TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

 

 

Oversight and Administration of the Tax Counseling for the Elderly Program Need Improvement

 

 

 

April 29, 2008

 

Reference Number:  2008-40-112

 

 

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.

 

Redaction Legend:

3(d) - Identifying Information - Other Identifying Information of an Individual or Individuals

 

Phone Number   |  202-622-6500

Email Address   |  inquiries@tigta.treas.gov

Web Site           |  http://www.tigta.gov

 

April 29, 2008

 

 

MEMORANDUM FOR COMMISSIONER, WAGE AND INVESTMENT DIVISION

 

FROM:                            Michael R. Phillips /s/ Michael R. Phillips

                                         Deputy Inspector General for Audit

 

SUBJECT:                    Final Audit Report – Oversight and Administration of the Tax Counseling for the Elderly Program Need Improvement (Audit # 200740041)

 

This report presents the results of our review to determine whether the Tax Counseling for the Elderly (TCE) Program is effectively administered and is in compliance with legal requirements.[1]  This audit was conducted as part of the Treasury Inspector General for Tax Administration Office of Audit Fiscal Year 2007 Annual Audit Plan.

Impact on the Taxpayer

Over the last 3 calendar years, the Internal Revenue Service (IRS) Volunteer Program has assisted taxpayers with filing more than 6.5 million Federal income tax returns.  The TCE Program prepared more than one-half of these returns.  However, the TCE Program has not been effectively administered, and current management information and performance measures do not provide adequate oversight for the Program.  This limits the IRS’ ability to assure that the Program is meeting the intent of the law and primarily serving elderly taxpayers.

Synopsis

The IRS Volunteer Program plays an increasingly important role in achieving the IRS’ goal of improving taxpayer service and facilitating participation in the tax system.  The TCE Program plays a significant role in the Volunteer Program, preparing more than one-half of the tax returns prepared by volunteers.  Nevertheless, based on the data provided and tested, we could not determine if the 2006 TCE Program met the intent of the law or successfully directed its services to the elderly population.

The TCE Program has not been effectively administered.  The IRS does not have effective controls or monitoring processes to ensure that funds are appropriately spent, and management information is not sufficient to provide adequate oversight for the Program.  Additionally, there are insufficient performance measures to evaluate the success of the Program.  Tests of the 58 Fiscal Year 2006 Program grantees showed:

·         The selection process needs to ensure that the most-qualified applicants are selected.  Few guidelines and procedures exist on how to rate applicants, select grantees, and allocate grant funds.  Not all applications were logged in, and no documentation existed to show that all applicants were considered.  Additionally, the IRS conducted no demographic analysis of elderly taxpayers to weigh applicants’ geographic coverage, either individually by applicant or for the TCE Program as a whole.  No specific criteria were used to select the grantees or to determine the amount of the award to grant each organization. 

·         Better controls and more monitoring are needed to ensure that grantees are spending funds appropriately.  The IRS does not verify the majority of expenses or conduct any analyses to identify whether expenses appear reasonable.  No supporting documentation existed to verify how grantees spent their grant funds.  In addition, the instructions in the IRS Publication and Form[2] used to report how grant funds are spent are confusing and unclear as to what should be reported to the IRS.

Limited TCE Program grant data are captured in a central management information system, which prevents effective and efficient monitoring and tracking.

·         Better management information is needed to help provide effective oversight and ensure that grantees are directing their services to the elderly and operating as intended.  No centralized management information system captures and controls grantees’ current year activities, including fund withdrawals, expenses reported, and tax preparation assistance. 

Furthermore, performance measures and goals are needed to evaluate the success of the TCE Program.  Currently, the IRS measures only the number of tax returns prepared, the percentage of returns prepared electronically, and the number of taxpayer contacts for its Volunteer Program as a whole and has no measures specific to the TCE Program (i.e., no measures to evaluate the individual grantees or the Program as a whole).

Recommendations

We recommended that the Commissioner, Wage and Investment Division, 1) establish a process and system of controls to ensure that the most-qualified applicants are selected for the TCE Program, 2) establish a process and system of controls to ensure that grant funds are expended appropriately and grantees are held accountable, 3) revise the IRS Publication and Form used to report Program costs to clarify what is to be reported to the IRS, 4) develop a management information system to oversee, control, and measure the Program’s activities and goals, and 5) establish performance measures to gauge the Program’s success in meeting its goals and objectives, including directing services to elderly taxpayers.

Response

IRS management agreed with all of our recommendations.  They have established scoring, ranking, and selection criteria for grantees that include how the grant funds are allocated and used historical performance data in scoring the Fiscal Year 2008 applicants.  The IRS will document all actions taken during the year of the grant within each organization’s case file and continue to enhance this process by tracking and documenting steps taken during the grant and award process.  It will ensure that internal manuals are updated and accurately reflect these processes and controls.

The IRS has established a process and system of controls to ensure that grant funds are expended appropriately and that grantees are held accountable.  During Fiscal Year 2007, financial reviews of the TCE Program were instituted to examine policies, procedures, and controls.  The IRS has developed TCE Financial Review Guidelines and an onsite checklist for use during site reviews.  In October 2007, it hired three individuals to conduct such financial reviews on an ongoing, annual basis.  The IRS is using its Statistics of Income Office to select the Fiscal Year 2009 TCE Grant Program recipients for reviews that will be conducted following the conclusion of the 2008 Filing Season.[3]

In Fiscal Year 2007, IRS management developed new processes to ensure that consideration was given as to whether sponsoring organizations were in compliance with administrative program requirements and allocation of funds.  The IRS is in the process of revising Publication 1101 and Form 8654 for use by 2009 TCE Program applicants.

IRS management agreed to the benefits of using a management information system to capture and retain data to measure Program activities and effectiveness.  They will explore use of a database used by another IRS office that also administers grants. 

The IRS also agreed that performance measures are necessary to gauge the TCE Program’s success in meeting its goals and objectives, including the goal of directing services to elderly taxpayers.  It has an existing measure, Volume of Taxpayers Served, which is representative of the Program’s success.  Other measures include Volunteer Return Preparation Program Accuracy, Local Partner Satisfaction/Dissatisfaction, National Partner Satisfaction/Dissatisfaction, and Taxpayer Contacts.  Management will continue to use existing measures to gauge performance and expand their focus on targeting the elderly population to enhance Program success.  Management’s complete response to the draft report is included as Appendix VIII.

Office of Audit Comment

Although IRS management agreed that performance measures are necessary to gauge the TCE Program’s success in meeting its goals and objectives, they stated that they have an existing measure, Volume of Taxpayers Served, which is representative of the Program’s success.  However, the IRS does not have performance measures specific to the TCE Program.  For example, it does not measure and report whether the Program is meeting the goal of serving the elderly population.

