TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
Accountability Over Volunteer Income Tax Assistance Program Computers Continues to Be a Problem
September 25, 2006
Reference
Number: 2006-40-172
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.
Phone Number |
202-927-7037
Email Address | Bonnie.Heald@tigta.treas.gov
Web Site |
http://www.tigta.gov
September 25, 2006
MEMORANDUM
FOR
CHIEF INFORMATION OFFICER
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Accountability Over Volunteer Income Tax Assistance Program Computers Continues to Be a Problem (Audit #200640030)
This report presents the results of our review to assess whether computers used in the Volunteer Income Tax Assistance (VITA) Program[1] are properly accounted for and controlled. In an effort to promote electronic filing (e‑filing), the Internal Revenue Service (IRS) provides computers[2] to enable VITA Program sites to offer taxpayers the option of e‑filing their tax returns. These computers are loaded with the tax preparation software necessary to e-file a tax return with the IRS. During Fiscal Year 2006, VITA Program sites were involved in the preparation of over 2 million tax returns, with about 1.9 million being e-filed.
Impact on the Taxpayer
In a prior Treasury Inspector General for Tax
Administration report dated August 2002,[3] we identified concerns that the IRS did not
have adequate internal controls and accountability over the computers it
provides to volunteers. We again identified
that key controls designed by the IRS to assist in accounting for computers are
not being consistently followed. Taxpayer data are at risk of unauthorized
disclosure or misuse as a result of the IRS’ inability to accurately account
for VITA Program computers used in the preparation and transmission of
electronic tax returns.
Synopsis
Taxpayer
data are at risk of unauthorized disclosure or misuse as a result of the IRS’ inability
to accurately account for VITA Program computers.
In our prior report, we stated the IRS could not
physically account for computers provided to VITA Program volunteers. This happened because the IRS did not
consistently conduct the required annual certification of the Information
Technology and Asset Management System (ITAMS),[4] immediately
record receipt of new computers on the ITAMS, and update inventory records when
equipment was delivered. Again, key
controls designed by the IRS to assist in accounting for computers are not
being consistently followed. During this
review, much of the information provided to support the accounting for VITA
Program computers was inconsistent and changed throughout the course of the
audit. The issues detailed below are similar to those identified and reported
in our prior review.
·
The IRS accounted
for 97 percent (191 of 197) of the computers sampled; however, repeated attempts
were necessary to locate the computers.
·
During
the period October 2003 to February 2006, Modernization and Information
Technology Services organization
employees changed the ITAMS name data field for 7,150 computers[5] to reflect these computers as being in the
VITA Program. IRS management stated the
ITAMS name data field was changed in an attempt to clean up inventory.
·
The IRS
did not ensure required procedures were followed when disposing of computers on
the ITAMS. The Reports of Survey (Form 1933)[6] used to document the disposal of assets did
not contain proper authorizations, details of the specific actions taken to
locate the computers prior to removing them as lost, or the required statement
on whether taxpayer data were at risk.
Documentation
was not provided to support inclusion of VITA Program computers in the IRS’
annual certifications. These computers
were also not included in the Government Accountability Office’s annual
audit of the IRS’ financial statements.
We will be referring
information relative to the above ITAMS transactions to our Office of Investigations. Additionally, the IRS was unable to provide
documentation to demonstrate that the VITA Program computers have been
consistently included in the IRS’ annual certification of its computer
inventory. IRS management initially
stated the VITA Program computers were not included in the required annual certifications.
After we completed audit testing and discussed the results with IRS
officials, Modernization and Information Technology Services organization
management provided a memorandum indicating the computers located at the Computer
Depot[7] were included in the Fiscal Year 2004
Annual Certification. They believe a
certification of the Computer Depot inventory was completed again in Fiscal Year 2005
but could not provide the required memorandum supporting their claim. The VITA Program computers were also not
included in the Government Accountability Office Fiscal Years 2003 through 2005
annual audits of the IRS’ financial statements.
The IRS stated it
plans to take actions to address concerns raised during our review. These include certifying the VITA Program computer
inventory beginning in Fiscal Year 2006, developing guidelines
outlining responsibilities of the Stakeholder Partnerships, Education, and
Communication (SPEC) and the End User Equipment and Services functions, and
monitoring and limiting the ability to change the ITAMS name data field.
