TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Inspections and Evaluations

 

RECOVERY ACT

 

IRSís Implementation of the Office of Management and Budget Guidelines for the American Recovery and Reinvestment Act of 2009

 

 

 

 

March 31, 2010

 

Reference Number:2010-IE-R003

 

 

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.

 

Phone Number ††|202-622-6500

Email Address ††|inquiries@tigta.treas.gov

Web Site†††††† |http://www.tigta.gov

 

March 31 2010

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT

 

 

FROM:††††††††††††††††††††††††††† R. David Holmgren /s/ R. David Holmgren

†††††††††††††††††††††††††††††††††††††††† Deputy Inspector General for Inspections and Evaluations

 

SUBJECT:††††††††††††††††††† Final Interim Inspection Report Ė IRSís Implementation of the Office of Management and Budget Guidelines for the American Recovery and Reinvestment Act of 2009 (# IE-09-011-A)

 

This report presents the results of our inspection to assess whether IRS has properly complied with mandatory requirements identified by the Office of Management and Budget (OMB) for implementing the American Recovery and Reinvestment Act (ARRA) of 2009[1] regarding:

  1. Transparency and reporting;
  2. Information collection and dissemination;
  3. Budget execution; and
  4. Risk management.

For example, the information collection and dissemination guidance provides that agencies must ensure all funds are clearly distinguishable from non-ARRA funds in all agency financial, business (e.g., grant and contract writing systems), and reporting systems. OMB also requires that agencies provide weekly reports that allow the Congress and taxpayers to track and monitor use of the funds.

This is expected to be the first in a series of inspections regarding compliance with OMBís guidance for implementing ARRA.The ARRA 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 inspection was conducted using ARRA funds.

Interim Results

The OMB issued two memorandums[2] that provided guidance for carrying out and reporting on the programs and activities enacted in the ARRA.The IRS has implemented a comprehensive process that is compliant with the guidelines OMB established.

 

The IRS has the reporting processes in place that should address OMBís requirements. These processes will allow for transparency and accountability in the use of ARRA administrative funds and will provide IRS the ability to identify and track these expenditures separately from its regular appropriations. The IRS has also submitted the required weekly reports summarizing administrative costs incurred.

Recommendation

We made no recommendations in this report.

IRS reviewed the draft report, concurred with the facts and offered a suggestion, which we incorporated into this final report.

Please contact me at (202) 927-7048 if you have questions or Kevin Riley, Director, Inspections and Evaluations at (972) 249-8355.

 

 

Table of Contents

 

Background

Results of Review

The IRS Has Implemented a Comprehensive Reporting Process that Addresses the Office of Management and Budgetís Implementing Guidance for the American Recovery and Reinvestment Act of 2009

Appendices

Appendix I Ė Detailed Objective, Scope, and Methodology

Appendix II Ė Major Contributors to This Report

Appendix III Ė Report Distribution List

 

 

Abbreviations

 

ARRA

American Recovery and Reinvestment Act

OMB

Office of Management and Budget

SAO

Senior Accountable Official

 

 

Background

 

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA) of 2009, P.L. 111-5. The Office of Management and Budget (OMB) issued Guidance for the American Recovery and Reinvestment Act of 2009; in February 2009 and then updated the guidance in April 2009. The purpose is to establish a set of government-wide requirements and guidelines that Federal agencies must immediately implement or prepare for to effectively manage activities under the ARRA.

OMB outlines necessary enhancements to standard processes for awarding and overseeing funds to meet accelerated timeframes and other unique challenges posed by ARRA transparency and accountability framework.

Specifically, OMB provides guidance to effectively manage and report on the programs and activities enacted in ARRA. Four critical elements of the OMB guidance are:

  1. Transparency and reporting;
  2. Information collection and dissemination;
  3. Budget execution; and,
  4. Risk management.

The information collection and dissemination guidance provides that agencies must ensure all funds are clearly distinguishable from non-ARRA funds in all agency financial, business (e. g., grant and contract writing systems), and reporting systems. OMB also requires that agencies provide weekly reports that allow the Congress and taxpayers to track and monitor use of the funds.

To accomplish these tasks, ARRA provided the IRS with a total of $203 million for the expenses, $80 million for Health Insurance Tax Credit, and $123 million for necessary changes to IRSís processing system.These funds are available for IRSís use beginning Fiscal Year 2009 through Fiscal Year 2011. All ARRA funds for implementation of the tax credit and tax provisions are for administrative expenses only.

ARRA funds were used for the Health Coverage Tax Credit program to update systems and products to implement ARRA changes. These changes included expanding capacity to provide easy access, reducing burden for eligible taxpayers claiming the Health Coverage Tax Credit, and ensuring compliance with the law.

