The Internal Revenue Service has taken steps to prepare for procurements made under the American Recovery and Reinvestment Act of 2009, but lacked the necessary controls to ensure the procurements would comply with new requirements, according to a new government audit.

The audit, by the Treasury Inspector General for Tax Administration, found that the IRS has not developed written procedures, provided formal training for those employees procuring goods and services, or dedicated sufficient resources for the tracking and reporting requirements associated with the Recovery Act.

One aspect of the Recovery Act’s transparency and accountability requirements does not appear to apply to IRS contractors, the report noted. IRS contractors receiving Recovery Act funds are not required to report information on the government website Recovery.gov, including how the funds were used, any jobs created or retained, and executive compensation package information. As a result, the public will not know how IRS contractors used the $31.9 million in Recovery Act funds paid out as of Feb. 19, 2010.

Enacted on Feb. 17, 2009, the Recovery Act contained both spending and tax provisions of $787 billion over 10 years designed to stimulate the national economy by creating and retaining jobs. Because some of the tax provisions were effective for the 2009 filing season, the IRS began planning for the tax law changes before the Recovery Act was enacted.

This involved identifying the potential new tax law and administrative changes; revising various tax forms, instructions, and publications; and reprogramming its computer systems to ensure tax returns would be accurately processed. In April 2009, the IRS received an appropriation of $203 million in Recovery Act funds, which were to be used to implement the necessary tax changes as a result of the Recovery Act provisions.

The Recovery Act also contained unprecedented reporting requirements to enable the public to track who has received Recovery Act funds and how the funds were used to stimulate the economy. The Treasury issued an Acquisition Bulletin on Feb. 19, 2009, as well as informal guidance to its bureaus and offices on the use and reporting of Recovery Act funds, including a requirement for Treasury Department approval before Recovery Act procurements are awarded.

The Treasury Department required the IRS to submit weekly Recovery Act procurement plans, program reports, and financial reports on how it is spending the funds. Federal agencies receiving Recovery Act funds were required to post these reports on Recovery.gov. The IRS’s Recovery Act procurement plan initially listed 41 procurements with an estimated total value of $96.7 million. As of Aug. 20, 2009, because of the consolidation and removal of some of the procurements, there were 32 procurements with an estimated total value of $83.9 million.

TIGTA determined that the IRS did not always comply with Recovery Act procurement requirements. TIGTA reviewed 10 procurements from the IRS's Recovery Act Procurement Plans and determined that two did not comply with the new procurement requirements. In addition, the IRS used annual appropriated funds instead of Recovery Act funds for six of the 10 procurements. As a result, approximately $385,000 was not available for other IRS mission-critical needs.

“The IRS must ensure that it complies with all Recovery Act procurement requirements and uses its Recovery Act funds for their intended purpose,” said TIGTA Inspector General J. Russell George in a statement. “Until IRS management provides the necessary oversight and guidance to IRS program office and procurement personnel, it will continue to be at risk of noncompliance with the Recovery Act.”

TIGTA recommended that the IRS strengthen the controls for Recovery Act procurements, including developing written procedures, providing training to both program office and procurement personnel, and re-evaluating the resources assigned to track and report IRS Recovery Act procurements.

The IRS agreed with TIGTA’s recommendations and plans to make improvements.

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