The Internal Revenue Service needs to increase its oversight over its technology hardware maintenance contracts to ensure it isn’t paying for unnecessary services, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, found several weaknesses in the oversight of selected information technology hardware maintenance contracts at the IRS. Specifically, TIGTA found instances where contracting personnel were not always effectively monitoring the contracts.

TIGTA also found an instance where the IRS did not receive contract deliverables in accordance with the contract’s requirements or submit written modifications when necessary to update an existing contract. As a result of the lack of coordination and oversight, the IRS paid for services it did not receive or need.

In addition, TIGTA found incomplete or inaccurate asset data in three of the seven information technology hardware maintenance contracts reviewed. A current TIGTA review provided the IRS with several recommendations for improving internal controls and overall reliability of the data.

TIGTA pointed out that coordination among acquisition team members is a key to ensuring that the contractor is meeting the government’s interest in terms of providing deliverables that are of high quality, complete, timely, and cost effective. However, the IRS’s administration of selected IT hardware maintenance contracts could be improved. As a result, the IRS cannot ensure that taxpayer dollars are not being misspent to service information technology hardware assets that are no longer in use.

TIGTA recommended that the IRS’s chief technology officer ensure that contracting officer’s representatives provide contracting officers notification to timely process a contract modification when information technology assets are retired or removed from service or changes to performance requirements are made. Contracting officer’s representatives should also make any necessary adjustments with respect to receipt and acceptance. In addition, the chief technology officer should ensure that contracting officer’s representatives work closely with technical points of contact to periodically reconcile assets associated with hardware maintenance contracts and provide necessary updates to User and Network Services Asset Management personnel.

In response to the report, the IRS agreed with TIGTA’s recommendations. The IRS plans to communicate and emphasize expectations with IT organizations so that managers can take appropriate action to ensure that hardware maintenance contracts are administered, acquisition duties are performed, and acquisition staff effectively coordinate in reconciling and providing updates about assets associated with hardware maintenance contracts, all in accordance with existing IRS policy.

IRS chief technology officer Terence V. Milholland objected to some of the conclusions in the report, however. “The IRS recognizes the significance of ensuring complete accountability for hardware maintenance coverage and costs through proper oversight of contracts and asset inventory records,” he wrote. “While the IRS agrees with the recommendations in the report, we take exception to the conclusion that the IRS paid for services it did not need or did not receive. As we discussed during the audit, the contracts identified in the report were firm fixed price contracts that did not allow for midterm changes to product inventory from maintenance coverage. The decision to use firm fixed price contracts is a risk based decision intended to lower overall contracting costs. Of course the risk with using these type contracts is that in some situations the expected benefits are not realized. The Service will seek continual improvements in these areas to reduce risks.”

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