Telecommunications Costs Controls Have
Not Been Effectively Implemented and Should Continue to Be Improved and
Monitored
September 2004
Reference Number: 2004-20-156
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.
September
8, 2004
MEMORANDUM FOR
CHIEF INFORMATION OFFICER
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector
General for Audit
SUBJECT: Final Audit Report - Telecommunications Costs Controls Have Not Been
Effectively Implemented and Should Continue to Be Improved and Monitored (Audit #
200420006)
This
report presents the results of our review of the Internal Revenue Service’s (IRS) controls over telecommunications
costs. The overall objective of this
review was to evaluate the effectiveness of the controls over telecommunications
costs.
In summary, the Enterprise Networks organization is responsible
for providing all forms of electronic communications (i.e., voice, data, video,
and wireless) in the most efficient and effective manner. Since 1993, the Treasury Inspector General for Tax
Administration, formerly the Inspection function of the IRS, has performed
several audits and found that the IRS did not have effective controls over its
telecommunications costs. As a result,
in 1994 the IRS began tracking the internal controls over its
telecommunications costs as a material weakness.
On October 16, 2003, the IRS
notified the Department of the Treasury of its intent to downgrade the material
weakness to a reportable condition. The
IRS’ decision was based upon the completion of several corrective actions,
including the implementation of the Telecommunications Asset Tool (TAT) system
in June 2003. The
TAT system is a web-based telecommunications resource management system
designed to allow local and national offices to initiate, process, approve,
review, and manage telecommunications resources
to identify potential waste, fraud, and abuse. As of April 2004, TAT system expenditures
totaled $5.1 million. The IRS also
created an automated process to compile an inventory of cellular telephones and developed a
system that provides online ordering and
inventory capability for phone cards.
Other corrective actions
taken by the IRS included hiring an outside firm to conduct an analysis of
local telecommunications costs. As of
May 19, 2004, the analysis had resulted in actual refunds to the IRS of approximately
$2.2 million, while an additional $48,000 in projected refunds were still
pending. In addition, the IRS will avoid
$635,000 in telecommunications costs annually ($3.2 million over 5 years) as a
result of the vendor’s analysis. The IRS also conducted a review of Treasury Communications System
invoices, which recovered over $825,000 in credits due to the Federal
Government and identified $850,000 in unrecoverable circuit overpayments that
resulted from the IRS not having disconnected services when offices were
relocated.
While the IRS has completed several corrective
actions, the TAT system has not been effectively implemented and inventory
control weaknesses for cellular telephones and phone cards have not been
adequately addressed. For example, as of May 21, 2004, the TAT system’s Waste, Fraud, and Abuse
(WFA) reports system had significant problems and the automated quarterly
reports, reflecting questionable long
distance telephone call and phone card use, had not been effectively
distributed for managerial review.
In addition, critical
information is not captured by the WFA reports system for management to assess
the program’s effectiveness. For example, the system does not permit management to
assess a call as “Unauthorized.” The
system also does not generate reports presenting the timeliness of management’s
review of the quarterly call detail reports.
Therefore,
the IRS cannot determine the
effectiveness of the quarterly review criteria in identifying suspicious
calling patterns and the timeliness of management’s reviews.
The TAT system electronic billing (e-billing) module also had
implementation problems. For example, it
does not reconcile the invoice against an inventory of circuits for asset
verification, and several IRS offices we contacted reported problems with the
electronic invoice process. While the
TAT system e-billing module does compare
invoices against the historical norm to identify suspect charges, the
variance threshold is currently at the system default setting of 10 percent for
all offices (i.e., invoices are not flagged for review until the invoice amount
is above the historical norm by at least 10 percent). As a result, erroneous local telephone
service charges may not be detected.
Finally, the IRS has not
established an accurate inventory of its cellular telephones, and a complete
inventory of phone cards has not been conducted since 2002. In addition, policies and procedures have not
been developed for completing the annual inventory validation and reporting the
results.
We recommended the Chief
Information Officer (CIO) ensure the IRS continues to monitor controls over its
telecommunications costs as a reportable condition, quarterly
reports to monitor employee telephone use are distributed, and the TAT
system permits an assessment of calls as “Unauthorized” and requires “Follow
up” calls to be resolved as “Valid” or “Unauthorized.” We also recommended that the CIO ensure a reporting feature is added to identify the results of
managerial reviews, and work continues to resolve the technical problems. In addition, we recommended the CIO
ensure the variance threshold percentage is evaluated, offices are directed to use the TAT system e-billing module,
and a post-implementation review is conducted.
Finally, we recommended the CIO ensure that service
is immediately discontinued for unregistered cellular telephones, policies and
procedures are developed for the annual inventory validation of cellular
telephones and phone cards, and a complete and
accurate inventory is established.
Management’s
Response: IRS management agreed with the recommendations presented in this
report. The IRS will continue to monitor
controls over its telecommunications costs and maintain it as a reportable
condition until deficiencies are resolved.
IRS management corrected two problems causing the WFA report
deficiencies and will implement automated distribution of the quarterly detail
reports. The remaining two deficiencies
will also be corrected. The status
indicators will be changed and the information will be
provided to local management for further actions, if necessary. Also, a reporting feature is being added to
the system and the quarterly reports will be provided to management.