Implementation of Health Coverage Tax Credit will include:

        education and outreach;

        guidance and instructions;

        IRS processing and programming;

        compliance; and,

        reporting.[3]

 

The purpose of IRSís Tax Provisions Implementation Program is to ready IRS systems and products to enable taxpayers to take advantage of new tax provisions in a timely manner. ARRA contained enhanced or new credits for both the individual and business taxpayers and were incorporated in this program.

This review was performed at the IRS National Headquarters in Washington, D.C., in the Office of Director for Collection Policy, the Senior Accountable Official (SAO) for the ARRA activities, during the period April 2009 through November 2009. We limited this inspection to IRSís compliance with the guidance outlined by OMB.We conducted this inspection in accordance with the Presidentís Council on Integrity and Efficiency Quality Standards for Inspections. Detailed information on our inspection objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.

 

Results of Review

 

The IRS Has Implemented a Comprehensive Reporting Process that Addresses the Office of Management and Budgetís Implementing Guidance for the American Recovery and Reinvestment Act of 2009

The OMB guidance outlined the government-wide requirements that Federal agencies were to immediately implement or prepare for in order to effectively manage activities under the ARRA. Agencies were required to appoint an SAO to oversee ARRA activities.The guidance addresses the responsibilities of the SAO to oversee implementation of ARRA. IRSís reporting processes addresses OMBís four critical elements: transparency and reporting; information collection and dissemination; budget execution; and, risk management.

The IRS designated a senior level executive as SAO. The SAO has overall oversight and coordination responsibilities for implementing ARRA. The SAO is knowledgeable and has significant involvement in the ARRA implementation for the organization.

1. Transparency and Reporting: The IRS timely reported to both the Congress and taxpayers its expenditures and benefits of ARRA funds with the level of transparency and accountability envisioned in ARRA.

The IRS was following the OMB ARRA guidelines for reporting ARRA expenditures. The IRSís expenditures of ARRA funds are transparent to the public. Public benefits of these funds are reported clearly, and posted to www.Recovery.gov in a timely manner.

The ARRA Program-specific Plans and Weekly Financial Activity Reports are two areas that specifically address transparency and reporting for the IRS. The Program-specific Plans, and the Weekly Financial and Activity Reports were posted on www.Recovery.gov, once approved by OMB and the SAO consistent with the OMB guidelines. These activities reflect the implementation and oversight of the total funds provided by ARRA.

We reviewed two Program-specific Plans, and determined that the plans met the required OMB guidelines. Each plan contained the required data elements for Program-specific Plans as outlined in the Agency and Program Data Elements, Appendix 3. The plans included all required data elements, such as Objectives, Activities, Characteristics, and Delivery Schedule.

We also evaluated Weekly Financial Activity Reports from the April 2009 through November 2009 timeframe, one report each month, and determined that these reports complied with OMB guidelines. The Weekly Financial and Activity Reports posted on www.Recovery.gov had the required content and were populated with required data fields outlined in the OMB Data Definitions - Financial Activity Report. The reports appropriately included the following data fields: Agency/Bureau; Treasury Appropriation Fund Symbol (TASF); Award Type; Total Obligations; and, Total Gross Outlays.

The SAO and the Chief Financial Officer reviewed and approved the Weekly Financial Activity Reports prior to sending them to the Department of the Treasury. Further, IRSís ARRA Executives Steering Committee approved the IRSís ARRA Program-specific Plans that were posted on www.Recovery.gov.

The IRS also achieves the objective of transparency and reporting on www.Recovery.gov by outlining how it used ARRA funds, and by posting the total obligations and gross outlays for these funds on the website. All documents were reviewed and approved by the SAO or his/her designee.

2. Information Collection and Dissemination: The IRS established a page on its existing website dedicated to ARRA that is linked to www.Recovery.gov and provides all bureau-specific information related to the ARRA.

The IRS is complying with the existing OMB guidelines regarding information collection and dissemination. We reviewed a Funding Notification Report sent to the Department of the Treasury that outlines contract types, amounts, and ARRA versus non-ARRA expenditures. IRSís financial and reporting systems clearly distinguish between ARRA funding and non‑ARRA activities.

We reviewed two communications items posted on www.Recovery.gov and found they met the recommended intent of the OMB guidelines.

The SAO designated the Information Technology Office to maintain IRSís ARRA content on their website.The Office of Communications approves all IRSís major communications releases.

3. Budget Execution: The IRS established internal fund codes that separately track obligations and gross outlays related to ARRA funds.

We were able to determine that the IRS is complying with the existing OMB guidelines regarding budget execution reporting. We verified compliance by reviewing the Weekly Financial Activity Reports and the Funding Notification Reports that outlines contract types, amounts, and ARRA verse non-ARRA expenditures.

IRSís ARRA expenditures are reported and tracked separately. The IRS uses separate Treasury Appropriation Fund Symbols to track and report apportionments, allotments, obligations, and disbursements. This is consistent with OMB guidelines that require agencies to ensure all funds are clearly distinguishable from non-ARRA funds in all agency financial, business, and reporting systems.

