oversight

Improvements Are Needed to Identify Contractors Meeting the Criteria for Potential Suspension or Debarment

Published by the Office of the Treasury Inspector General for Tax Administration on 2021-05-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION




          Improvements Are Needed to Identify
           Contractors Meeting the Criteria for
           Potential Suspension or Debarment


                               May 28, 2021

                  Report Number: 2021-10-037




            TIGTACommunications@tigta.treas.gov | www.treasury.gov/tigta   1
                     HIGHLIGHTS: Improvements Are Needed to Identify Contractors
                       Meeting the Criteria for Potential Suspension or Debarment
Final Audit Report issued on May 28, 2021                                         Report Number 2021-10-037

Why TIGTA Did This Audit               What TIGTA Found
The Federal Government can use         The IRS has processes in place to prevent contractors that have been
suspensions and debarments to          suspended or debarred from entering into contracts with the IRS.
ensure that agencies award             TIGTA verified that the IRS did not enter into any new contracts, or
contracts only to responsible          exercise options on any ongoing contracts, between October 1, 2016,
contractors. A suspension or           and September 30, 2019, with contractors that had been suspended
debarment excludes a contractor        or debarred.
from doing business with the
                                       However, the IRS does not have a dedicated suspension and
Government for a specified period
                                       debarment program or a specific subject matter expert responsible
of time.
                                       for these activities. Moreover, the IRS does not have adequate
This audit was initiated to            processes in place to evaluate contractor performance and
determine if the IRS has sufficient    determine, based on actual performance, whether contractors should
controls in place to prevent           be considered for suspension or debarment. In addition, TIGTA
contractors that have been             concluded that the IRS did not always evaluate contractor
suspended or debarred from             performance or track contracts that have been terminated. Finally,
receiving contracts and whether        IRS procurement personnel stated that there is no suspension and
the IRS has an effective process to    debarment training required for the staff.
identify and refer contractors that
                                       TIGTA determined that the IRS did not prepare performance
meet the criteria for suspension
                                       evaluations for 115 (29%) of 395 contractors. Timely completion of
or debarment.
                                       past performance evaluations is necessary to ensure that the IRS and
Impact on Taxpayers                    other agencies have current information available regarding a
                                       contractor’s performance under previously awarded contracts.
The Government uses taxpayer
                                       Without relevant past performance information, future contracts may
funds to execute contracts that
                                       be awarded to contractors that do not have the financial resources to
help agencies fulfill their missions
                                       perform the contract or comply with the contract performance
and serve taxpayers. The IRS
                                       schedule, or that have a poor performance record.
awards more than $2 billion in
contracts each year. The IRS and       In addition, the IRS was unable to identify a consolidated list of
other agencies could unknowingly       contracts that had been terminated between October 1, 2016, and
contract with nonresponsible           September 30, 2019, and did not ensure that information was
contractors if suspension or           accurately reflected in the Federal contractor evaluation system after
debarment risk factors are not         a contract was terminated for default. Entering contract terminations
documented.                            in this system is critical since the IRS and other Federal agencies rely
                                       on the information to make responsibility determinations during the
                                       source selection process.
                                       What TIGTA Recommended
                                       TIGTA recommended that the Chief Procurement Officer: (1) appoint
                                       a designated point of contact to be responsible for the IRS
                                       suspension and debarment process; (2) establish a process to
                                       monitor compliance with contractor past performance evaluation
                                       requirements; (3) track contract termination status; and (4) require
                                       that contracting personnel complete suspension and debarment and
                                       termination training. The IRS agreed or partially agreed with our
                                       recommendations and plans to take corrective actions.
                                         U.S. DEPARTMENT OF THE TREASURY
                                                  WASHINGTON, D.C. 20220



TREASURY INSPECTOR GENERAL
  FOR TAX ADMINISTRATION



                                             May 28, 2021


MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE



FROM:                        Michael E. McKenney
                             Deputy Inspector General for Audit

SUBJECT:                     Final Audit Report – Improvements Are Needed to Identify Contractors
                             Meeting the Criteria for Potential Suspension or Debarment
                             (Audit # 202010021)