In addition, a memorandum
was issued advising field locations they will be required to deliver the true 10-digit originating telephone number. The TAT team is working with the Human
Resources Connect Project Office to ensure the data are current. The TAT team will
also evaluate the use of the 10 percent variance for all field offices and
adjust the percentage accordingly. A
memorandum is being issued directing the mandatory use of the TAT e-billing system
process for bill payment and bill verification.
A post-implementation review will be conducted within 60 days of accepting
the TAT system application.
IRS management
also responded that the service for unregistered cellular telephones will be
terminated as of December 31, 2004; policies
and procedures regarding the Cellular Telephone program are part of the
Wireless Electronic Ordering System web page and Internal Revenue Manual;
cellular telephones will be validated annually; and web site improvements will enable a more effective
validation process.
In addition, in May 2004, draft
phone card policies and procedures were developed and are being reviewed; inventory
reports will be shared with Business Operating Division management; the Calling
Card Ordering System contains an accurate phone card inventory; and in April
2004, the Enterprise Networks organization began an annual audit/revalidation
process for phone cards. Finally, a
determination will be made as to whether the inclusion of a cellular telephone
and/or phone card inventory module in the TAT system is a cost-effective
solution for the Federal Government. Management’s complete
response to the draft report is included as Appendix V.
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 Margaret E. Begg, Assistant Inspector
General for Audit (Information Systems
Programs),
at (202) 622-8510.
Control Weaknesses in Managing the Cellular Telephone Inventory Still Exist
Recommendations 10 through 12:
Annual Inventories of Phone Cards Have Not Occurred on a Consistent Basis
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix IV
– Outcome Measures
Appendix V –
Management’s Response to the Draft Report
One of the Internal Revenue
Service’s (IRS) major strategies contained in the IRS Strategic Plan Fiscal
Years (FY) 2000 – 2005 is to promote effective stewardship of assets and
information by improving internal processes for information and asset
management. In support of this strategy,
the mission of the
Enterprise Networks organization is to provide all forms of electronic
communications (i.e., voice, data, video, and wireless) in the most efficient
and effective manner. For FY 2004, the Enterprise Networks organization’s nonlabor
budget was $297 million, which included
$115 million for Wide Area Data Services, $80 million for Local Voice and Data
Services, $11 million for
Federal Technology Services (FTS) Network Services, and $4.5 million for
Wireless Cellular Telephone Services.
Since 1993, the Treasury Inspector General for Tax Administration (TIGTA), formerly the Inspection function of the IRS, has performed several audits of the IRS’ telecommunications program and found that the IRS did not have effective controls over its telecommunications costs for long distance, local telephone service, cellular telephones, phone cards, and data networks. As a result, in 1994 the IRS began tracking the internal controls over its telecommunications costs as a material weakness in accordance with the Federal Managers’ Financial Integrity Act of 1982. IRS management has since implemented several corrective actions to improve controls in the telecommunications program.
In July 2000, the IRS began developing the
Telecommunications Asset Tool (TAT) system as its telecommunications monitoring
and tracking system to address many of the reported weaknesses in the controls over its
telecommunications costs. As of April
2004, TAT system expenditures totaled $5.1 million. The
TAT system is a web-based telecommunications resource management system
designed to allow local and national offices to initiate, process, approve,
review, and manage FTS resources to identify
potential waste, fraud, and abuse.
The identification of potential waste, fraud, and
abuse is accomplished by reviewing long distance telephone call and phone card
use with established criteria agreed to by the National Treasury Employees
Union (NTEU) on September 25, 2001.
However, prior to this agreement, long distance telephone call and phone
card use had not been reviewed since December 1998 because the NTEU had not
agreed to the revised Billing Analysis Reporting Tool (BART) criteria.
In addition to reviewing long distance telephone
call and phone card use, the TAT system provides additional functionality in the
following five modules:
·
Service Request Orders – Provides
an online telecommunications ordering function used to submit new FTS orders to
Sprint and monitor the acceptance status of orders.
·
Telecom Assets – Allows
authorized users to view the asset inventory by type of service or by IRS site.
·
Local Exchange Carriers
(LEC) Electronic Billing (e-billing) – Allows authorized users to register,
review, authorize, and certify telecommunications invoices from six LECs
online.
·
Finance – Allows users to view FTS
billing data in various report formats.
The finance module has also been enhanced to support other financial
functionalities. For example, the Waste,
Fraud, and Abuse (WFA) reports system was added to provide managers the ability
to review employee use of telephones and phone cards
for long distance calls.
·
Administration – Allows users and
administrators to perform administrative functions such as authorizing users,
editing user information, configuring service types and features, editing or
adding location information, and running various reports.
On
October 16, 2003, the IRS notified the Department of the Treasury of its intent
to downgrade the internal controls over its telecommunications costs from a
material weakness to a reportable condition.
The IRS’ decision was based on the completion of several corrective
actions it had taken to address the control weaknesses, which included
implementing the TAT system and issuing policies and procedures on the proper
use of phone cards and cellular telephones.
The Department of the Treasury concurred with the IRS’ request on
November 20, 2003.
