TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
IMPROVEMENTS ARE NEEDED IN PLANNING FOR THE ACQUISITION OF GOODS AND SERVICES AND IN MANAGING CONTRACT CLOSEOUTS
Reference No. 2000-10-044
The Internal Revenue Serviceís (IRS) Procurement function implemented the Integrated Procurement System (IPS) in Fiscal Year 1998. The IPS is an on-line processing system that, according to Procurement management, has helped improve contract administration by expediting the procurement process. The overall objective of this review was to determine whether the IRS is effectively and efficiently planning for and administering contracts.
Although the IPS has enhanced contract administration and contracting officerís technical representatives are ensuring goods and services comply with the contracts, IRS can further improve the planning for and administration of contracts. We identified approximately $2 million of government funds that were unnecessarily expended or placed at risk because of inadequate planning by program offices or because excess funds were not deobligated.
Funds Are Being Placed at Risk Due to Inadequate Planning and Oversight by Program Offices
Program offices have not adequately planned for the acquisition of goods and services and, as a result, approximately $1.6 million of government funds have either been unnecessarily expended or placed at risk. We determined guaranteed minimums proposed for contracts were being set too high. In one instance, because the IRS did not request services from the contractors, the guaranteed minimums of $123,000 were paid, and the IRS did not receive any goods or services in exchange for these payments.
We also identified concerns with program officesí oversight of funding for contracts. In two instances, requisitions were not timely submitted to add funds to existing contracts to extend the time period of the contract, which could have caused the IRS to incur liabilities in excess of existing funds.
Additionally, we determined that one program office had not timely expended obligated funds. The funds either needed to be properly expended or timely deobligated during the corresponding fiscal year to allow the monies to be used for other endeavors.
Procurement Management Needs to Ensure That Contracts Are Timely Closed Out and Funds Deobligated on Completed Contracts
Procurement management is not able to adequately manage the closeouts of contracts due to inconsistencies with the automated systems used to monitor contracts. We sampled 40 inactive contracts and determined 30 contracts had not been timely closed out. The remaining 10 contracts were closed, but had not been properly reflected as closed on the IPS. As a result, we identified approximately $352,000 of funds from completed contracts that should be deobligated.
Summary of Recommendations
The Director of Procurement should advise program offices to properly prepare acquisition plans and funding documents before contracting actions are taken. Both the Procurement function and program offices should ensure that sufficient quantities are ordered to satisfy guaranteed minimums, and that minimums are not set too high. Also, continual monitoring of outstanding obligations is needed to ensure funds are properly expended or timely deobligated. Additionally, the Director of Procurement should ensure all Procurement personnel properly update closeout and completion information on the IPS. Lastly, additional oversight is needed to ensure contracts are properly closed out and excess funds are timely deobligated.
Managementís Response: Procurement management believes the IRSí existing policy and procedures regarding acquisition plans and funding documents are adequate. Management specifically stated that guidelines requiring the completion of acquisition plans prior to the issuance of a solicitation already exist; therefore, no further action is necessary. However, Procurement management has agreed to make all policy guidance available on the IRS Procurement Intranet site to allow broader access to policy guidance by all IRS personnel. In addition, Procurement management believes appropriate mechanisms are in place regarding the processing of requisitions and no further action is necessary.
Although Procurement management believes the program offices must ultimately decide their program needs, they agreed with our recommendation that Procurement personnel should review guaranteed minimum levels and monitor the pace of ordering. In addition, Procurement management will issue guidance reminding contracting personnel of their responsibilities to update the IPS. Lastly, Procurement management agreed that improvement is needed in the closeout of IRS contracts. Procurement management plans to significantly reduce the number of overage and current closeouts by the end of Fiscal Year 2000. This commitment will be included in Managersí Performance Agreements.
Office of Audit Comment: The Federal Acquisition Regulations, the Department of Treasury Acquisition Regulations, and IRS Procurement Policy and Procedures Memorandum 7.1 all require completion of acquisition plans prior to the issuance of a solicitation. At the time of our review the acquisition plans were not prepared before the issuance of the solicitation. Although guidance is available, we believe Procurement management should not continue with the acquisition process until the plan is properly completed. Procurement managementís plan to allow broader access to the policy guidance on the Intranet may help facilitate the preparation process.
Although guidance is in place to encourage the program offices to timely submit requisitions, we believe the contracting officer is ultimately responsible for ensuring that funds are available prior to signing award documents. Requisitions provide the assurance that adequate funds will be available. While we agree the contracting officers acted in the best interest of the government by allowing the contractors to continue to work, the requisitions were not submitted until after costs had accumulated on the contract.