SOCIAL SECURITY ADMINISTRATION
TO THE SOCIAL SECURITY
We improve SSA programs and operations and protect them against fraud, waste, and abuse by conducting independent and objective audits, evaluations, and investigations. We provide timely, useful, and reliable information and advice to Administration officials, the Congress, and the public.
The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:
Conduct and supervise independent and objective audits and investigations
relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems in agency programs and operations.
To ensure objectivity, the IG Act empowers the IG with:
Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.
By conducting independent and objective audits, investigations, and evaluations,
we are agents of positive change striving for continuous improvement in the
Social Security Administration's programs, operations, and management and in
our own office
Date: September 23, 2005
To: The Commissioner
From: Inspector General
Subject: Tax Information Related to the Social Security Administration's Contractors (A-03-05-25010)
Our objectives were to determine whether (1) the Social Security Administration (SSA) is adequately screening contractors during the pre-award and registration process and (2) Agency contractors are appropriately paying payroll taxes.
As of August 2004, SSA had about 4,600 active contracts worth more than $1.4 billion. These contracts were awarded to 3,097 contractors who provided a variety of goods and services including medical, worker rehabilitation, consulting, auditing, and verification services.
Table 1: SSA Active Contracts (as of August 2004)
Contract Amount Greater Than Contract Amount Less Than or Equal to Number of Contracts Percentage of Total Contracts Total Award Obligation
$ 0 $ 10,000 3,006 65.2% $ 4 M
10,000 50,000 611 13.3% 15 M
50,000 100,000 350 7.6% 26 M
100,000 500,000 426 9.3% 98 M
500,000 1 M 66 1.4% 45 M
1 M 10 M 119 2.6% 369 M
10 M 25 M 20 0.4% 320 M
25 M 250 M 9 0.2% 548 M
Totals 4,607 100.0% $1,425 M
In October 2003, the Federal Acquisition Regulations (FAR) made it a requirement for all contractors doing business with any Federal agency to register in the Department of Defense's (DoD) Central Contractor Registration (CCR) database, with a few exceptions. The objectives of the CCR database are to: (1) increase visibility of contractor sources (including their geographical locations) for specific supplies and services and (2) establish a common source for Government contractor data. The CCR collects, validates, stores, and disseminates data in support of an agency's acquisition mission.
Our audit focused on active SSA contracts as of August 2004. Specifically, we reviewed and assessed SSA procedures for determining whether its contractors were complying with the FAR as it relates to CCR registration and providing tax-related information. Further, to determine if SSA contractors were appropriately paying their payroll taxes, we assessed whether the contractors reported the correct amount of Social Security wages to SSA and the Internal Revenue Service (IRS). We provide information on our scope and methodology in Appendix C. The entities audited were SSA's Office of Acquisition and Grants (OAG) and Office of Financial Policy and Operations (OFPO) under the Deputy Commissioner for Finance, Assessment and Management (DCFAM). We conducted our audit in Baltimore, Maryland between June 2004 and April 2005 in accordance with generally accepted government auditing standards.
RESULTS OF REVIEW
Our review found that some SSA contractors were not registered in CCR. Specifically,
we found that 19 of 100 sample contractors were not registered in the CCR as
required. In four of these cases, SSA awarded new contracts without ensuring
the contractors were registered. Further, we found that contractors' Tax Identification
Numbers (TIN) included in SSA's acquisition database were not accurate. Specifically,
we found that as many as 5 percent of the TINs were either invalid or could
not be validated in SSA records. Finally, while we found discrepancies with
contractors reporting payroll data to SSA and the IRS, we were not able to confirm
if these contractors were tax delinquent due to the restrictions of the Internal
Revenue Code, which prevents the disclosure of certain tax-related information.
CENTRAL CONTRACTOR REGISTRATION
In our review of 100 sample SSA contractors, we identified 19 contractors who were not registered in the CCR database. In four of these cases, SSA awarded new contracts prior to verifying that the contractors were registered. Of the remaining 81 contractors, 74 were registered in CCR and 7 were exempt from registration.
