The Internal Revenue Service Should Improve the Management
of Its Energy Conservation Program
March
2003
Reference
Number: 2003-10-068
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.
March
4, 2003
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 – The Internal Revenue Service Should Improve
the Management of Its Energy Conservation Program (Audit # 200210026)
This
report presents the results of our review to determine whether the Internal
Revenue Service (IRS) has complied with the prescribed energy conservation
requirements under the National Energy Conservation Policy Act of 1978,
Executive Order 13123 (Greening the Government Through Efficient Energy
Management), and Treasury Directive 75-04 (Energy Management Program).
In
summary, although the Department of the Treasury has responsibility for
providing a consolidated report of energy consumption to the Department of
Energy, the IRS must provide a significant amount of the information to be used
in compiling the report. However,
information reported by the IRS is not reliable due to recent building
reclassifications, which affected the baselines and goals used for measurement,
and concerns with the accuracy and completeness of the data provided by the
IRS.
Furthermore, the IRS has not
complied with certain organization and accountability provisions of Executive
Order 13123. Most notably, the IRS has
assigned one of its mechanical engineers a peripheral duty to be the IRS’
Energy Coordinator, with the responsibility to consolidate energy consumption
data for submission to the Department of the Treasury. The IRS does not have a senior level
official that is responsible for monitoring energy conservation efforts and
does not have a technical support team with representation from the budget,
procurement, legal, management, and technical areas to expedite agency efforts
to meet the goals and requirements.
Management’s Response: IRS
management agreed to initiate corrective actions for each of our five
recommendations. Specifically, the IRS
has realigned the Energy Program so that the National Energy Program Manager
reports directly to the Chief, Real Estate Management Branch. In addition, it is in the process of
selecting a senior management analyst to serve as the National Energy Program
Manager. This individual’s
responsibilities will include establishing a standard data submission process,
updating the IRS’ Energy Management Plan, issuing written guidelines,
developing a training plan, ensuring all IRS delegated buildings are properly
classified, and verifying baseline energy consumption figures. Further, the Program Manager will have a
full range of technical support from engineering, procurement, legal, and
budget personnel to help develop energy conservation projects.
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 who are 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.
Information Used to Report Compliance With Energy
Conservation Requirements Is Not Reliable
The Internal Revenue Service Has Not Complied With Certain Requirements of Executive Order 13123
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 Federal Government is the nation’s largest energy consumer. As such, energy conservation at federal facilities has been a longstanding priority. The Energy Policy Act of 1992 (EPACT), along with its amendments to the National Energy Conservation Policy Act of 1978 (NECPA), forms the statutory basis for federal energy management activities.
Executive Order 13123 (Greening the Government Through Efficient Energy Management (June 1999)), which has also been incorporated into the NECPA, further builds on these laws. Energy conservation goals outlined in the Executive Order and the applicable base years used to measure progress for each type of building are shown below.
|
Building Type |
Base Year |
Energy
Reduction Goals |
|
|
By 2005 |
By 2010 |
||
|
Standard Buildings/
Facilities |
1985 |
30% |
35% |
|
Industrial, Research
and Other Energy-Intensive Facilities |
1990 |
20% |
25% |
Source:
Executive Order 13123
Because of the variance in the size of federal agencies and their facilities, the consumption of energy (as measured in British Thermal Units [Btu]) per gross square foot of building space for each year is generally used as the basis for comparison. The following table shows the energy consumption (in Btus per gross square foot) reported by the Department of the Treasury for Fiscal Year (FY) 2001 and the Internal Revenue Service’s (IRS) reported consumption for the space it is responsible for managing.
|
Building Type |
Energy Consumption |
|
|
Treasury-wide |
IRS |
|
|
Standard Buildings/ Facilities |
88,335 |
77,101 |
|
Industrial, Research and Other Energy-Intensive
Facilities |
247,618 |
216,620 |
Source:
Department of the Treasury
It is important to note that Treasury-wide consumption is an average which includes the IRS as well as the other Treasury bureaus and offices. Additionally, the energy consumption amounts shown above do not include space for which the General Service Administration (GSA) provides building operation and maintenance services. As of July 31, 2002, the IRS had office space in approximately 760 buildings. The GSA provides building operation and maintenance services for most of these buildings (accounting for approximately 23 million square feet of IRS space), and is responsible for reporting on energy conservation efforts for the buildings. At the time of our review, the IRS was delegated with building management and energy consumption reporting responsibility for 23 buildings at 11 geographic sites, with a total of approximately 7 million square feet. Our review was limited to these sites, which included the National Headquarters building, the Martinsburg Computing Center, and the IRS Campuses. In FY 2001, the IRS reported that it spent approximately $21 million for utilities at these sites.
