IRS to spend $13.2 million on headquarters flood recovery

Agency avoided using any new appropriations and followed contracting rules, auditors find.

The Internal Revenue Service will spend about $13.2 million to fix damage from June 2006 storm flooding that submerged the subbasement of its Washington headquarters building in 20 feet of water, according to a recent audit.

As of the end of 2006, the IRS had spent $11.6 million to recover from the flood, the 18-page report from the Treasury Inspector General for Tax Administration said. The latest estimate for the overall cost is 37 percent below the original projection of $21.1 million.

The IRS followed contracting rules and did not rely on additional funding from Congress, auditors added. The agency paid by using year-end surpluses, rent credits from the damaged buildings and fees charged to individuals and businesses for special benefits beyond those granted to the public.

IRS officials told the inspector general that the original estimates were high because they were made before damage had been thoroughly assessed. Technology improvements also helped reduce costs.

The four offices with the highest estimated costs were the agencywide shared services office, at $8 million; the modernization and information technology services office, at $2.7 million; the chief counsel's office, at $1.6 million; and the criminal investigation office, at $700,000. Nearly three-quarters of the money went toward rent for temporary space, data processing equipment, services and maintenance, and salaries.

Water severely damaged the building's electrical, heating and air-conditioning systems in the subbasement. It also destroyed offices, vehicles, furniture and computer equipment located in the basement and garage, the audit stated. The 2,200 employees who worked in the building, including the top officials in the agency's major divisions, were assigned temporary space in other IRS facilities or teleworked.

In February, auditors found that while IRS officials protected taxpayer data satisfactorily after the flood, it took several days before a system was set up to track computers that were removed from the building.

For the more recent report, the auditors reviewed a sample of the 140 purchases related to the flood recovery and looked at the 10 largest expenditures. They did not find anything improper. All purchases for more than $2,500 were properly handled through the procurement process and the IRS used existing federal contracts with approved vendors to purchase large-dollar items.

Since the building is leased from the General Services Administration, the IRS was not responsible for making structural repairs. GSA estimated in September 2006 that it would cost about $36.8 million to repair the building, grounds and internal infrastructure such as the plumbing, the electrical system, heating and air-conditioning, and wiring. The inspector general did not review this aspect of the recovery.