RECOVERY ACT
Additional Actions Are Needed to Ensure Readiness to Comply With the American Recovery and Reinvestment Act of 2009 Procurement Requirements
June 28, 2010
Reference Number: 2010-11-071
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) = Other Identifying Information of an Individual or Individuals
Phone Number |
202-622-6500
Email Address | inquiries@tigta.treas.gov
Website |
http://www.tigta.gov
HIGHLIGHTS
ADDITIONAL
ACTIONS ARE NEEDED TO ENSURE READINESS TO COMPLY WITH THE AMERICAN RECOVERY AND
REINVESTMENT ACT OF 2009 PROCUREMENT REQUIREMENTS
Highlights
Final
Report issued on June 28, 2010
Highlights of Reference Number:
2010-11-071 to
the Internal Revenue Service Deputy Commissioner for Operations Support and Deputy Commissioner for
Services and Enforcement.
IMPACT ON TAXPAYERS
The Internal Revenue Service (IRS) received an
appropriation of $203 million in American Recovery and
Reinvestment Act of 2009 (Recovery Act) funds.
TIGTA determined that the IRS did not always comply with Recovery
Act procurement requirements and used annual appropriated funds instead of
Recovery Act funds for some procurements.
As a result, approximately $385,000 was not available for other IRS
mission-critical needs, such as improving taxpayer service or addressing the
tax gap.
WHY TIGTA DID THE AUDIT
This audit
was initiated to determine the IRS’ readiness to implement the requirements of
the Recovery Act in planning, awarding, and reporting Recovery Act-funded procurements. The Recovery Act provided separate funding to
TIGTA to provide oversight of IRS programs.
This audit was conducted using Recovery Act funds.
WHAT
TIGTA FOUND
The IRS took
some proactive steps before the Recovery Act was enacted in February 2009 and continued to
refine its efforts to plan, award, and report Recovery Act procurements during
the remainder of Calendar Year 2009.
However, it still does not have the necessary controls in place to
ensure future procurements will comply with Recovery Act requirements. For example, the IRS has not developed
written procedures regarding Recovery Act procurement requirements, provided
formal training for those procuring goods and services, or dedicated sufficient
resources to track and report Recovery Act procurements.
TIGTA reviewed 10 procurements from the IRS’ Recovery Act Procurement
Plans and determined that 2 did not comply with the new procurement
requirements. In addition, the IRS used annual appropriated
funds instead of Recovery Act funds for 6 of the 10 procurements. The IRS
will continue to be at risk of noncompliance until IRS management provides the
necessary oversight and guidance to IRS program office and procurement
personnel.
One aspect of
the Recovery Act’s transparency and accountability requirements does not apply
to IRS contractors. IRS contractors
receiving Recovery Act funds are not required to report information on
Recovery.gov, including how the funds were used, any jobs created or retained,
and executive compensation package information.
As a result, the public will not know how IRS contractors used the $31.9
million in Recovery Act funds paid out as of February 19, 2010.
WHAT TIGTA RECOMMENDED
TIGTA
recommended that the IRS strengthen controls for Recovery Act procurements,
including developing written procedures, providing training to both program
office and procurement personnel, and reevaluating the resources assigned to
track and report IRS Recovery Act procurements.
The IRS agreed
with the recommendation. Once the
Department of the Treasury issues updated guidance, the IRS plans to issue a
new policy memorandum and meet with IRS operating divisions and program
personnel to discuss the policy. The IRS
has increased procurement staffing to provide coverage and backup, and it plans
to periodically assess staffing assignments to ensure continued coverage for
Recovery Act procurements.
June 28, 2010
MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT
FROM: (for) Michael R. Phillips /s/ Margaret E. Begg
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Additional Actions Are Needed to Ensure Readiness to Comply With the American Recovery and Reinvestment Act of 2009 Procurement Requirements (Audit # 200910124)
This report presents the results of our review to determine the Internal Revenue Service’s (IRS) readiness to implement the requirements of the American Recovery and Reinvestment Act of 2009 (Recovery Act)[1] in planning, awarding, and reporting Recovery Act-funded procurements. This report is consistent with Office of Management and Budget guidance[2] to identify high-risk programs and create quicker turnaround reporting. This review is included in our Fiscal Year 2010 Annual Audit Plan and addresses the major management challenge of Leveraging Data to Improve Program Effectiveness and Reduce Costs.
The Recovery Act provides separate funding to the Treasury
Inspector General for Tax Administration through September 30, 2013, to be used
in oversight activities of IRS programs.
This audit was conducted using Recovery Act funds.
Management’s complete response to the draft report is included as Appendix VII.
Copies of this report are also being sent to the IRS managers affected by the report recommendation. Please contact me at (202) 622-6510 if you have questions or Nancy A. Nakamura, Assistant Inspector General for Audit (Management Services and Exempt Organizations), at (202) 622-8500.
