IRS Could Be Wasting Stimulus Money

Some of the $203 million in stimulus funds provided to the Internal Revenue Service through last year’s Recovery Act are at risk of being misspent due to continued problems with contract oversight, according to a new government report.

The report from the Treasury Inspector General for Tax Administration acknowledged that the IRS has made some improvements in its oversight of funds provided by the American Recovery and Reinvestment Act to support the reprogramming of its computer systems, the updating of corresponding tax forms and publications, and taxpayer services since TIGTA first reported on the problems. As of April 2010, a year after passage of the stimulus bill, the IRS had 40 procurement actions planned on various Recovery Act program initiatives, with a total contract value of $81.9 million.

However, in a recent review of TIGTA acquisition audit reports issued during the period of fiscal year 1999 through June 2009, TIGTA identified several trends in IRS procurement oversight and policy that are also of concern to Recovery Act-funded procurements, including the limited use of fixed-price contracts, the limited use of performance-based contracts, and the inadequate monitoring of procurements.

The IRS took corrective actions to address many of these findings when TIGTA’s reports were originally issued. However, the repeat findings and recommendations are an indication that the corrective actions were not effective.

“Until the IRS implements effective internal controls, it will be unable to provide assurance that the federal government is receiving the best value for its Recovery Act procurements,” said TIGTA Inspector General J. Russell George in a statement.

TIGTA did not make any recommendations in this report. However, key IRS management officials reviewed it prior to issuance and agreed with the facts and conclusions presented.

In their response to the prior report, IRS officials agreed that increasing both performance-based and firm fixed-price contracting has been challenging over the past 10 years but added that they have made significant progress in both of these areas and have identified several new initiatives to address other trends.