This review was
performed in the Enterprise Networks office at the IRS National Headquarters in
New Carrollton, Maryland, and the
The Department of the Treasury Directive (TD) 40-04, Treasury Internal (Management) Control Program, and the Office of Management and Budget (OMB) Circular A-123, Management Accountability and Control, provide guidance on the internal (management) controls required to reasonably ensure programs and resources are protected from waste, fraud, and mismanagement. The IRS Management Controls Accountability Program (MCAP) defines management controls as the programs, policies, and procedures for ensuring mission and program objectives are accomplished and resources are adequately safeguarded. The MCAP also assigns IRS managers stewardship and accountability for IRS operations and prompt correction of management control deficiencies.
Corrective actions completed by the IRS to improve the management of telecommunications costs include:
·
Implementing a nationwide system to detect and
identify potential wasteful, fraudulent, and abusive charges and to monitor employee long distance telephone call and phone
card use.
In addition, in response to a September 2002 TIGTA report on control weaknesses over the IRS’ local telecommunications costs, the IRS hired an outside firm to conduct an analysis of local telecommunications costs to identify areas where potential savings could be realized. As of May 19, 2004, the analysis had resulted in actual refunds to the IRS by the LECs of approximately $2.2 million, while an additional $48,000 in projected refunds were pending final negotiations with the vendors. The IRS will also avoid $635,000 in telecommunications costs annually as a result of the vendor’s analysis.
We also previously recommended the IRS perform an in-depth analysis of Treasury Communications System (TCS) invoices to identify billings for circuits and equipment that no longer exist at IRS offices. In January 2003, the IRS completed its review of TCS billing invoices, which recovered over $825,000 in credits due to the Federal Government and identified $850,000 in unrecoverable circuit overpayments that resulted from the IRS not having disconnected services when offices were relocated (see Appendix IV for the savings calculations).
With the completion of these corrective actions, the Enterprise Networks organization has requested closing as a reportable condition the controls over telecommunications costs. However, the implementation of the TAT system and other completed corrective actions have not effectively addressed the control deficiencies surrounding the management of telecommunications costs. For example:
· An effective managerial review process for long distance telephone calls and phone card use has not been implemented.
Consequently,
management cannot effectively detect and deter
abusive calling patterns, detect erroneous local telephone service charges, and realize expected
gains in efficiency from electronic invoice processing. The IRS also
continues to be at
risk to the possible misappropriation of cellular telephones and the payment of
erroneous or unauthorized cellular telephone and phone card charges.
1. The Chief Information Officer (CIO) should ensure the IRS continues to monitor the controls over its telecommunications costs as a reportable condition until the remaining control deficiencies are resolved.
Management’s Response: The IRS will continue to monitor controls over its telecommunications costs and maintain it as a reportable condition until deficiencies are resolved.
OMB
Circular A-123 requires management controls to reasonably ensure programs and
resources are protected from waste, fraud, and mismanagement.
To ensure the appropriate use of office equipment, the Department
of the Treasury issued TD 87-04, Personal Use of Government Office Equipment
Including Information Technology, which authorized limited personal use of
Federal Government office
equipment by employees under certain conditions. The IRS allows employees to make limited use
of Federal Government telephones for necessary personal calls that do not
adversely affect the performance of office duties, are of reasonable duration
and frequency, and could not reasonably have been
made during nonwork hours. For
employees in travel status, the IRS permits limited use of Federal Government
telephones or phone cards for necessary personal telephone calls.
On February 21, 2003, the IRS CIO issued
memoranda to all employees and managers notifying them that the IRS
would use the TAT system to perform quarterly reviews of employee long distance
telephone call use and phone card records that meet certain criteria. In June 2003, the
IRS reported the TAT system finance module was fully functional and effectively
generates reports to monitor employee telephone use.
With the implementation of the TAT system, the IRS notified the Department of the Treasury on October 16, 2003, that it had implemented a system to detect and identify potential wasteful, fraudulent, and abusive charges and monitor employee telephone use. However, as of May 21, 2004, an effective managerial review process of FTS long distance telephone call and phone card use had not been implemented. For example:
·
Questionable calls are not being regularly
identified for managerial review.
As
a result, management cannot effectively detect and
deter abusive calling patterns and collect reimbursement for unauthorized FTS
long distance telephone call and phone card charges from employees.
Questionable calls are not being regularly identified for managerial
review
Standardized reports were
developed for managerial review based on established criteria used to recognize
patterns of potentially inappropriate or wasteful calls. The TAT
system’s WFA reports processing was to be conducted on a quarterly basis
and would concentrate on the potential waste, fraud, and abuse of
telecommunications resources and lost productivity resulting from excessive
staff time spent on personal telephone calls rather than on official
duties. Managers were to use the
automated reports to conduct follow-up analyses, educate users, facilitate
corrective actions, and track implementation of best practices.
Although the IRS reported to the
Department of the Treasury that the TAT system finance module (including the
WFA reports system) was fully functional in June 2003, the reports were not
automatically generated and provided to managers. Report generation was delayed because the IRS
had not completed the computer matching program notification requirements
pursuant to the Privacy Act of 1974 to provide for a 40-day window of review by
the OMB and members of the Congress prior to implementation. The review window expired the beginning of
March 2004.
The TAT Project Team began the
initial run of the automated WFA reports system reports process on April 22,
2004, after complying with the computer matching program notification
requirements and ensuring all communication and training activities to promote
awareness and understanding of the system were completed. The WFA reports system is designed to
provide first-level managers an email
containing a link to the WFA reports system reports for their offices.
