Procedures and Practices to Comply With the Rural
Development Act of 1972 Have Improved
July 2004
Reference Number: 2004-10-134
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
July
22, 2004
MEMORANDUM FOR
CHIEF, AGENCY-WIDE SHARED SERVICES
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector General
for Audit
SUBJECT: Final Audit Report - Procedures and
Practices to Comply With the Rural Development Act of 1972 Have Improved (Audit
# 200410019)
This
report presents the results of our audit to determine if the Internal Revenue Service
(IRS) has implemented the corrective actions planned in response to our prior
audit and if the policies that have been established to comply with
requirements of the Rural Development Act of 1972 (RDA) (as amended) are
adequate and being followed. This audit
was performed in compliance with the requirements of the Consolidated
Appropriations Resolution, 2004.
The
intent of the RDA was to help revitalize and develop rural areas by ensuring
they receive adequate consideration when locating Federal facilities. The IRS established policy and procedures to
promote compliance with the Act and documented them in a Location Policy in
June 2002. The Location Policy uses a
definition of a rural area that is consistent with the definition recommended
by the General Services Administration.
In
summary, our review of moves and relocations showed the procedures in the
Location Policy are being followed in most instances. However, some projects initiated prior to the establishment of
the Location Policy did not contain documentation showing that the RDA and
Department of the Treasury requirements had been considered. Because of the length of the IRS’ space
acquisition process, projects initiated prior to establishment of the Location
Policy may still not have been finalized, and the RDA and Department of the
Treasury requirements could still be addressed. In addition, one of the relocation projects misclassified the
site of a new post-of-duty as rural instead of urban. While this particular IRS building may be best suited to an urban
site, accurate classification is an important factor in making a proper
determination.
We
recommended the Chief, Agency-Wide Shared Services (AWSS), require that moves
or relocations initiated prior to establishment of the Location Policy, but for
which the Solicitations for Offers have not been made, be reviewed for
compliance with the RDA. In addition, a
definitive source, such as the United States Census, should be established for
making decisions as to whether a location is rural or urban.
Management’s
Response: AWSS management agreed with our
recommendations. Based on our
conversations with management, we changed the wording of one of the
recommendations to ensure its intent was clear. The AWSS will review projects approved prior to the Location
Policy, where the Government has not yet issued a Solicitation for Offers, to
ensure compliance with the RDA. The
AWSS will also identify a preferred standard for obtaining population
data. Management’s complete response to
the draft report is included as Appendix IV.
Copies
of this report are also being sent to the IRS managers affected by the report
recommendations. Please contact me at (202) 622-6510 if you have questions or Daniel R.
Devlin, Assistant Inspector General for Audit (Headquarters Operations and
Exempt Organizations Programs), at (202) 622-8500.
Procedures to Ensure Compliance With the Rural Development Act Are Generally Being Followed
Use of a Definitive Source for Population Statistics Would Help Properly Classify Locations
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix IV
– Management’s Response to the Draft Report
The Rural Development Act of 1972 (RDA) (as amended) requires the heads of all Federal executive departments and agencies to establish and maintain departmental policies and procedures giving first priority to the location of new offices and other facilities in rural areas. The intent of this provision is to help revitalize and develop rural areas by ensuring they receive adequate consideration when locating Federal offices and facilities.
The Department of the Treasury issued a directive, Location of New Offices and Facilities in Rural Areas (Treasury Directive (TD) 72-03), which was updated August 19, 2003, to meet the requirements of the RDA. TD 72-03 states that the policy of the Department of the Treasury (and all bureaus) is to give first priority to locating new Treasury facilities in rural areas unless there are substantial reasons for not doing so. TD 72-03 also requires the bureaus to obtain written approval to deviate from the requirements of the Directive. Department of the Treasury approval is required for a major facility acquisition, a significant organizational change involving geographic or regional adjustments, or a program activity that involves, in its entirety, 50 or more employees. In all other instances, the appropriate bureau official may approve decisions to relocate to other than a rural area.
The Real Estate and Facilities Management (REFM) Division of the Agency-Wide Shared Services (AWSS) office is responsible for real estate acquisition and management for the Internal Revenue Service (IRS). To promote compliance with the RDA, the IRS established policy and procedures and documented them in the Memorandum on Location Policy in June 2002. The Location Policy is published on the AWSS office web site and provides guidelines to ensure the RDA is addressed. Included with the Location Policy is a checklist developed to help evaluate new locations for RDA compliance. The policy also requires narrative support for decisions to locate in other than rural areas. Facilities Management Officers (FMO) and project managers for space projects are responsible for preparing this documentation, which is forwarded to realty specialists at the National Headquarters for review for compliance with the policy. Once reviewed by a realty specialist, the documentation is returned to the FMOs or project managers for inclusion in their project files.
The Consolidated Appropriations Resolution, 2004 requires the Inspector General of each applicable department or agency to submit to the House of Representatives Committee on Appropriations a report detailing what policies and procedures are in place for each department or agency to give first priority to the location of new offices and other facilities in rural areas, as directed by the RDA.
For the last 2 years, the Treasury Inspector General for Tax
Administration has performed reviews to determine the IRS’ compliance with the
RDA. In last year’s report, we noted
that, in most of the project files we reviewed, there was no documentation as
to whether the RDA requirements were considered before moves were
completed. We also determined that the
definition of a rural area that the IRS used in its procedures was not
consistent with the definition recommended by the General Services
Administration (GSA) and did not comply with the Interim Procedures for TD
72-03. The IRS responded by
revising the rural area definition; it is now consistent with the definition
recommended by the GSA and TD 72-03.
The definition is included in the IRS Location Policy and is posted on
the REFM Division web site.
