IG warns against year-end spending frenzy at IRS

The Internal Revenue Service rushed to spend unused appropriations at the end of the fiscal year in 2006 — a practice that the Treasury Department inspector general said led to the misuse of taxpayer money.IRS contracting officers find themselves under pressure to spend a flood of acquisition dollars in the last weeks of the fiscal year, according to a Sept. 24 report from the Treasury Inspector General for Tax Administration. Spending from 2002 to 2006 in September alone increased from $17 million to $131 million, a 671 percent increase. The number of purchases also increased 29 percent in that period.The IG found that the overload of work affects IRS’ acquisitions and puts greater pressure on contracting officers when time is shortest. Acquisition workers say they can’t be as thorough as they should when they must handle a torrent of spending requests comes. As a result, they make mistakes, the report states.“We understand the need to expend funds at the end of the fiscal year,” the IG wrote. “However, we believe any rush to use funds before they expire increases the risk of inaccurate definition of requirements, resulting in the item purchased not meeting the requester’s need and completion of another procurement action.”In a letter responding to the IG report, David Grant, director of IRS’ Office of Procurement, wrote that he agreed the increasing amount of end-of-year spending raises the likelihood of inefficient and ineffective procurements.The IG cited an award of approximately $4.6 million that had no finished acquisition plan, among other things. The officer said it was an oversight because of the amount of work. Two other purchases violated appropriations rules. The transactions totaling about $186,000 appeared to use fiscal 2006 funds for work started in 2007. The IG said the IRS should have used 2007 money because the contracting officer could not justify a legitimate need in 2006, the report states.Grant disagreed, saying one of the transactions was a bona fide need, which justifies the purchase.None of the contracting officers believed the errors compromised the integrity of any procurement. In addition, managers submitting the requests to the contracting officers said it is not a deliberate decision to wait until the end of the fiscal year to make purchases. However, at times, funding becomes available late in the year for projects that originally did not have any funding.For example, Congress passed appropriations for 2006 on Dec. 31, 2005, which is three months into the fiscal year. Congress approved 2003 money Feb. 20, 2003 — almost halfway through the fiscal year, according to the report.The IRS also has limited use of its funds during a continuing resolution, which it is operating under through mid-November. Officials can’t start new programs, and IRS guidance indicates that funded contracts should be mission-critical.The IG recommends, among other things, that IRS officials involve procurement officials early on the procurement and budget planning process. The procurement office then can better manage its workload in September. IRS officials issued a memo emphasizing it, and they will issue annual joint memos to remind the various offices about working with the procurement officers, according to theletter.