This report presents the results of our review to determine if the Internal Revenue Service (IRS)
has sufficient controls in place to prevent contractors that have been suspended or debarred
from receiving contracts and whether the IRS has an effective process to identify and refer
contractors that meet the criteria for suspension or debarment. This review is part of our Fiscal
Year 2021 Annual Audit Plan and addresses the major management and performance challenge
of Enhancing Security of Taxpayer Data and Protection of IRS Resources.
Management’s complete response to the report is included as Appendix III.
Copies of the report are also being sent to the IRS managers affected by the report
recommendations. If you have any questions, please contact me or Heather M. Hill, Assistant
Inspector General for Audit (Management Services and Exempt Organizations).
                                              Improvements Are Needed to Identify Contractors
                                          Meeting the Criteria for Potential Suspension or Debarment




Table of Contents
Background .....................................................................................................................................Page      1


Results of Review .......................................................................................................................Page             4

            Contracting Oversight Activities Need Improvement,
            Including Strengthening the Suspension and Debarment
            Program ...................................................................................................................................Page 4
                         Recommendation 1: ...................................................................Page 6

                         Recommendations 2 through 4:..............................................Page 7


Appendices
            Appendix I – Detailed Objective, Scope, and Methodology ................................Page 8
            Appendix II – Outcome Measure ...................................................................................Page 10
            Appendix III – Management’s Response to the Draft Report .............................Page 11
            Appendix IV – Abbreviations ...........................................................................................Page 15
                                     Improvements Are Needed to Identify Contractors
                                 Meeting the Criteria for Potential Suspension or Debarment




Background
The Federal Government uses suspensions and debarments to ensure that agencies award
contracts only to responsible contractors. 1 Suspension of a contractor is a temporary exclusion
(usually 12 months) from doing business with the Government. A suspension is generally used
when the facts about possible wrongdoing are still being developed, either through
investigation or legal proceedings. A debarment typically has a legal basis, such as a civil
judgment or conviction, and excludes the contractor for a specific period of time (usually no
more than three years).
The Federal Acquisition Regulation outlines policies and procedures for agencies to suspend or
debar contractors for given causes. 2 Contractors may be referred for suspension or debarment
for various reasons, including:
       •   Commission of fraud, embezzlement, theft, forgery, bribery, falsification or destruction of
           records, making false statements, tax evasion, violating Federal criminal laws, receiving
           stolen property, and unfair trade practice.
       •   Violation of Federal or State antitrust statutes relating to the submission of offers.
       •   Willful, or a history of, failure to perform in accordance with the terms of a
           contract/contracts.
       •   Violations of Drug-Free Workplace.3
       •   Delinquent Federal taxes (more than $3,500).
       •   Knowing failure to disclose a violation of criminal law.
       •   Any other offense that indicates a lack of integrity or that seriously and directly affects
           present responsibility.
Treasury Directive 12-12 further established policies and responsibilities for procurement-related
suspensions and debarments for all offices and organizations within the Department of the
Treasury (Treasury Department). 4 The Directive states that an agency office, program manager,
contracting officer, or contracting officer representative must notify the appropriate Inspector
General and the office of the Treasury Suspension and Debarment Official when indications of
potential fraud or lack of responsibility exists. Referrals may include rationale for the referral,
relevant facts, acquisition history, and appropriate documents, exhibits, or evidence. The
Treasury Suspension and Debarment Official reviews referrals and makes a final determination.
Suspended or debarred contractors are published as ineligible on the System of Award
Management (SAM), a website administered by the General Services Administration. The SAM
contains publicly available data for contractors registered to do business with the Federal

1
  To be responsible, a prospective contractor must have adequate financial resources to perform the contract, be able
to comply with the contract performance schedule (based on existing business commitments), have a satisfactory
performance record, and have a satisfactory record of integrity and business ethics.
2
    48 C.F.R. Section (§) 9.4, Debarment, Suspension, and Ineligibility (October 2019).
3
    41 U.S.C., Chapter 81, Drug-Free Workplace (January 2011).
4
    Treasury Directive 12-12, Procurement and Non-Procurement Suspension and Debarment (August 2012).
                                                                                                             Page 1
                                    Improvements Are Needed to Identify Contractors
                                Meeting the Criteria for Potential Suspension or Debarment