The IRS did not agree with the potential outcome measure of $3.9 million, which represents the amount of grant funds drawn from the Fiscal Year 2006 TCE Program.  The IRS stated that it has begun implementing several corrective actions to strengthen its financial oversight of the grant program and will continue to work with the United States Department of Health and Human Services to resolve account closings and over-advanced amounts.[4] 

Nevertheless, our test results showed that the IRS does not verify the majority of expenses and does not conduct any analyses to identify whether expenses appear reasonable.  We could not determine if any funds had been spent inappropriately because there were no expense receipts to compare to reported expenses or any documentation to show whether expenses had been verified or analyzed for reasonableness.  Therefore, based on the data provided and tested, we could not determine if the 2006 TCE Program met the intent of the law or successfully directed its services to elderly taxpayers.

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.

 

 

Table of Contents

 

Background

Results of Review

Improvements Are Needed to Ensure That the Most-Qualified Applicants Are Selected and Funds Are Spent Appropriately

Recommendations 1 and 2:

Recommendation 3:

Better Management Information Is Needed to Help Provide Effective Oversight

Recommendation 4:

Performance Measures and Goals Are Needed to Evaluate the Success of the Tax Counseling for the Elderly Program

Recommendation 5:

Appendices

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Outcome Measure

Appendix V – Tax Counseling for the Elderly Program Quarterly/Final Report (Form 8654)

Appendix VI – Geographic Analysis of Fiscal Year 2006 Tax Counseling for the Elderly Program Grantees

Appendix VII – Fiscal Year 2006 Tax Counseling for the Elderly Program Grant Amounts and Tax Return Preparation Activity

Appendix VIII – Management’s Response to the Draft Report

 

 

Abbreviations

 

AARP

American Association of Retired Persons

IRS

Internal Revenue Service

SPEC

Stakeholder Partnerships, Education, and Communication

TCE

Tax Counseling for the Elderly

VITA

Volunteer Income Tax Assistance

STARS

SPEC Taxpayer Assistance Reporting System

 

 

Background

 

The Internal Revenue Service (IRS) Volunteer Program plays an increasingly important role in achieving the IRS’ goal of improving taxpayer service and facilitating participation in the tax system.  The Volunteer Program includes the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) Programs.  The VITA Program offers free tax help for low- to moderate-income (about $39,000 and below) individuals.  The TCE Program provides free tax help to people age 60 and older (hereafter referred to as the elderly).

Over the last 3 calendar years, the Volunteer Program has assisted taxpayers with filing more than 6.5 million Federal income tax returns.  The TCE Program prepared more than one-half of these returns.  Figure 1 provides a breakdown of the volume of tax returns prepared by the Volunteer Program during January through September 2007.

Figure 1:  Tax Returns Prepared by the Volunteer Program
(January - September 2007)

Volunteer Program

Number of Tax Returns Prepared

Percentage

VITA and Colocated VITA*

846,450

34%

Military VITA

272,666

11%

TCE (Non-AARP**)

51,203

2%

TCE (AARP)

1,293,202

52%

Other

23,484

1%

Totals:

2,487,005

100%

Source:  Our analysis of data retrieved from the IRS management information system.
*Colocated VITA = VITA site located in close proximity to a Taxpayer Assistance Center.[5]  
**AARP = American Association of Retired Persons.

The Revenue Act of 1978[6] authorized the TCE Program.  The IRS can enter into agreements with private or nongovernmental, public, nonprofit agencies and organizations to provide training and technical assistance to volunteers who provide free tax counseling and assistance to elderly individuals in the preparation of their Federal income tax returns.  The law authorizes appropriation of special funds, in the form of grants, to provide tax assistance to the elderly.  Treasury Regulations[7] state that all tax preparation provided under this Program must be free of charge and must be provided only to elderly individuals.  The IRS receives the funds as a line item in the budget appropriation. 

An organization interested in becoming a TCE Program grantee must meet the following eligibility criteria prior to submitting an application to the IRS.  A grantee:

1.      Must be a private or public, nonprofit organization that qualifies for exemption status under Section 501 (c) of the Internal Revenue Code of 1986.

2.      Must have experience in coordinating volunteer programs.

3.      Must operate programs that serve and assist elderly individuals.

4.      Cannot be a Federal, State, or local governmental agency or organization.

5.      Must be compliant with “Common Rule Certifications” contained in the Application Package and Guidelines for Managing a TCE Program (Publication 1101).

6.      Must be compliant with applicable civil rights requirements.

Source:  IRS internal guidelines.

 

In 1980, the IRS established the first cooperative agreement in the TCE Program, awarding the American Association of Retired Persons (AARP) a grant of all available funds to operate Tax‑Aide/TCE Program sites.  In Fiscal Year 1992, 57 grantees were accepted into the Program, and the number of applicants awarded grants has remained consistent. 

The TCE Program appropriation was $3.95 million for each of Fiscal Years 2005 through 2007.  Although other organizations have been awarded TCE Program grants since 1980, the AARP receives approximately 85 percent of the Program’s grant funds.  Grants awarded in Fiscal Year 2006 ranged from $1,348 to $46,000 for non-AARP grantees.  The grant awarded to the AARP was $3,435,658.[8]  

Eligible agencies and organizations compete annually for TCE Program grants in compliance with the Federal Grant and Cooperative Agreement Act of 1977.[9]  Applicants apply using Application Package and Guidelines for Managing a TCE Program (Publication 1101).

IRS guidelines are specific as to how funds may be spent.  Volunteers may be reimbursed for costs associated with assisting taxpayers.  Grant funds are used to reimburse volunteers for out‑of-pocket costs including transportation, meals, and other expenses incurred by them in providing tax counseling assistance at locations convenient to taxpayers.  In addition to volunteers’ out‑of‑pocket costs, funds may be used by the grantee organization for administrative expenses.  These include 1) salaries, wages, and benefits of clerical personnel, 2) office supplies and equipment with a unit cost of less than $15, 3) printing and postage costs, 4) installation of telephone lines necessary to service a telephone answering site, 5) rent, utilities, and custodial services when necessary, and 6) costs for interpreter services.  IRS guidelines state that only 30 percent of grant funds awarded can be used for administrative expenses. 

After being awarded the grants, TCE Program grantees are allowed to draw an advance payment of up to one-half of the amount awarded.

Grant funds are maintained and distributed through the United States Department of Health and Human Services Payment Management System.  The IRS enters the grantees and their award amounts into this System.  Grantees draw funds directly from it via direct deposit.  They are allowed to draw an advance payment of up to one-half of the grant amount awarded.  After the initial advance payment, grantees must incur Program expenses before submitting requests for reimbursement.  Expenses are reported to the IRS on the Tax Counseling for the Elderly Program Quarterly/Final Report (Form 8654),[10] which grantees are required to submit to the IRS within 30 business days following the end of each quarter.  Final reports are due to the IRS within 3 months of the end of the Program or no later than December 31.

The Wage and Investment Division Stakeholder Partnerships, Education, and Communications (SPEC) function is responsible for the IRS Volunteer Program.  The objective of the TCE Program is to provide free assistance to elderly taxpayers in the preparation of Federal income tax returns by providing training, technical, and administrative support to volunteers under the direction of nonprofit agencies and organizations that have cooperative agreements with the IRS.

