 2001, and September 30, 2002.  We identified 268 travel vouchers containing $29,175 in duplicate claims of subsistence expenses (i.e., meals and lodging).  Management advised us that 7 of the duplicate claims for $4,128 were caused by a computer program problem that occurred in 2001 with the implementation of the TRAS.  These duplicate expense claims were researched and adjustments to correct the vouchers were identified by the Beckley Finance Center (BFC).  However, the duplicate expense claims for $25,047 on the remaining 261 vouchers were caused by inadequate management review and computer program controls. 

Type and Value of Outcome Measure: 

·        Increased Revenue – Potential; $180,485 (see page 5).

Methodology Used to Measure the Reported Benefit:

We reviewed TRAS travel voucher data for 159,494 vouchers, totaling $151,545,232, approved between August 27, 2001, and September 30, 2002.  Our analysis identified 24 employees who continuously traveled to the same location for more than 1 year, 13 of whom did not report any of the travel expense as taxable.  The inaccurate reporting of long-term taxable travel resulted in the employees potentially underreporting income totaling $595,658 and Federal income, Federal Insurance Contributions Act, and Medicare taxes estimated at $180,485.

 

Table 1: Estimated Underreported Taxes

Potentially Underreported Income

Type of Tax

Tax Rate

Potentially

Underreported Tax

$595,658

Federal Income

15 percent

$89,349

$595,658

FICA

12.4 percent

$73,862

$595,658

Medicare

2.9 percent

$17,274

TOTAL

 

 

$180,485

Source:  2001 and 2002 IRS Publication 17, Your Federal Income Tax For Individuals, and the FICA and Medicare tax rates obtained from the Social Security web site.

 

Type and Value of Outcome Measure: 

·        Inefficient Use of Resources – Actual; $869 (see page 5).

Methodology Used to Measure the Reported Benefit:

In October 2002, the Internal Revenue Service (IRS) began paying late payment fees to employees when travel vouchers were not paid within 30 days.  Management advised that as of July 23, 2003, $869 in late payment fees ($700 for TRAS vouchers and $169 for manual vouchers) have been paid to employees on 291 travel vouchers.

Type and Value of Outcome Measure:

·        Inefficient Use of Resources – Actual; $254,702 (see page 14).

Methodology Used to Measure the Reported Benefit:

The BFC analyzed the outstanding advances over 6 years old and determined that documentation to substantiate the advances does not exist. Therefore, the IRS could not initiate collection action against the employees, resulting in IRS General Legal Services approving 62 travel advances, totaling $254,702, being written-off. 

Type and Value of Outcome Measure: 

·        Cost Savings – Questioned Costs – Potential; $95,679 (see page 14).

Methodology Used to Measure the Reported Benefit:

During our audit, the BFC identified 152 advances over 6 years old, totaling $95,679, that are at risk of being uncollectible because there is no supporting documentation, and the IRS has not implemented a debt collection process.

 

Appendix V

 

Mandatory Joint Financial Management Improvement Program Requirements Not Included in the Travel Reimbursement and Accounting System

 

Travel Vouchers:

·        Process partial/interim vouchers against a travel authorization to expedite liquidation related to travel obligations.

·        Process amended vouchers with appropriate reviewing and approving controls and provide the capability to update related systems/modules.

·        Provide for system generated series of notices when information has not been submitted timely in accordance with internal policies and procedures established by the agency.

·        Allow for offset of funds to indebtedness through salary offset, a retirement credit, or other amount owed the employee.

·        Provide for matching of travel vouchers with the travel authorizations and/or centrally issued passenger tickets and provide for audit of the claim.

Travel Advances:

Provide for limiting the allowed advance based upon the transportation method, subsistence rates, miscellaneous expenses, and possession of a charge card.

 

Appendix VI

 

Management’s Response to the Draft Report

 

The response was removed due to its size.  To see the response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.