Government, as well as those actively excluded from receiving Federal contracts. The SAM
Exclusion data includes any contractors that have been suspended, have a proposed debarment,
or have an active debarment.
Statistics on suspension and debarment activities are submitted to Congress through the
Interagency Suspension and Debarment Committee’s annual report. In Fiscal Year 5 2013, the
Treasury Department created an intake form on its Waste, Fraud, and Abuse website and
increased training via webinars and print media to reach out to contracting officer
representatives across the Treasury Department. 6 As shown in Figure 1, the total number of
suspensions, proposed debarments, and debarments increased shortly thereafter.
                 Figure 1: Treasury Department Suspension and Debarment Actions




Source: Interagency Suspension and Debarment Committee Annual Reports, Fiscal Years 2012–2019. 7
According to the Internal Revenue Service’s (IRS) Office of the Chief Procurement Officer
(OCPO), there were no referrals for potential suspension or debarment initiated by the IRS in
Fiscal Years 2013 and 2014, two referrals in Fiscal Year 2015, and no referrals between May 2015
and September 2019. Therefore, the suspensions and debarments reported by the Treasury
Department were not significantly impacted by activity at the IRS.

Contractor Responsibility Determination
The Government uses taxpayer funds to execute contracts that help agencies fulfill their
missions and serve taxpayers. Within the IRS, the OCPO provides acquisition services for all
business units and awards more than $2 billion in contracts each year. Prior to awarding a
contract, OCPO contract personnel are required by the Federal Acquisition Regulation to
determine whether a prospective contractor is responsible. 8 This includes consideration of a
contractor’s financial resources, existing business commitments, and past performance records,
which can be obtained from the SAM, the Contractor Performance Assessment Reporting

5
 Any yearly accounting period, regardless of its relationship to a calendar year. The Federal Government’s fiscal year
begins October 1 and ends on September 30.
6
    Government Accountability Office, GAO-14-513, Agencies Have Taken Steps to Improve Suspension and Debarment
Programs (May 2014).
7
 The information in this figure is presented for background purposes only and as such, we did not validate the
accuracy of this information.
8
    48 C.F.R. § 9.1, Responsible Prospective Contractors (October 2019).
                                                                                                              Page 2
                                     Improvements Are Needed to Identify Contractors
                                 Meeting the Criteria for Potential Suspension or Debarment

System (CPARS), and the Federal Awardee Performance and Integrity Information System
(FAPIIS).

                                         The primary Government repository for prospective Federal
                                         awardee and Federal awardee information. It includes data
    System for Award                     collected from prospective Federal awardees required for
    Management                           conducting business with the Government, annual representations
                                         and certifications, and identification of those parties excluded from
                                         receiving Federal contracts.

    Contractor Performance
                                         The Governmentwide evaluation reporting tool for all past
    Assessment Reporting
                                         performance reports on contracts that require an evaluation.
    System

                                         A module of the CPARS that contains Federal contractor criminal,
                                         civil, and administrative proceedings in connection with Federal
    Federal Awardee
                                         awards; suspensions and debarments; administrative agreements
    Performance and Integrity
                                         issued in lieu of suspension or debarment; non-responsibility
    Information System
                                         determinations; contract terminations for cause or default; and
                                         defective pricing determinations. 9

The IRS’s contractor responsibility determination process was completed manually until
May 2019, when the OCPO began automating the process using the Contractor Responsibility
Determination Bot.10 The bot automates the search, collection, and analysis of required
documentation and e-mails a streamlined report back to the requestor. This includes matching
a potential contractor to the SAM exclusion data and the FAPIIS website. IRS policy requires
contracting officers to include supporting documentation in all contract files to demonstrate
that the entity’s SAM and FAPIIS records were reviewed to establish responsibility. 11 In addition,
contracting officers may exercise contract options only after determining that the contractor
does not have an active exclusion in the SAM. 12

Contractor Performance Evaluations
Past performance evaluations are required for contracts that exceed a certain dollar threshold.13
When a contract is awarded, the IRS’s procurement system, Procurement for Public Sector (PPS),
feeds data into the Federal Procurement Data System, which in turn feeds data into the CPARS. 14
For contracts requiring an evaluation, contracting personnel should register the contract in the
CPARS within 30 days following award. The CPARS is used to input data on contractor
performance following each contract period of performance. Agencies are required to assign
responsibility and management accountability for the completeness of past performance