This review was performed at the Wage and Investment Division Headquarters in Atlanta, Georgia, in the SPEC function and at the Oversight and Analysis Staff function in Lanham, Maryland, during the period July through December 2007.  We conducted this performance audit in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective.  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.  Detailed information on our audit objective, scope, and methodology is presented in Appendix I.  Major contributors to the report are listed in Appendix II.

 

 

Results of Review

 

Improvements Are Needed to Ensure That the Most-Qualified Applicants Are Selected and Funds Are Spent Appropriately

The TCE Program accounts for more than one-half of the tax returns prepared in the IRS Volunteer Program.  Nevertheless, only about 62 percent of the Calendar Years 2006 and 2007 tax returns prepared by the TCE Program grantees were prepared for elderly taxpayers.  Figure 2 presents a breakdown of tax returns prepared by the TCE Program for this period. 

Figure 2:  Tax Returns Prepared by the TCE Program
for Calendar Years 2006 and 2007

 

Calendar Year 2006

Calendar Year 2007

Tax Returns Prepared

Non-AARP

AARP

Non-AARP

AARP

Paper Tax Returns Prepared

8,523

236,068

12,590

239,519

Electronic Tax Returns Prepared

31,439

831,802

38,613

1,053,683

Total Tax Returns Prepared

39,962

1,067,870

51,203

1,293,202

Tax Returns Prepared for Elderly Taxpayers

17,691

664,200

25,570

846,764

Percentage of Tax Returns Prepared for Elderly Taxpayers

44%

  62%

50%

65%

Percentage of Tax Returns Prepared for Elderly Taxpayers

62%

65%

Source:  Our analysis of data retrieved from IRS management information systems.

Based on the data provided and tested, we could not determine if the most-qualified applicants were accepted into the TCE Program or if the funds were spent appropriately.  The Program has not been effectively administered.  The IRS does not have an effective process or sufficient internal controls to ensure that the most-qualified applicants were selected.  It also was not effectively monitoring the grantees to ensure that the funds were appropriately spent. 

An integral component of every organization’s management should be a system of internal controls that provides reasonable assurance of the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with applicable laws and regulations.  Internal controls should provide reasonable assurance that the objectives of the TCE Program are being met and that grantees are using funds according to the law and IRS regulations. 

The selection process needs to ensure that the most-qualified applicants are selected

IRS guidelines state:

1.       Members of the TCE Program Panel Review from the SPEC function field offices meet to review/rank all applications. 

2.       Panel Review members are provided with the evaluative criteria with which the applications will be ranked and will base recommended grant amounts for each organization on these criteria and the applicant’s proposal. 

3.       Checklists are provided to ensure that all applications are complete and contain required information and certification documents.

Source:  IRS internal guidelines

IRS Publication 1101 instructs applicants on what they must do to submit an application package, including program and administrative requirements, instructions on how to apply, and an explanation of what happens after acceptance into the TCE Program.  It also defines allowable and unallowable expenses and explains how to manage funds, submit reports, and close out the grants.

Conversely, internal guidelines provide only an overview of the application and selection process.  They include few instructions and procedures on how SPEC function staff should rate applicants, select grantees, and allocate grant funds.

A review of case files for the 58 Fiscal Year 2006 grantees showed that the grantees met all eligibility requirements.  In addition, the grantees submitted required narratives and proposed program plans[11] during the application process.  However, we could not determine from the case files and other available records how many and what organizations applied for Fiscal Year 2006 grants and how the grantees were selected and awarded.  Also, case files contained little support to show that the IRS selected applicants based on their technical evaluation score, the geographic location of the site, and the number of taxpayers who would be served.  Specifically: 

·         Not all applications were logged in, and no documentation existed to show that all applicants were considered.  Lists of applicants and grantees did not agree with paper case files.  A list of applicants contained 65 organizations; a list of grantees contained 60 organizations, but there were 79 applicant case files.  Because of the discrepancy between the lists and the paper files, we could not determine if all application packages were considered.

Comparison of the number of Fiscal Year 2006 TCE Program sites to the elderly population by State showed that Kansas, Missouri, Maine, Minnesota, Oregon, and Vermont had proportionately more sites and Arkansas, Colorado, Delaware, Mississippi, South Carolina, and Virginia had proportionately fewer.

·         The Panel Review was not provided with established criteria or written guidelines to score the individual elements in each application package.  The selection checklist included five categories with multiple subcategories to be scored (weighted) and considered by the Panel Review.  However, no guidance was provided on how to score the subcategories.

·         The SPEC function did not conduct 1) any demographic analyses of elderly taxpayers (either individually by applicant or for the TCE Program as a whole) to weigh applicants’ geographic coverage or 2) any independent analyses of demographics to determine which areas of the country have high populations of elderly taxpayers that would benefit the most from the TCE Program during the application process.  Of the 50 States and the District of Columbia, 12 States (24 percent) had a significantly disproportionate number of Fiscal Year 2006 TCE Program sites based on their elderly populations.  Appendix VI presents an analysis of the demographics for the Fiscal Year 2006 TCE Program grantees. 

·         No specific criteria were used to select the grantees or to determine the amount of the award to grant each organization.  Although each applicant’s package was individually scored, the case files included no support to show why each grantee was selected (e.g., based on individual scores and a numerical ranking or to achieve appropriate geographic coverage).  The IRS explained that officials met, discussed the applicants and application packages, selected the grantees, and judgmentally allocated award amounts.  The officials did not document the rationale for the decisions made.  Additionally, there was no independent review or validation of the applications, Panel rankings, or grant awards. 

The IRS needs to have controls in place to enhance the integrity of the evaluation and selection process.  Without logging in each application when received, it has no assurance that all applicants are considered and treated fairly during the evaluation and selection process.  There were no established criteria or written guidelines for selecting grantees and assigning grant/award amounts.  Without specific criteria, consistent procedures, and internal controls, the IRS has no assurance that the best applicants were selected for the Program and the funds were appropriately allocated. 

The IRS stated that it has begun to take the following corrective actions:  1) requiring that all actions taken on applicants and grantees be documented in the grantee case files, 2) adding evaluative criteria to rank the applications and weighted scoring for serving elderly taxpayers, 3) holding an orientation meeting for the Panel Review and conducting a secondary review of the Panel Review scoring, and 4) including in the application package an analysis of an applicant’s prior years’ data on the number of tax returns prepared for elderly taxpayers and information on its adherence to grant guidelines (e.g., if the grantee submitted forms in a timely manner or had administrative expenses of more than 30 percent). 

Better controls and more monitoring are needed to ensure that grantees are spending funds appropriately

Allowable expenses include:

Reimbursements to volunteers, publicity, and training costs directly and totally associated with the Program.

Salaries, wages, and benefits of clerical personnel.

Office supplies and equipment with a unit cost of less than $15.

Rent, utilities, and custodial services when additional and necessary.

Miscellaneous services, such as printing, postage, insurance, etc.

Installation of telephone lines necessary to service a telephone answering site and/or a telephone line to support electronic filing.

Source:  IRS internal guidelines

Internal guidelines and Publication 1101 provide general instructions on how the grantees should manage and account for grant funds.  Expenses are allowable only for costs that would not have been incurred except for the Program.  However, oversight is limited, and few controls exist to ensure that the funds are spent according to guidelines. 

