IRS loses track of $67 million in Obamacare spending, audit finds

WHERE DID IT GO? An audit finds the Internal Revenue Service provided inaccurate and unsubstantiated documentation in tracking Obamacare costs.
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WHERE DID IT GO? An audit finds the Internal Revenue Service provided inaccurate and unsubstantiated documentation in tracking Obamacare costs.

By M.D. Kittle | – MADISON — Lest we forget, the Internal Revenue Service is in charge of accounting for and reporting the costs associated with all things Obamacare.

Turns out, the tax collector isn’t doing a very good job.


new audit shows the IRS had trouble keeping track of nearly $70 million in indirect Affordable Care Act costs incurred for fiscal years 2010 through 2012.

Hey, Ted Cruz! You’re on.

The Treasury Inspector General for Tax Administration in its report “identified several opportunities where the IRS could improve the process it uses to account for and report costs associated with the implementation of the ACA.”

As TIGTA points out, the IRS plays a significant role in Obamacare, charged with overseeing its numerous tax law changes. The agency reported that, between fiscal years 2010 and 2012, $488 million was spent out of the Health Insurance Reform Implementation Fund,administered by the U.S. Department of Health and Human Services. The auditor also notes another important fact.

“Because implementation of the ACA remains an ongoing effort, it is crucial that the IRS has complete and reliable information regarding all costs associated with the implementation in order to effectively manage taxpayer funds devoted to this effort,” TIGTA scolds in the audit.

The request perhaps isn’t out of line given the massive $1.375 trillion price tag attached to the health care overhaul over the next decade.

The audit found costs related to direct labor charged to the Health Insurance Reform Implementation Fund were “sometimes inaccurate and not always substantiated by reliable supporting documentation.”

And TIGTA found the IRS did not track all of the costs associated with implementation, including costs not charged to the fund.

“Specifically, the IRS did not account for or attempt to quantify approximately $67 million of indirect ACA costs not charged to” the fund for fiscal years 2010-12, the audit notes. Indirect costs include expenses such as providing employees with workspace and information technology support.

There is a method to the tax agency’s process of tracking costs in its accounting records. But the IRS accounted only for direct costs, such as labor and contract costs, “because it did not believe that indirect costs should be recovered” from the fund, the audit states. The IRS’ use of the Health Insurance Reform Implementation Fund is in line with the law’s requirements.

“However, by not also identifying and tracking indirect costs, the IRS lacks complete information regarding the full cost of ACA implementation,” TIGTA states. “This lack of complete information on ACA implementation costs limits the IRS’s ability to accurately report to stakeholders the total resources it applied to the ACA implementation and fully estimate the resources needed in the future for this effort.”

Ultimately, the IRS’ auditor notes what critics of the health-care law have been screaming for years: Obamacare is a web of government regulations that will be difficult to track. That is ostensibly why U.S. Sen. Ted Cruz, R-Texas, spent nearly a day this week in a quasi-filibuster futilely aimed at shutting down Obamacare.

“(The ACA) contain(s) an extensive array of tax law changes that will present many challenges for the Internal Revenue Service (IRS) in the coming years,” TIGTA notes.

Obamacare includes about 50 tax provisions, by the IRS’ estimates, at least eight of which will require the IRS to build new computer applications and business processes that do not exist within the current tax administration system.

The law created the $1 billion fund to pay for the federal administrative expenses to carry out the ACA.

The IRS told auditors it does not expect to pull any additional funds the pool.

But the spending doesn’t end there. Expenditures in fiscal 2013 include $360 million to implement Obamacare, funded through the IRS’ operating budget, according to the audit. The agency’s fiscal 2014 budget request includes another $440 million to fund the nearly 2,000 employees need to implement the health-care law.

“The largest component of this increase is $306 million for the implementation of the information technology changes needed to deliver tax credits and other requirements,” the audit states. “It therefore continues to remain critical that the IRS develop complete and reliable estimates for all costs associated with the implementation of the ACA and accurately track and report on actual costs devoted to this effort.”

IRS administrators agreed with TIGTA’s recommendations, including improved documentation and reporting.

“The IRS takes seriously its obligation to be good stewards of government resources and recognizes the importance of ensuring accurate accounting of resources,” the agency said in a statement, noting that it ensured ACA funds were accurately tracked.

Contact M.D. Kittle at





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