Although the emails were issued on April 22, 2004, containing a link for managers to access the quarterly call detail reports, the implementation date was not met because managers were
unable to access their reports due to network and database problems. While the TAT Project Team reported that both
problems were corrected by April 26, 2004, additional problems were identified.
As of May 21, 2004, the problems
had not been resolved and the system had not been implemented. The delay
in automatically distributing the WFA reports system reports resulted in the IRS being unnecessarily exposed, since
June 2003, to incurring charges for unauthorized
telephone use without the possibility of detection and the initiation of
disciplinary and collection action against employees.
In addition, information was
provided to all managers that the ad hoc process was available to request
reports detailing calls from office telephones or phone cards if they suspected
potential problems. The ad hoc reporting
process began in January 2003, but its use has been limited. For example, the TAT Project Team received
only 20 requests for ad hoc reports during the period October 2003 through March
2004.
Significant implementation problems reduce the TAT system’s
effectiveness
While implementing the WFA reports system, the TAT Project Team has identified problems associating the telephone number in the call detail record to the telephone number assigned to an IRS employee, which significantly reduces the number of exception records that are available for managerial review. For example, only 986 (38 percent) of the 2,624 records that contained FTS long distance telephone and phone card calls meeting the questionable criteria during the first run of the WFA reports system on April 22, 2004, actually resulted in the generation of an email to a manager. The TAT Project Team attributed part of the problem to an issue with the Automatic Number Identifier (ANI) capability at some IRS facilities, which is needed to identify the telephone number that initiated the questionable call. Not having the ANI capability results in mismatches, since the call detail record does not contain the correct telephone number from which the call originated.
In addition, the TAT Project
Team suspects the telephone numbers for some IRS employees and managers contained
in the Corporate Authoritative Directory Service (CADS) system may not be
complete or accurate. Since the TAT system’s WFA reports system uses the CADS
system to identify the employee who made the questionable telephone call by
matching the originating telephone number in the call detail report to the
telephone number contained in the CADS system, erroneous telephone numbers
affect the IRS’ ability to correctly associate the questionable call with the
responsible IRS employee. For example, an analysis of the 113,158 employee accounts
contained in the CADS system showed that only 94,801 (84 percent) had a
telephone number for the employee in their account information. Not having the ANI capability at some IRS
facilities, combined with incomplete and inaccurate information in the CADS
system, significantly hampers the ability of the WFA reports system to
correctly identify the employee responsible for making a questionable call.
Critical information is not captured by the TAT system for management to
assess the program’s effectiveness
The Department of the Treasury Information
Technology Manual requires each bureau to establish a performance
measurement approach to measure an information technology investment in terms
of improved efficiency, effectiveness, and increased quality. For the WFA reports system, managers
are required to review their quarterly call detail reports within 5 business
days of the initial TAT system email and certify within 15 business days that
their employee(s) made the call(s) for valid business reasons. For an unauthorized call, the manager is
instructed to obtain reimbursement of the cost of the call plus fees and
taxes. In addition, managers were
advised that disciplinary or adverse action might be appropriate.
The WFA reports system permits
management to assess a call as “Valid” or “Follow up” but does not permit
management to assess a call as “Unauthorized.”
In addition, the WFA reports system does not include the ability to
generate a report that would identify the timeliness of management’s review of
the quarterly call detail reports. For
the ad hoc reports requested by managers, the TAT Project Team tracks the date
of the request and who requested the ad hoc report because the WFA reports
system module does not track the requests.
As a result, the TAT Project Team cannot determine whether the quarterly review criteria are effective in identifying suspicious calling patterns and whether managers timely reviewed the questionable calls. The TAT Project Team explained that the WFA reports system is considered to be a data-gathering system only intended to provide managers with information on telephone use by their staffs.
The CIO should ensure:
2. Quarterly call detail reports are manually distributed until the problems associated with implementing the WFA reports system have been sufficiently addressed.
Management’s Response: Two of the four problems that caused the deficiencies in the initial reports were corrected in April 2004. With the corrections, the Enterprise Networks organization is implementing automated distribution of the quarterly call detail reports. The two remaining problems will be corrected with the implementation of a change in the way employees access the IRS computer network and a modification to the system that will allow a manager to designate a proxy manager.
3.
The WFA reports system is modified
to permit an assessment of calls as “Unauthorized” and require “Follow up”
calls to be resolved as “Valid” or “Unauthorized.”
Management’s Response: The Enterprise Networks organization submitted
a change request to the contractor to change the STATUS indicators from “Valid”
and “Follow-up” to “Accept” and “Reject.” Further selections under “Reject” will
include: “Closed – Employee did not make call;” “Closed – See manager,”
followed by free-form comments; and “Closed – Resolved” – followed by free-form
comments to be entered by the manager. The
information will be used by local management for further actions, if necessary.
4.
A reporting feature is added to the WFA reports system to
identify the results of the managerial reviews (including the timeliness of
management’s review), the assessment on the validity of the call, and trends of
repeated unaccounted for use of Federal Government telephones and phone
cards. Management should also follow up
on the trends of questionable calls.
Management’s Response: A reporting feature is being added to the
system that will allow a report to be run that identifies the nature and
timeliness of the managers’ decisions.
These reports will be provided quarterly
to Business Operating Division (BOD) management to determine if decisions were
appropriate and to the Chief
Human Capital Officer to determine if there are any labor/employee relations issues to
resolve.
