WASHINGTON - The Internal Revenue Service (IRS) lacks sufficient controls to provide assurance that its employees do not improperly use government-issued purchase cards, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
The IRS, like other Federal agencies, uses credit cards with a purchase limit per transaction of $3,000 to make small purchases directly from vendors.
TIGTA conducted this audit, in part, to determine whether the IRS had implemented recommendations from an August 2011 TIGTA report. The objective of this review was to assess the effectiveness of IRS processes to identify questionable and abusive purchase card transactions. The review covered the two-year period ending September 30, 2011.
During Fiscal Years 2010 and 2011, the IRS had 5,241 purchase card accounts. Purchase cardholders made approximately 234,000 purchases totaling $103.2 million with these cards.
TIGTA's report identified the following concerns:
- The IRS does not have a policy to timely cancel purchase cards prior to employee separation, despite a recommendation from a previous TIGTA report;
- A lack of guidance defining what qualifies as a split purchase for office supplies contributed to cardholders splitting purchases to avoid spending limits; and
- The IRS does not have a process in place to review credit card purchases to detect personal use.
"Inadequate procedures to identify, report, and address inappropriate use leave the IRS purchase card program vulnerable to repeated violations of applicable laws and regulations," said J. Russell George, the Treasury Inspector General for Tax Administration. "While the majority of
IRS cardholders appear to use their purchase cards properly, TIGTA's audit identified some troubling instances of inappropriate usage," George added.
TIGTA's report raised concerns about the purchase of improper decorative and give-away items for managers' meetings and Combined Federal Campaign fundraising events. The IRS disagreed with TIGTA's assessment that these items were inappropriate. In addition, TIGTA found one purchase cardholder who made what appeared to be personal purchases. The cardholder has since been charged with embezzlement.
In addition, IRS officials used purchase cards to pay for multiple lunches, dinners, and related alcohol purchases when entertaining foreign officials during an International Executive Conference in 2010. While the expenditure of appropriated funds for this purpose was authorized and TIGTA did not find any Department of the Treasury or IRS criteria to assess the reasonableness of these charges, TIGTA considers the costs related to this entertainment to be high. For example, TIGTA identified a dinner at an approximate cost of $140 per person and lunch at an approximate cost of $100 per person.
Finally, the IRS's Credit Card Services Branch did not report for consideration of potential disciplinary action all instances of inappropriate purchase card use that it identified.
TIGTA recommended that the IRS:
- Require purchase card accounts to be closed prior to the date of a cardholder's separation;
- Clearly define what constitutes a split purchase;
- Develop an oversight process to identify IRS employee personal use of purchase cards and other inappropriate purchase card transactions; and
- Require its Credit Card Services Branch to report all instances of potential inappropriate use of purchase cards to the Labor and Employee Relations function for potential disciplinary action.
IRS management agreed with all 11 recommendations and stated that they plan to develop and implement corrective actions.