Additional Actions Are
Necessary to Ensure Readiness With Recovery Act Procurement Requirements
Use of Recovery Act Funds Are
Reported to the Department of the Treasury
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
V – Recovery Act Contract Award Requirements
Appendix VI – Recovery
Act Recipient Reporting Requirements
Appendix
VII – Management’s Response to the Draft Report
|
FAR |
Federal Acquisition Regulation |
|
FedBizOpps |
Federal Business Opportunities |
|
FPDS |
Federal Procurement Data System |
|
IRS |
Internal Revenue Service |
|
OMB |
Office of Management and Budget |
Enacted on February 17, 2009, the American Recovery and Reinvestment Act of 2009 (Recovery Act)[3] contained both spending and tax provisions of $787 billion over 10 years designed to stimulate the national economy by creating and retaining jobs. Because some of the tax provisions were effective for the 2009 Filing Season,[4] the Internal Revenue Service (IRS) began planning for the tax law changes[5] before the Recovery Act was enacted. This involved identifying the potential new tax law and administrative changes; revising the various tax forms, instructions, and publications; and reprogramming its computer systems to ensure tax returns would be accurately processed. In April 2009, the IRS received its appropriation of $203 million in Recovery Act funds, which were to be used to implement the necessary tax changes as a result of the Recovery Act provisions.
The Recovery Act also contained unprecedented reporting requirements to enable the public to track who has received Recovery Act funds and how the funds were used to stimulate the economy. The Office of Management and Budget (OMB)[6] issued several supplemental guidance documents[7] that outlined steps for implementing the Recovery Act and also clarified the new requirements for processing procurements. For example, presolicitation and contract award notices must be posted on the Federal Business Opportunities (FedBizOpps)[8] system so the public will be aware of Recovery Act procurement opportunities. In addition, the Department of the Treasury issued an Acquisition Bulletin[9] on February 19, 2009, as well as informal guidance to its bureaus and offices on the use and reporting of Recovery Act funds, including a requirement for Department of the Treasury approval before Recovery Act procurements are awarded.
In addition, each Federal agency was required to conduct risk assessments to identify any potential areas that could adversely affect its implementation of the Recovery Act provisions. Agencies were also required to develop specific plans for spending their allocated portion of the Recovery Act funds. The Department of the Treasury required the IRS to submit weekly Recovery Act procurement plans, program reports, and financial reports[10] on how it is spending the funds. Federal agencies receiving Recovery Act funds were required to post these reports on Recovery.gov.[11] The IRS’ Recovery Act procurement plan initially listed 41 procurements with an estimated total value of $96.7 million. As of August 20, 2009, because of the consolidation and removal of some of the procurements, there were 32 procurements with an estimated total value of $83.9 million.
This review
was performed at the IRS Office of Procurement in
While the IRS took some proactive steps before the Recovery Act was enacted in February 2009 and continued to refine its efforts to plan, award, and report Recovery Act procurements during the remainder of Calendar Year 2009, it still does not have the necessary controls in place to ensure future procurements will comply with Recovery Act requirements. For example, the IRS has not developed written procedures regarding Recovery Act procurement requirements, provided formal training for those procuring goods and services, or dedicated sufficient resources to track and report Recovery Act procurements. As a result, 2 of the 10 procurements we reviewed did not comply with the new requirements. The IRS will continue to be at risk of noncompliance with Recovery Act requirements until IRS management provides the necessary oversight and guidance to IRS program office and procurement personnel.
In addition, we noted there is one aspect of the Recovery Act’s transparency and accountability requirements that does not apply to IRS contractors.[13] IRS contractors receiving Recovery Act funds are not required to report information on Recovery.gov, including how the funds were used, any jobs created, and executive compensation packages. As a result, the public will not know how IRS contractors used the $31.9 million in Recovery Act funds paid out as of February 19, 2010.
Additional Actions Are Necessary to Ensure Readiness With Recovery Act Procurement Requirements
Because the Recovery Act was enacted after the start of the 2009 Filing Season, the Office of Procurement had to award several procurements before the new funds were available. The IRS awarded the procurements using annual appropriated funds[14] and intended to replace them once Recovery Act funds were available. OMB implementing guidance did not specifically comment on this practice. The guidance stated that agencies are required to maintain Recovery Act funds separately from other appropriated funds for tracking and reporting purposes.
The Office of Procurement took some initial steps to prepare for Recovery Act procurements, including coordinating with the Department of the Treasury on the Department’s requirements and designating ***3(d)*** to oversee the IRS’ implementation of the Recovery Act requirements. However, additional preparation was needed to ensure the IRS was ready to comply with the Recovery Act procurement requirements.