Recommendations
The Chief
Information Officer and the Commissioner, Wage and Investment Division, should (1)
perform a physical inventory and reconciliation of computers listed on the SPEC
Taxpayer Assistance Reporting System (STARS)[8] to computers listed on the ITAMS and ensure
VITA Program computers are included in the required annual certification of the
ITAMS, (2) integrate the ITAMS and STARS to link the information between
the two and ensure all VITA Program computers are properly and efficiently
controlled, (3) develop guidelines
outlining the responsibilities of the SPEC and End User Equipment and Services functions
pertaining to the control and accountability of VITA Program computers, and (4)
ensure proper authorization and physical verification of computers are obtained
prior to reassigning computers on the ITAMS and ensure required procedures are
followed when disposing of computers.
Response
The IRS agreed with our recommendations and has taken or will take the following actions:
Management’s complete response to the draft report is included as Appendix V.
Copies of this report are also being sent to
the IRS managers affected by the report recommendations. Please contact me at (202) 622-6510 if
you have questions or Michael E. McKenney,
Assistant Inspector General for Audit (Wage and Investment Income
Programs), at (202) 622-5916.
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix IV
– Report of Survey
Appendix V
– Management’s Response to the Draft Report
Abbreviations
|
AWSS |
Agency-Wide Shared Services |
|
e‑filing |
Electronic Filing |
|
EUES |
End User Equipment and Services |
|
GAO |
Government Accountability Office |
|
IRS |
Internal Revenue Service |
|
ITAMS |
Information Technology and Asset Management System |
|
MITS |
Modernization and Information Technology Services |
|
SPEC |
Stakeholder Partnerships, Education, and Communication |
|
STARS |
SPEC Taxpayer Assistance Reporting System |
|
TIGTA |
Treasury Inspector General for Tax
Administration |
|
VITA |
Volunteer Income Tax Assistance |
The Internal Revenue Service (IRS) Volunteer Income Tax Assistance (VITA) Program[9] provides free tax help to people for whom professional assistance may be too expensive. The IRS partners with the military, community-based organizations, and the AARP[10] to assist individuals with the preparation of basic income tax returns.[11] Particularly, it assists those who have low incomes or disabilities or are non‑English speaking, elderly, or have other special needs. Oversight of the VITA Program is the responsibility of the Stakeholder Partnerships, Education, and Communication (SPEC) function, located in the IRS Wage and Investment Division.
In an effort to promote electronic filing (e‑filing), the IRS provides computers[12] to enable VITA Program sites to offer taxpayers the option of e‑filing their tax returns. These computers are loaded with the tax preparation software necessary to e‑file a tax return with the IRS. During Fiscal Year 2006, VITA Program sites were involved in the preparation of over 2 million tax returns, with about 1.9 million being e-filed.
A prior TIGTA review identified the IRS does not have adequate internal controls and accountability over VITA Program computers.
In a prior Treasury Inspector General for Tax Administration (TIGTA) report dated August 2002,[13] we identified concerns that the IRS did not have adequate internal controls and accountability over the computers it provides to volunteers. The IRS could not physically account for computers provided to VITA Program volunteers. This happened because the IRS did not consistently perform the required annual certification of the Information Technology and Asset Management System (ITAMS),[14] immediately record receipt of new computers on the ITAMS, and update inventory records when equipment was delivered. In addition, several factors contributed to the inadequate internal controls and accountability over computer equipment. These factors included a lack of SPEC function management oversight and no physical verification and/or reconciliation to determine the volume and location of computers transferred when the SPEC function was established. We recommended the IRS perform a physical inventory of all computers included in the VITA Program, develop procedures to ensure computer equipment obtained from external agencies is immediately added to the inventory records, and develop procedures to ensure taxpayer e-file data are removed from volunteer computers.