In the 1990s, DoD established the CCR database to be a single repository of contractor financial and procurement data for the entire DoD to avoid administrative duplication and allow contractors to take responsibility for the accuracy of their own important business information by supplying it directly to the Government through a single registration process. In October 2003, the FAR made it a requirement for all potential Government contractors to register in the CCR database to be awarded contracts by the Federal Government. Further, it required that existing Government contractors-with awards prior to October 1, 2003-register, if their period of performance extended beyond December 31, 2003.
Of the 19 contractors that had not registered in the CCR database as appropriate,
4 were new contractors and 15 were existing contractors (see Figure 1).
New Contractors Not Registered
Between December 2003 and January 2004, SSA awarded contracts to four contractors totaling about $60,000 without verifying that the contractors were registered in CCR prior to the award. As of January 2005, three of these contractors still did not appear to be registered. The one remaining contractor registered approximately 7 months after SSA awarded it the contract. According to the FAR, if potential contractors are not registered in CCR "at the time of the award," contracting officials are to: (1) delay the award until the contractors are registered or (2) if a delay is not permissible, award the contracts to the next successful registered offerors. We could not determine if SSA had taken any of these actions for these four contracts. Further, for one of the four contracts, SSA contracting officials failed to include the CCR registration provisions in the contract as required under the FAR. Consequently, the contractor was not officially notified about the registration requirement. For the remaining three contracts, the CCR provisions were included in the contracts.
Existing Contractors Not Registered
We found that 15 existing contractors with awards totaling about $63,000 were not registered in CCR, although SSA had modified the contracts to include the CCR provisions. As of January 2004, SSA modified 14 of the 15 contracts to include the CCR provisions that required the contractors to be registered in CCR by December 31, 2003 and to maintain registration until final payment. They failed to include the CCR provision in the one remaining contract. We spoke to SSA contracting staff and they agreed that the 15 contractors did not appear to be registered in CCR, but stated the FAR does not require them to verify that "existing contractors" have registered. It only requires them to instruct contractors to register by modifying the contracts with the CCR provisions.
EXCLUDED PARTIES LIST SYSTEM
The General Services Administration maintains the Excluded Parties List System
(EPLS), which identifies those parties throughout the U.S. Government that are
debarred or suspended from receiving Federal contracts, certain subcontracts,
and certain types of Federal financial and non-financial assistance and benefits.
For example, a contractor may be debarred for a conviction of or civil judgment
for fraud, embezzlement, theft, forgery, bribery, false statements, or other
offenses indicating a lack of business integrity. Our review of the EPLS as
of January 2005 revealed that none of the 3,097 SSA contractors were included
on the list and therefore were eligible to receive a Government contract.
TAX IDENTIFICATION NUMBERS
We found that as many as 147 (5 percent) of the 3,097 contractors' TINs included in the OAG's database of active contracts were problematic as shown in Table 2. In addition, SSA was not using the information contained in the CCR database to locate the appropriate TINs or to make Electronic Fund Transfer (EFT) payments.
The TIN is a 9-digit number required by the IRS to be used by taxpayers in reporting tax-related information. The TIN may be either an EIN issued by IRS for businesses or an SSN issued by SSA to individuals. Contractors doing business with a Government agency are required to furnish their TINs to that agency as it may be used for the collection of debts owed the Government or reporting of certain contract and payment information to the IRS.
Of the 147 TINs, we were unable to verify 95 because they were not included in SSA's systems as shown in Table 2. However, we were able to verify the remaining 52 TINs that contained transposed digits (29), more than 9 digits (19), or unusual numbers (4) and provided the valid TINs to OAG enabling it to update SSASy.