The NECPA recommended that Inspectors General conduct periodic reviews of compliance with the Act. This review was performed from May through December 2002. To accomplish our objective, we conducted interviews with and reviewed documentation maintained by the IRS’ Energy Coordinator in Philadelphia, Pennsylvania, and building management staffs at the Atlanta, Austin, and Philadelphia IRS Campuses, as well as the National Headquarters building. 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.
Executive Order 13123 provides that each agency shall measure and report its progress in meeting the prescribed energy conservation goals and requirements on an annual basis. While the Department of the Treasury has responsibility for providing a consolidated report to the Department of Energy (DOE), the IRS must provide input to be used in compiling the report. We were unable to assess the IRS’ progress to date due to both recent building reclassifications, which affected the baselines and goals used for measurement, and concerns with the accuracy of the data provided by the IRS.
Most buildings were recently reclassified from Standard to Industrial, which changed the baselines and goals
In general, Standard Buildings can be described as those sites where energy is used to provide standard building services, such as lighting, heating, ventilation, and cooling. Industrial Buildings have a much higher level of energy consumption than Standard Buildings because they generally use additional machines or equipment as a part of normal operations. As such, their energy needs go beyond the normal lighting, heating, ventilation, and cooling. Therefore, buildings need to be properly classified according to their level of energy use so that an accurate, useful depiction of an agency’s energy consumption can be provided. It is equally important to ensure that the base year energy consumption figures an agency will use to measure its progress are accurate and complete.
Neither the IRS nor the Department of the Treasury can attest to the accuracy of the IRS’ baseline energy consumption figures. Prior to FY 2001, all IRS delegated sites (with the exception of the Martinsburg Computing Center and its Annex) were classified as Standard Buildings/Facilities. In FY 2001, the Department of the Treasury determined that delegated buildings at the IRS’ Campuses could be reclassified under the Industrial Buildings category. The baselines were then recomputed and the IRS’ Energy Coordinator was asked to validate the figures. However, the IRS’ Energy Coordinator was unable to do this since he did not have the necessary supporting documents.
This reclassification to the Industrial Buildings category included not only 9 Submission Processing buildings but also 10 other buildings, which include office space, warehouses, and a childcare center. Once the reclassification was completed, only 2 of the 23 buildings for which the IRS is responsible remained classified as Standard Buildings/Facilities. Reclassifying the Submission Processing buildings to the Industrial Buildings category appeared to have a reasonable basis; however, there does not appear to be an adequate basis for reclassifying office space, warehouses, or the child care center, given the lower energy needs for this use of space.
Certain information provided for the FY 2001 Annual Energy Report was incomplete or inaccurate
In addition to the above concerns related to the classification of buildings and the baselines used for measuring progress, we also identified inaccurate or incomplete information provided to the Department of the Treasury for each of the following four sections of the FY 2001 Annual Energy Report:
Annual Report on Energy Management – This included a statement that all IRS delegated sites have in-depth energy management and conservation plans. However, we were subsequently advised that there are, in fact, no specific energy conservation plans maintained by the individual sites.
There were several instances in which the information provided did not meet the requirements outlined in the FY 2001 reporting guidance provided by the DOE. For example, the DOE guidelines provide that the section covering training and education should describe actions taken to ensure all appropriate personnel receive training. The IRS’ response only noted that members of the building management group are available to attend seminars or training. Also, the energy efficiency in lease provisions section should describe how energy and water efficiency are considered when entering into new leases or when renegotiating existing leases. The IRS’ response only provides three standard lease provisions that are to be incorporated into lease agreements.
FY 2002 Implementation Plan – This did not provide a plan for implementing energy conservation for FY 2002; rather, it contained a narrative similar to the Annual Report on Energy Management.
Annual Energy Management Data Report – IRS personnel at the Atlanta IRS Campus reported two buildings as exempt from the energy reduction goals because they were leased sites and it was believed that significant infrastructure changes could not be made in those buildings. When it is not technically feasible to implement energy efficiency measures, a justification must be provided to the DOE explaining why energy efficiency measures cannot be implemented. The DOE must approve this designation. However, approval for this designation was not requested from the DOE. In addition, the IRS’ Energy Coordinator did not report energy consumption data for the two buildings. Also, natural gas costs for the Philadelphia IRS Campus were overstated by almost $1.8 million due to an error made when converting the figures to the specified format.