Management agreed with our recommendations. The IRS stated that it instructed field employees to complete an inventory assessment and validate equipment used in the VITA Program and to suspend the acquisition of equipment from external sources. Management also stated that they have instructed Territory offices[15] to delete taxpayer data from VITA Program computers. The IRS advised us that additional processes have been put in place to protect taxpayer data, such as adding password protection at the operating system level and using a “disk wipe” program that deletes all programs, including taxpayer data, from the hard drive. The IRS stated that it has also created a property loan agreement to specifically address how the equipment can or cannot be used and is addressing the addition of software to the equipment. Finally, the IRS stated that it developed a database to accurately account for the location of the computer inventory to supplement the existing database, ITAMS, which could not accommodate all the inventory needs for this Program.
Accountability for VITA Program computers is a responsibility shared between the SPEC function and the End User Equipment and Services (EUES) function, located in the IRS Modernization and Information Technology Services (MITS) organization. The MITS organization is responsible for the accounting and recording of all computers and technology equipment. The SPEC function is responsible for assigning and determining the placement of the computers with volunteers and its partners, maintaining the related documentation on the assignments, and controlling the computers and assignments on the SPEC Taxpayer Assistance Reporting System (STARS).
The EUES function provides technical support for VITA Program computers at its Computer Depot. Established in August 2003, the Computer Depot is a centralized location that receives computers for the VITA Program, prepares them for use by loading the operating system and tax preparation software, ships them to volunteers, and stores them when they are not in use (e.g., not assigned to volunteers). In addition, the EUES function maintains computer inventory records on the ITAMS. The ITAMS was developed in March 2001 and is used to control all IRS computer assets, including VITA Program computers. The ITAMS is the IRS’ authoritative record for asset control, where each piece of equipment is tracked from procurement to disposal. As of February 2006, there were approximately 15,000 computers in active VITA Program inventory, with approximately 11,000 computers assigned to volunteers and 4,000 in storage at the Computer Depot.
This review was performed at the MITS organization’s offices
in New Carrollton, Maryland; the Wage and Investment Division SPEC
function Headquarters office in
Procedures Are Not Adequate to Ensure Volunteer Income Tax Assistance Program Computers Are Properly Controlled
Taxpayer data are at risk from unauthorized disclosure or misuse as a result of the inability to accurately account for VITA Program computers used in the preparation and transmission of electronic tax returns. The issues detailed below are similar to those identified and reported in our prior review. These issues include:
· Although the IRS was able to account for 191 (97 percent) of 197 of the computers sampled,[17] repeated attempts were necessary to locate some computers. It took between 2 months and 3 months to locate 52 computers and up to 5 months to locate 9 computers. Three of the six computers not located were assigned to volunteers; the remaining three were listed with incorrect information on the STARS and ITAMS or as unassigned and in inventory at the Computer Depot. Repeated attempts were necessary to find some of the computers tested because the IRS maintains two separate inventory systems (the STARS and the ITAMS) and their inventory records did not agree. There are no specific guidelines outlining the responsibilities of the SPEC and EUES functions regarding the accountability of VITA Program computers.
· During the period October 2003 to February 2006, MITS organization employees changed the ITAMS name data field for 7,150 computers[18] to reflect these computers as being in the VITA Program. IRS management stated that the ITAMS name data field was changed in an attempt to clean up inventory.
· The IRS did not ensure required procedures were followed when disposing of computers. The Reports of Survey (Form 1933)[19] used to document the disposal of assets did not contain proper authorizations, details of the specific actions taken to locate the computers prior to removing them as lost, or the required statement on whether taxpayer data were at risk.
We will be referring information relative to the above ITAMS
transactions to our Office of Investigations.
The IRS was also unable to provide documentation to demonstrate that the
VITA Program computers have been consistently included in IRS’ annual certification
of its computer inventory. In addition, VITA Program computers were not included in
the Government Accountability Office (GAO) Fiscal Years 2003 through 2005
annual audits of the IRS’ financial statements.
The majority of the control breakdowns occurred in the MITS organization. The IRS stated it plans to take actions to address concerns raised during our review, including certifying the VITA Program computer inventory in Fiscal Year 2006, developing guidelines outlining responsibilities of the SPEC and EUES functions, and monitoring and limiting the ability to change the ITAMS name data field.
Two separate inventory systems are used to account for VITA Program computers
The IRS maintains two inventory systems to account for VITA Program computers because the ITAMS structure is limited and cannot capture VITA Program partner, site, or volunteer specific information. This information is captured on the STARS, and the SPEC function needs this information to appropriately account for VITA Program computers.