Table 2: Discrepancies with Contractors' Tax Identification Numbers
Discrepancies Number of TINs Obligated Amount
TINs could not be located in SSA's Employer Identification File (EIF)1 54 $3,818,000
TINs were included in the EIF, but the associated name and address did not match OAG's database 412 $1,062,000
TINs with transposed digits 293 $15,559,000
TINs with more than 9 digits 193 $429,000
TINs contained unusual or consecutive numbers
(e.g. 111222333) 43 $91,000
Total 147 $20,959,000
1. The EIF database contains the EINs issued by the IRS to employers along with their name and address. This file is updated monthly via the IRS Business Master File, which is a magnetic tape file containing information about taxpayers filing business returns and related documents. According to SSA officials, the EIF and the IRS Business Master File do not always match, which may explain why the contractors TINs were not included in the EIF.
2. We searched the EIF using the contractors' name, address, and TIN included in OAG's database. However, an entity assigned an EIN can use more than one name. The EIF does not display the names of all entities assigned each EIN.
3. We provided the corrected TINs to SSA.
Although the OAG could not provide an explanation for most of these discrepancies, it appears some of these discrepancies occurred because of possible data entry errors and improper format of the data field used to capture the TINs. We spoke to OAG staff about the feasibility of modifying the SSASy database to capture only 9 digits for the contractor TINs and they agreed the modification was feasible and the cost, if any, would be minimal. Further, we believe these discrepancies may have been avoided if the TINs were verified using CCR.
Use of CCR to Verify Contractor TINs
Contracting staff could have used the CCR database as a tool to verify whether the TINs included in SSASy are valid. Currently, contracting staff search the public version of the CCR database to determine if contractors are registered, but this version does not include contractors' sensitive and proprietary data such as TINs and banking information. OAG staff stated that in the future they intend to interface SSASy with the CCR database, which would provide them with access to all contractor data-public, sensitive, and proprietary-included in CCR, but they could not tell us when this would occur. However, CCR does provide authorized Government officials read-only access to all contractor data via the internet. The Government officials need only complete an application to gain access, which CCR normally grants within 2 business days.
In addition to proper tax reporting, it is critical the OAG capture valid TINs
in its database because TINs are used to determine if individuals or businesses
owe a Federal debt. The OAG database is one of the sources used by OFPO to establish
contractors' accounts within the Social Security Online Accounting and Reporting
System (SSOARS) and to issue payments. OFPO transfers the payment information
(e.g., name, banking information, and TINs) to the Department of Treasury's
Financial Management Service (FMS), which is responsible for disbursing SSA's
payments. As part of the disbursement process, FMS determines if the individual
or business owes a Federal debt. FMS, which maintains a database of debts owed
the Federal Government, compares the name and TIN on a Federal payment to information
database to determine if a match exists so the debt can be collected. The reporting of invalid TINs could impede debt-collecting efforts by FMS.
Electronic Funds Transfer Data
Currently, OFPO is not using contractors' EFT information included in the CCR database to issue electronic payments. Federal agencies are encouraged to use the contractors' EFT data included in CCR as the single source for making contractor payments. Within SSA, contractors' EFT data is normally received by the contracting office during the solicitation phase of the contracting process and then forwarded to OFPO who enters the data into SSOARS to establish the obligation and make payments. CCR allows an agency to enter the data electronically into its payment system, thus eliminating the necessity for any manual intervention and prevent potential input errors. OFPO personnel stated that CCR data has not been integrated into its data system due to interface problems. However, they expect to have the issue resolved by the fourth quarter of 2005.
PAYROLL TAX INFORMATION
Current law does not prevent SSA from awarding contracts to contractors who are tax delinquent. The FAR appears to allow contracting officers the discretion to consider tax-related issues when determining whether a potential contractor is responsible. Specifically, contracting officers must determine if potential contractors have a satisfactory record of integrity and business ethics, which could involve tax delinquency.
