The Internal Revenue Service is providing taxpayers' personal and financial information to agencies in all 50 states, but is not adequately safeguarding the security of that information, said a report from a Treasury Department watchdog.

The Treasury Inspector General for Tax Administration found weaknesses in the IRS Safeguard Review program, which was set up to make sure that states have adequate security in place so taxpayer information doesn't become vulnerable to identity theft or other fraudulent activities. But TIGTA found that the IRS had not done enough to improve the program after a 2005 audit found faults. "During the course of the review, TIGTA became very concerned at the lack of management attention being directed to the Safeguard Review program," said the report.

The IRS signed a five-year contract with Booz Allen Hamilton to conduct further reviews of the program, but TIGTA faulted the IRS for not doing enough to oversee the contract. TIGTA said the controls over the contract were not sufficient to ensure the government received the services for which it contracted.

TIGTA wants the IRS to expand its oversight of the program, which costs the agency $1.4 million annually. It said the IRS should monitor the contractor billings to ensure the money is spent prudently.

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