In an effort to ensure the STARS and ITAMS agree, the IRS uses a two-way matching process. Update extracts are generated from the STARS when inventory records are changed. These update extracts are provided to the MITS organization to be used to update the ITAMS. Similarly, when inventory records on the ITAMS are changed, ITAMS updates are provided to the SPEC function to be used to update the STARS.
The two-way matching process was not used to ensure the STARS and ITAMS computer inventories were in agreement.
However, the MITS
organization was not using the information extracted from the STARS to update
the ITAMS because the information was considered unreliable. In addition, the ITAMS update extracts were
incomplete and the information was not current, creating update delays to the
STARS of up to 6 weeks. As a result,
inventory records reflected in the STARS and ITAMS were not in agreement.
We selected a judgmental
sample of 50 computers physically located at the Computer Depot to assess the
accuracy of the STARS and ITAMS for these computers.
· For 8 (16 percent) of the 50 computers, the STARS did not show them correctly as being located at the Computer Depot.
· For 3 (6 percent) of the 50 computers, the ITAMS did not show them correctly as being located at the Computer Depot.
Based on the results of our sample, we matched extracts from the STARS to the ITAMS. There were a total of 16,559 unique VITA Program computers listed on these inventory systems. The ITAMS extract dated December 12, 2005, showed 15,690 VITA Program computers while the STARS extract dated December 9, 2005, showed 14,531 computers assigned to the VITA Program. There were 13,662 computers on both inventory systems. However, 2,028 computers were on the ITAMS and not on the STARS, and 869 computers were on the STARS and not on the ITAMS.
Although there are two systems controlling the VITA Program computers, there is no clear separation of responsibilities and duties to ensure the computers are properly accounted for. For example, the Computer Depot has taken responsibility for updating both the STARS and the ITAMS for computers used by AARP volunteers. The computers loaned to the AARP account for approximately two‑thirds of the computers used by volunteers. The updating of both the STARS and ITAMS by one function raises concerns because there is not a clear separation of duties when the Computer Depot both receives and disposes of computers as well as records these transactions.
Key duties and responsibilities should be divided or segregated to reduce the risk of error or fraud. This should include separation of responsibility for authorizing transactions; processing, recording, and reviewing the transactions; and handling any related assets.
Ineffective internal controls allowed computers to be reassigned on
the ITAMS without proper authorization or validation
We reported concerns in August 2002 that VITA Program computers could not be located and taxpayer data may be at risk. This review identified the same problems. Key controls designed by the IRS to assist in controlling VITA Program computers and protecting taxpayer information are not consistently followed. Documentation was not provided to support the consistent inclusion of VITA Program computers in the annual certifications of the IRS’ computer inventory, and MITS organization employees were able to change ITAMS records without proper authorization or validation.
In August 2002, we also reported the SPEC function could not provide documentation that VITA Program computers were included in the Fiscal Year 2001 Annual Certification. The IRS was again unable to provide documentation to demonstrate that the VITA Program computers have been consistently included in IRS’s annual certification of its computer inventory. Specifically, IRS management initially stated the VITA Program computers were not included in the required annual certification that (1) verifies the existence of the assets, (2) verifies all assets have an associated inventory record on the ITAMS, (3) certifies the correctness of data contained in the critical fields on the ITAMS,[20] (4) corrects data inaccuracies in the ITAMS critical to control of assets, and (5) ensures all asset inventory transactions are updated in the ITAMS. Verifying the physical existence of the computer is of utmost importance. IRS guidelines also require that a certification letter be prepared to include a statement of certification, completeness, and accuracy.
However, after we completed audit testing and discussed the results with IRS officials, they provided a memorandum indicating the VITA Program computers located at the Computer Depot (where the majority of VITA Program computers are located) were included in the Fiscal Year 2004 Annual Certification. MITS organization management believes a certification of the Computer Depot inventory was also completed in Fiscal Year 2005, but they could not provide a copy of the required certification memorandum.