To address this issue, GAO recommended the Office of Management and Budget (OMB) consider mechanisms to prohibit contract awards to contractors who failed to pay their taxes. In a February 2004 audit report, GAO recommended OMB pursue policy options for prohibiting Federal contract awards to contractors in cases when abuse to the Federal tax system has occurred and tax owed is not contested. The report stated that options could include designating such tax abuse as a cause for governmentwide debarment and suspension or, if allowed by statute, authorizing IRS to declare such businesses and individuals ineligible for Government contracts. The intent of this recommendation was to help ensure that the Federal Government does not award contracts to businesses and individuals that have flagrantly disregarded their Federal tax obligations (e.g. failed to remit payroll taxes).
We were not able to confirm with the IRS whether the 3,097 contractors were tax delinquent due to the limitations of Section 6103 of the Internal Revenue Code, which restricts the disclosure of certain tax-related information. To gain a perspective of the potential problem, we reviewed the results of the SSA/IRS reconciliation process for the 3,097 contractors. This process can identify those employers who under/over-report the amount of Social Security wages to the IRS, which could result in an underpayment of payroll taxes. Our review found that for Tax Year 2002, 172 (6 percent) of the 3,097 contractors reported Social Security wages to both SSA and IRS that did not agree. Specifically, 46 contractors reported approximately $23 billion less in Social Security wages to IRS and 126 contractors reported approximately $353 million less in Social Security wages to SSA. While SSA and IRS may resolve these wage reporting discrepancies through the reconciliation process, the discrepancies could indicate possible tax delinquency. We provide more details about these cases in Appendix E.
CONCLUSION AND RECOMMENDATIONS
Although we found the majority of SSA contractors were adhering to the requirements of the FAR as it relates to registering in CCR and providing the required tax information to SSA, we believe improvements are needed to ensure all contractors are compliant. Also, SSA needs to ensure it is accurately capturing contractors' information in its data systems. Although current law does not prevent SSA from awarding contracts to contractors who are tax delinquent, contracting officers can consider tax-related information, if available, to determine if potential contractors are responsible. Furthermore, we support GAO's recommendation that mechanisms be created to prohibit contract awards to contractors who failed to pay their taxes.
We recommend SSA:
1. Ensure the FAR provision requiring contractors to register with CCR is included in all applicable contracts.
2. Ensure contracting officers verify that potential contractors are registered in the CCR database.
3. Encourage OAG staff to apply for read-only access to the CCR database provided to Government agencies. This access will provide the staff the ability to verify contractors' TIN as well as other contractor information.
4. Reformat OAG's database to restrict more than 9-digits from being entered as a TIN.
SSA agreed with recommendations 1 and 2, but disagreed with recommendations 3 and 4. In reference to recommendations 3 and 4, SSA stated that effective January 1, 2005, the process for submitting contractor TIN information changed. Contracting officers will no longer need to enter the contractors' TINs into SSASy because contractors can use a new on-line Representation and Certification program to certify that their TINs are included in the CCR database. Further, SSA stated that effective with the implementation of Federal Procurement Data System-Next Generation (FPDS-NG), the TIN field is no longer a data element and that FPDS-NG verifies whether Government contractors are registered in CCR. Finally, SSA stated they expect in early FY 2006 to complete their enhancement of SSASy to retrieve contractor data directly from the CCR database using the contractor supplied DUNS number. This will be a seamless connection to CCR through the contract management system, and it will provide access to all the information necessary to make a proper award. The full text of SSA's comments is included in Appendix F.
We appreciate the Agency's response to our recommendations as well as the assistance of SSA staff throughout this review. We agree that the new process for submitting and verifying contractor TINs should prevent the discrepancies noted in the report from occurring in the future providing SSA is able to obtain direct access to contractor data included in the CCR database. However, should the interface of SSASy and CCR be delayed, we believe SSA should consider implementing recommendations 3 and 4 as an interim measure.
Patrick P. O'Carroll, Jr.
