TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Inspections and Evaluations

 

 

RECOVERY ACT

 

Review of the Internal Revenue Service’s American Recovery and Reinvestment Act Fund Expenditures for Fiscal Year 2012

 

 

 

October 18, 2013

 

Reference Number:  2014-IE-R001

 

 

 

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

E-mail Address  |  TIGTACommunications@tigta.treas.gov

Website             |  http://www.treasury.gov/tigta

 

 

October 18, 2013

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT

 

FROM:                            R. David Holmgren

                                         Deputy Inspector General for Inspections and Evaluations

 

SUBJECT:                Final Inspection Report – Review of the Internal Revenue Service’s American Recovery and Reinvestment Act Fund Expenditures for Fiscal Year 2012 (IE‑13‑006‑A)

 

 

This report presents the results of our inspection to verify the accuracy, timeliness, and reporting of the payment of invoices by the Internal Revenue Service (IRS) for American Recovery and Reinvestment Act of 2009[1] (Recovery Act) expenditures.  Our inspection included invoices paid during the period October 1, 2011, through September 30, 2012.  This is the fifth in a series of inspections regarding compliance with the Office of Management and Budget (OMB) guidance for implementation of the Recovery Act.

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 Recovery Act programs.  This inspection was conducted using Recovery Act funds.

Synopsis

Our inspection showed that the IRS was in compliance with the OMB’s Recovery Act implementation guidance for Recovery Act expenditures from October 1, 2011, through September 30, 2012.  The IRS generally executed adequate internal controls to ensure timely and accurate reporting.

During the period of our inspection, the IRS paid approximately $212,000[2] to seven vendors for Recovery Act expenses, including an interest fee in excess of $3,100[3] for one invoice.  Discounts were offered for the prompt payment of invoices, and the IRS obtained approximately $2,400 of the approximately $4,300[4] available.  The IRS is not required to obtain all discounts offered by vendors.  Due to the limited scope of our inspection, we did not review the IRS’s ability or inability to obtain the offered discounts.

Response

IRS management agreed to the observations in the draft report.  See Appendix IV for their complete response.

If you have any questions, please contact me at (202) 927-7048 or Kevin P. Riley, Director, Office of Inspections and Evaluations, at (972) 249-8355.

 

 

Table of Contents

 

Background

Results of Inspection

Recovery Act Expenditures Were Reported Accurately and Timely

The Internal Revenue Service Did Not Take All Available Discounts

Financial Reports Complied With the Office of Management and Budget’s Implementing Guidance and Recovery Act Requirements

Appendices

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Management’s Response to the Draft Report

 

 

Abbreviations

 

IRS

Internal Revenue Service

OMB

Office of Management and Budget

 

 

Background

 

This is the fifth in a series of inspections regarding compliance with the Office of Management and Budget (OMB) guidance for implementation of the American Recovery and Reinvestment Act of 2009[5] (Recovery Act).  Enacted on February 17, 2009, this legislation allocated $787 billion over 10 years in order to stimulate the national economy.  The Recovery Act contains both spending and tax provisions.

The Internal Revenue Service (IRS) is responsible for administering more than 50[6] tax law provisions contained in the Recovery Act.  In April 2009, the IRS received $202 million of its appropriation of Recovery Act funds.[7]  These funds were required to implement the necessary tax changes resulting from provisions of the Recovery Act.  The changes included reprogramming the IRS computer systems, updating related tax forms and publications, and providing customer service to assist taxpayers in obtaining their Recovery Act benefits.  As of September 30, 2012, the IRS had obligated more than $200 million,[8] with disbursements exceeding $198 million.

One of the stated goals of the Recovery Act is to “foster unprecedented levels of accountability and transparency in government spending.”  The Recovery Accountability and Transparency Board (Recovery Board)[9] provides transparency to the public concerning Recovery Act funds.  One way the Recovery Board accomplishes this goal is by publishing Federal agencies’ use of Recovery funds weekly.

The OMB[10] issued guidance documents[11] that outlined steps for implementing the Recovery Act and clarified the requirements for processing procurements.  Federal agencies are required to report to the Recovery Board, on a weekly basis, all cumulative Recovery Act obligations and gross outlays (expenditures)[12] in a standard reporting format.  They must use separate Treasury Appropriation Fund Symbols[13] to track and report Recovery Act obligations and disbursements.