Furthermore, during
the period October 2003 to February 2006, MITS organization employees changed
the ITAMS name data field for 7,150 computers to show them as assigned to the
VITA Program. IRS management stated these
records were changed to clean up the inventory of computers that were old, were
obsolete, or could not be located. Although
the ITAMS name data field was changed, the physical location field was not
changed for 5,157 (72 percent) of the 7,150 computers, confirming
these computers had not been physically transferred to the Computer Depot. The disposition of these 7,150 computers as
recorded on the ITAMS is shown in Figure 1.
Figure 1: Disposition of 7,150 Computers
Figure 1 was removed due to its size.
To see Figure 1, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
We have concerns with the changes to the system name data field because the changes reflect transfers that may not have occurred. The ability of IRS employees to circumvent internal controls by changing ITAMS records raises serious concerns about the validity of the transactions in the ITAMS and the physical accounting for these computers. It is a strong indication that the internal control environment is ineffective.
Changing the name data field in the ITAMS to show these were
VITA Program computers also resulted in computers being excluded from the
extract of IRS computers provided to the GAO to select its sample of computers
to perform the yearly verification for its financial audit. The IRS and GAO agreed not to include the
VITA Program computers in the GAO
Fiscal Year 2003 through 2005 annual audits of the IRS’ financial
statements. According to the IRS, it has achieved an
accuracy rate of over 95 percent in each of the past 3 years, enabling it
to pass the last GAO financial audit.
This high accuracy rate may have resulted from not including VITA
Program computers in the GAO’s statistical sample for its financial audit.[21]
Transactions such as
those to record the transfer and disposition of assets as well as other
significant events should be authorized and executed only by persons acting
within the scope of their authority. This
is the principal means of assuring that only valid transactions to exchange, transfer,
use, or commit resources and other events are initiated or entered in to.
In addition, documentation should be readily available for examination,
and all documentation and records should be properly managed and maintained.
Required procedures were not followed when disposing of computers
A total of 1,041 computers
were disposed of without following proper procedures.
A test of 1,041 of the 1,118 ITAMS inventory
records with a disposition type of lost inventory with no criminal activity
showed MITS organization employees did not properly follow procedures when disposing
of these computers. As a result, there
is no assurance that proper actions were taken to locate the computers and assess
the risk the lost computers may have on taxpayer data.
The IRS uses Form 1933 to guide employees when they are trying to locate computers and protect taxpayer information. This process requires users to document on the Form 1933:
(1) Results of a physical search for the computer based on location and contact information reflected in the ITAMS.
(2) Results of a telephone contact with the last person responsible for possession of the computer.
(3) Results of an email contact with the responsible person.
(4) Results of a contact with the manager of the responsible person.
(5) An explanation of whether taxpayer data were at risk.
Thirty-three (3 percent) of the 1,041 ITAMS inventory records were not listed on a Form 1933. The remaining 1,008 ITAMS inventory records were listed on 52 Forms 1933. However, 31 (60 percent) of the 52 Forms 1933 did not contain the required authorization from the Agency-Wide Shared Services (AWSS) organization approving official. The final disposition of computers is processed through the ITAMS and authorized by an AWSS organization approving official. This process is in place to ensure duties are separated.
Although
justifications for writing off the computers were included on 50 (96 percent) of
the 52 Forms 1933, none of the justifications detailed the actions
taken to try to locate the computers prior to writing them off as lost, as
required. In addition, we question the validity of the justifications
that detail computers as being part of the VITA Program because the physical
location field was not changed for 5,157 of the 7,150 (72 percent)
computers, confirming these computers had not been physically transferred to
the VITA Program.
Examples of justifications included:
−
The
equipment listed was not located in the last inventory and is presumed to have
been previously excessed, lost or to never have been received. . . .
To the best of our knowledge there is no taxpayer data at risk.
−
Equipment
has not been located, validated, or inventoried for the past two (2)
certification periods.
−
These
desktops were assigned to the . . . SPEC Office for VITA. These
desktops were given to VITA partners including AARP and NAVY. These
desktops will not be returned to the IRS, and therefore are being surveyed out
from ITAMS.
−
This MITS Equipment
was assigned to the . . . MITS office.
During the FY [Fiscal Year] 2005 inventory these items could not be
located. After extensive searches by
employees of both MITS these items can not be located. The equipment on this Report of Survey is for
the following reason:
1. The
asset may have been disposed of on a previous report of survey, but was not
removed from the data base.