APPENDIX A - Acronyms
APPENDIX B - Central Contractor Registration
APPENDIX C - Scope and Methodology
APPENDIX D - Flowchart of the Social Security Administration's Procurement Process
APPENDIX E - Payroll Tax Information
APPENDIX F - Agency Comments
APPENDIX G - OIG Contacts and Staff Acknowledgments
AIE Integrated Acquisition Environment
CCR Central Contractor Registration
C.F.R. Code of Federal Regulations
CO Contracting Officer
DoD Department of Defense
DUNS Data Universal Numbering System
EIF Employer Identification File
EIN Employer Identification Number
EPLS Excluded Parties List System
FAR Federal Acquisition Regulations
FPDS-NG Federal Procurement Data System - Next Generation
FICA Federal Insurance Contributions Act
FMS Financial Management Service
FY Fiscal Year
GAO Government Accountability Office
IRS Internal Revenue Service
OAG Office of Acquisition and Grants
OFPO Office of Financial Policy and Operations
OIG Office of the Inspector General
OMB Office of Management and Budget
POMS Program Operations Manual System
SSA Social Security Administration
SSASy SSA's Streamlined Acquisition System
SSN Social Security Number
SSOARS Social Security Online Accounting and Reporting System
TIN Tax Identification Number
U.S.C. United States Code
Form SS-5 Application for a Social Security Number
Central Contractor Registration
In 1998, the Department of Defense (DoD) established the Central Contractor Registration (CCR) database. The CCR database was created to be the single repository of contractor data for the entire DoD to avoid administrative duplication and allow contractors to take responsibility for the accuracy of their own important business information by supplying it directly to the Government through a single registration. In the past, any vendor who wanted to do business with more than one DoD site was required to submit the same business information to each and every site. This redundancy of paperwork not only created an administrative burden for both the Government and the vendor, but also was a major source of administrative error and expense in terms of both time and money.
CONTRACTS COVERED BY CCR
In October 2003, the Federal Acquisition Regulations (FAR) made it a requirement
for all potential contractors doing business with the Federal Government to
register in CCR with the exception of:
purchases that use a governmentwide commercial purchase card;
classified contracts when registration in the CCR database or use of CCR information can compromise the safeguarding of classified information or national security;
contracts issued by (1) deployed contracting officers in the course of military operations and (2) contracting officers in the conduct of emergency operations, such as responses to natural or environmental disasters or national or civil emergencies;
contracts to support unusual or compelling needs;
awards made to foreign contractors for work performed outside the United States, if it is impractical to obtain CCR registration; and
micro-purchases that do not use the Electronic Funds Transfer (EFT) method for payment and are not required to be reported.
In addition, the FAR required contracting officials to modify existing contracts
(1) require contractors to register in CCR no later than December 31, 2003 and
(2) inform contractors that the CCR will be the source of EFT account information.
To register for CCR, contractors are required to complete a 1-time registration to provide basic information relevant to procurement and financial transactions to include contractor name, address, points of contact, electronic payment information, and tax identification number. Further, contractors must update or renew their registration annually to maintain an active status. CCR validates some contractor's information and electronically shares the secure and encrypted data with the Federal agencies' finance offices to facilitate paperless payments through EFT. Additionally, CCR shares the data with Government procurement and electronic business systems. As of March 2005, there were 355,478 active contractors registered in the CCR database.
SSA CONTRACT DEVIATIONS
In October 2003, the Deputy Commissioner for Finance, Assessment and Management issued a class deviation that allowed the Agency to deviate from the CCR requirements in its entirety due to conflicts with the implementation of the Agency's new financial accounting/payment system that was mandated by the Federal Financial Management Act. However, the Office of Acquisition and Grants (OAG) later determined that is needed to implement some of the CCR requirements due to other Federal reporting requirements. Therefore, it issued a Flash Notice in November 2003 that (1) required all SSA contractors register in CCR unless exempt by FAR, and (2) exempt the Agency's use of the CCR database as the source for EFT payments. In February 2004, OAG reversed its decision about requiring Employee Network (EN) contractors to register in CCR citing that these contracts are exempt from CCR because (1) the contracts are not required to be reported in the Federal Procurement Data System and (2) SSA's Office of Finance does not process the submitted invoices. OAG determined that the class deviation in its entirety would apply to these types of contracts.