9
    FAPIIS information is also available on a public website, https://www.fapiis.gov (last visited Jan 14, 2021).
10
  The Treasury Inspector General for Tax Administration previously reported on the OCPO’s use of the Contractor
Responsibility Determination Bot in September 2020 (Ref. No. 2020-20-060, Process Automation Benefits Are Not
Being Maximized, and Development Processes Need Improvement (Sept. 2020)).
11
     IRS Acquisition Policy, FY 2021 Edition (November 2020).
12
     48 C.F.R. § 17.207, Exercise of Options (October 2019).
13
   The simplified acquisition threshold delineates when simplified acquisition procedures may be used. The simplified
acquisition threshold was $150,000 for any contract signed March 5, 2018, or earlier, and $250,000 for any contract
signed March 6, 2018, or later.
14
     The Federal Procurement Data System is a web-based tool for agencies to report contract actions.
                                                                                                                    Page 3
                                    Improvements Are Needed to Identify Contractors
                                Meeting the Criteria for Potential Suspension or Debarment

submissions. In addition, if a contract is terminated for cause or default, agencies are required
to ensure that information is accurately reported in the FAPIIS module of the CPARS within
three calendar days. 15 Fourteen days after the termination is entered, the FAPIIS record will be
available on the public FAPIIS website. 16



Results of Review

Contracting Oversight Activities Need Improvement, Including Strengthening
the Suspension and Debarment Program
The IRS has processes in place to prevent contractors that are
suspended or debarred from entering into contracts with the              The IRS did not always
IRS. We independently verified that the IRS did not enter into            evaluate contractor
any new contracts, or exercise options on any ongoing                    performance   or track
contracts, between October 1, 2016, and September 30, 2019,            contracts  that have been
with contractors that were suspended or debarred. 17 While                    terminated.
the IRS does have procedures to avoid contracting with an
excluded contractor, we found that the IRS does not have a
program in place to identify and refer contractors that meet the criteria for potential suspension
or debarment, a specific subject matter expert responsible for these activities, or suspension and
debarment training required for staff. In addition, the IRS does not have adequate processes in
place to evaluate contractor performance and determine, based on actual performance, whether
contractors should be considered for potential suspension or debarment. Specifically, we found
the IRS did not always evaluate contractor performance or track contracts that have been
terminated.

Suspension and debarment procedures should be strengthened
The IRS has no formal process in place to identify contractors that meet the criteria for potential
suspension or debarment. The Government Accountability Office has reported that agencies
with the most suspension and debarment activity have a dedicated suspension and debarment
program, detailed policies and procedures, and practices that encourage an active referral
process. 18 IRS Acquisition Policy defines the process for review of any identified potential
suspension or debarment risk factors. OCPO stated that to avoid duplication, the IRS relies on
suspension and debarment content in the Department of the Treasury Acquisition Procedures
for guidance on how contract personnel should structure a referral. However, there is no
reference to this content in the IRS Acquisition Policy. There is also no subject matter expert or
centralized resources available to assist contracting personnel with researching suspension and

15
     48 C.F.R. § 42.15, Contractor Performance Information (October 2019).
16
     48 C.F.R. § 9.105-2, Determinations and documentation (October 2019).
17
  The IRS automated its process in May 2019 by implementing the Contractor Responsibility Determination Bot,
which is intended to be used by contracting officers to conduct their contractor responsibility determinations. We did
not validate the accuracy of Contractor Responsibility Determination Bot data in this audit.
18
  Government Accountability Office, GAO-13-707T, SUSPENSION AND DEBARMENT, Characteristics of Active Agency
Programs and Governmentwide Oversight Efforts p. 3 (June 2013).
                                                                                                     Page 4
                                    Improvements Are Needed to Identify Contractors
                                Meeting the Criteria for Potential Suspension or Debarment

debarment factors or how to make a referral. In addition, OCPO personnel stated that there is
external suspension and debarment training available for staff, but this training is not required.
Because the IRS does not have a formal process to identify contractors that meet the criteria for
potential suspension and debarment, we attempted to identify contractors that may have met
the criteria. We reviewed a judgmental sample of 37 of 791 completed performance evaluations
that included risk factors that could have resulted in a referral for potential suspension or
debarment for contracts signed between October 1, 2016, and September 30, 2019. 19 While we
did not identify any information that would indicate that a referral was necessary, we were
limited in our selection because evaluations were not completed for nearly one-third of the
contractors that required an evaluation and terminated contracts were not tracked. The IRS and
other Government agencies could unknowingly contract with nonresponsible contractors if
suspension or debarment risk factors are not documented. 20