An analysis of the 58 Fiscal Year 2006 TCE Program grantee case files showed that the IRS does not verify the majority of expenses and does not conduct any analyses to identify whether expenses appear reasonable.  We could not determine if any funds had been spent inappropriately because there were no expense receipts to compare to reported expenses or any documentation to show whether expenses had been verified or analyzed for reasonableness.

·         Case files contained no supporting documentation to verify how grantees spent their grant funds.  Form 8654 categorizes and reports expenses.  However, the case files we reviewed contained no records or receipts supporting the expenses.  Guidelines do not require that grantees submit receipts for certain expenses.  However, receipts are required for travel-related expenses for orientation meetings.  Nonetheless, only two of the eight grantees claiming orientation meeting expenses submitted receipts or supporting documentation.

·         Some grantees spent more than the allowed percentage of grant funds for administrative expenses.  Publication 1101 instructs grantees that no more than 30 percent of the total grant funds awarded may be expended for administrative expenses.  An analysis of the 58 grantees showed 9 (16 percent) reported spending more than 30 percent (or $44,111) of the allowable funds on administrative expenses.  None of the nine case files contained documentation showing any actions were taken to recover these funds.  Six of the nine grantees were awarded Fiscal Year 2007 grants, including the four with the highest percentages of administrative expenses.

·         Grantees reported total costs rather than only TCE Program costs on the Forms 8654, making it difficult to determine how the grantees used the Program funds and if the funds were used appropriately.  Grantees may have operating funds other than TCE Program grant funds, including private donations or other Government grants.  Form 8654 is to be used to report how TCE Program grant funds are spent.  However, Publication 1101 is confusing and unclear as to whether grantees should report all expenses incurred or just those expenses paid out of or allocated to TCE Program grant funds. 

Forty-seven of 58 grantees had funding other than TCE Program funds.  Nine of the 58 reported total costs rather than just those expenses paid for or costs associated with TCE Program funds.  For example, ***3(d)***. 

·         Grantees did not submit Forms 8654 on time.  Final Forms 8654 are to be submitted to the IRS within 90 calendar days of the end of Program activity.  Twelve (21 percent) of the 58 grantees filed late final reports.  Nine (75 percent) of these 12 grantees received TCE Program grants in Fiscal Year 2007.

·         The IRS did not regularly monitor or analyze Forms 8654.  It did not determine if expenses appeared reasonable or needed followup.  Our analyses of various expenses identified some expenses significantly above the average.  Figure 3 shows the results of our analysis of specific expenses reported on Forms 8654.

Figure 3:  Fiscal Year 2006 Expenses Reported by Non-AARP Grantees[12]

 

Travel Expenses

Supply Expenses

Rents

 

Electronic Filing Costs

Average Expenses for the 57 Non‑AARP Grantees

$172

$591

$594

$699

Number of Non-AARP Grantees With Expenses More Than 50% Above Average

11 (19%)

9 (16%)

4 (7%)

12 (21%)

Average Expenses for Non‑AARP Grantees That Reported These Expenses

$350 for
28 Grantees

$648 for
 52 Grantees

$1,692 for
20 Grantees

$1,138 for
35 Grantees

Number of Non-AARP Grantees With Expenses More Than 50% Above Average

5 (18%)

7 (13%)

1 (5%)

6 (17%)

Source:  Our analysis of Fiscal Year 2006 Forms 8654.

In some cases, after our additional analysis (e.g., reviewing the program plan or final narrative, or analyzing sites and tax return preparation activity), the expense, although above average, appeared reasonable. 

·         Grant accounts were not reconciled and closed in a timely manner because either the filing of the final reports by the grantees or the updating of the Payment Management System was not done on time.  Fifteen (26 percent) of the 58 Fiscal Year 2006 grant accounts had not been closed on the Payment Management System as of November 2007.  Ten (67 percent) of these 15 grantees were also awarded Fiscal Year 2007 grants.  When grantee accounts are not closed out, costs the IRS incurs to maintain the accounts on the Payment Management System continue to accrue.  As of November 2007, the 58 grantees had drawn $3,914,625 in grant funds from the Fiscal Year 2006 TCE Program.[13]

If grantees spend more than $500,000 a year in total Federal Government awards, they are required to arrange for an audit–23 of the 58 Fiscal Year 2006 TCE Program grantees met this requirement.

If grantees spend more than $500,000 a year in total Federal Government awards, they are required to arrange for an audit by an independent auditor, in accordance with the Government Auditing Standards developed by the Comptroller General of the United States,[14] and to provide a copy of the audit report to the IRS.  If the grantee does not meet the requirement, the IRS still has the authority to audit expenditures of TCE Program funds, regardless of the dollar amount of Federal Government funding received by the grantee.  Twenty-three of the 58 Fiscal Year 2006 grantees met this requirement.  However, only 4 case files contained the required copies of the audit results.  The other 19 files contained no support that the audits had been completed. 

In October 2006, the SPEC function instituted financial reviews for the TCE Program.  It collaborated with another IRS office to conduct 10 reviews.  The reviewer was to look at receipts and expenditures.  However, only six reviews were completed, with the results of only two being reported to the function.  Additionally, IRS officials stated that SPEC function Headquarters personnel reviewed reports monthly to analyze expenditures drawn from the Payment Management System.  No support for these reviews was provided to us.

The IRS advised us that in October 2007, the SPEC function hired three individuals to conduct annual financial reviews, including visitations.  The results of the reviews will be maintained in the grantee case files, along with recommendations and corrective actions.  If corrective actions are not taken, the IRS will determine the appropriate sanction, including requiring the grantee to return grant funds and removing the grantee from the TCE Program. 

Financial reviews should be an integral part of controls in a grant program.  The IRS should establish controls to track forms and analyze the financial information on Forms 8654 to help identify potential issues.  This would assist the IRS in determining which sites to visit to ensure that the information provided in the reports is accurate or which expenses to verify.  Without an effective monitoring process, the IRS has no assurance that grant funds are being used appropriately and that recipients are complying with the terms and conditions of the grant.

The IRS has already begun corrective actions.  For example, the SPEC function has improved the ranking criteria to ensure equitable ranking among the Panel Review members and among all organizations.  It hired three financial reviewers in October 2007 to conduct financial reviews and visitations to determine if expenses are reasonable.  Additionally, the SPEC function has instituted, as part of the award process, an annual conference call with field offices to discuss TCE Program expectations for the upcoming year and the actions that need to be accomplished.

Recommendations

The Commissioner, Wage and Investment Division, should:

Recommendation 1:  Establish a process and system of controls to ensure that the most-qualified applicants are selected for the TCE Program.  The process and system of controls should 1) track applicants through application/award; 2) establish scoring, ranking, and selection criteria for grantees, including how the grant funds are to be allocated; 3) use historical performance data, when applicable, as a criterion during the selection process; and 4) document steps taken during the grant/award process.  Internal manuals should be updated to reflect the process and controls.