Scope and Methodology
To meet our objectives we:
Reviewed pertinent laws and regulations, as well as prior audits related to the Social Security Administration's (SSA) procurement process and the collecting of payroll taxes.
Interviewed SSA staff to obtain an understanding of the contracting award process.
Obtained a copy of the Office of Acquisition and Grants (OAG) database of all active SSA contracts as of August 2004. This list does not include some micro-purchases made by regional contracting officers who are not required to input the purchase information into the OAG database.
Reviewed contract files for sample contractors and compared contractor data to the OAG database to determine if the database was reliable.
Randomly selected 100 contractors to determine if they were registered in the Central Contractor Registration database. We started with a contractor population of 3,124. Additional audit work determined this population contained 27 duplicate contractors, adjusting our population to 3,097 contractors. We searched for the contractors using their full/partial name and their Data Universal Numbering System, which is a 9-digit number, assigned by the marketing company Dun & Bradstreet, to identify unique business entities.
Reviewed the Excluded Parties List System to determine whether the 3,097 contractors were debarred or suspended from receiving Government contracts.
Reviewed SSA's Employer Identification File (EIF), Social Security Online Accounting and Reporting System (SSOARS), and Numident database to verify contractors' Tax Identification Numbers.
Obtained from the Office of Earnings, Enumeration, and Administrative Systems a listing that included the results of the SSA and IRS reconciliation process for the SSA contractors. The data was obtained by using the EINs included in the OAG database.
Sent a letter to IRS requesting confirmation as to whether SSA contractors were delinquent in paying their payroll taxes. While citing Internal Revenue Code, 26 U.S.C. § 6103, the IRS declined our request stating that that their confidentiality statutes prevent them from making public any records related to finalized tax delinquency cases and do not allow the disclosure of tax information unless there is an exception to the general rule of non-disclosure.
Flowchart of the Social Security Administration's Procurement Process
1. The Office of Acquisition and Grants (OAG) is responsible for purchases over
$2,500 originating from a Headquarters office (Baltimore, Maryland; Washington D.C.; and Falls Church, Virginia). Regional offices also have their own contracting officers.
2. OAG proceeds with the procurement, which includes verifying available funds, soliciting contractors, evaluating proposals, verifying the contractor is responsible and awarding contracts. The contracting officer considers factors such as: the financial resources available to the contractor; the contractor's history of integrity and business ethics; and the equipment and facilities that the contractor has at its disposal to complete performance under the contract.
3. The Office of Financial Policy and Operations (OFPO) registers, examines, and verifies the invoice as being satisfied and issues an invoice certification to the Department of the Treasury's Financial Management Service (FMS). FMS makes payment using the contractor's bank information provided on the invoice certification. FMS also determines if the recipient of payment owes a debt to the Government. If there are any contractors with delinquent debts, the payment is offset by FMS.
Payroll Tax Information
Current law does not prevent the Social Security Administration (SSA) from awarding contracts to contractors who have failed to pay their payroll taxes to the Internal Revenue Service (IRS). To address this issue, in a February 2004 audit report, the Government Accountability Office (GAO) recommended that the Office of Management and Budget develop and pursue policy options for prohibiting Federal contract awards to contractors in cases where abuse of the Federal tax system has occurred and tax owed is not contested. The report stated that such options could include designating such tax abuse as a cause for government-wide debarment and suspension or, if allowed by statute, authorizing IRS to declare such businesses and individuals ineligible for Government contracts. The intent of this recommendation was to help ensure that the Federal Government does not award contracts to businesses and individuals that have flagrantly disregarded their Federal tax obligations (e.g. failed to remit payroll taxes).