Initial actions to prepare for Recovery Act procurements were not sufficient
Although IRS senior management reacted quickly to implement the Recovery Act tax provisions, they did not provide sufficient oversight to ensure the IRS was adequately preparing for the new procurement requirements. The I***3(d)***** ensured the IRS business units conducted risk assessments required by OMB implementing guidance; however, the risk assessments did not adequately assess procurement risks, and the Office of Procurement did not conduct a separate risk assessment of its own. Further, IRS management did not ensure program office and procurement staff were sufficiently trained and prepared to properly plan, award, and report Recovery Act procurements.
One of the reasons for the insufficient oversight may have been the nature of the procurements needed for the Recovery Act. These procurements were related to the normal filing season updates, and the IRS had existing contracts in place for these updates, including those needed for the Recovery Act tax provisions. As a result, except for some additional tracking and reporting necessary to meet the accountability and transparency requirements of the Recovery Act, the Office of Procurement did not see any significant difference in processing procurements for the Recovery Act. However, the IRS did not sufficiently prepare for the following new requirements for Recovery Act procurements:
In addition, IRS management did not perform an adequate review of the June 2009 OMB implementing guidance to gain a full understanding of the requirement for contract recipients to report on Recovery.gov.[15] There was initial confusion on this requirement because the expectation was that all recipients of Recovery Act funds would be held to this requirement, yet the June 2009 guidance that listed the specific Government agencies and programs that were required to comply did not include IRS programs on the list. The IRS Office of Procurement initially thought that this requirement would apply to IRS contractors as it did to other Federal Government contractors receiving Recovery Act funding. When IRS contractors questioned this reporting requirement, IRS management sought clarification in September 2009 from the OMB, which agreed that IRS contractors would not be subject to this requirement.
Another concern was that the IRS decided not to use Recovery Act funds for 6 of the 10 planned Recovery Act procurements we reviewed where the procurements were awarded before Recovery Act funds were available. The following procurements were not converted to Recovery Act funds:
The IRS advised us that the labor-intensive administrative
burden outweighed the benefits of using Recovery Act funds and that it decided
not to modify the procurements to bring them into compliance with the Recovery
Act procurement requirements. However,
this meant that the $385,421 for these 6 procurements was not available for other
IRS mission-critical needs, such as improving taxpayer service or addressing
the tax gap. IRS management advised us that because this was a small portion of the
overall IRS budget, they did not believe it was necessary to convert these six procurements
to Recovery Act funds.
Aspects of initial procurements were noncompliant
To evaluate whether the IRS was taking the necessary actions to prepare for the new requirements of the Recovery Act, we selected a judgmental sample[16] of 9 of the 32 Recovery Act procurements as of August 20, 2009. We also selected 1 procurement from the 34 Recovery Act procurements as of June 19, 2009, for a total sample of 10 procurements. We reviewed the procurement files and interviewed the procurement and program office staff involved in the procurements to determine whether they were aware of and understood the new procurement requirements. At the time of our interviews in September and October 2009, the program office and procurement staff indicated they were either aware of the Recovery Act requirements, or would ask the ***3(d)*** if they had any questions. However, two of our sampled procurements that were awarded before these interviews were held had some noncompliance issues, indicating there was still some confusion during the months after the Recovery Act took effect. Specifically, we found that:
In 2 instances, Recovery Act-related procurements valued at a
combined $2 million were initially awarded prior to the Recovery Act funds
being available. Once the funds became available, the IRS attempted to
use one modification for each procurement (one in May 2009 and the second in
June 2009) to deobligate[17] the annual appropriated funds and obligate
the Recovery Act funds. However, this
resulted in the IRS commingling[18] Recovery Act funds for both procurements,
which is prohibited by the Act. The
Office of Procurement was not aware at the time that the deobligation of the
annual appropriated funds and obligation of the Recovery Act funds in the same
transaction was considered a commingling of funds.[19] To
comply with the Recovery Act, the IRS should have handled all Recovery Act
funding transactions as separate transactions on separate modifications. The IRS issued separate modifications in June
and July 2009 to include the required Recovery Act clauses.
In addition, the
Office of Procurement did not obtain the Department of the Treasury approval
prior to awarding one of the procurements.
The Contracting Officer did not realize the procurement was related to
the Recovery Act. The IRS worked with the
Department of the Treasury on this procurement and has obtained
“after-the-fact” approval for the procurement to use Recovery Act funds.
We believe the noncompliance occurred because IRS management did not prepare written procedures for this process. In addition, because the procurement process was not considered in the risk assessments conducted during the initial implementation of the Recovery Act, the Office of Procurement was not initially aware of the need for new procedures.
Written procedures have not been developed and formal training has not been provided
As of February 2010, except for some informal guidance on the proper use of accounting codes for Recovery Act funds, IRS management had not developed any written guidance to program office or procurement staff regarding Recovery Act procurement requirements. Instead, the IRS relied on formal and informal guidance provided by the OMB and the Department of the Treasury. However, these documents provided general guidance and were not specific enough to ensure IRS employees properly processed and awarded Recovery Act procurements.