Management’s Response:  IRS management agreed with this recommendation.  They have established scoring, ranking, and selection criteria for grantees that include how the grant funds are allocated, and they used historical performance data in scoring the 2008 applicants.  The SPEC function Grant Program Office will document all actions taken during the year of the grant within each organization’s case file using a history sheet that tracks applicants through the application and award process.  Management will continue to enhance this process by tracking and documenting steps taken during the grant and award process.  They will ensure that internal manuals are updated and accurately reflect these processes and controls. 

Recommendation 2:  Establish a process and system of controls to ensure that grant funds are expended appropriately and grantees are held accountable.

Management’s Response:  IRS management agreed with this recommendation.  They have established a process and system of controls to ensure that grant funds are expended appropriately and that grantees are held accountable.  During Fiscal Year 2007, financial reviews of the TCE Program were instituted to examine policies, procedures, and controls.  Management has developed TCE Financial Review Guidelines and an onsite checklist for use during site reviews.  In October 2007, the SPEC function hired three individuals to conduct such financial reviews on an ongoing, annual basis.  The SPEC function is using the IRS Statistics of Income Office to select the Fiscal Year 2009 TCE Grant Program recipients for reviews that will be conducted following the conclusion of the 2008 Filing Season.[15]

Office of Audit Comment:  The IRS did not agree with the potential outcome measure of $3.9 million, which represents the amount of grant funds drawn from the Fiscal Year 2006 TCE Program.  The IRS stated that it has begun implementing several corrective actions to strengthen its financial oversight of the grant program and will continue to work with the Department of Health and Human Services to resolve account closings and over-advanced amounts. 

Nevertheless, our test results showed that the IRS does not verify the majority of expenses and does not conduct any analyses to identify whether expenses appear reasonable.  We could not determine if any funds had been spent inappropriately because there were no expense receipts to compare to reported expenses or any documentation to show whether expenses had been verified or analyzed for reasonableness.  Therefore, based on the data provided and tested, we could not determine if the 2006 TCE Program met the intent of the law or successfully directed its services to elderly taxpayers.

Recommendation 3:  Revise Publication 1101 and Form 8654 to make it clear that Form 8654 is to be used to report those expenses paid for or allocated to TCE Program grants.

Management’s Response:  IRS management agreed with this recommendation.  In 2007, they developed new processes to ensure that consideration was given as to whether sponsoring organizations were in compliance with administrative program requirements and allocation of funds.  The SPEC function TCE Grant Program Office is in the process of revising Publication 1101 and Form 8654 for use by 2009 TCE Program applicants. 

Better Management Information Is Needed to Help Provide Effective Oversight

Guidelines require that specific information be gathered from TCE Program grantees using various SPEC function reports and Forms 8654.  Although information is to be gathered from the Forms 8654, no central management information system captures these data.  In addition, the current management information system used to capture Volunteer Program activities is not always accurate and does not provide historical data.

Based on the data provided and tested, we could not determine if the 2006 TCE Program successfully directed its services to the elderly population.  The IRS does not have an effective process or sufficient management information to ensure that the Program is operating effectively, efficiently, or as intended by the law or regulations.  Management information is essential to control operations and make decisions and should be an integral component of a system of internal controls.

No system tracks the expectations and performance of TCE Program grantees

Limited TCE Program grant data are captured in a central management information system, which prevents effective and efficient monitoring and tracking.

No centralized IRS management information system captures and controls grantees’ current year activities, including fund withdrawals, expenses reported, and tax preparation assistance.  This information is essential to compare grantee and IRS expectations to accomplishments. 

The SPEC function maintains data for the Volunteer Program in the SPEC Taxpayer Assistance Reporting System (STARS), which includes the profiles and contact information for Program participants and site information.  It also captures the number of taxpayer contacts for outreach activities, along with information about the activity conducted and the number of volunteers at each site, and controls the computers and software used to prepare the tax returns.  The STARS was not designed to capture those data unique to the TCE Program (e.g., award amounts, expectations, funds distributions, expenses, or the number of tax returns prepared for elderly taxpayers).  Thus, the IRS must use manual processes to monitor and oversee the Program, which is time consuming and ineffective. 

The STARS has inaccurate data and does not provide historical data 

IRS guidelines require that all Volunteer Program tax preparation sites be listed on the STARS.  However, the STARS data are limited and not always accurate.  In addition, the System does not maintain historical data and is only a snapshot of current operations.  Historical data must be separately captured, extracted, and stored.

The STARS tracks Volunteer Program organizations and their tax return preparation activity by Site Identification Number and STARS Program Code.  Each Volunteer Program site is to be assigned a unique Site Identification Number, which identifies the original Program type (VITA, Military, AARP, and TCE Program) and the physical location of the site.  TCE Program grantees are instructed to enter the Site Identification Number on all tax returns prepared to ensure that each site receives credit for the tax returns prepared at the site. 

However, tests of Fiscal Year 2006 grantees identified inconsistencies.  When auditors asked for a list of TCE Program sites for Fiscal Years 2006 and 2007, they were provided with three different lists.  Figure 4 shows how the number of sites varied, depending on how the sites were input to the STARS and how the data were queried.

Figure 4:  Number of TCE Program Sites in Fiscal Years 2006 and 2007

 

September 2007

October 2007

November 2007

TCE Program Site

Fiscal Year 2006

Fiscal Year 2007

Fiscal Year 2006

Fiscal Year 2007

Fiscal Year 2006

Fiscal Year 2007

AARP

7,190

7,140

7,209

6,749

7,474

7,150

 

Non-AARP

502

308

253

281

348

298

 

Total Sites

7,692

7,448

7,462

7,030

7,822

7,448

 

Source:  Forms 8654 and the STARS.[16]

An analysis of the data in Figure 4 showed the following discrepancies:

·         18 (32 percent) of the 57 non‑AARP grantees had Site Identification Numbers that identified them as VITA Program sites.  This affected 65 non-AARP TCE Program sites and 6 AARP TCE Program sites.  When Volunteer Program organizations change Programs, they are not required to change their Site Identification Numbers.  The IRS advised us it is too difficult to have the volunteer organizations do this.

·         26 (46 percent) of the 57 non-AARP grantees had sites that did not have unique Site Identification Numbers.  

The SPEC function reports total volunteer assistance and does not report by Program type.  SPEC function analysts stated that they can obtain data on the TCE Program using a STARS Program Code.  However, when we attempted to do this, we identified 51 sites with incorrect Program Codes.  

The STARS has been unable to track sites by grantee/organization.  Therefore, determining activity by grantee has not been possible.  Not all Fiscal Year 2006 sites listed in Appendix VI were associated with the grantees, requiring that Individual Site Identification Numbers be queried and then manually totaled.  

The SPEC function is aware of these problems and is planning corrective actions.  It plans to issue letters to its field offices requiring them to ensure that data entered in the STARS are accurate, including Program Codes and Site Identification Numbers.  The field offices are also to ensure that the grantees and all their sites are linked within the STARS. 

Finally, the STARS does not maintain historical information.  Therefore, the IRS does not have records with which to gauge the progress of the TCE Program or the historical performance of the grantees.  For example, the System cannot be queried to determine which grantees participated in a prior year and how many tax returns they prepared.  This can be accomplished only if data have been extracted and maintained outside the System.