We were not able to confirm with the IRS whether SSA contractors had paid their appropriate payroll taxes due to the limitations of section 6103 of the Internal Revenue Code, which restricts the disclosure of certain tax related information. To gain a perspective of the potential problem, we reviewed the SSA/IRS reconciliation process to determine whether SSA's contractors accurately reported the amount of Social Security wages to both agencies. The SSA/IRS process can identify cases where employers may have under/over-reported the amount of Federal Insurance Contributions Act (FICA) wages to the IRS, which could result in an under/overpayment of payroll taxes. Our review found that as of September 2004, 172 (6 percent) of the 3,097 contractors reported FICA wages to both agencies that did not agree for Tax Year 2002. Specifically, we found the following:
For 46 contractors, the amount of wages reported to the IRS was less than the
amount reported to SSA totaling about $23 billion. These cases could represent
circumstances where the contractors failed to pay the appropriate amount of
FICA taxes to the IRS. Again, we were not able to confirm this fact with the
IRS due to the restrictions of section 6103. It is also possible that these
cases could represent wage reporting errors by the employers. For example, one
contractor who represented $22 billion (96 percent) of the $23 billion difference
in FICA wages submitted numerous wage reports to SSA to correct previous submissions.
The latest corrected report was submitted in February 2005, nearly 2 years after
it was due. According to SSA staff, this contractor was referred to IRS because
SSA considers the contractor to be a high-profile employer who has had wage
reporting problems in the past.
For 126 contractors, the amount of wages reported to the IRS exceeded the amount reported to SSA totaling about $353 million. SSA is concerned about these cases as they may represent missing W-2s or wage reports, which could affect employees' eligibility for receiving Social Security benefits. SSA referred the 126 contractors to the IRS because the contractors failed to respond to SSA's reconciliation correspondence used to help resolve discrepancies or to avoid the expiration of the statue of limitation for assessing penalties. The IRS can assess penalties against employers who fail to cooperate with SSA to resolve the wage reporting discrepancies.
Date: September 7, 2005
To: Patrick P. O'Carroll, Jr.
From: Larry W. Dye
Chief of Staff
Subject: Office of the Inspector General (OIG) Draft Report, "Tax Information Related to the Social Security Administration's Contractors" (A-03-05-25010)--INFORMATION
We appreciate OIG's efforts in conducting this review. Our comments on the draft report's recommendations are attached.
Please let me know if you have any questions. Staff inquiries may be directed to Ms. Candace Skurnik, Director, Audit Management and Liaison Staff, at extension 54636.
COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL'S (OIG) DRAFT REPORT, "TAX INFORMATION RELATED TO THE SOCIAL SECURITY ADMINISTRATION'S CONTRACTORS" (A-03-05-25010)
Thank you for the opportunity to review and provide comments on this draft report. The Agency supports the President's Management Agenda in the area of Electronic Government and specifically in the Integrated Acquisition Environment (IAE) initiative by using various tools and systems that support IAE, including Central Contractor Registration (CCR) and Federal Procurement Data System-Next Generation (FPDS-NG). Our effective implementation and use of these and various other IAE tools allows us to continuously improve our acquisition operations in headquarters and regional office contracting activities.
Ensure the Federal Acquisitions Regulations (FAR) provision requiring contractors to register with CCR is included in all applicable contracts.
We agree. We will continue our acquisition management review process which entails steps to ensure that the CCR provision is included in all applicable contracts along with a random review of contracts to ensure that proper awards are being made, and that they include all appropriate clauses. It should be noted that the fact that this review only found 1 contract out of 100 that did not have the required clause, indicates that this is not a widespread problem.
Ensure contracting officers (CO) verify that potential contractors are registered
in the CCR database.
We agree. We feel this is an important step in evaluating a contract; however, we do not feel additional procedures are warranted from what is already required by the FAR and the Agency supplemental guidance. We will send a reminder to the COs reminding them about our current file documentation requirements that require the CO to indicate that the CCR database was checked as appropriate and that the contractor is registered. Also, a feature of FPDS-NG serves as a reminder to the CO that the award should not be made unless the contractor is registered. FPDS-NG checks the CCR database as the CO is completing the FPDS information. If the contractor is not registered in CCR, the CO receives a message to that fact, and the award will not pass the edit process. On the rare occasion that a CO overrides the FPDS-NG message, the Office of Acquisitions and Grants (OAG) FPDS-NG administrator contacts the CO to remind him/her to make sure the contractor registers in the CCR database. Sometimes the administrator contacts the contractor and requests that they complete the registration.