The Office of Procurement assigned responsibility to ***3(d)*** to brief the procurement staff responsible for Recovery Act procurements on the processes that should be followed. ***3(d)*** also disseminated the guidance issued by the OMB and the Department of the Treasury. The IRS stated that it was using the Recovery Accountability and Transparency Board’s[20] checklist for awarding Recovery Act procurements. This checklist was issued in June 2009 and was designed to assist procurement personnel in ensuring the Recovery Act procurement requirements were followed. However, since it was designed for general use by Federal Government agencies, it did not contain specific instructions for ensuring Recovery Act funds would be recorded separately.
During our fieldwork, IRS management stated that they did not want to issue any written guidance until the Department of the Treasury issued an updated Acquisition Bulletin. After our fieldwork ended in February 2010, the IRS Office of Procurement provided us with the Department of the Treasury draft Acquisition Bulletin, which was intended to incorporate the informal guidance issued up to that date. The IRS Office of Procurement further stated that it would issue written guidance for awarding Recovery Act procurements once the draft Acquisition Bulletin is finalized. We did not review the draft Acquisition Bulletin because it was received after we completed our fieldwork and cannot comment on whether it will address the issues we identified.
Without written procedures and training for employees involved in Recovery Act procurements, IRS management cannot ensure that future procurements will be in compliance with the Recovery Act and other implementing guidance.
Insufficient resources were assigned to track and report procurements
In November 2009, we expressed concerns to the IRS Senior Accountable Official and the Director of Procurement related to insufficient resources allocated to the oversight of Recovery Act procurements. Specifically, ***3(d)*** assigned a new collateral duty[21] of providing oversight to Recovery Act procurements. For this new responsibility, in addition to the primary task of ensuring procurement personnel understood the Recovery Act procurement requirements, ***3(d)***:
Although ***3(d)*** was working proactively to implement Recovery Act procurement requirements, the oversight needed to stay current with these additional duties required more time than what was feasible as a collateral duty assignment. In addition, because procurement personnel did not always notify ***3(d)*** of all planned Recovery Act procurements, one of the sampled procurements was not properly tracked. Another concern was the lack of a backup to ***3(d)***. The IRS assigned an additional employee in late October 2009 to assist the ***3(d)***. However, we do not know whether this will address the IRS’ need for additional resources to provide effective oversight. The Office of Procurement may still be at risk of having insufficient resources for this critical responsibility, particularly considering the lack of written procedures.
Recommendation
Recommendation 1: The Deputy Commissioner for Operations Support and the Deputy Commissioner for Services and Enforcement should strengthen controls in the following areas:
Management’s Response:
The IRS agreed with this
recommendation. The Office of
Procurement has added additional staff to provide adequate coverage and backup,
and will periodically assess staffing assignments to ensure continued coverage
for Recovery Act requirements. The
Office of Procurement also plans to take the following actions:
·
Issue a memorandum to outline IRS and Department of the Treasury
processes once the revised Acquisition Bulletin has been issued by the Department
of the Treasury.
·
Once the memorandum is issued, the Office of Procurement
Policy will meet with each of the operating divisions, as well as program office
personnel, to discuss the policy and address questions regarding its
implementation. One-on-one training will
continue to be available for all acquisition personnel with Recovery Act
requirements.
Use of Recovery Act Funds Are Reported to the Department of the Treasury
The IRS reports weekly to the Department of the Treasury the status of how the $203 million in Recovery Act funds is being obligated and spent by State. This includes the individual procurements approved for Recovery Act funds and amounts spent on administrative costs. The Department of the Treasury includes the IRS information when it posts Treasury-wide use of its $7.8 billion in Recovery Act funds on Recovery.gov. Figure 1 shows the Department of the Treasury’s reporting of Recovery Act funds paid out as of February 19, 2010. However, Figure 1’s information does not enable the public to see how Recovery Act funds are used by IRS contract recipients because they are not required to report this information on Recovery.gov.
Figure 1: Department of the
Treasury Recovery Act Funds Paid Out
Agency: Department of the Treasury
Report Date: 02/19/2010
|
Available Amount |
Paid Out Amount |
|
$7,810,803,589 |
$2,983,249,383 |
Source: Recovery.gov for the Department of the Treasury. Data were obtained from Federal Agency
Financial and Activity Reports.
Appendix I
Detailed Objective, Scope, and Methodology
Our overall objective was to determine the IRS’ readiness to implement the requirements of the Recovery Act[23] in planning, awarding, and reporting Recovery Act-funded procurements. To accomplish this objective, we:
I. Reviewed the guidance that has been issued for planning, awarding, and reporting procurements using Recovery Act funds.