In performing this review during the period June through August 2013, we obtained relevant data and information from personnel at the IRS National Headquarters in Washington, D.C., and the Beckley Finance Center in Beckley, West Virginia.  The review included Recovery Act invoices submitted to the IRS by vendors for payment during the period October 1, 2011, through September 30, 2012.

This inspection was performed in accordance with the Council of the Inspectors General for Integrity and Efficiency Quality Standards for Inspections.  Detailed information on the objective, scope, and methodology is presented in Appendix I.  Major contributors to the report are listed in Appendix II.

 

 

Results of Inspection

 

Recovery Act Expenditures Were Reported Accurately and Timely

The IRS generally executed adequate internal controls to ensure timely and accurate reporting for the Recovery Act expenditures during the review period.  The IRS has adequate, documented operating procedures for ensuring that Recovery Act procedures are properly and timely reported.

The Internal Revenue Service Did Not Take All Available Discounts

The IRS obtained approximately $2,400[14] (56.2 percent) of the approximately $4,300[15] in total discounts offered by vendors.  However, the IRS paid an interest fee of approximately $3,200[16] on one invoice.  We were informed by IRS Beckley Finance Center staff that the interest paid was due mainly to a delay in the receipt and acceptance phase of the procurement, which took from October 24, 2011, (when the invoice was received) until January 12, 2012.

Even though the Prompt Payment Act[17] does not require that Federal agencies take all available discounts that are offered, taking the discounts provides the IRS with the opportunity to make better use of its funds.  Due to the limited scope of our inspection, we did not review the IRS’s ability or inability to obtain the offered discounts.

Financial Reports Complied With the Office of Management and Budget’s Implementing Guidance and Recovery Act Requirements

The IRS was in general compliance with OMB’s guidance and Recovery Act requirements by:

·         Submitting all 52 weekly reports of its cumulative Recovery Act obligations and gross outlays in the prescribed format;

·         Using separate Treasury Appropriation Fund Symbols for its two Recovery Act funds; and

·         Ensuring that Recovery Act expenditures were timely forwarded to the Department of the Treasury for posting to Recovery.gov.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to verify the accuracy, timeliness, and reporting of the payment of invoices for the IRS’s Recovery Act[18] procurement expenses for the period October 1, 2011, through September 30, 2012 (Fiscal Year 2012). 

To accomplish this objective, we:

I.                   Documented procedures used to identify, record, and report Recovery Act expenditures, including internal controls.

A.    Interviewed personnel in the Budget Execution Office in the IRS’s National Headquarters to identify the reporting process.

B.     Interviewed personnel in the Beckley Finance Center in Beckley, West Virginia, to identify and document the invoice payment process.

C.     Reviewed the Financial and Activity Reports posted on Recovery.gov for the period under inspection.

II.                Determined whether Recovery Act procurement expenditures that the IRS reported were accurate and substantiated by complete and reliable supporting documentation.

A.    Identified all Recovery Act expenditures for the period October 1, 2011, through September 30, 2012.  We reviewed all seven Recovery Act invoices that the IRS paid during the period.

B.     Traced Recovery Act procurement expenditures to available supporting documentation, including invoices, receiving reports, and check payment records.

C.     Verified the mathematical accuracy of expenditures and supporting documentation.

D.    Compared Recovery Act expenditures from the Weekly Financial Report on Recovery.gov to the amounts the IRS recorded in the Integrated Financial System.[19]

E.     Determined if the IRS used separate Treasury Appropriation Fund Symbols[20] for its two Recovery Act funds:

1.      Treasury Appropriation Fund Symbol 20-0129 2009/2011 for Administrative Expense – Recovery Act.

2.      Treasury Appropriation Fund Symbol 20-0934 2009/2011 for Health Insurance Tax Credit Administration – Recovery Act.

F.      Reconciled disbursements from the Integrated Finance System to the Total Gross Outlays in the Financial and Activity Report.

G.    Obtained Status of Available Funds Reports from the IRS.

H.    Reconciled the IRS Recovery Act weekly reports provided for the review period to the expenditures posted on Recovery.gov.

III.             Determined whether the IRS had established effective controls to identify, record, and report Recovery Act expenditures in accordance with OMB guidance.