Encourage the OAG staff to apply for read-only access to the CCR database provided to Government agencies. This access will provide the staff the ability to verify contractors' Tax Identification Number (TIN) as well as other contractor information.
We disagree. Between the time the subject contracts were awarded and this audit was conducted, the process for submitting TIN information has changed. Prior to January 1, 2005 contractors submitted their TIN with their Representations and Certifications, and the CO entered this information in the SSA's Streamlined Acquisition System vendor file and in the Contractor TIN field in the "old" FPDS. Effective January 1, 2005, a new FAR regulation took effect allowing contractors to complete their Representation and Certifications on-line. Some information required by the Representations and Certifications is also required by CCR. The TIN is one such piece of information. Therefore, when a contractor completes its on-line Representations and Certifications, the contractor does not show the TIN, but cross-refers that information to CCR. With this process, there is no TIN for the CO to verify, because the contractor has indicated that the TIN in the CCR is the contractor TIN.
Additionally, effective with the implementation of FPDS-NG, the TIN field is no longer a data element. COs do not enter this information into the FPDS-NG database. We are not aware of any other contractor information contained in the non-public CCR record that a CO would need in order to make a proper award.
In early fiscal year (FY) 2006, we will be enhancing our contract management system to dynamically retrieve contractor data directly from the CCR database using the contractor supplied Data Universal Numbering System (DUNS) - a 9 digit number assigned by the marketing company Dun & Bradstreet to identify unique business entities. This will be a seamless connection to CCR through the contract management system, and it will provide access to all of the information necessary to make a proper award.
Reformat OAG's database to restrict more than 9-digits from being entered as
We disagree. As stated in our response to recommendation 3, in early FY 2006 we will be enhancing our contract management system using the contractor supplied DUNS to retrieve contractor data directly from the CCR database. The contractor data from the CCR will include the TIN, and we will no longer be manually entering the TIN.
[In addition to the comments above, SSA provided technical comments which have
been addressed, where appropriate, in this report.]
OIG Contacts and Staff Acknowledgments
Walter Bayer, Director, Philadelphia Audit Division, (215) 597-4080
Cylinda McCloud-Keal, Audit Manager, (215) 597-0572
In addition to those named above:
Damon Mahoner, Auditor-in-Charge
Annette DeRito, Writer/Editor
For additional copies of this report, please visit our web site at www.socialsecurity.gov/oig
or contact the Office of the Inspector General's Public Affairs Specialist at
(410) 965-3218. Refer to Common Identification Number A-03-05-25010.
Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of our Office of Investigations (OI), Office of Audit (OA), Office of the Chief Counsel to the Inspector General (OCCIG), and Office of Executive Operations (OEO). To ensure compliance with policies and procedures, internal controls, and professional standards, we also have a comprehensive Professional Responsibility and Quality Assurance program.
Office of Audit
OA conducts and/or supervises financial and performance audits of the Social Security Administration's (SSA) programs and operations and makes recommendations to ensure program objectives are achieved effectively and efficiently. Financial audits assess whether SSA's financial statements fairly present SSA's financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA's programs and operations. OA also conducts short-term management and program evaluations and projects on issues of concern to SSA, Congress, and the general public.
Office of Investigations
OI conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement in SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, third parties, or SSA employees performing their official duties. This office serves as OIG liaison to the Department of Justice on all matters relating to the investigations of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.
Office of the Chief Counsel to the Inspector General
OCCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCCIG also advises the IG on investigative procedures and techniques, as well as on legal implications and conclusions to be drawn from audit and investigative material. Finally, OCCIG administers the Civil Monetary Penalty program.
Office of Executive Operations
OEO supports OIG by providing information resource management and systems security. OEO also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, OEO is the focal point for OIG's strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act of 1993.