Contracting personnel did not complete contractor performance evaluations
We found that the IRS did not prepare a performance evaluation in the CPARS for 115
(29 percent) of 395 contractors. 21 Each of these contractors had at least one IRS contract that
was signed between October 1, 2016, and April 20, 2019, and required an evaluation. 22 The
Federal Acquisition Regulation requires
agencies to monitor their compliance
with the past performance evaluation
requirements and use the CPARS metric
tools to measure the quality and timely
reporting of past performance
information. 23 However, there is no
process in place at the IRS to ensure that evaluations are completed timely. OCPO officials
stated that evaluations may not have been completed due to changes in contract personnel or
because individual contracts were not registered in the CPARS.
Timely completion of past performance evaluations is necessary to ensure that the IRS and other
Federal agencies have current information available regarding a contractor’s actions and
performance under previously awarded contracts. Without relevant past performance
information (including the ratings and supporting narratives), future contracts may be awarded
to potentially nonresponsible contractors.
In addition, Treasury guidance requires that IRS contracting personnel oversee and monitor
procurement transactions for indications of fraud or for behavior that would indicate grounds
for suspension or debarment, and notify the Inspector General and the office of the Treasury


19
     A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.
20
   A prospective contractor can be determined to be nonresponsible for a variety of reasons, including a history of
criminal, civil, or administrative proceedings in connection with the award or performance of a Government contract,
current or recent serious deficiencies in contract performance, or a failure to demonstrate integrity and business
ethics.
21
  We identified unique contractors using the Data Universal Numbering System number. The number is a unique
nine-digit identification number provided by Dun & Bradstreet that is site-specific. Therefore, each distinct physical
location of an entity (such as branches, divisions, and headquarters) may be assigned a separate number.
22
     Contracts over the Simplified Acquisition Threshold require an evaluation.
23
     48 C.F.R. § 42.15, Contractor Performance Information (October 2019).
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                                    Improvements Are Needed to Identify Contractors
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Suspension and Debarment Official when indications of fraud or lack of responsibility exist. 24
Incomplete performance evaluations could result in a lack of referral for potential suspension or
debarment for contractors that may lack present responsibility.

The IRS does not have a process in place to accurately track termination information
OCPO officials were unable to identify a consolidated list of contracts that had been terminated
between October 1, 2016, and September 30, 2019. We found that the termination status of
26 contract records were not accurately reported in the FAPIIS module of the CPARS, incorrectly
reported in CPARS evaluations, or unknown. This includes:
       •   1 contract terminated by the IRS for default that was not reflected in the FAPIIS module
           of the CPARS. The IRS Contracting Officer indicated that the contractor was not referred
           for potential suspension or debarment because the inability to perform did not appear
           to be willful or deliberate. TIGTA’s review did not identify any information in the
           termination documentation that would indicate that a referral was necessary.
       •   20 contract evaluations that incorrectly identified contracts as terminated for cause or
           default. 25
       •   5 contracts that were identified as terminated for default in contract evaluations,
           however OCPO officials were not able to provide any additional information regarding
           the terminations despite multiple requests by TIGTA for information. These five
           contracts were not reported as terminated in the FAPIIS. TIGTA’s review of performance
           evaluations for these five contracts did not identify risk factors warranting referral for
           potential suspension or debarment.
The Federal Acquisition Regulation requires agencies to ensure that information is accurately
reported in the FAPIIS module of the CPARS within three calendar days after a contracting
officer issues a final termination for cause or default notice. 26 The IRS does not have a process
in place to ensure the accuracy of termination details in the FAPIIS module. Inaccurate
termination information can make it more challenging to identify actual terminations. In
addition, initiating a termination record in the FAPIIS module is a manual process and is subject
to human error. The IRS and other Federal agencies rely on the termination information in the
FAPIIS regarding contractor performance and integrity in order to make the responsibility
determination during the contract source selection process. Without this information, there is a
risk that Government funds may be wasted on awarding contracts to contractors that have
unethical business practices or that cannot meet the contract terms.

