The IRS often takes a beating in the reports from the Treasury Department’s inspector general, and two of the latest pointed to problems with security at the IRS and how the agency is spending money on security projects.

In one recent report, the Treasury Inspector General for Tax Administration found that IRS databases continue to be susceptible to penetration tests of their security. TIGTA scanned 1,900 of the IRS networks and found that 369 of them, or about 11 percent, had one or more installation accounts with a default or blank password. Not only that, but 26 of those accounts had powerful administrator privileges that could have given a hacker access to some sensitive financial information.  Some of the databases, TIGTA pointed out, contained personally identifiable taxpayer information.

However, even when the IRS does spend money on improving security, the results don’t always add up too well. Another recent TIGTA report chided the IRS for wasting millions of dollars in taxpayer money on a system that is supposed to issue and process ID badges for entering federal government facilities and accessing computer systems.

The IRS has been tasked with leading the initiative, known as HSPD-12, named after the Homeland Security Presidential Directive-12 that President Bush signed in August 2004. As of June 2007, the IRS estimated it had obligated $30 million to the program. However, TIGTA found that the IRS spent $3.5 million on acquisitions that should have been avoided, including unneeded hardware, software and services. It also said the IRS did not administer the contracts effectively and could not provide documentation to support the actual costs charged to the HSPD-12 program.

It’s not always bad news for the IRS with the TIGTA reports. In its most recent report, for example, TIGTA praised the IRS for taking the appropriate actions to prepare for the receipt of new filing information in the form of “e-Postcards” from smaller tax-exempt organizations. Even when TIGTA spotted a few deficiencies in that program, the IRS followed up right away and made sure they were fixed.

TIGTA provides a valuable service in shedding light on the good and bad about the IRS, filling the watchdog role and trying to make sure the IRS spends the taxpayer money it collects more prudently. As we head into a new tax season in which the IRS will once again be expecting timely taxpayer contributions, it's good to know there's someone looking over their shoulder too.

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