Tax Policy and Administration:

Activities of the Treasury Inspector general for Tax Administration

GAO-05-999R: Published: Sep 27, 2005. Publicly Released: Oct 27, 2005.

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The Department of the Treasury Inspector General for Tax Administration (TIGTA) audits and investigates the Internal Revenue Service's (IRS) operations to (1) promote economy and efficiency and detect and prevent fraud and abuse and (2) recommend actions for improvement. TIGTA was established by the Internal Revenue Service Restructuring and Reform Act of 1998 (IRS Reform Act), which amended the Inspector General Act of 1978 (IG Act), to include an independent inspector general (IG) to provide oversight of IRS's activities, programs, and offices. This report responds to a Congressional request that we review the activities of TIGTA. We are providing information regarding (1) TIGTA's budget and staffing levels; (2) TIGTA's audit and investigative coverage of IRS, including oversight of IRS's offices and identified weaknesses in IRS's operations, and audit coverage of specific requirements of the IRS Reform Act; (3) TIGTA's audit and investigative accomplishments; (4) the quality assurance program, including the results of peer reviews; and (5) the audit follow-up process to track IRS's implementation of TIGTA's audit recommendations.

Over the 5-year period of fiscal years 2000 through 2004, TIGTA's budget authority increased by 14 percent while staff levels decreased by 6 percent. In fiscal year 2004, TIGTA had budget authority of about $130 million and realized authorized full-time equivalent (FTE) staff of 877. In relation to IRS's total federal funds, the budget authority for TIGTA's oversight has steadily declined but is comparable to such ratios for other IG offices. During fiscal year 2004, TIGTA provided audit coverage of IRS through an organizational structure that mirrors IRS's organizational structure and through audit plans that include coverage of IRS's business units, management challenges, and congressionally mandated work. TIGTA's audits provided coverage of the IRS management challenges identified by TIGTA, the high-risk areas designated by us, and mandatory coverage required by the IRS Reform Act. Investigative coverage is provided through TIGTA's investigative mission of addressing employees' integrity, external attempts to corrupt tax administration, and employee and infrastructure security. As a result of its audit and investigative coverage, TIGTA reported that it issued 942 audit reports, addressed 39,611 complaints and allegations, and closed 22,350 investigations over the 5-year period of fiscal years 2000 through 2004. TIGTA claimed financial accomplishments resulting from these audits and investigations of over $16.3 billion, and identified additional potential financial impacts on tax administration of over $50 billion. TIGTA's external peer reviews and internal quality reviews have concluded that TIGTA's quality assurance program provides reasonable assurance that audit reports meet applicable standards. The program includes internal quality reviews of individual audits, internal quality inspections of the Office of Audit, and an external quality peer review of the Office of Audit every 3 years in compliance with government auditing standards. IRS tracks corrective actions on audit recommendations using the Department of the Treasury's Joint Audit Management Enterprise System (JAMES). The system includes audit recommendations from TIGTA, the Department of the Treasury Office of Inspector General, and us. IRS management is responsible for ensuring that corrective actions are taken on audit recommendations that address IRS. For fiscal years 2000 through 2004, JAMES reported that as of May 2005, about 83 percent of all audit recommendations were implemented.

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