5. The TAT Project Team reviews the call detail records to identify potential ANI issues and takes the necessary actions to resolve these issues.
Management’s Response: The Director, End User Equipment and Services, and Director, Enterprise Networks, issued a memorandum, dated June 21, 2004, advising field locations that effective January 3, 2005, each official IRS site will be required to deliver the true 10-digit originating telephone number of each calling party to the FTS long-distance carrier. This ANI policy will allow the originating telephone number to be passed through the FTS network for reporting purposes. Additionally, sites were advised to notify the Enterprise Networks organization of any impediments to achieving that objective.
6. The TAT Project Team continues to work with the CADS Program Office to ensure the information in the CADS system is complete and accurate.
Management’s Response: The TAT database links with the CADS to match the telephone number with the employee assigned and, consequently, the manager of that employee. The CADS obtains its employee and manager data from the Human Resources Connection (HR Connect). Discrepancies in both the HR Connect and the CADS have led to invalid data in the reports. The TAT database is being revised to permit an administrator to run filters to collect and identify invalid data provided by the HR Connect. The TAT team is working with the HR Connect Project Office to ensure the HR Connect is kept up-to-date.
The
Department of the Treasury Information System Life Cycle Manual establishes
the rules and principles governing the life cycle management of information
systems to ensure developed systems are responsive to mission
requirements. After a system has been
operational for a period of time, management should evaluate the success of the
system by determining whether expected benefits have been achieved and user
needs have been met.
The TAT system
e-billing module allows authorized users online capability to register, review,
authorize, and certify telecommunications invoices from LECs. This module is expected to streamline the
review, certification, and processing of electronic invoicing to allow timely
payment of bills. In October 2003, the IRS reported to the
Department of the Treasury that the TAT system e-billing module to address the
control weakness over local telecommunications costs was operational. However, several obstacles preclude the
successful implementation of an electronic invoice process for local telephone
services. For example:
As a
result, erroneous local telephone service charges may not be detected and
expected gains in efficiency from electronic invoice processing may not be
realized. In addition, the TAT Project
Manager advised that a post-implementation review had not been conducted
because the TAT system was not yet fully implemented and they are waiting for
it to be security certified.
The
TAT system e-billing module does not reconcile the invoice against an inventory
of circuits for asset verification
On
December 16, 2003, an outside firm completed an analysis of the IRS’ local
telecommunications costs to identify areas where potential savings could be
realized. This analysis was also used by
the IRS to establish a baseline inventory of local telephone service circuitry,
which could then be used by the TAT system e-billing module to reconcile invoices
against the asset database for billing certification purposes. If discrepancies should be identified, the
TAT system e-billing module would issue notifications to the affected
users. However, the TAT Project Team
explained that the asset reconciliation capability is on hold because the
process causes a delay in system performance that affects user processing. To address the system performance issue, the
TAT Project Team developed a system requirements document and submitted a
system change request.
Although the reconciliation of invoices against the
asset database has not occurred, the TAT system e-billing module does
compare invoices against a user-defined
variance threshold to determine whether the current charges are above or below
the historical norm, which is intended to identify suspect charges for
additional scrutiny by the reviewer. For
example, if the amount of the current month’s bill exceeds the historical
average by 10 percent (current system default variance for all offices) or
more, the TAT system e-billing module notifies the user by highlighting the
bill amount and displaying a note detailing the exception. While the variance threshold may increase the
possibility of identifying suspect charges, it also increases the risk that
inappropriate charges will not be identified in subsequent months because
inappropriate charges within the variance amount are added to the baseline for
future historical comparisons.
Some IRS locations are not using
the TAT system
e-billing module to review invoices
On June 25, 2003, the Director,
End User Equipment and Services (EUES), issued a memorandum to all Area Directors, Computing Center Directors, and Territory
Managers announcing that the TAT system e-billing module for local telephone
services was operational. The memorandum
encouraged management to identify
those individuals responsible for receiving, reviewing, and certifying local
telephone bills and have those individuals register for the TAT system
e-billing module.
However, not all IRS locations
are using the TAT system e-billing module.
For example, three of the eight offices we contacted were not using the
electronic invoice process available on the TAT system e-billing module.
The reasons provided by the three
sites for not using the TAT system e-billing module varied. Officials at one site indicated their budget
information was not accurately input into the module, while those at another
site explained that the person responsible for reviewing its invoices was
incorrectly assigned to a different site in the TAT system. Local management at the third site explained
that they did not use the TAT system e-billing module because their site had
entered into a 5-year contract with the local telephone carrier that they
preferred to administer outside of the electronic invoice process available on
the TAT system. The TAT Project Team
explained that no directive has been issued requiring all IRS offices to use
the TAT system e-billing module.
Several offices
reported problems and concerns with the electronic invoice process
We surveyed 42 offices that were
registered to use the TAT system e-billing module. Of these 42 offices, 9 reported problems
and/or complaints with the electronic invoice process. Systemic problems reported by the offices
included:
Several
offices also complained that the TAT system e-billing module has not automated
the process for paying the invoices, since they still have to print the invoice
summary page and fax it to the
As a
result of the problems with the TAT system e-billing module, IRS management cannot determine the module’s effectiveness
in achieving original program objectives and maximize efficiency gains from
online electronic invoice processing.