2. The
asset may have been parted out and never recorded on a previous report.
3. The
asset may have failed and been replace[sic] without appropriate record keeping.
4. The
asset may have been improperly disposed of with no record kept.
In addition, the required
explanation of whether taxpayer data were at risk was not included on 49 (94
percent) of the 52 Forms 1933 provided.
For the remaining three Forms 1933, the following statement was made: “To
the best of our knowledge, there is no taxpayer data at risk.”
Furthermore, Forms 1933 included in our sample raise additional concerns as to the validity of the actions and information provided to support the removal of computers from the ITAMS inventory. For example:
· One Form 1933 was dated April 2006, 1 month later than the ITAMS extract of disposed assets generated in March 2006. This particular Form 1933 listed 43 computers from our sample. However, these 43 computers were shown in the ITAMS as retired from inventory records in June 2005. Subsequent to our bringing this to MITS organization management’s attention, a Form 1933 dated February 2006 was provided for these same computers.
· One Form 1933 was provided May 2006 for six computers. Subsequently, another Form 1933 dated July 2006 was provided for these same computers. Although the computers listed on the Forms matched, there were different approving officials on each Form 1933.
After we presented the audit results to IRS management, additional information was provided to support the disposal of the 1,041 computers. However, 1 Form 1933, which included 276 computers, contained information that conflicted with that we had been advised of earlier. We had been advised that the 276 computers included in our sample and listed on the Forms 1933 had been disposed of because they were lost. This additional Form 1933 stated VITA Program computers were donated. Further, an IRS representative stated:
This equipment was assigned to . . . SPEC for the . . . (VITA) project.
As the equipment was somewhat old and
obsolete, once it was issued to the VITA partners, it was determined that the
equipment would not be returned into the IRS offices for excess. When equipment was issued from MITS,
there was no taxpayer data on the CPUs [central processing units], only the
operating system and any . . . software loaded by either MITS or SPEC. Once it was determined that the equipment
would not be returned to the IRS, the Form 1933 was prepared by MITS to show
that the equipment had been “donated” to the VITA Project, and a copy of the
Form 1933 would have been turned over to AWSS.
TIGTA would not have been involved in this, as the equipment was not
missing but rather donated.
When we questioned whether the computers were
in fact donated, we were informed older computers used by the IRS that were ready
for disposal were turned over to the VITA Program and given to its VITA Program
partners. The IRS could not provide
documentation to support this claim. If these
computers were in fact donated, this may be in violation of the Federal
Property and Administrative Services Act of 1949,[22] which prohibits the donating of computers to
volunteers.
During the course of this review, we made
repeated attempts to obtain documentation to support actions taken to dispose
of computers. Although some documentation
was ultimately provided, it was inadequate and we were unable to substantiate
the reliability of this information.
There is no assurance that taxpayer data are not at risk if these
computers were in IRS operations or in the VITA Program. No documentation was provided to support the
removal of taxpayer information from the computers. Information on tax
forms, including names, Social Security Numbers, income, employment and bank
account details, is regarded as a prime target for identity thieves.
Recommendations
The Chief Information
Officer and the Commissioner, Wage and Investment Division, should:
Recommendation 1: Perform a physical inventory and reconciliation of computers listed on the STARS to computers listed on the ITAMS to ensure all computers are accounted for and the systems’ records are accurate. Additionally, ensure VITA Program computers are included in the required annual certification of the ITAMS.
Management’s Response: The IRS agreed with this recommendation. The SPEC function will perform a physical inventory and reconciliation of computers on the STARS. The EUES function will ensure VITA Program computers are included in the required annual certification of the ITAMS. In accordance with the annual certification plan, the Computer Depot will conduct a final verification of assets and certify the accuracy of the inventory records and reconciliation as directed by the Asset Management Program Office.
Recommendation 2: Integrate the ITAMS and STARS to link the information between the two and ensure all VITA Program computers are properly and efficiently controlled.
Management’s Response: The IRS agreed with this recommendation and will modify the ITAMS and STARS to enable linking with each other, to improve the control over computers used in the VITA Program.
Recommendation 3: Develop guidelines outlining the responsibilities of the EUES and SPEC functions pertaining to the control and accountability of VITA Program computers.
