IRS deficient in tracking contractor employees, IG concludes

The Internal Revenue Service's  processes for checking contractors are defective in identifying all the contractors who work with taxpayer data and are subject to required security reviews, according to a new report released by the Treasury Inspector General for Tax Administration (TIGTA).

To develop its contractor inventory, the IRS’ Infrastructure Security and Reviews Office (ISR Office) asks businesses to name all of their contractors who have access to the tax data at their facilities where the information is housed. But in its audit, TIGTA found two contractors with access to the confidential information who were not on the IRS’ contractor inventory list.

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“These two examples highlight the need for improvement in identifying contractors who receive taxpayer data from the IRS,” Michael Phillips, deputy IG for audits, wrote in the report. The report suggests that IRS officials use the agency's procurement information system as a source of contractor data because it may provide “the most definitive, reliable, and complete source for identifying such contractors."

The IRS also has security weaknesses at contractor facilities that have not been corrected as quickly as they should have been, the audit found. For this report, auditors visited eight contractor facilities that have security weaknesses, which ISR Office officials found in fiscal 2009. Their problems, such as assess controls and configuration management controls, still existed. And agency officials at seven of the eight facilities could not provide documents showing how they have monitored the facilities in the past year, the report states.

IRS officials said they did not create Plan of Action and Milestone documents and monitor the improvements to to fix the ISR Office’s findings. The reason was that officials did not consider the contractors’ systems as subject to the requirements included in the Federal Information Security Management Act. The auditors disagreed with the officials, Phillips wrote.

The IG recommended that the IRS implement a better system to identify contractors receiving and using taxpayer data at contractor facilities and that the service improve its system for monitoring security weaknesses at such facilities to ensure the problems are corrected quickly.

IRS officials agreed with the recommendations. In response to the audit report, they said they will modify the personal identity verification background investigation process system reports for identifying the contractors with access to information. The IRS’ cybersecurity arm will use those reports, along with other reported information, to find which facilities need annual reviews. They expect the change to be in place in October.

To track improvements to security weaknesses at contractors’ facilities, officials from the ISR Office will send requests for status updates on plans of action from the units in charge, the IRS’ response states. The changes are expected to be in place by December.