The IRS proactively addressed information technology system application changes affected by ARRA. System and programming changes frequently require long lead times to implement. IRSís early start of work on ARRA activities required IRSí procurement staff to initially issue ARRA task orders using non-ARRA funds.We were informed that these orders have subsequently been reclassified as ARRA funds.

4. Risk Management: The risk considerations have been documented for Program-specific Plans with the required content and populated with data fields as outlined in the OMB ARRA Guidance for Risk Management.

IRS is adequately addressing Risk Management. We determined that the SAO had significant knowledge and involvement in the Risk Management for the organization.

We reviewed the IRS Risk Management Assessments, Risk Impact Analysis, and Risk Mitigation Plans for each Program-specific Plan and found that they complied with the OMB guidelines as outlined in the risk framework provided in Chapter 3 of the OMB Guidelines. The plans also contained the appropriate data elements including; Risk Descriptions, Mitigation Descriptions, Assessment Measures, Triggers for Contingency plans, and Responsible Office and Officials. IRS assessed their risk as low with the exception of the First Time Homebuyer Credit that was rated as medium risk.

The IRS has a designated Risk Management Council with participation by the SAO. Their representative at the Department of the Treasury is the Chief Financial Officer. The implementation of ARRA activities in the IRS is overseen by an Executive Steering Committee. The committee consists of the senior level executives in IRS representing every major function and business unit. From January through March 2009, IRS executives met weekly, then monthly through August, to review progress on all ARRA activities. Since August, progress on ARRA activities have been reviewed ad hoc during other regular IRS senior executive meetings for related topics such as Filing Season Readiness and implementation of the Workers, Homeownership, and Business Assistance Act of 2009. Executives in each IRS operating division are responsible for reviewing and approving ARRA plans and ensuring activities in those plans are completed timely while assessing and mitigating risks.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of the review was to determine that IRS has properly complied with the ARRA reporting requirements established by OMB guidance in regards to transparency and reporting, information collection and dissemination, budget execution, and risk management.

To accomplish our objective we determined:

A.                If an SAO had been appointed. OMB ARRA Guidance, Section 3.3.

B.                 If the SAO or his/her designee approved the Agency/Bureau Major Communications releases. OMB ARRA Guidance Section 2.2.

C.                If the SAO or his/her designee approved the Agency/Bureau Weekly Financial and Activity Reports. OMB ARRA Guidance Section 2.4.

D.                If the SAO or his/her designee approved the Agency/Bureau Program-specific Recovery Act Plans.OMB ARRA Section 2.8.

E.                 If the SAO or his/her designee completed a risk management matrix.OMB ARRA Section 3.4.

F.                 If the SAO or his/her designee established accountability internal fund codes and separately tracked apportionments, allotments, obligations, and gross outlays related to ARRA funds.OMB ARRA Section 4.3.

Additionally we:

  1. Interviewed members of the ARRA Executive Committee, or designated employees responsible for managing and tracking ARRA activities.
  2. Reviewed Funding Notification Reports that showed ARRA funds obligated to date.
  3. Reviewed ARRA Risk Assessments for Program-specific Plans, Risk Mitigation Plans, Risk Management/Internal Control Program Certifications, and Monthly Progress Reports.
  4. Reviewed two IRS Program-specific Plans posted on www.Recovery.gov.
  5. Reviewed seven Weekly Financial and Activity Reports posted on www.Recovery.gov, one report posted each month, April through October 2009.
  6. Reviewed two Major Communication Releases posted on www.Recovery.gov.
  7. Reviewed www.Recovery.gov and the IRS website specifically related to ARRA activities.

 

Appendix II

 

Major Contributors to This Report

 

Kevin P. Riley, Director

Stanley Rinehart, Supervisory Program Analyst

Mel Thomas, Program Analyst

Freddie Ephraim, Program Analyst

 

Appendix III

 

Report Distribution List

 

CommissionerC

Office of the Commissioner - Attention:Chief of StaffC

Deputy Commissioner for Services and EnforcementSE

Commissioner for Small Business/Self-Employed DivisionSE:S

Director, CollectionSE:S:C

Director, Collection PolicySE:S:C:CP

Chief CounselCC

National Taxpayer AdvocateTA

Director, Office of Legislative AffairsCL: LA

Director, Office of Program Evaluation and Risk AnalysisRAS:O

Office of Internal ControlOS:CFO:CPIC:IC



[1] Public Law No. 111-5, February 17, 2009.

[2] M-09-10, Initial Implementing Guidance for the American Recovery and Reinvestment Act of 2009, February 18, 2009 and M-09-15, Updated Implementing Guidance for the American Recovery and Reinvestment Act of 2009, April 3, 2009.

[3] Education and outreach activities are designed to assist taxpayers in determining whether various provisions apply to them specifically.Examples of these activities include issuing news releases, and providing up-to-date information on www.irs.gov.