Office of Inspections and Evaluations
RECOVERY ACT
IRS’s 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 – IRS’s 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:
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 OMB’s 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 OMB’s
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.
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Abbreviations
|
ARRA |
American Recovery and Reinvestment Act |
|
OMB |
Office of Management and Budget |
|
SAO |
Senior Accountable Official |
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:
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 IRS’s processing system. These funds are available for IRS’s 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 IRS’s
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
The IRS Has Implemented a Comprehensive Reporting Process that Addresses the Office of Management and Budget’s 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. IRS’s reporting processes addresses OMB’s 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 IRS’s 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, IRS’s ARRA Executives Steering Committee approved the IRS’s 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. IRS’s 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 IRS’s ARRA content on their website. The Office of Communications approves all IRS’s
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.
IRS’s 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. IRS’s early start of work on ARRA activities
required IRS’ 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:
Appendix II
Major Contributors to This Report
Kevin
P. Riley, Director
Mel
Thomas, Program Analyst
Freddie
Ephraim, Program Analyst
Appendix III
Commissioner C
Office of the Commissioner - Attention: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Commissioner for Small Business/Self-Employed Division SE:S
Director, Collection SE:S:C
Director, Collection Policy SE:S:C:CP
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
[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.