Management of tax fraud detection system improves

Oversight of the Internal Revenue Service's electronic system for catching falsified tax returns has improved, but critical work remains, according to an audit report released Tuesday.

Agency officials have corrected several problems involving the management of the Electronic Fraud Detection System, the report from the Treasury Inspector General for Tax Administration stated. The agency beefed up oversight by requiring status and risk reports at various meetings, auditors found.

Regular meetings have been held with stakeholders and contractors, for instance, to ensure tasks are on time and risks are addressed, the IG stated.

The electronic detection system is used by the IRS Criminal Investigation Division as part of a program started in January 1997 to stop fraudulent refund claims on income tax returns.

The system wasn't operational last tax season because the IRS and its contractors tried (but failed) to launch a Web-based version without keeping the original in place as a backup. This lapse contributed to about $318.3 million in fraudulent refunds being issued as of May 19, 2006.

After the attempt to launch a Web-based system failed, the office in charge of the project spent about $1.7 million to hire Booz Allen Hamilton to help with the management of system and obtain "independent assessments" from MITRE, a nonprofit corporation that provides systems engineering and information technology support to the government.

The audit report stated that this was an inefficient use of funds, since the consultants would not have been needed had the Web version of the system been implemented last year.

Meanwhile, the original system was back up and running again on Jan. 16, 2007, according to the IRS. The report stated that as of December 2006, the agency paid Computer Sciences Corp., the contractor working on the system, $2.6 million for restoring the original.

But the agency may have difficulty receiving a $3 million equitable adjustment payment related to the restoration work from CSC, the IG report said.

Richard Spires, chief information officer for the IRS, said in response to the report that the agency had prepared the necessary paperwork to ensure it receives the full adjustment.

Auditors also noted that oversight of the project on the contractor's end had not changed significantly, but that the IRS project office is drafting a set of procedures for monitoring the agency's acquisitions.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.


When you download a report, your information may be shared with the underwriters of that document.