DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
INSPECTOR GENERALfor TAXADMINISTRATION
December 28, 1999MEMORANDUM FOR COMMISSIONER ROSSOTTIFROM:Pamela J. GardinerDeputy Inspector General for AuditSUBJECT:Final Audit Report – Improvements Are Needed in Planning andAwarding Internal Revenue Service Contracts to 8(a) BusinessesThis report presents the results of our review of the Internal Revenue Service’s (IRS)use of 8(a) contractors. We reviewed 25 8(a) contract files to determine whether theIRS was effectively using the 8(a) program to achieve organizational goals and whethersufficient controls exist to prevent fraud, waste, and abuse within the program.In summary, we found that although the IRS Procurement function has activelypromoted and worked with 8(a) contractors to provide valuable services to the IRS,improvements are needed in planning and awarding 8(a) contracts.We believe the Assistant Commissioner (Procurement) should ensure all costs of anacquisition are considered when determining whether to compete the contract andcontinue to discourage the use of letter contracts. In addition, the AssistantCommissioner (Procurement) should ensure that documentation is obtained to certifythat the 8(a) contractors are in compliance with subcontracting limitations.In commenting on a draft of this report, IRS management agreed to take correctiveaction on two of the three recommendations. Management believes ourrecommendation for ensuring all costs of an acquisition are considered whendetermining whether to compete a contract is unnecessary. Management’s commentshave been incorporated into the report where appropriate, and the full text of theircomments is included as an appendix.Copies of this report are also being sent to the IRS managers who are affected by thereport recommendations. Please contact me at (202) 622-6510 if you have questions,or your staff may call Maurice S. Moody, Associate Inspector General for Audit(Headquarters Operations and Exempt Organizations Programs), at (202) 622-8500.