Management’s Response: The IRS agreed with this recommendation. On May 19, 2006, the EUES and SPEC functions signed a Memorandum of Understanding outlining the roles and responsibilities for the SPEC function, the Computer Depot, and the loan of equipment to VITA Program partners.
Recommendation 4: Ensure proper authorization and physical verification are obtained prior to reassigning computers on the ITAMS to VITA Program inventory records and ensure required procedures are followed when disposing of computers within the ITAMS inventory records.
Management’s Response: The IRS agreed with this recommendation and will reinforce guidelines already in place with its employees responsible for inventory to ensure they follow the required procedures for reassigning or disposing of VITA Program computers. Accountability and review of effectiveness will be ensured through Quality Assurance reviews.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to assess whether computers used in the VITA Program are properly accounted for and controlled. To accomplish this objective, we:
I.
Determined
whether the SPEC function properly controls and accounts for VITA Program
computers.
A. Interviewed SPEC function management to
determine current and planned inventory control procedures.
B.
Obtained and reviewed SPEC function
guidelines to determine whether the procedures for controlling and accounting
for VITA Program computers were adequate.
C.
Using a statistically valid sample,
determined whether the computers assigned to the Territory offices[23] were accurately controlled and accounted for
on the STARS and ITAMS. A
statistically valid sample of 138 computers was selected during fieldwork to
enable a projection to the entire population.
The sample included computers that were in stock at the Computer Depot,
in stock in a SPEC Territory office, and in use in a VITA Program site. The sample of 138 computers was selected from
a STARS extract dated January 25, 2006, with a population of 16,053 computers. The sample size was based on an error rate of
10 percent, a confidence level of 1.96, and a precision rate of +5 percent.[24]
1.
For computers listed as “in use,” determined
who the computers were assigned to, contacted the individuals to determine whether
they had the computer, and, if so, obtained the barcode and serial number of
the computer in their possession. We
matched this information to our sample of inventory records to confirm the
accuracy.
2.
For computers listed as “in stock,” we sent
an email to the specific Territory offices where the computers were
assigned. We requested an email response
detailing the barcodes and serial numbers of all computers, confirmed the
information, and matched the remaining computers to inventory records to assess
the accuracy.
D. Determined the effect on both the IRS and
taxpayers.
II.
Determined
whether the Computer Depot properly controls and accounts for VITA Program computers.
A. Interviewed EUES function management to determine
current and planned inventory control procedures.
B.
Obtained and reviewed the Computer Depot’s
guidelines to determine whether procedures for controlling and accounting for
VITA computers were adequate.
C.
Selected a judgmental sample of 109 computers
actually located at the Computer Depot and determined whether the computers were
correctly controlled on the ITAMS and the STARS. We selected a judgmental sample of 59
VITA Program computers from the STARS by using a random number of 55 from a
population of computers that were in stock at the Computer Depot and had barcodes
with the last two digits of 55. We
placed the barcodes in ascending order and then selected every other computer
beginning with the first computer. Additionally,
we judgmentally selected 50 computers that were on hand at the Computer
Depot. We used a judgmental sample to
determine whether further testing would be necessary.
D. Using the statistically valid sample in Step I.
C., determined whether the computers assigned to the Computer Depot were
controlled and accounted for.
1.
For computers listed as “in use,” reviewed
SPEC function information to determine who was assigned the computer, contacted
these individuals to determine whether they had a computer, and obtained the
barcode and serial number for the computer in their possession. We matched this information to inventory
records to confirm the accuracy.
2.
For computers listed as “in stock,” visited
the Computer Depot, physically confirmed possession of the computers, and,
based on the results, confirmed the accuracy of the inventory records.
E.
Determined the effect on both the IRS and
taxpayers.
III.
Assessed
the accuracy and reliability of data in the STARS and the ITAMS.
A. Requested an extract from the STARS and the
ITAMS detailing computers in the possession of the VITA Program.
B.
Analyzed the data included in the two
inventory systems to identify anomalies and determined whether similar data
included in the two inventory systems were consistent, accurate, and
complete. Based on analysis of the data
in the two inventory systems, we determined the inventory records in both
systems were not in agreement.
IV.
Assessed
whether procedures were followed when disposing of VITA Program assets.