A. Obtained and reviewed all guidance issued by the OMB[24] pertaining to procuring goods and services using Recovery Act funds.
B. Obtained and reviewed all Department of the Treasury guidance pertaining to procuring goods and services using Recovery Act funds.
C.
Obtained and reviewed all guidance issued by the
OMB pertaining to the recipient reporting of Recovery Act funds by prime and subcontractors.
D.
Obtained and reviewed the Recovery Act pertaining
to procuring goods and services using Recovery Act funds.
E.
Obtained
and reviewed the Treasury Inspector General for Tax Administration report
issued on the 2009 Filing Season.[25]
II.
Determined whether the IRS has policies, procedures,
and controls in place to ensure it will be able to implement the Recovery Act
requirements for planning, awarding, and reporting procurements made using Recovery
Act funds.
A.
Interviewed procurement personnel as to the internal
policies, processes, and procedures they are developing and using to plan, award,
and report Recovery Act procurements to ensure they will meet the Recovery Act
requirements.
B.
Interviewed
procurement personnel to determine how they will ensure that Recovery Act
requirements and updates are distributed to IRS program office personnel
involved with the Recovery Act procurements.
C.
Obtained
the Recovery Act Funding Notification Report dated August 21, 2009, and the IRS
Procurement Plan dated August 20, 2009, which
contained 32 planned and awarded procurements. We obtained the IRS Procurement Plan dated
June 19, 2009, that we used for our planning. This list contained 34 planned and awarded
procurements.
D.
Selected
a judgmental sample of 9 procurements from the August 20, 2009, list of 32 procurements
and 1 procurement from the June 19, 2009, list of 34 procurements for a
total of 10 procurements,[26] and interviewed the procurement and business
unit personnel involved with those procurements, including Contracting Officers
and the requestors, to ascertain: their
understanding of the Recovery Act requirements and internal procedures; how
they ensured the requirements were met; and what, if any, corrective actions
have been taken. We also interviewed
IRS personnel regarding the interpretation from the Office of Federal Procurement
Policy on recipient reporting.
E.
Interviewed the IRS Recovery Act Senior Accountable
Official[27] and the Director, Office of Procurement, on
their roles in regards to Recovery Act procurements.
F.
Followed up
with the Department of the Treasury in regards to written procedures issued to
the bureaus.
G.
Obtained the
IRS February 19, 2010, Recovery
Act Financial Activity Report to determine the amount of Recovery Act funds
paid out for IRS procurements. We also
obtained the Department of the Treasury Recovery Act Funds Paid Out that was
posted to Recovery.gov[28] as of February 19, 2010.
H.
Summarized
the IRS’ readiness to implement the Recovery Act reporting requirements based
on interviews with procurement and business unit personnel and reviews of documentation
provided for the requirements that were not met.
Internal controls methodology
Internal controls
relate to management’s plans, methods, and procedures used to meet their
mission, goals, and objectives. Internal
controls include the processes and procedures for planning, organizing,
directing, and controlling program operations.
They include the systems for measuring, reporting, and monitoring
program performance. We determined the
following internal controls were relevant to our audit objective: policies, procedures, and practices for
planning, awarding, and reporting Recovery Act funded procurements issued by the
program offices within the Modernization and Information Technology Services organization,
the Wage and Investment Division, and the Office of Procurement. We evaluated
these controls by interviewing program office and procurement personnel and
reviewing contract files.
Appendix II
Major Contributors to This Report
Nancy
A. Nakamura, Assistant Inspector General for Audit (Management Services and
Exempt Organizations)
Alicia
P. Mrozowski, Director
Darryl
Roth, Audit Manager
M.
Rita Woody, Audit Manager
Julia
Moore, Acting Audit Manager
Terrey
A. Haley, Lead Auditor
James
S. Mills, Jr., Senior Auditor
Evan
A. Close, Audit Evaluator
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Chief, Agency-Wide Shared Services OS:A
Chief Technology Officer OS:CTO
Commissioner, Small Business/Self-Employed Division SE:S
Commissioner, Wage and Investment Division SE:W
Director, Procurement OS:A:P
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 Liaisons:
Chief, Agency-Wide Shared Services OS:A
Chief Technology Officer OS:CTO
Commissioner, Small Business/Self-Employed Division SE:S
Commissioner, Wage and Investment Division SE:W
Director, Procurement OS:A:P
Appendix IV
This appendix presents detailed information on the measurable impact that our recommended corrective action will have on tax administration. This benefit will be incorporated into our Semiannual Report to Congress.
Type and Value of Outcome Measure:
· Inefficient Use of Resources – Actual; $385,421 in annual appropriated funds (see page 3).