Recommendation

Recommendation 4:  The Commissioner, Wage and Investment Division, should develop a management information system to oversee, control, and measure the TCE Program’s activities and goals.  The system should capture grantees’ historical and current year information and include information about the grantee such as 1) the number of sites and geographic dispersion; 2) grantee awards requested, made, and spent; 3) grant funds distributed and returned; 4) grantee expectations and planned activity; 5) grantee expenses related to the Program; and 6) actual tax returns prepared by the grantee for all taxpayers and elderly taxpayers.

Management’s Response:  IRS management agreed with this recommendation.  They agreed to the benefits of using a management information system to capture and retain data to measure TCE Program activities and effectiveness.  However, they will not be developing a new management information system because of the President’s E-Gov Initiatives (M-04-08), which were created to avoid duplication of information systems.  They will explore use of a database used by the Low Income Tax Clinic Office for administering its grants, as well as other existing databases, for comparative analysis of capabilities and adaptation to fit the TCE Program needs. 

Performance Measures and Goals Are Needed to Evaluate the Success of the Tax Counseling for the Elderly Program

Performance measures reported by the SPEC function for its Volunteer Program:

Percentage of Individual Returns Prepared Electronically

Number of Taxpayer Contacts

Number of Tax Returns Prepared

Source:  Wage and Investment Division Strategy and Program Plan Fiscal Year 2008 – Fiscal Year 2009

The Government Performance and Results Act of 1993[17] states that agencies should establish general goals and objectives, including those that are outcome-related, for the major functions and operations of the agency.  Neither the SPEC function’s $69 million budget (which includes the Volunteer Program) nor the TCE Program’s almost $4 million in grant funds is significant to the IRS’ more than $10 billion budget.  Nevertheless, the Volunteer Program plays an increasingly important role in achieving the IRS’ goal of improving taxpayer service and facilitating participation in the tax system.  Additionally, the TCE Program is a Federal Government grant program and is currently a significant contributor to the Volunteer Program. 

Regulations require grant funds to be used for tax return preparation only for elderly individuals.  IRS guidelines state that, “All tax return preparation assistance provided under the TCE Program must be provided free of charge to taxpayers and must target the elderly population.  The Program must be designed and operated to provide assistance to such individuals.” 

Because the IRS had insufficient data and management information, we could not determine if the TCE Program had directed its resources and services to the elderly population and if the current level of tax preparation for the elderly represents success.  Additionally, a lack of historical data on the TCE Program, including performance measures specific to it, prevented us from determining if the Program needs improvement or is improving. 

Furthermore, the IRS does not evaluate the effectiveness of the individual grantees in meeting expectations, in successfully serving elderly taxpayers, or on the return on investment or average cost of tax returns prepared (i.e., the number of tax returns prepared with the grant funds awarded).  Our analyses showed:

·         Although approximately 62 percent of the tax returns prepared by the TCE Program were prepared for elderly taxpayers in Calendar Year 2006, only 27 (47 percent) of the 58 TCE Program grantees prepared the majority of their tax returns for elderly taxpayers in Fiscal Year 2006.  Appendix VII presents a list of awards and the numbers and percentages of tax returns prepared for elderly taxpayers with the award funds. 

·         The average cost per tax return prepared, according to IRS records, was approximately $3.57, with a range of $1 to $3,200.[18]  Using the number of tax returns the grantees reported preparing on Forms 8654, the average cost per tax return was approximately $3.13, with a range of $1 to $341.  Appendix VII presents a list of each grantee’s average cost per tax return.

The IRS should analyze TCE Program information at the end of each fiscal year to assess each grantee’s accomplishments as well as those of the Program as a whole.

During Fiscal Year 2006, the IRS used $10 to evaluate each applicant’s expected cost per tax return prepared.  IRS officials advised us that, for Fiscal Year 2008, they have increased this to $16 to better reflect current costs.  They stated that this estimate is to be used to determine a reasonable amount of TCE Program grant funds, based on the applicant’s projected tax return preparation. 

However, this type of information must be closely analyzed to evaluate the applicants’ projected activities and to determine if they met expectations.  The IRS should analyze all information from Form 8654, along with data from the grantee’s various computer systems, at the end of each fiscal year to assess each grantee’s accomplishments as well as those of the TCE Program as a whole.  These analyses are essential in determining if each grantee and the TCE Program are meeting the Program’s goals and objectives.

In Fiscal Years 2005 to 2007, the IRS increased volunteer tax return preparation from 1.9 million to 2.5 million tax returns and improved the accuracy rate of tax returns prepared by its volunteers from 0 percent to 56 percent.  It plans to continue expanding and improving the Volunteer Program.  When asked their plans and expectations for the TCE Program, IRS officials stated that they would be contacting the Taxpayer Services Program Management Office to determine how the VITA and TCE Programs fit into the IRS Taxpayer Assistance Blueprint, which is the IRS’ strategic plan for the future of service delivery.  It presents portfolios of service improvements, performance measures, and additional research projects to provide a foundation for the future of service at the IRS.

Without TCE Program historical data and performance measures, the IRS cannot readily determine how the Program fits into its overall taxpayer service strategy, whether it is effectively directing services to the elderly population, and whether it is cost effective.  The IRS needs to develop management information systems and performance measures to determine if the TCE Program is meeting the intent of the law and primarily serving the elderly.

Recommendation

Recommendation 5:  The Commissioner, Wage and Investment Division, should establish performance measures to gauge the TCE Program’s success in meeting its goals and objectives, including directing services to elderly taxpayers.

Management’s Response:  IRS management agreed with this recommendation, stating that they have an existing measure, Volume of Taxpayers Served, which is representative of the TCE Program’s success.  A variety of other measures is outlined in the 2008 SPEC Business Plan and the Wage and Investment Strategy and Program Plan.  These measures include Volunteer Return Preparation Program Accuracy, Local Partner Satisfaction/Dissatisfaction, National Partner Satisfaction/Dissatisfaction, and Taxpayer Contacts.  Management will continue to use existing measures to gauge performance and expand their focus on targeting the elderly population to enhance Program success. 

Office of Audit Comment:  Although IRS management agreed that performance measures are necessary to gauge the TCE Program’s success in meeting its goals and objectives, they stated that they have an existing measure, Volume of Taxpayers Served, which is representative of the Program’s success.  However, the IRS does not have performance measures specific to the TCE Program.  For example, it does not measure and report whether the Program is meeting the goal of serving the elderly population.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

Our objective was to determine whether the TCE Program is effectively administered and is in compliance with legal requirements.  To accomplish this objective, we:

I.                   Determined whether the IRS established adequate procedures and controls to ensure that 1) grantees meet TCE Program requirements and 2) the IRS was meeting the Program’s objective and goals. 

A.    Determined the method used to solicit applications for the Program.

B.     Identified the application process and determined how the grantees were selected to participate in the Program by reviewing internal guidelines and Application Package and Guidelines for Managing a TCE Program (Publication 1101) and by:

1.      Reviewing the 58 Panel Review Application Packages for the Fiscal Year 2006 Program.  We reviewed and tested Fiscal Year 2006 because this was the most recent year for which all closing actions should have been taken on grantee files.