A.    Obtained and reviewed all guidance issued by the OMB pertaining to procurement of goods and services using Recovery Act funds.

B.     Evaluated the procedures for recording Recovery Act obligations, outlays, disbursements, and payments made against these funds and reconciled the sum of the obligations, expenditures, and disbursements amounts from the Status of Available Funds Reports to the Total Obligations and Gross Outlays columns of the Financial and Activity Report.

 

Appendix II

 

Major Contributors to This Report

 

Kevin P. Riley, Director

Stanley Rinehart, Supervisory Evaluator

Mark Anderson, Program Analyst

 

Appendix III

 

Report Distribution List

 

Principal Deputy Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Assistant Deputy Commissioner for Operations Support  OS

Chief, Agency-Wide Shared Services  OS:A

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 Liaison:  Chief, Agency-Wide Shared Services  OS:A

 

Appendix IV

 

Management’s Response to the Draft Report

 

The response was removed due to its size.  To see the complete response,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.



[1] Pub. L. No. 111-5, 123 Stat. 115 (2009).

[2] The exact amount of payment for these invoices was $212,412.24.

[3] The exact amount of the interest fee was $3,186.37.

[4] The exact amount of available discounts was $4,289.28.  The IRS took $2,411.57 (56.2 percent) of the available discounts.

[5] Pub. L. No. 111-5, 123 Stat. 115 (2009).

[6] This number could be as high as 56, depending on how the law is interpreted.

[7] This included $80 million for Fiscal Years 2009 and 2010 to implement the Health Coverage Tax Credit program.  The IRS also received $123 million for supporting tax provision changes in the Recovery Act.  The Department of the Treasury retained $1 million for administrative oversight, resulting in the IRS receiving $202 million.

[8] From October 1, 2011, through September 30, 2012, the IRS deobligated $941,685 in Recovery Act funds.

[9] The Recovery Board was created by the Recovery Act with two goals:  to provide transparency of Recovery Act funds and to prevent and detect fraud, waste, and mismanagement.  Twelve Inspectors General from various Federal agencies serve with the Chairman.  The Recovery Board issues quarterly and annual reports to the President and Congress and, if necessary, “flash reports” on matters that require immediate attention.

[10] The OMB has primary responsibility for developing Governmentwide rules and procedures to ensure that Recovery Act funds are awarded and distributed in a prompt and fair manner, that use of funds is transparent to the public, and that steps are taken to mitigate fraud, waste, and abuse.

[11] OMB, M-09-10, Initial Implementing Guidance for the American Recovery and Reinvestment Act of 2009 (Feb. 18, 2009); M-09-15, Updated Implementing Guidance for the American Recovery Reinvestment Act of 2009 (April 3, 2009); and M-10-34, Updated Guidance on the American Recovery and Reinvestment Act (Sept. 24, 2010).

[12] Total obligations equal the sum of financial commitments and expenditures.  Total outlays consist of expenditures only.

[13] The Treasury Appropriation Fund Symbol is an identification code assigned by the Department of the Treasury, in collaboration with the OMB and the owner agency, to an individual appropriation, receipt, or other fund account.  It is used to describe a particular type of Treasury Fund Symbol that has budget authority.  All financial transactions of the Federal Government are classified by a Treasury Fund Symbol for reporting to the Department of the Treasury and the OMB.

[14] The exact amount of the discounts taken was $2,411.57.

[15] The exact amount of available discounts was $4,289.28.

[16] The exact amount of the interest fee was $3,186.37, paid to Verizon Business Network Services.

[17] Pub. L. No. 97-177, 96 Stat. 85 (1982) (codified as amended at 31 U.S.C. § 3901 et seq.).

[18] Pub. L. No. 111-5, 123 Stat. 115 (2009).

[19] Financial system used by the IRS to ensure proper accounting and timely reporting of the appropriated funds received by the IRS.

[20] The Treasury Appropriation Fund Symbol is an identification code assigned by the Department of the Treasury, in collaboration with the OMB and the owner agency, to an individual appropriation, receipt, or other fund account.  It is used to describe a particular type of Treasury Fund Symbol that has budget authority.  All financial transactions of the Federal Government are classified by a Treasury Fund Symbol for reporting to the Department of the Treasury and the OMB.