Methodology Used to Measure the Reported Benefit:
The IRS decided not to use Recovery Act[29] funds for 6 of the 10 procurements we reviewed where the procurements were awarded before Recovery Act funds were available. The following procurements were not converted to Recovery Act funds:
The IRS advised us that the labor-intensive administrative burden outweighed the benefits of using Recovery Act funds and that it decided not to modify the procurements to bring them into compliance with the Recovery Act procurement requirements. However, this meant that the $385,421 for these 6 procurements was not available for other IRS mission-critical needs, such as improving taxpayer service or addressing the tax gap.
Appendix V
Recovery Act Contract Award Requirements
For Recovery Act[30]
contract awards, agencies must:[31]
·
To the maximum extent practicable, award contracts
using Recovery Act funds as fixed-price contracts (see Federal Acquisition Regulation (FAR)[32] Subpart 16.2) using competitive
procedures.
·
Provide maximum
practicable opportunities for small businesses to compete for agency contracts
and to participate as subcontractors in contracts awarded by agencies.
·
Publish
presolicitation and award notices of orders under task and delivery order
contracts on the FedBizOpps system,[33] in addition to the FAR Part 5 requirements
for presolicitation and award notices.
·
Include
special formatting for presolicitation and award notices in the FedBizOpps system
and award reporting in the Federal Procurement Data System (FPDS)[34] to distinguish Recovery Act actions.
o
All
presolicitation notices and award announcements must include the word
“Recovery” as the first word in the Title field in the FedBizOpps system, preceding
the actual title.
o
Presolicitation
notices for delivery and task orders must also include the following statement
in the Description field, preceding the actual description:
THIS
NOTICE IS PROVIDED FOR INFORMATION PURPOSES ONLY. THIS OPPORTUNITY IS AVAILABLE ONLY TO
CONTRACTORS UNDER (contracting officer insert program name).
o
When
entering data in the FPDS on any action (including modifications) funded by the
Recovery Act, agencies must enter the Treasury Account Symbol in the
Description of Requirement field.
·
Include
terms and conditions in contract documents necessary for effective
implementation of Recovery Act data collection and accountability requirements.
·
Provide
a summary of the contract or order (or modification to an existing contract or
order), including a description of the required products and services, which
will be made available publicly and linked to the Recovery.gov[35] web site for each Government contract or order (or
modification to an existing contract or order) exceeding $500,000.
·
Post
a summary of any contract or order (or modification to an existing contract or
order), including a description of the required products and services, in a
special section of the Recovery.gov web site, unless the contract or order is
both fixed-price and competitively awarded.
·
Place special emphasis on responsibility
determinations and preaward surveys. The
award of a contract based solely on lowest evaluated price can produce a false
economy, increasing performance, cost, and schedule risk. FAR Subpart 9.103 states that a prospective
contractor must affirmatively demonstrate its responsibility, including, when
necessary, the responsibility of its proposed subcontractors.
·
Use
authorized acquisition flexibilities as appropriate to avoid unnecessary delays
in awarding contracts with Recovery Act funds.
·
Provide
for appropriate oversight of contracts to ensure outcomes that are consistent
with and measurable against agency plans and goals under the Recovery Act. It is critical that agencies evaluate their
workforce needs so that they are able to appoint qualified Contracting Officers,
Contracting Officer Technical Representatives, and Program Managers with certification levels appropriate
to the complexity of Recovery Act projects.
· Do not commingle Recovery Act funds with other funds in apportionment requests they prepare for the OMB. Agencies must separately track apportionments, allotments, obligations, and expenditures related to Recovery Act funding. In some cases, agencies may need to use Recovery Act funds in conjunction with other funds to complete projects. They may do so, but must separately track and report the use of Recovery Act funds for these projects.
Appendix VI
Recovery Act Recipient Reporting Requirements
The Recovery Act[36] included requirements for some recipients of Recovery Act funds to report on the use of those funds on the Recovey.gov[37] web site to show the public how the funds are being spent. The IRS’ recipients are not required to report on Recovery.gov because the June 2009 OMB guidance states that the recipient reporting requirement does not apply to recipients receiving funds through entitlements or tax programs to individuals, which would include the IRS. We are providing this information to inform readers of the type of information that will not be publicly posted on Recovery.gov for the $31.9 million paid out as of February 19, 2010, in IRS Recovery Act procurements.
The recipient reports are required to include the following detailed information no later than the tenth day after the end of each calendar quarter:
· Total amount of funds received and, of that, the amount spent on projects and activities.
· A list of those projects and activities funded by name, to include:
o Description of the project or activity.
o Evaluation of the completion status of the project or activity.
o Estimates on jobs created or retained.
· Details on subawards and other payments.