Management’s Actions: The TAT Project Team has taken several actions to address the system problems, including working with the Enterprise Service Desk (ESD) Program Office to incorporate the TAT system modules as an ESD Help Desk project, working with the Mission Assurance organization to obtain final security certification of the system so vendor invoices can be electronically received, and submitting several system change requests. The system changes are to be implemented by September 2004.
The CIO should ensure:
7.
The variance percentage is evaluated to ensure the setting is
appropriate for each site.
Management’s Response: A memorandum will
be issued by September 3, 2004, requiring the mandatory use of the TAT system e-billing
process effective October 1, 2004. Subsequently,
the use of the 10 percent variance for all field offices will be evaluated and
adjusted accordingly.
8.
Offices are directed to use the TAT system e-billing module and
any obstacles to nationwide use are identified for timely resolution.
Management’s Response: A memorandum is
being issued directing the mandatory use of the TAT system e-billing process for
bill payment and bill verification effective October
1, 2004. Any office that cannot
use the TAT system e-billing process must submit an exception request with full
justification no later than September 15, 2004.
9. A post-implementation review is conducted to assess the effectiveness of the system in meeting the original objectives.
Management’s Response: The Enterprise Networks organization will conduct a post-implementation review within 60 days of accepting the TAT system application. Additionally, a follow-up review will be conducted 6 months after the system has been fully implemented.
OMB Circular A-123 requires managers to maintain appropriate, cost-effective controls over the agency’s financial resources and assets to improve the accountability and effectiveness of Federal Government programs and operations. Specifically, it requires agency managers to establish management controls that provide reasonable assurance that assets are safeguarded against waste, loss, unauthorized use, and misappropriation. It also holds agency managers responsible for taking timely and effective action to correct deficiencies. For example, it stipulates that management has a responsibility to identify and implement corrective actions regarding agreed to Inspector General audit recommendations within 1 year, to the extent practicable.
The national cellular telephone inventory is currently not
managed using the TAT system; however, the IRS plans to move the cellular
telephone inventory and billing function to the TAT system in FY 2005. Since 1993, we have performed several audits
and reported control weaknesses in managing the IRS’ cellular telephone
inventory. IRS management agreed to
establish an accurate cellular telephone inventory, conduct annual inventory
validations, and implement an automated process that will compile a national
cellular telephone database and be used to order equipment, automatically
update the inventory, and support the annual inventory validations.
Although the IRS established an automated process to
improve the management of its cellular telephone inventory, control weaknesses
continue to exist. For example, an
accurate inventory of cellular telephones has not been established, and
policies and procedures have not been developed for completing the annual
validation of the cellular telephone inventory and reporting the results.
An accurate inventory of cellular telephones
has not been established
To establish a current inventory, the IRS mandated that all
new requests for cellular telephones be made using the electronic ordering
system for wireless devices, effective August 1, 2002. In addition, all IRS employees that were
assigned a cellular telephone prior to implementation of the automated process
were required to register their telephones on the Wireless Services Web Page by
September 1, 2002. Current cellular
telephone holders were warned that, if they did not timely register their
cellular telephones, their service would be discontinued until registration
occurred.
The initial cellular telephone inventory was completed in
September 2002; however, it is not accurate because it does not include
employees that had cellular telephones prior to implementation of the automated
process but failed to register their cellular telephones in the database by
September 1, 2002, as required. The
Wireless Program Office acknowledges that it has not yet established an
accurate inventory of cellular telephones. In addition, management
advised that the IRS is currently being billed monthly for approximately 9,100
cellular telephone numbers, but management could not provide the cellular
telephone inventory records.
Management also could not provide the monthly costs for cellular
telephone services. We requested the
information on two occasions during the audit and were advised the information
could not be provided. However, after we
completed our audit work, management stated that the monthly costs for cellular
telephone services could be provided from the vendor bills. Since our audit work was completed, we did
not obtain and review the cost information.
Although service was to be discontinued for unregistered
cellular telephones, the Wireless Program Office explained that the IRS has
been reluctant to cancel service for those employees who failed to register
their cellular telephones. This is due,
in part, to the fact that some of the unregistered cellular telephones were
assigned to IRS executives. Wireless
Program Office management believes it is inappropriate to discontinue cellular
telephone service for IRS executives who have not registered their cellular
telephones. Consequently, the IRS
continues to be at risk of the possible misappropriation of cellular telephones
and the payment of erroneous or unauthorized cellular telephone charges for
individuals who may no longer work for the IRS or who have changed positions
and no longer have a need for a cellular telephone.
Policies and procedures have not been
developed for completing the annual validation of the cellular telephone
inventory and reporting the results
To maintain an accurate inventory of cellular telephones, the IRS agreed to conduct annual inventory validations. As part of this process, the IRS issued guidance requiring each employee with an issued cellular telephone to log on to the Wireless Services Web Page (upon receipt of an email notification) and verify his or her account information (e.g., name, address, cellular phone make and model). However, the Wireless Program Office has not developed guidelines for its staff specifying how to perform the annual cellular telephone inventory validation.
In addition, no document was prepared to report the results of the initial inventory validation (i.e., exceptions identified and corrective actions planned). As a result, discrepancies that existed between registered cellular telephones in the database and cellular telephones for which the IRS is being charged for services were not reported, and corrective actions have not been identified. Management attributes the delay in developing appropriate policies and procedures to limited project staffing and other priorities. However, requirements are currently being developed for various administrator guides and management reports.