This review was performed at the IRS National Headquarters in Washington, D.C., in the REFM Division during the period March through May 2004. The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
To accomplish this year’s review, we selected a judgmental sample of 19 of the 94 space projects that were either completed between January 2003 and April 2004 or pending at the end of this period. We reviewed the project files to evaluate the IRS’ compliance with the requirements of the RDA. Of the 19 projects in our sample, 15 were for moves to urban areas, and 4 were for moves to rural areas.
The project files contained documentation that the RDA requirements were considered and Department of the Treasury approval was obtained when necessary for 14 of the 19 projects in our sample. The other five projects were missing some documentation needed to determine compliance with the RDA or Department of the Treasury policy. However, they were initiated before the IRS established its Location Policy in June 2002, which required IRS employees to retain documentation in the project file on the consideration of the RDA requirements and receipt of Department of the Treasury approval. For four of these five projects, the moves are complete; however, for one project, the new site location had not been finalized. We believe the IRS should review this project, document whether the RDA was considered, and obtain Treasury approval for this site, because it involves more than 50 employees.
The IRS’ space acquisition process usually begins well in advance of the need for that space. Furthermore, delays caused by lack of funding, union negotiations, etc., can increase the amount of time between the initiation and completion of a project. As such, the IRS should review the project files for any moves that were initiated prior to the establishment of the Location Policy but for which the Solicitations for Offers have not been issued and commitments to specific locations have not yet been made. Such a review would help ensure compliance with the RDA and the IRS Location Policy.
1.
The Chief, AWSS, should require the review of space
projects that were initiated prior to establishment of the IRS Location Policy,
but for which the Solicitation for Offers has not been issued, to ensure those
moves are in compliance with the RDA.
Management’s Response: The AWSS will
evaluate projects approved prior to the adoption of the Location Policy, where
the Government has yet to issue a Solicitation for Offers, to ensure compliance
with the RDA.
The definition of rural is a city, town, or unincorporated area that has a population of 50,000 inhabitants or less, other than an urbanized area immediately adjacent to a city, town, or unincorporated area that has a population in excess of 50,000 inhabitants. To meet the requirements of the RDA, an agency must determine whether a location meets this definition. There are several sources for population statistics, which can differ in the statistics they provide. We searched several sources for the populations of the cities in our sample and found there was considerable variation in the populations cited.
In our sample of 19 cases, there was 1, a planned relocation to Santa Maria, California, in which the site of the new post-of-duty was misclassified as rural. The narrative attached to the request for space for this particular move states “this requirement is outside the boundary of a metropolitan area, and therefore, does not require further Rural Development Act analysis.” We researched the United States Census for 1990 and 2000 and found the populations for Santa Maria were 61,284 and 77,423, respectively. Based on the definition of rural that was established by the GSA and adopted by the IRS, this city would not qualify as rural. This particular IRS building will house employees who have day-to-day contact with taxpayers and may be best suited to an urban site instead of a rural location. However, because the site was not properly classified, that determination was not made.
For consistency, the IRS Location Policy should include a recommended source for obtaining population information during RDA consideration. Neither the RDA nor GSA guidelines set a specific source for population information; however, the United States Census is the official population census of the United States. If different or more current population information is available elsewhere, that information could be used and the reason documented in the project file.
2.
The Chief, AWSS, should modify the IRS Location Policy to
establish a definitive source for obtaining population information when the RDA
is being considered for new or relocated sites. Using a consistent, reliable source, such as the most recent
United States Census, would help ensure sites are properly classified as either
rural or urban. If population
information from a source other than the United States Census is used, it
should be documented in the project file.
Management’s Response: The AWSS will
identify a preferred standard for population data and require files be
documented as to source and reason if an alternate standard is used.
Appendix I
Detailed Objective, Scope,
and Methodology
The objective of this review was to determine if the Internal Revenue Service (IRS) implemented the corrective actions planned in response to our prior audit and if the policies that have been established to comply with requirements of the Rural Development Act of 1972 (RDA) (as amended) are adequate and being followed. This audit was performed in compliance with the requirements of the Consolidated Appropriations Resolution, 2004. To accomplish our objective, we:
I. Determined whether the IRS established adequate procedures to comply with the RDA and Treasury Directive (TD) 72-03, Location of New Offices and Facilities in Rural Areas.
A.
Verified whether
the IRS revised the definition of a rural area to be consistent with the
definition recommended by the General Services Administration and TD 72-03.
B. Reviewed the procedures established by the IRS for locating new facilities.
II. Evaluated whether the IRS is in compliance with the RDA and TD 72-03. We selected a judgmental sample of 19 of the 94 space projects that were either completed between January 2003 and April 2004 or pending at the end of this period. We used judgmental sampling due to time constraints, as we are required to report on the IRS’ compliance with the RDA by July 2004. We ensured we selected projects from each of the five Real Estate and Facilities Management Division geographic areas.
A.
Determined
whether the IRS complied with the RDA and TD 72-03 when establishing new
offices.
B.
Determined
whether the IRS received the required approval if there were any deviations
from the RDA.
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant
Inspector General for Audit (Headquarters Operations and Exempt
Organizations Programs)
Michael E. McKenney, Director
Kevin P. Riley, Audit Manager
Susan A. Price, Lead
Auditor
David P. Robben, Senior Auditor
Gene
A. Luevano, Auditor
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Operations Support OS
Director, Real
Estate and Facilities Management
OS:A:RE
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis RAS:O
Office of Management Controls OS:CFO:AR:M
Audit Liaison: Chief, Agency-Wide Shared Services OS:A
Appendix IV
The response was
removed due to its size. To see the
response, please go to the Adobe PDF version of the report on the TIGTA Public
Web Page.