2.      Comparing the performance (number of returns prepared, number of taxpayers assisted excluding returns prepared, etc.) for returning grantees to determine whether they should have been selected based on prior performance.

3.      Reviewing the documentation of the Notification of the Award Decisions to determine whether all grantees were provided sufficient notification.

II.                Interviewed the United States Department of Health and Human Services employees responsible for the TCE Program grants and determined the procedures used to reimburse the Program grantees as well as what controls were in place to safeguard funds and ensure that funds were expended according to the law.

III.             Determined whether the IRS established adequate financial controls to ensure that all TCE Program funds were safeguarded and expended according to the law.

A.    Determined whether the IRS had procedures to review financial information submitted by Program grantees.

B.     Determined whether the IRS effectively validated the financial information reported by Program grantees during the site visits by reviewing documentation of site visits and comparing the onsite financial information to that submitted to the Program office to determine the accuracy of reported information.

C.     Determined whether the IRS had adequate procedures for collecting unexpended funds and transferring these funds to other taxpayer services before fiscal yearend.

D.    Ascertained whether the IRS was accurately recording Program grant payments.

E.     Reviewed the status of corrective actions taken by the IRS in response to the recommendations related to financial management of Program grantees.

IV.             Determined whether the TCE Program grantees were properly managing grant funds.

A.    Reviewed applicable legislation, Office of Management and Budget policies, and IRS procedures to determine all requirements.

B.     Determined whether any Fiscal Year 2006 Program grantees had unexpended grant funds at the end of the grant period and whether these funds were returned to the IRS by reviewing reports and comparing amounts of funds received to funds expended and/or returned. 

V.                Determined whether the SPEC function was ensuring that the TCE Program grantees were directing services to the appropriate population and providing appropriate coverage to elderly taxpayers.

A.    Obtained data from IRS computer systems and United States census data to determine the volume of tax returns filed electronically and by paper for Tax Processing Years 2006 and 2007.  We also determined geographic dispersion.  For each fiscal year, we validated a judgmental sample of 30 records from the data obtained from IRS computer systems by researching the Integrated Data Retrieval System[19] and matching the information.

B.     Analyzed the data and determined whether the Program grantees and sites were located where the elderly populations were located.

 

Appendix II

 

Major Contributors to This Report

 

Michael E. McKenney, Assistant Inspector General for Audit (Wage and Investment Income Programs)

Augusta R. Cook, Director

Paula W. Johnson, Audit Manager

Jackie E. Forbus, Lead Auditor

Lynn Faulkner, Senior Auditor

Tracy Harper, Senior Auditor

Jean Bell, Auditor

Joe Butler, Information Technology Specialist

Kevin O’Gallagher, Information Technology Specialist

Jeff Williams, Information Technology Specialist

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Deputy Commissioner for Services and Enforcement  SE

Deputy Commissioner, Wage and Investment Division  SE:W

Director, Customer Assistance, Relationships, and Education, Wage and Investment Division  SE:W:CAR

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

 

Outcome Measure

 

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

Type and Value of Outcome Measure:

·         Reliability of Information – Potential; $3,914,625 (see page 4).

Methodology Used to Measure the Reported Benefit:

We examined documentation obtained from the IRS SPEC function and from the United States Department of Health and Human Services to determine amounts received by the 58 Fiscal Year 2006 TCE Program grantees.  These grantees received $3,914,625 in Fiscal Year 2006 Program awards as of November 2007.  Because of the lack of internal controls, stakeholders cannot rely on the information the IRS is reporting about the Program’s operations.

 

Appendix V

 

Tax Counseling for the Elderly Quarterly/Final Report
(Form 8654)

 

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 VI

 

Geographic Analysis of Fiscal Year 2006
Tax Counseling for the Elderly Program Grantees

 

Ranking by Number of TCE Program Sites

Ranking by the State’s Elderly Population

State

Total
 Population by State

State's Elderly Population

Number of AARP Sites

Number of
Non-AARP Sites

Total Number of TCE Program Sites

1

3

NEW YORK

19,306,183

3,415,729

514

130

644

2

1

CALIFORNIA

36,457,549

5,373,476

577

25

602

3

5

PENNSYLVANIA

12,440,621

2,487,309

402

21

423

4

4

TEXAS

23,507,783

3,244,467

361

7

368

5

16

MISSOURI

5,842,713

1,052,540

208

136

344

6

7

OHIO

11,478,006

2,060,785

331

6

337

7

2

FLORIDA

18,089,889

3,968,253

333

 

333

8

6

ILLINOIS

12,831,970

2,075,063

297

7

304

9

14

MASSACHUSETTS

6,437,193

1,161,333

298

 

298

10

9

NEW JERSEY

8,724,560

1,539,180

241

21

262

11

21

MINNESOTA

5,167,101

851,910

258

 

258

12

17

WASHINGTON

6,395,798

1,038,082

238

 

238

13

18

INDIANA

6,313,520

1,065,690

223

14

237

14

8

MICHIGAN

10,095,643

1,726,673

194

34

228

15

19

WISCONSIN

5,556,506

974,028

199

2

201

16

20

MARYLAND

5,615,727

906,755

191

1

192

17

28

OREGON

3,700,758

653,847

153

 

153

18

10

NORTH CAROLINA

8,856,505

1,493,958

140

11

151

19

11

GEORGIA

9,363,941

1,302,053

144

 

144

20

33

KANSAS

2,764,075

476,582

114

1

115

21

22

ALABAMA

4,599,030

839,067

41

66

107

22

13

ARIZONA

6,166,318

1,064,491

98

 

98

23

15

TENNESSEE

6,038,803

1,067,781

97

 

97

24

25

KENTUCKY

4,206,074

740,978

88

8

96

25

27

CONNECTICUT

3,504,809

639,905

91

 

91

26

39

MAINE

1,321,574

262,269

87

 

87

27

30

IOWA

2,982,085

574,144

80

 

80

28

37

NEBRASKA

1,768,331

308,200

72

7

79

29

47

VERMONT

623,908

116,980

75

 

75

30

12

VIRGINIA

7,642,884

1,238,524

70

 

70

31

24

LOUISIANA

4,287,768

722,289

69

 

69

32

41

IDAHO

1,466,465

236,145

69

 

69

33

23

SOUTH CAROLINA

4,321,249

778,695

68

 

68

34

29

OKLAHOMA

3,579,212

642,346

66

 

66

35

45

DELAWARE

853,476

158,690

62

 

62

36

42

NEW HAMPSHIRE

1,314,895

230,035

61

 

61

37

26

COLORADO

4,753,377

682,865

55

5

60

38

35

WEST VIRGINIA

1,818,470

377,447

60

 

60

39

43

RHODE ISLAND

1,067,610

199,678

52

 

52

40

34

NEVADA

2,495,529

396,998

48

 

48

41

40

HAWAII

1,285,498

243,893

47

 

47

42

36

NEW MEXICO

1,954,599

331,269

46

 

46

43

31

ARKANSAS

2,810,872

529,952

44

 

44

44

44

MONTANA

944,632

180,365

44

 

44

45

38

UTAH

2,550,063

309,236

43

 

43

46

32

MISSISSIPPI

2,910,540

494,756

41

 

41

47

51

DISTRICT OF COLUMBIA

581,530

97,668

25

 

25

48

50

ALASKA

670,053

71,812

23

 

23

49

46

SOUTH DAKOTA

781,919

145,378

22

 

22

50

49

WYOMING

515,004

88,965

17

 

17

51

48

NORTH DAKOTA

635,867

121,546

13

 

13

Source:  Our analysis of United States census data and IRS TCE Program data.