Energy Scorecard – The IRS indicated that it used management tools to help meet the goals of the Executive Order. The Order specifies that the tools to be employed include awards/incentive programs, acknowledging successful efforts in performance evaluations, and designating showcase facilities. However, the IRS’ Energy Coordinator was not aware of whether these tools were employed.
The IRS also indicated that it has established water management plans for its facilities and implemented at least four water conservation best practices. The IRS’ Energy Coordinator advised us that the IRS sites do not have water conservation plans; however, recent renovation projects have included the installation of low flow water devices.
During our review of utility invoices, we were provided information indicating that the IRS’ National Headquarters building used additional electricity in providing chilled/ cooled water for cooling of a neighboring building and, in the past, had also provided steam for heating because of the configuration of the pipe and metering system. As such, IRS electric and steam consumption figures for the National Headquarters building may be incorrectly stated. The IRS’ Energy Coordinator was not aware of these situations and was unable to provide the appropriate disclosures regarding the accuracy of IRS data.
The conditions discussed above occurred for the following reasons:
· Information provided in the Department of the Treasury’s FY 2001 Annual Energy Report did not provide details as to the number and types of buildings reported under the Industrial, Research and Other Energy Intensive Buildings category. As such, the DOE was not in a position to assist the Department of the Treasury/IRS in determining whether the reclassification of buildings was appropriate.
· The IRS does not have a process in place to validate data before they are submitted to the Department of the Treasury.
· The IRS’ Energy Coordinator does not always receive sufficient information related to energy conservation plans or progress from all 11 delegated sites. Therefore, he supplemented the incomplete information using his knowledge of IRS operations.
The Department of the Treasury is not in a position to provide an accurate picture of progress and/or setbacks in attaining the goals of the law because of the inaccurate and incomplete information provided by the IRS.
1. The IRS’ Energy Coordinator should work with representatives of the 11 delegated sites, the DOE’s Federal Energy Management Program, and the GSA, as necessary, to ensure the IRS’ facilities are properly classified and that baseline energy consumption figures are accurate.
Management’s Response: The National Energy Program Manager will work with the specified parties and the Department of the Treasury’s Energy Coordinator to ensure that delegated buildings are properly classified. The Program Manager will also collect data from all delegated sites in order to verify the baseline energy consumption figures.
2. The Chief, Agency-Wide Shared Services, should establish a reliable process for providing accurate information to the Department of the Treasury for its Annual Energy Report.
Management’s Response: The National Energy Program Manager will establish a standard data submission process to ensure that data in the Annual Energy Report are accurate and reliable.
The IRS has made some progress toward improving energy efficiency. For example, it replaced the heating and cooling equipment at its Atlanta IRS Campus with newer, more efficient equipment. It also performed energy audits at its National Headquarters and Austin IRS Campus to identify energy conservation opportunities. However, the IRS does not have a coordinated energy conservation program in place; therefore, energy conservation activities have been performed at certain individual sites but have not been coordinated to ensure effective implementation at all sites.
Executive Order 13123 provides that each agency must designate a senior official responsible for meeting the goals and requirements of the Order, and establish a technical support team with representation from the budget, procurement, legal, management, and technical areas to expedite agency efforts to meet the goals and requirements. Treasury Directive 75-04 (Energy Management Program) re-delegated these responsibilities to the bureau level. The Directive also calls for each bureau to implement a program to ensure compliance with Executive Order 13123.
The IRS does not have a senior level official that is responsible for monitoring energy conservation efforts, and does not have a technical support team with representation from the budget, procurement, legal, management, and technical areas to expedite agency efforts to meet the goals and requirements. The IRS has assigned one of its mechanical engineers a peripheral duty to be the IRS’ Energy Coordinator, with the responsibility to consolidate energy consumption data for submission to the Department of the Treasury. While the IRS developed an Energy Management Plan that was to cover the period between 1995 and 2005, the IRS’ Energy Coordinator has not updated or used the plan, and has generally not been involved in the planning or monitoring of energy conservation activities or projects.
The conditions noted above occurred because the IRS did not take the necessary actions to ensure the requirements of the Executive Order were implemented. The IRS does not have the strategic plans, policies, or guidelines necessary to implement an organization-wide program. Furthermore, the IRS’ Energy Coordinator is not at a high enough level in the organization to implement the necessary changes. As a mechanical engineer, the IRS’ Energy Coordinator does not serve in a managerial role, nor does he have the authority to oversee the activities of the 11 building managers.
