TREASURY INSPEcTOR GENERAL
FOR TAX ADMINISTRATION
INTERNAL REVENUE SERVIcEíS INVOIcE PROcESSING
FOR AT&T TOLL-FREE TELEPHONE SERVIcE
Reference No. 093802
The Internal Revenue Service (IRS) has four main customer service toll-free telephone numbers that are offered to taxpayers. In Fiscal Year (FY) 1997, AT&T charged $30.3 million for 120.9 million calls, totaling 611.9 million minutes, for these toll-free customer Service lines.
The Treasury Inspector General for Tax Administration Office of Audit examined the IRS' processing of AT&T invoices for toll-free telephone service. This audit was performed as a follow-up to an Office of Audit review of the IRS' oversight of its contract for toll-free service.
We determined that no effective procedures exist to affirm that the vendorís charges accurately reflect the amount of services received, or that the charges for those services are accurate, allowing a high potential for overpayment. There were also indications that the IRS is not receiving optimum discounts from AT&T.
Specifically, we found the following weaknesses in the billing process:
The IRS Has No Effective Procedures to Ensure that the Vendorís charges Accurately Reflect the Amount of Services Received
The review process for toll-free telephone service invoices does not include the verification of usage data, primarily because data available internally is inadequate or not in a usable format to allow an adequate verification of the charges. Because of the ineffectiveness of the review process, the IRS has not questioned erroneous charges and has not tracked credits for disputed items. In one instance, the IRS' process did not identify an erroneous extraordinary installation charge of $3.7 million. The IRS is also paying three times more than it should for a revised monthly report. Additionally, each month credits for thousands of dollars of inaccurate charges for services are not effectively tracked because the General Service Administrationís (GSAí) notification is sent to an individual in an IRS Service center who has no idea why the document is sent there.
AT&T Has Not changed Its Billing Practices, Possibly causing the IRS to Forego Significant Discounts
During the 1997 filing season, IRS management concluded that AT&Tís billing practices did not provide the IRS with optimum discounts. AT&T continues to bill for separate numbers within one IRS call location. The IRS estimates that if the billing were based on total usage within one call site, as was the practice with the previous toll-free carrier, millions of dollars in discounts might be realized yearly. The IRS has not followed up sufficiently to affect a change in this billing practice. AT&T has not acted to address this issue and it remained unresolved as of the date of this report.
Summary of Recommendations
We believe that the following steps need to be taken to initiate an effective processing of AT&T charges to ensure that AT&Tís billing procedures accurately reflect the IRS' usage of toll-free service.
IRS management has already started to address some of the issues surfaced in our review. The Telecommunications and Operations Division has begun taking initiatives to contract with outside vendors to strengthen the billing verification of invoices.
IRS management determined that outside assistance would be needed to establish an effective billing verification effort. The Illinois Institute of Technology Research Institute (IITRI) has been selected to develop a financial management system that will include validation of voice and data telecommunication charges. IITRI will assess the extent of coordination necessary with the GSA and Treasury and will establish appropriate responsibility for any liaison efforts.
Additionally, management has awarded a contract to Unisys corporation to perform a billing audit of the entire contract. Based on contract pricing and tariff rates, the review will verify telephone charges and attempt to determine whether the IRS has paid any erroneous charges for its toll-free service. Any such charges can be recovered, retroactively, from the inception of the contract. The contractor will produce weekly status reports and its effort will continue through December 1999. The Unisys review will also address any discounts due the IRS in accordance with the terms and conditions of the AT&T contract.