Treasury Inspector General for Tax Administration
July 30, 2012
TIGTA - 2012-35
Contact: David Barnes
WASHINGTON -- The Internal Revenue Service (IRS) is not always fully reimbursed for services it provides to other Federal government agencies, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
During Fiscal Year 2011, the IRS entered into 89 agreements to perform services on a reimbursable basis. These services were conducted primarily on behalf of other Federal agencies, with the IRS collecting approximately $90 million related to these agreements.
TIGTA evaluated six randomly selected agreements between the IRS and other Federal agencies and identified more than $28 million in costs incurred by the IRS that were not reimbursed. In addition, the IRS did not use a consistent approach when calculating overhead to be included in the costs of the reimbursable services performed. Finally, the IRS could not always provide verifiable information supporting all of the costs associated with the agreements reviewed.
In one instance, the IRS was not reimbursed for approximately $26 million in costs incurred during fiscal years 2010 through 2012 related to the processing of refund offsets of taxpayer debts, such as delinquent student loans and child support for the Financial Management Service.
“When the IRS is reimbursed less than the cost it incurred for performing reimbursable work, it must fund this work using its own operating budget, thereby reducing funds available for tax administration,” said J. Russell George, Treasury Inspector General for Tax Administration.
TIGTA recommended that the IRS Chief Financial Officer ensure that all active reimbursable agreements are based on the full costs estimated for the services provided; ensure guidelines are updated to require that overhead be included in reimbursable work cost estimates; and, provide refresher training on a periodic basis to responsible business unit personnel. In addition, the CFO should reconcile the identified difference between reimbursement receipts and the expected reimbursement for one of the agreements TIGTA reviewed and pursue collection of additional funds, as applicable.
IRS management agreed with TIGTA’s recommendations. The IRS plans to conduct an ongoing, full review of all reimbursable agreements beginning in Fiscal Year 2013; review one agreement to reconcile differences and determine the reason for the differences; develop interim guidance on reimbursable work cost estimates; and develop and hold training on current and upcoming procedural changes.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
A special plugin is required to view PDF documents. To obtain the free PDF reader, please visit the Adobe web site.