There are a number of reasons for the requirements in the law. Without a well-coordinated program and active use of the Energy Management Plan, the IRS cannot ensure that efforts to conserve energy at the IRS’ delegated facilities are properly planned, implemented, and monitored. Nor can it ensure that positive results from energy conservation initiatives are shared among personnel at all buildings the IRS manages. As such, the IRS is not in a position to ensure that all appropriate energy efficiency measures will be implemented in its facilities.
As required by Treasury Directive 75-04, the Chief, Agency-Wide Shared Services, should:
3. Designate a senior level official with responsibility for ensuring the IRS is making sufficient progress toward meeting the mandated energy conservation goals and requirements. In turn, the designated official should assign an Energy Coordinator with clearly defined authority and responsibility for overseeing the IRS’ energy conservation efforts at its 11 delegated sites.
Management’s Response: Real Estate and Facilities Management is in the process of selecting a senior management analyst to serve as the National Energy Program Manager. In addition, the Energy Program has been realigned and the Program Manager will report directly to the Chief, Real Estate Management Branch.
4. Establish a cross functional team consisting of representatives from the Procurement, Chief Counsel, and Chief Financial Officer functions, as well as personnel with technical expertise on energy conservation, to assist the IRS’ Energy Coordinator. This team should provide the IRS’ Energy Coordinator with assistance in identifying and financing mechanisms for meeting energy conservation goals. This should include ensuring that the IRS’ annual budget submission includes requests for funding necessary to meet the stated goals.
Management’s Response: The National Energy Program Manager will have a full range of technical support from engineering, procurement, legal, and budget personnel to help develop energy conservation projects. When the Program Manager identifies projects requiring funding, those projects will be submitted to the IRS Governance Board for approval and funding or for inclusion in the IRS’ annual budget.
5. Update the Energy Management Plan and ensure that it outlines the scope and organization of the IRS’ energy conservation program. This plan should be supplemented by written guidelines and training aimed at assisting building managers in the planning, monitoring, and tracking of energy conservation efforts.
Management’s Response: The Program Manager will update the Energy Management Plan to ensure it provides clear guidance to staff responsible for energy conservation measures in IRS facilities.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine whether the Internal Revenue Service (IRS) has complied with the prescribed energy conservation requirements under the National Energy Conservation Policy Act of 1978 (NECPA), Executive Order 13123 (Greening the Government Through Efficient Energy Management), and Treasury Directive 75-04 (Energy Management Program). We also attempted to determine if the IRS has met and will be able to meet future energy efficiency improvement goals. To accomplish our objective, we:
I.
Reviewed the NECPA, Energy
Policy Act of 1992, Executive Order 13123, and Treasury Directive 75-04
to determine requirements applicable to the IRS. Also determined whether the IRS developed
procedures, guidelines, or training to assist employees in complying with the
laws and regulations.
II.
Determined whether the IRS
designated individuals with responsibility for meeting the goals and
requirements of the NECPA and Executive Order 13123. Additionally, performed analysis to evaluate the accuracy and
completeness of the IRS’ Fiscal Year
(FY) 2001 Annual Energy Report data provided for inclusion in the
Department of the Treasury’s overall report.
Our analysis was limited to reviewing the IRS’ FY 2001 input to the
Department of the Treasury and tracing data back to supporting
documentation maintained by the IRS’ Energy Coordinator.
III.
Determined whether the IRS
had adequate action plans and processes to track, guide, and monitor progress
toward meeting the energy conservation goals established in the NECPA/
Executive Order 13123.
IV.
Assessed the effectiveness of
the IRS’ energy program based upon information gathered in Objectives I –
III. In addition, interviewed staff
from the Department of Energy’s Federal Energy Management Program to identify
suggested best practices and “model” agencies to evaluate whether the IRS could
make use of such practices to improve compliance with the goals and
requirements of the energy conservation laws.
V.
Evaluated the reliability of
reported energy consumption by reviewing utility bills (steam, gas, electric,
and water) at four judgmentally selected sites.
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
Scott P. Begley,
Audit Manager
Thomas F. Polsfoot, Acting Audit Manager
Melvin Lindsey,
Senior Auditor
Barbara A.
Sailhamer, Senior Auditor
Angela Garner,
Auditor
Carolyn D. Miller,
Auditor
Appendix III
Acting Commissioner N:C
Deputy Chief, Agency-Wide Shared Services A
Director, Real Estate and Facilities Management A:RE
Chief Counsel CC
National Taxpayer
Advocate TA
Director,
Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
N:ADC:R:O
Office of
Management Controls N:CFO:F:M
Audit Liaison:
Agency-Wide Shared Services A
Appendix IV
The response was removed due to its size. To see the complete response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.