WASHINGTON - While the Internal Revenue Service (IRS) has made improvements in its oversight of funds provided by the American Recovery and Reinvestment Act (Recovery Act), some of the funds are at risk of being misspent due to continued problems with contract oversight, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS received $203 million in Recovery Act funds in April 2009 to support the reprogramming of its computer systems, the updating of corresponding tax forms and publications, and taxpayer services. As of April 2010, the IRS had 40 planned procurement actions on 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 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 J. Russell George, the Treasury Inspector General for Tax Administration.

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.