A report from the Treasury Inspector General for Tax Administration estimates that computer programming woes cost the country more than the $200- to $300-million range originally estimated by the Internal Revenue Service.

The inspector general's report estimated that the agency doled out approximately $318 million in improper refunds this tax season because a computer-based screening system was not in place. The IRS had contracted with Computer Sciences Corp. to update software in place since 1996, but the company was unable to produce a working program by the spring tax-filing deadline -- despite a $20 million budget.

TIGTA's report, dated Aug. 9, outlines recommendations to address several findings, including that:

  • The project didn't have adequate executive oversight;
  • The system risks were not effectively managed;
  • Contractor performance was not effectively monitored; and,
  • Performance-based contracts were not used.

The refund fraud program stopped $412 million in fraudulent returns in 2005, running an automated check on any return claiming a refund. The inspector general said that by using other methods to reviews claims, the IRS stopped about $94 million in fraudulent returns for 2006.The inspector general plans a future study to look more closely at the amount of money the government lost, along with IRS procedures for detecting fraudulent refunds.The full report is available at http://www.treas.gov/tigta/auditreports/2006reports/200620108fr.pdf.

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