Appendix VII
Management’s Response to the Draft Report
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
CHIEF
AGENCY-WIDE
SHARED
SERVICES
June 4, 2010
MEMORANDUM FOR MICHAEL R. PHILLIPS
DEPUTY INSPECTOR GENERAL FOR AUDIT
FROM: David A. Grant /s/ David A. Grant
Chief, Agency-Wide Shared Services
SUBJECT: Draft Audit Report - Additional Actions Are Needed to Ensure Readiness to Comply With the American Recovery and Reinvestment Act of 2009 Procurement Requirements (Audit #200910124)
Thank you for the opportunity to respond to the subject audit report. The audit was conducted to determine the Internal Revenue Service's (IRS) readiness to implement the requirements of the American Recovery and Reinvestment Act of 2009 (Recovery Act) in planning, awarding, and reporting Recovery Act funded procurements. Our response is attached.
The audit review states that, while the IRS has taken some proactive steps before the Recovery Act was enacted, and continues to refine efforts to plan, award and report Recovery Act procurements, we still do not have the necessary controls to ensure future procurements will comply with Recovery Act requirements and cites the following examples: The IRS has not developed written procedures regarding Recovery Act procurement requirements; provided formal training for those procuring goods and services; and has not dedicated sufficient resources to track and report Recovery Act procurements.
We agree written guidance is needed for IRS employees involved in the Recovery Act procurement process. Once the Department of the Treasury issues a revised acquisition bulletin, guidance will be issued and presented to operational divisions for discussion and questions. We also agree that adequate resources are essential to this effort. We have increased our staff to ensure we are providing full coverage of required activities and we will continue to assess staffing assignments throughout the life of the program.
The review also discusses commingling of Recovery Act funds with annually appropriated funds on early contract transactions. We would like to offer the following comments: Procurement understood the requirement not to commingle funds and ensures that there is separation of funding between Recovery Act and other appropriated funds. The appearance of commingling occurred due to systematic reporting limitations imposed by GSA's Federal Procurement Data System-Next Generation (FPDS-NG). FPDS-NG does not allocate separate funding lines but reports aggregate obljg8tions which appear to commingle funds. IRS had to begin work on the tax programming changes to meet filing season deadlines which required the use of annual appropriations prior to the apportionment of Recovery Act funding to Treasury and its bureaus. Due to the unique nature of this activity and strict deadlines, it was not anticipated by OMS or Treasury that such replacement of funds would require separate transactions on separate modifications for transparency purposes. Once the limitations were identified, Treasury imposed new requirements for separate transactions on separate modifications when using Recovery Act funds.
We appreciate your continued support and the valuable assistance and guidance your team provides. If you have any questions, please contact me or a member of your staff may contact Fred W. Martin, Director, Procurement, at {202} 283-1200. For matters concerning audit follow-up, please contact Larry Pugh, Office of Strategy and Finance, Agency-Wide Shared Services, at (202) 622-4541.
Attachment
RECOMMENDATION #1: The Deputy Commissioner for Operations Support and the Deputy Commissioner for Services and Enforcement should strengthen controls in the following areas:
CORRECTIVE ACTION TO RECOMMENDATION: We concur with this recommendation and provide the following actions:
IMPLEMENTATION DATE: December 1, 2010
RESPONSIBLE OFFICIAL: Director of Procurement
CORRECTIVE ACTION MONITORING PLAN:
Procurement will enter accepted corrective actions into the Joint Audit
Management Enterprise System (JAMES). These corrective actions are monitored on
a monthly basis until completion.
[1] Pub. L. No. 111-5, 123 Stat. 115 (2009).
[2] Updated
Implementing Guidance for the American Recovery and Reinvestment Act of 2009 (dated April 3, 2009).
[3] Pub. L. No. 111-5, 123 Stat. 115 (2009).
[4] The period from January 1 through April 15 when most individual tax returns are filed.
[5] The Recovery Act included more than 50 tax law provisions that the IRS is charged with administering. These tax changes included refundable credits, such as the Making Work Pay and First-Time Homebuyer Credits.
[6] The OMB has the primary responsibility for developing Government-wide rules and procedures to ensure that funds are awarded and distributed in a prompt and fair manner; uses of funds are transparent to the public; and steps are taken to mitigate fraud, waste, and abuse.
[7] The OMB issued implementing guidance on February 18, 2009; April 3, 2009; June 22, 2009; and December 19, 2009.
[8] The FedBizOpps system is a single Government-wide point of entry for Federal Government procurement opportunities exceeding $25,000. Government buyers are able to publicize their business opportunities by posting information directly to the FedBizOpps system via the Internet. Through this system, commercial vendors seeking Federal markets for their products and services can search, monitor, and retrieve opportunities solicited by the entire Federal contracting community.
[9] The official document the Department of the Treasury uses to issue procurement guidance to its bureaus and offices.