A. Using a judgmental sample, determined whether MITS organization employees followed procedures when disposing of VITA Program computers. During fieldwork, we selected a judgmental sample of 1,041 computers that were recorded as disposed of and considered lost. The sample was selected from a population of 7,150 computers recorded on the ITAMS. We used a judgmental sample because we wanted to test whether the Territory offices with the highest number of computers disposed of had followed procedures.
B. We determined the effect on both the IRS and taxpayers.
Appendix II
Major Contributors to This Report
Michael
E. McKenney, Assistant Inspector General for Audit (Wage and Investment Income
Programs)
Augusta
R. Cook, Director
Russell
P. Martin, Manager
Lena
Dietles, Lead Auditor
Pamela
DeSimone, Senior Auditor
Jean
Bell, Auditor
Roberta
Fuller, Auditor
Appendix III
Commissioner C
Office of the
Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Operations Support OS
Deputy Commissioner for Services and
Enforcement SE
Chief, Agency-Wide Shared Services OS:A
Deputy Commissioner, Wage and Investment
Division SE:W
Director,
Customer Assistance, Relationships, and Education, Wage and Investment
Division SE:W:CAR
Associate Chief Information Officer, End User
Equipment and Services OS:CIO:EU
Director, Strategy and Finance, Wage and
Investment Division SE:W:S
Chief, Performance Improvement, Wage and
Investment Division SE:W:S:PI
Director, Stakeholder Partnerships, Education,
and Communication, Wage and Investment Division SE:W:CAR:SPEC
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 Internal
Control OS:CFO:CPIC:IC
Audit Liaison: Senior Operations Advisor, Wage and Investment
Division SE:W:S
Appendix IV
The form
was removed due to its size. To see the form,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Appendix V
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.
[1] For the purposes of this report, the VITA Program includes the Tax Counseling for the Elderly Program.
[2] An extract dated February 2006 identified approximately 11,000 computers were assigned to volunteers.
[3] Computers Used to Provide Free Tax Help and That Contain Taxpayer Information Cannot Be Accounted For (Reference Number 2002-40-144, dated August 2002).
[4] The ITAMS is the IRS’ authoritative record for asset control, where each piece of equipment is tracked from procurement to disposal.
[5] Computers were listed on the ITAMS under the category of retired asset and were not reflected in active VITA Program computer inventory totals.
[6] See Appendix IV.
[7] The Computer Depot is a centralized location that receives computers for the VITA Program, prepares them for use by loading the operating system and tax preparation software, ships them to volunteers, and stores them when they are not in use.
[8] The STARS is a database that resides in a network environment used to record VITA Program partner information.
[9] For the purposes of this report, the VITA Program includes the Tax Counseling for the Elderly Program.
[10] The AARP was formerly known as the American Association of Retired Persons.
[11] Basic income tax returns include the U.S. Individual Income Tax Return (Forms 1040 and 1040A) and the Income Tax Return for Single and Joint Filers With No Dependents (Form 1040EZ).
[12] An extract dated February 2006 identified approximately 11,000 computers were assigned to volunteers.
[13] Computers Used to Provide Free Tax Help and That Contain Taxpayer Information Cannot Be Accounted For (Reference Number 2002-40-144, dated August 2002).
[14] The ITAMS system is the IRS’ authoritative record for asset control, where each piece of equipment is tracked from procurement to disposal.
[15] Territory offices are SPEC function field offices.
[16] The campuses are the data processing arm of the IRS. They process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.
[17] The total of 197 computers represents both a judgmental sample (59) and statistical sample (138) selected to determine if the computers could be physically located.
[18] These computers were listed on the ITAMS under the category of retired asset and are not reflected in active VITA Program computer inventory totals.
[19] See Appendix IV.
[20] Critical fields include assignment, barcode, building location, and user name.
[21] The IRS
stated it had an agreement with the GAO to exclude VITA Program computers from
the GAO’s annual financial audit.
[22]
Pub. L. No. 81-152, 63 Stat. 377 (codified as
amended in scattered sections of 40 U.S.C and 41 U.S.C.).
[23] Territory offices are SPEC function field offices.
[24] We did not project to the total population the number of computers that were not accounted for because the accountability rate fell within the margin of error of +5 percent.