The Wireless Program Office is aware of the problems in effectively managing the cellular telephone inventory and has initiated some corrective actions. For example, management submitted a Request for Information Services (RIS) to require changes to the electronic ordering system and to establish various management reports. Management will also be developing user and administrator guides. In addition, management will assign responsibility for updating the cellular telephone inventory database to the local telecommunications staff rather than the assigned cellular telephone holders.
While
local telecommunications employees will validate the cellular telephone
inventories, the reports to be used for the validation are inaccurate.
Our review of an inventory report issued in March 2004 for 1 area code
included 48 cellular telephone numbers and the associated devices. Of these 48 cellular numbers, 22 (46 percent)
were duplicate listings (some as many as 5 times). The continued
existence of control weaknesses in managing the cellular telephone inventory
exposes the IRS to the possible misappropriation of assets and the payment of
erroneous or unauthorized charges.
The CIO should ensure:
10.
Service is immediately discontinued for cellular telephones
that have not been registered in the national database.
Management’s Response: A memorandum from
the CIO was signed on August 5, 2004, and distributed to all BODs instructing
all employees who have IRS-issued cellular telephones to register these cellular
telephones by September 30, 2004.
Failure to register a telephone will result in suspension of service to
that telephone until it is registered.
By October 31, 2004, the Wireless Staff will suspend service on any
remaining non-validated (i.e., unregistered) telephones.
Employees will have an opportunity
to protest and register their telephones prior to the end of the calendar
year. However, telephones remaining on
suspended service on December 31, 2004, will have service terminated and the
telephone number will be dropped from the inventory.
11.
Policies and procedures are developed for completing the
annual inventory validation and reporting the inventory results.
Management’s Response: Policies and procedures regarding the Cellular Telephone program are part of the Wireless Electronic Ordering System web page. They are also documented in the Internal Revenue Manual (IRM). The annual validation process already described in the cellular telephone policy statement will be followed annually. Additionally, improvements are being made to the web site which will enable a more effective validation process.
12. A complete and accurate inventory of cellular telephones is established as an interim measure until the inventory management and billing function can be added to the TAT system.
Management’s Response: The requirement for a complete and accurate inventory will be fully met once the corrective actions described for Recommendations 10 and 11 are implemented. Once the TAT system program is fully accepted and the post-implementation review is conducted, a determination will be made as to whether the inclusion of a cellular telephone inventory module in the TAT system is a cost-effective solution for the Federal Government.
The Government Accountability Office Standards for
Internal Control in the Federal Government require that periodic comparisons of resources with accountability
records be completed to reduce the risk of errors, fraud, or unauthorized
use. In 1993, we reported that the IRS needed to improve
controls over issued Federal Government phone cards. In response, IRS management agreed to conduct an annual inventory
of its phone cards and issue inventory guidelines and procedures. In September 2001, we reported that the IRS
had conducted only one inventory of the phone cards since 1993.
The IRS has approximately 39,000 phone cards issued to its
employees, approximately 16,000 of which are currently being converted from
Sprint to AT&T phone cards. IRS
management has implemented several procedures to safeguard and manage the phone
card inventory to minimize the risk of waste, fraud, and abuse. For example, the staff responsible for
maintaining the phone card inventory updates the inventory database regularly
based on information received from managers and employees notifying them if an
employee has been reassigned, separated from the IRS, or no longer has a
business need for the phone card. In
addition, a monthly reconciliation between the phone card database and the
Totally Automated Personnel System (TAPS) is performed to ensure phone cards
were cancelled for employees that have left the IRS. The IRS also developed a separate web site
and the Calling Card Ordering System (CCOS) to manage the phone card
inventory. The IRS plans to migrate the
inventory management and billing processes for phone cards to the TAT system in
FY 2005.
Although the IRS has taken several measures to improve the
management of issued phone cards, a complete inventory of the phone cards has
not been conducted since 2002.
Management explained that only partial inventories were completed in 2003
because the IRS began converting phone cards from Sprint to AT&T. With this process nearing completion,
management stated that a full audit of the phone card inventory would be
conducted during this calendar year prior to converting the remaining cards to
AT&T.
In addition, management has not documented the guidelines
and procedures for completing the annual inventory or reporting the inventory
results (i.e., exceptions identified and corrective actions planned).
Management attributes this to limited staffing and other
priorities. Not having consistent
recurring inventories and documented inventory procedures increases the risk
that unauthorized use of IRS-issued phone cards will not be detected.
The CIO should ensure:
13.
Policies and procedures are developed for completing the annual inventory
validation and reporting the inventory results.
Management’s Response: The IRM currently describes
phone card policies and procedures.
Draft policies and procedures were developed in May 2004 and are being
reviewed. The Enterprise Networks organization
will share inventory reports with BOD management by September 30, 2004. These procedures will be placed in a Detroit
Computing Center Phone Card Staff Desk Guide by November 2004.
14. A complete inventory of phone cards is established prior to migrating the inventory management and billing function to the TAT system and annual phone card inventories are completed on a consistent basis.
Management’s Response: The CCOS contains
an accurate inventory of the 37,000 Sprint/AT&T phone cards. In April 2004, the Enterprise Networks
organization began an annual audit/revalidation process for Sprint phone cards
by the BODs, which is being conducted simultaneously with the transition of the
phone cards to AT&T. The transition
to AT&T is expected to be completed in November 2004.