[10] Agency weekly financial and activity reports outline the amount of Recovery Act funds they have available and have paid out, the types of awards they have made (contract, grant, or loan), and the specific agency activities for the week and in the future. Agencies are also required to issue Financial Notification reports that detail the amount of Recovery Act funds allocated to each State through individual agency programs.
[11] The Recovery Act required the creation of a web site to report data related to Recovery Act spending. Recovery.gov was established as the United States Government’s official Recovery Act web site.
[12] A program office is the functional organization that needs the good or service provided by the procurement.
[13] The Recovery Act requires agencies receiving funds under Division A of the Recovery Act to comply with the transparency requirements for recipient reporting on Recovery.gov. The IRS received funds under Division B of the Recovery Act (Tax, Unemployment, Health, State Fiscal Relief, and Other Provisions), which does not include this transparency requirement. Although the IRS received its funding for the Health Coverage Tax Credit under Division A, this tax provision is covered under Division B and therefore the recipient reporting requirement does not apply.
[14] Congress annually considers appropriations measures, which provide funding for general Government operations. Under 31 United States Code Section 1301(a), public funds may only be used for purpose(s) for which Congress appropriated the funds.
[15] See Appendix VI for the Recovery Act contract recipient reporting requirements.
[16] To ensure that procurements in various stages of the procurement process would be included, we selected a judgmental sample of nine procurements from the IRS’ Recovery Act Procurement Plan for August 20, 2009. In addition, we selected one procurement that was listed as awarded on the IRS Procurement Plan dated June 19, 2009, and dropped from the August 20, 2009, plan. See Appendix I for additional information on our sampling methodology.
[17] Funds are considered “obligated” when there is a definite commitment by the Government to spend appropriated funds. Deobligation occurs when the commitment ends and the funds are available to be spent.
[18] Recovery Act funds become commingled when they are mixed with annual appropriated funds. OMB guidance required separate accounts and coding to ensure the funds were maintained, recorded, and reported separately.
[19] The IRS indicated that it can track and report the use of Recovery Act funds for these projects within its own financial and procurement systems and thought this was sufficient for meeting the Recovery Act requirement of keeping the funds separate.
[20] The Recovery Accountability and Transparency Board was created by the Recovery Act to provide transparency in relation to the use of Recovery Act-related funds and to prevent and detect fraud, waste, and mismanagement. The Board is comprised of a Chairperson and 12 Inspectors General from various Federal agencies. The Board issues quarterly and annual reports to the President and Congress.
[21] Collateral duties are official duties and responsibilities assigned to an employee in addition to the primary duties of the employee’s position.
[22] External stakeholders may consist of anyone outside of the IRS.
[23] Pub. L. No. 111-5, 123 Stat. 115 (2009).
[24] The OMB has the primary responsibility for developing Government-wide rules and procedures to ensure that funds are awarded and distributed in a prompt and fair manner; uses of funds are transparent to the public; and steps are taken to mitigate fraud, waste, and abuse.
[25] The 2009 Filing Season Was Successful Despite Significant Challenges Presented by the Passage of New Tax Legislation (Reference Number 2009-40-142, dated September 21, 2009).
[26] We selected a judgmental sample of procurements because we did not intend to project the results across the population and we wanted to ensure that procurements in all stages of the award process were included in our review.
[27] The Recovery Act Senior Accountable Official
is the individual with responsibility and authority to coordinate across agency
bureaus, program offices, and programs.
[28] The Recovery Act required the creation of a web site to report data related to Recovery Act spending. Recovery.gov was established as the United States Government’s official Recovery Act web site.
[29] Pub. L. No. 111-5, 123 Stat. 115 (2009).
[30] Pub. L. No. 111-5, 123 Stat. 115 (2009).
[31] The source of all requirements listed is the OMB Initial Implementing Guidance for the American Recovery and Reinvestment Act of 2009, dated February 18, 2009. The last requirement listed is defined in Section 4 of the Guidance. All other requirements listed are defined in Section 6.
[32] 48 C.F.R. ch. 1 (2009). The FAR is established for the codification and publication of uniform policies and procedures for acquisitions by all Executive Branch agencies.
[33] The FedBizOpps system is a single Government-wide point of entry for Federal Government procurement opportunities exceeding $25,000. Government buyers are able to publicize their business opportunities by posting information directly to the FedBizOpps system via the Internet. Through this system, commercial vendors seeking Federal markets for their products and services can search, monitor, and retrieve opportunities solicited by the entire Federal contracting community.
[34] The FPDS provides a comprehensive web-based tool for agencies to report contract actions.
[35] The Recovery Act required the creation of a web site to report data related to Recovery Act spending. Recovery.gov was established as the United States Government’s official Recovery Act web site.
[36] Pub. L. No. 111-5, 123 Stat. 115 (2009).
[37] The Recovery Act required the creation of a web site to report data related to Recovery Act spending. Recovery.gov was established as the United States Government’s official Recovery Act web site.