IRS Slammed by Audit: May Have 'Erroneously Paid' Contractors $927,992

By Penny Starr | November 29, 2012 | 1:12 PM EST

Plaque outside the building of the Internal Revenue Service. (AP)

( – An inspector general charged with reviewing the Internal Revenue Service's use of $208 million in funds from the American Recovery and Reinvestment Act of 2009 estimates that the IRS may have "erroneously paid" almost $1 million to contractors.

"Our review of a statistically valid sample of $1 million in labor charges identified that the IRS did not have documentation supporting $394,430 of the invoiced labor hours that were procedures, plans to review the labor charges paid," said the audit.

"Applying the results of our analysis to the $5.3 million in labor charges for the procurement in which unsupported payments were identified," said the audit, "TIGTA estimates a total of $927,992 may have been erroneously paid. IRS Contracting Officer’s Technical Representatives (COTR) did not obtain required documentation supporting all billed labor charges. The unsupported labor charges relate to work performed by contractor and subcontractor employees."

The report, posted on the website on Nov. 7, was published by the Treasury Inspector General for the Tax Administration (TIGTA) on Sept. 19, 2012.
It explains that the “IRS did not administer procurements funded by the Recovery Act in accordance with the Office of Management and Budget Recovery Act guidance, Federal Acquisition Regulation, and IRS policies and procedures.”

A press release posted with the report on the website states that the stimulus funds were “to pay for 56 tax provisions mandated in the stimulus legislation” and some of that money was used to hire contractors to reprogram computer systems, update tax forms and publications and for customer support for Recovery Act tax credits inquiries.

But IRS officials “did not obtain required documentation supporting all billed labor charges,” according to the report.

The report said the IRS has agreed to comply with the IG’s recommendation that the agency “tighten policies and procedures regarding contractor invoicing.”

The report also notes that its cost was paid for with stimulus funds.