Once the TAT system program is
fully accepted and the post-implementation review is conducted, a determination
will be made as to whether the inclusion of a phone card inventory module in
the TAT system is a cost-effective solution for the Federal Government.
Appendix I
Detailed
Objective, Scope, and Methodology
The overall objective of this review was to evaluate
the effectiveness of the controls over telecommunications costs. To accomplish this objective, we:
I. Reviewed national policies, procedures, and training materials for reviewing long distance telephone call and phone card use reports and for initiating disciplinary and collection actions for unauthorized calls using the Telecommunications Asset Tool (TAT) system finance module. We interviewed management about the implementation status and current functionality of the TAT system finance module, reviewed system documentation, and identified the number of ad hoc reports requested by managers in the first 2 quarters of Fiscal Year 2004. We also assessed management’s actions to resolve problems encountered while implementing the enhanced reporting tool to identify waste, fraud, and abuse.
II.
Reviewed national policies, procedures, and
training material for reviewing and certifying local billing invoices using the
TAT system electronic billing (e-billing) module. We also reviewed system documentation and
interviewed management on the implementation status and current functionality
of the e-billing module. For the 48
offices registered to use the TAT system e-billing module, we surveyed all 42
offices having an email address for the person to contact to identify system
problems. We also judgmentally selected
eight offices to evaluate
the invoice review and reconciliation process. We interviewed personnel responsible for
reconciling the local billing invoices and obtained a walk-through of the
process. The selected offices were
geographically dispersed across the country.
We judgmentally
selected the eight offices because there was no need to project the results to
the population.
III.
Reviewed policies and procedures
for managing and monitoring the cellular telephone and phone card inventories. We also interviewed management to determine the roles,
responsibilities, and procedures for updating and reconciling the inventories
and conducting annual inventory validations. In addition, we reviewed the documentation for completed inventory
reconciliations and the resolution of identified discrepancies.
IV.
Reviewed the status
and results of the corrective actions taken by management to address the
internal controls material weakness over telecommunications costs, including
the support to downgrade the material weakness to a reportable condition. We also interviewed
management on the results of the implemented savings initiatives and the
Treasury Communications System review completed January 2003.
V.
Interviewed management
on the expected benefits and performance measures for the TAT system. We also
obtained documentation identifying the TAT system performance measures and
reviewed performance statistics for the TAT system to determine whether the
expected benefits were being derived.
In addition, we reviewed any
evaluations of the TAT system completed by management to assess system
performance.
Appendix II
Major Contributors to This
Report
Margaret E. Begg, Assistant Inspector General for Audit (Information
Systems Programs)
Gary Hinkle, Director
Danny Verneuille,
Audit Manager
Olivia Jasper, Lead Auditor
Van Warmke, Senior Auditor
Steven Gibson, Auditor
Perrin Gleaton,
Auditor
Suzanne Noland,
Auditor
Appendix III
Commissioner C
Office of
the Commissioner – Attn: Chief of
Staff C
Deputy Commissioner for Operations Support OS
Associate Chief Information Officer, Information Technology
Services OS:CIO:I
Director, End User Equipment and Services OS:CIO:I:EU
Director,
Director, Stakeholder Management OS:CIO:SM
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 Liaisons:
Director, End User Equipment and Services OS:CIO:I:EU
Director,
Manager, Program Oversight Office OS:CIO:SM:
Appendix IV
This appendix presents detailed information on the measurable impact that our previously recommended corrective actions have had on tax administration. These benefits will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome Measures:
·
Cost
Savings, Questioned Costs – Actual; $2.2 million. Potential;
$48,000 (see page 3).
·
Cost Savings, Funds Put to Better Use – Actual;
$3.2 million (see page 3).
Methodology Used to Measure the Reported Benefit:
In September 2002, we reported
that the Internal Revenue Service (IRS) did not have effective controls over
its local telecommunications costs.
Specifically, the IRS did not
perform an in-depth analysis of the local telephone services billing invoices
to identify unauthorized charges and verify that the IRS is not being charged
for telephone services at vacated offices.
To address this issue, the IRS hired an outside firm to conduct an analysis
of its local telecommunications costs and determine potential areas of
savings. As of May 19, 2004, this
analysis resulted in disallowed charges and approved refunds from the Local
Exchange Carriers (LEC) of approximately $2.2 million and an additional $48,000
in projected refunds were pending final negotiations with the vendors. In
addition, the analysis will result in cost avoidance of $3.2 million (annual
cost avoidance of $635,000 computed over 5 years) in LEC overcharges to the IRS.
Type and Value of Outcome Measure:
·
Inefficient
Use of Resources – Actual; $742,000 (see page 3).
Methodology Used to Measure the Reported Benefit:
We previously recommended the IRS perform an in-depth analysis of Treasury Communications System (TCS) invoices to identify billings for circuits and equipment that no longer exist at IRS offices. In January 2003, the IRS completed a review of TCS billing invoices, which identified $850,000 in unrecoverable circuit overpayments that resulted from the IRS not having disconnected services when offices were relocated. Since the prior audit report claimed a potential outcome measure of $108,000 in questioned costs, we are claiming $742,000 ($850,000 - $108,000).
Appendix V
Management’s Response to
the Draft Report
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.