The Chief Procurement Officer should:

Recommendation 1: Appoint a designated point of contact to be responsible for the IRS
suspension and debarment process, including updating guidance for potential suspension and
debarment referrals, and coordinating with IRS contracting officers, the Treasury Inspector
General for Tax Administration, and the Treasury Suspension and Debarment Official for a
potential referral, if necessary.

24
     Treasury Directive 12-12, Procurement and Non-Procurement Suspension and Debarment (August 2012).
25
     These 20 evaluations relate to 14 contracts. Some contracts had more than one evaluation.
26
     48 C.F.R. § 42.15, Contractor Performance Information (October 2019).
                                                                                                         Page 6
                            Improvements Are Needed to Identify Contractors
                        Meeting the Criteria for Potential Suspension or Debarment

       Management’s Response: The IRS agreed with this recommendation and plans to
       update the IRS Acquisition Policy and Procedures Guidance Information to link directly to
       Treasury Directive 12-12, provide further guidance to contracting personnel on the
       process for referral and coordination, and identify the OCPO Policies and Procedures
       Section as the designated point of contact for the IRS suspension and debarment
       process.

Recommendation 2: Establish a process to monitor compliance with past performance
evaluation requirements to provide reasonable assurance that IRS contracting personnel prepare
evaluations of contractor performance for each contract that requires an evaluation.
       Management’s Response: The IRS agreed with this recommendation and plans to have
       OCPO’s Analytics, Research & Technology Division analyze data from CPARS and PPS
       semi-annually to monitor compliance with evaluation requirements. This data will be
       provided in a report to the Chief Procurement Officer.

Recommendation 3: Develop detailed policies and procedures to accurately track contract
termination status, and provide reasonable assurance that the FAPIIS and the CPARS accurately
reflect contract termination information within the time frame specified by the Federal
Acquisition Regulation.
       Management’s Response: The IRS agreed with this recommendation and plans to
       develop policies and procedures to accurately track contract termination status and
       provide reasonable assurance that the FAPIIS and CPARS accurately reflect contract
       termination information within the time frame specified by the Federal acquisition
       Regulation. The OCPO also plans to communicate the importance of data input as it
       relates to CPARS and FAPIIS to ensure contract termination status is properly identified.

Recommendation 4: Require that contracting personnel complete training on the processes to
identify and refer contractors that meet the criteria for potential suspension and debarment and
accurately track terminated contracts.
       Management’s Response: The IRS partially agreed with this recommendation and
       plans to provide a link to the Defense Acquisition University virtual one-hour training
       course (CLC065) on Suspension and Debarment. In addition, the OCPO plans to include
       this as a topic for future “just-in-time” training sessions and information for contracting
       personnel and will request the TIGTA Procurement Fraud Division provide annual
       refresher information to OCPO personnel on “what to look for” for potential fraud.
              Office of Audit Comment: While the corrective action does not address the
              need for training to accurately track terminated contracts, the IRS’s response to
              Recommendation 3 will address the intent of the training.




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                                    Improvements Are Needed to Identify Contractors
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                                                                                                   Appendix I
                       Detailed Objective, Scope, and Methodology
Our overall objective was to determine if the IRS has sufficient controls in place to prevent
contractors that have been suspended or debarred from receiving contracts and whether the IRS
has an effective process to identify and refer contractors that meet the criteria for suspension or
debarment. To accomplish our objective, we:
       •   Obtained and reviewed procedures to prevent contracts from being awarded to
           suspended or debarred contractors and to identify and refer contractors for potential
           suspension or debarment.
       •   Determined whether contracts were awarded to contractors between October 1, 2016,
           and September 30, 2019, that were suspended or debarred.
       •   Determined how many suspension and debarment referrals were made between
           October 1, 2016, and September 30, 2019.
       •   Matched data in the PPS system to data in the CPARS for contractors that required an
           evaluation to determine if evaluations were prepared for contracts signed between
           October 1, 2016, and April 20, 2019.
       •   Reviewed a judgmental sample of 37 of 791 performance evaluations for risk factors that
           could have resulted in a referral for potential suspension or debarment. 1 These
           791 completed evaluations were for contracts signed between October 1, 2016, and
           September 30, 2019. A judgmental sample was selected to identify evaluations that
           included the highest risk for factors that could have resulted in a referral for potential
           suspension or debarment. We based our selection on evaluation ratings, whether a
           contract had been terminated for cause or default, and whether the contractor would be
           recommended for similar requirements in the future.
       •   Requested a list of terminated contracts and the reason for termination, and compared
           that information to CPARS data.
       •   Interviewed the IRS contracting personnel responsible for awarding and administering
           IRS procurement contracts with risk factors for potential suspension or debarment.

