IRS mismanaged, misreported technology purchases, IG probe finds

Average taxpayers might find themselves in trouble with the Internal Revenue Service for reporting inaccurate or incomplete financial information. Yet, according to a recent audit, the IRS misreported information about more than $726 million and potentially overpaid almost $900,000 for government contracts. 

The Treasury Inspector General for Tax Administration, or TIGTA, issued a report earlier this month focusing on the IRS Office of Information Technology Acquisitions, which manages purchases of information technology products. 

The TIGTA deputy inspector general Michael McKenney submitted the report and recommendations to the IRS. 

The report tracks expenses from late 2018 through mid-2020, finding the IRS "may not have properly maintained sufficient receipt and acceptance documentation to support 6,502 invoice payments."

The findings come amid a controversy over a major leak of taxpayer data of wealthy Americans and as the Biden administration has pushed to boost the IRS budget by $80 billion to hire new agents to collect more revenue. 

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"The IRS misreported $7,469,962 in the Federal Procurement Data System and potentially spent $893,804 more than the total award amount of approximately $139.05 million for 11 information technology service contracts," according to the TIGTA report.

It goes on to state: "Further, contracts were not charged to valid expense categories. Specifically, 959 contracts totaling $726,067,888 were coded to invalid or no longer active material group code and Federal supply code combinations in the Integrated Procurement System and the Procurement for Public Sector application."

The inspector general report seemed to express frustration that the IRS "was unable to provide all of the necessary supporting documentation requested." Inspectors general don’t have the authority to subpoena documents.

In October 2020, the investigators "became concerned with the pace and the limited number of documents the IRS had provided," and had a series of meetings with IRS officials.

"Despite these efforts, we continued to experience delays. In total, we gave the IRS more than three months after our initial request to provide the supporting documentation for our sampled invoice payments," the TIGTA report says, later adding, "In spite of these efforts, the IRS was able to provide only a limited number of documents for our sample of invoice payments."

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The inspector general’s office recommended the agency update its tracking systems of contracts to reflect the accurate dollar amounts and to address the remaining outstanding underpayments and overpayments of late fees. The IRS agreed with the recommendations.

"We are proud to report that improvements to the consistency and reliability of information and processes include recent automation enhancements in our contract writing system … that will minimize data entry errors," reads a July 23 response to the inspector general from Shanna R. Webbers, the IRS chief procurement officer. "To ensure supporting documentation for invoice payments is easily accessible, a Receipt & Acceptance Supporting Documentation Upload Tool was implemented on February 25, 2021."

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Asked to comment on the report, an IRS spokesperson referred Fox News to Webbers' letter. 

The TIGTA investigators determined, "The IRS lacks effective management controls over select post-award activities of information technology service contracts to ensure that invoices are properly verified and supported. The IRS risks making improper payments if invoices are not fully verified and supporting documentation is not maintained."

Further, TIGTA found instances when the approved dollar amounts in a contract and modification didn’t match. One example was a contract awarded for $7.2 million – however, the details of the contract say it was $6.7 million. 

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"Specifically, the IRS overreported $113,498 for 12 modifications, underreported $4,071,286 for three base awards and 12 modifications, and did not report $3,285,178 for two base awards and six modifications," the report says. 

This IRS office also had to fork out late payment interest penalties totaling $141,443, the report found. In addition to that, the agency either overpaid or underpaid late fees on 168 invoices. 

An inspector general report in May found that despite having the funding for new staff, the IRS only reached 37 percent of its hiring goals. The same report found that during tax filing season, 42 percent of printers were not working at tax processing centers in Ogden, Utah and Kansas City, Missouri.