Appendix VII

 

Fiscal Year 2006 Tax Counseling for the Elderly Program
Grant Amounts and Tax Return Preparation Activity

 

 

Number of Tax Returns Reported Per

Percentage of Tax Returns Prepared for Elderly Taxpayers Per

Return on Investment[20] Per

Grant Amount

Forms 8654

IRS Computer System

Forms 8654

IRS Computer System

Forms 8654

IRS Computer System

$1,348

430

14

47%

57%

$3

$96

$1,700

1,681

1,101

61%

44%

$1

$2

$1,786

266

288

20%

19%

$7

$6

$1,800

480

358

20%

13%

$4

$5

$1,821

550

412

100%

73%

$3

$4

$2,000

357

309

100%

91%

$6

$6

$2,510

415

95

100%

69%

$6

$26

$2,569

100

75

42%

51%

$26

$34

$2,600

646

1

40%

0%

$4

$2,600

$2,618

321

184

100%

93%

$8

$14

$2,700

797

561

75%

68%

$3

$5

$2,900

2,035

296

50%

17%

$1

$10

$2,951

34

11

62%

64%

$87

$268

$3,000

213

87

100%

79%

$14

$34

$3,000

338

146

100%

90%

$9

$21

$3,000

1,267

501

76%

71%

$2

$6

$3,150

900

586

95%

77%

$4

$5

$3,200

527

0

100%

0%

$6

$3,200[21]

$3,200

747

28

63%

43%

$4

$114

$3,500

48

13

100%

38%

$73

$269

$3,500

1,369

1,289

32%

33%

$3

$3

$3,583

1,177

501

14%

11%

$3

$7

$3,800

181

124

7%

44%

$21

$31

$4,900

518

433

15%

48%

$9

$11

$4,922

701

690

70%

38%

$7

$7

$5,000

174

171

41%

37%

$29

$29

$5,000

968

68

10%

37%

$5

$74

$5,400

1,032

496

47%

17%

$5

$11

$5,500

979

745

36%

33%

$6

$7

$6,239

429

174

100%

89%

$15

$36

$6,340

669

616

69%

71%

$9

$10

$6,400

286

206

82%

40%

$22

$31

$6,500

1,710

804

100%

66%

$4

$8

$7,000

654

595

100%

89%

$11

$12

$7,000

666

511

42%

59%

$11

$14

$7,000

1,199

487

70%

72%

$6

$14

$7,200

1,636

1,394

15%

17%

$4

$5

$7,500

22

16

27%

31%

$341

$469

$7,500

658

358

61%

36%

$11

$21

$7,500

1,403

803

37%

32%

$5

$9

$7,900

217

118

100%

64%

$36

$67

$8,000

448

426

98%

88%

$18

$19

$9,500

1,023

999

19%

17%

$9

$10

$9,800

3,734

2,640

40%

46%

$3

$4

$10,800

1,552

11

50%

27%

$7

$982

$11,000

1,011

812

82%

77%

$11

$14

$13,000

723

262

75%

66%

$18

$50

$13,000

3,512

1,243

53%

67%

$4

$10

$15,865

745

616

46%

46%

$21

$26

$16,500

864

390

17%

20%

$19

$42

$22,000

1,229

1,088

17%

31%

$18

$20

$26,000

2,502

2,221

100%

85%

$10

$12

$29,500

1,898

1,642

44%

43%

$16

$18

$30,000

1,794

1,586

33%

35%

$17

$19

$33,140

1,195

875

57%

57%

$28

$38

$40,000

6,380

5,499

66%

16%

$6

$7

$46,000

2,800

1,773

80%

71%

$16

$26

$3,435,658

1,199,567

1,067,872

100%

62%

$3

$3

Source:  Our analysis of TCE Program data and data retrieved from IRS management information systems containing Tax Year 2006 filing information.

 

Appendix VIII

 

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] The TCE Program, which is part of the Internal Revenue Service Volunteer Program, provides free tax assistance to people age 60 and older (hereafter referred to as the elderly).  The law authorizes an appropriation of special funds, in the form of a grant, to the TCE Program.

[2] Application Package and Guidelines for Managing a TCE Program (Publication 1101) and Tax Counseling for the Elderly Program Quarterly/Final Report (Form 8654).

[3] The period from January through mid-April when most individual income tax returns are filed.

[4] Grant funds are maintained and distributed through the Health and Human Services Payment Management System.

[5] These are IRS offices with employees who answer questions, provide assistance, and resolve account-related issues for taxpayers face to face.

[6] Pub. L. No. 95-600, 92 Stat. 2810.

[7] Treas. Reg. Section 601.803(c) (1979).

[8] See Appendix VII for a list of grantee amounts awarded for Fiscal Year 2006.

[9] Pub. L. No. 95-224, 92 Stat. 3, February 3, 1978, codified at 31 U.S.C. Chapter 63. 

[10] See Appendix V.  Form 8654 reports, for example, administrative expenses, total costs, and funds advanced, in addition to actual tax preparation activity such as the number of individual Federal tax returns prepared and filed on paper and electronically and the number of taxpayers assisted (excluding tax return preparation) for the elderly and others.

[11] A program plan provides a narrative on what the applicant has done in the past or existing programs and should include the overall plans to ensure compliance with laws and regulations, method to recruit and train volunteers, funds needed, type of program and site publicity, and plan for electronic filing services.

[12] The AARP was not included in this analysis because the grant award and expense amounts claimed by the AARP skewed the averages.

[13] See Appendix IV.

[14] Audit requirements applicable to grant recipients are described in Office of Management and Budget Circular A‑133, Audits of States, Local Governments, and Non-Profit Organizations, 62 FR 35278-35302 (June 30, 1997). 

[15] The period from January through mid-April when most individual income tax returns are filed.

[16] Data were extracted from static files that had been downloaded from the STARS and separately maintained.

[17] Pub. L. No. 103-62, 107 Stat. 285 (codified as amended in scattered sections of 5 U.S.C., 31 U.S.C., and 39 U.S.C.).

[18] For one grantee, we used total cost for one return as $3,200 because IRS records showed no returns were filed by this grantee.

[19] This is the IRS computer system capable of retrieving or updating stored information.  It works in conjunction with a taxpayer’s account records.

[20] Averages have been rounded to the nearest dollar.

[21] We used total cost for one return as $3,200 because IRS computers showed no returns were filed by this grantee.