Performance of This Review
This review was performed with information obtained from the OCPO located in
Washington, D.C., during the period August 2020 through February 2021. We conducted this
performance audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.



1
    A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.
                                                                                                               Page 8
                            Improvements Are Needed to Identify Contractors
                        Meeting the Criteria for Potential Suspension or Debarment

Major contributors to the report were Heather Hill, Assistant Inspector General for Audit
(Management Services and Exempt Organizations); Troy Paterson, Director; Mindy Dowdy, Audit
Manager; Zachary Orrico, Lead Auditor; and Rick Choksi, Auditor.

Validity and Reliability of Data From Computer-Based Systems
We performed tests to assess the reliability of data from the SAM, the IRS PPS system, and the
IRS CPARS. We evaluated the data by (1) matching SAM contractor data with IRS contracts data
in the PPS system, (2) matching IRS contracts data in the PPS system with CPARS contract data,
(3) matching IRS CPARS Ad-Hoc report data with the IRS CPARS Status report, and
(4) performing electronic testing of required data fields. We determined that the data were
sufficiently reliable for the purposes of this report.

Internal Controls Methodology
Internal controls relate to management’s plans, methods, and procedures used to meet their
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance. We determined that the
following internal controls were relevant to our audit objective: OCPO and IRS policies and
procedures to prevent contracts from being awarded to suspended or debarred contractors
and to identify and refer contractors for potential suspension or debarment. We evaluated
these controls by comparing IRS contracts awarded between October 1, 2016, and
September 30, 2019, to the SAM exclusion data, judgmentally selecting and reviewing
performance evaluations for risk indicators that may have warranted a referral, and interviewing
the IRS contracting personnel responsible for awarding and administering IRS procurement
contracts.




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                                    Improvements Are Needed to Identify Contractors
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                                                                                                  Appendix II
                                             Outcome Measure
This appendix presents detailed information on the measurable impact that our recommended
corrective actions will have on tax administration. This benefit will be incorporated into our
Semiannual Report to Congress.

Type and Value of Outcome Measure:
       •   Reliability of Information – Potential; 26 contract records with incorrect or unknown
           termination status in CPARS (see Recommendation 3).

Methodology Used to Measure the Reported Benefit:
As part of our judgmental sample of 37 of 791 completed performance evaluations for contracts
signed between October 1, 2016, and September 30, 2019, we found that the termination status
of 25 contract records was incorrectly reported in CPARS evaluations, or was unknown. 1 In
addition, the IRS identified one contract that was terminated for default but not entered into the
FAPIIS module of the CPARS.




1
    A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.
                                                                                                              Page 10
        Improvements Are Needed to Identify Contractors
    Meeting the Criteria for Potential Suspension or Debarment


                                                                 Appendix III
Management’s Response to the Draft Report




                                                                       Page 11
    Improvements Are Needed to Identify Contractors
Meeting the Criteria for Potential Suspension or Debarment




                                                             Page 12
    Improvements Are Needed to Identify Contractors
Meeting the Criteria for Potential Suspension or Debarment




                                                             Page 13
    Improvements Are Needed to Identify Contractors
Meeting the Criteria for Potential Suspension or Debarment




                                                             Page 14
                        Improvements Are Needed to Identify Contractors
                    Meeting the Criteria for Potential Suspension or Debarment


                                                                                 Appendix IV
                                    Abbreviations

CPARS    Contractor Performance Assessment Reporting System
FAPIIS   Federal Awardee Performance and Integrity Information System
IRS      Internal Revenue Service
OCPO     The Office of the Chief Procurement Officer
PPS      Procurement for Public Sector
SAM      System of Award Management
TIGTA    Treasury Inspector General for Tax Administration




                                                                                       Page 15
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