Potential Problem With Federal Tax System Postemployment Conflicts of Interest Can Be Prevented

GGD-81-87: Published: Sep 15, 1981. Publicly Released: Sep 15, 1981.

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GAO evaluated the administration of the post-Federal employment restrictions by the Departments of Justice and the Treasury, including the Internal Revenue Service (IRS), to determine if their controls were adequate to prevent, identify, and remedy conflicts of interest in the Federal tax system. The positions covered in the review were selected because they involved responsibilities conducive to postemployment conflicts of interest and were most likely to be filled by persons who did not intend to make public service a career.

Results of a questionnaire sent by GAO to former employees indicated that: (1) 86 percent of the respondents were involved in Federal tax matters; (2) 44 percent of the respondents noted that they had not been informed of postemployment restrictions; and (3) an additional 29 former employees did not receive complete information on the restrictions from their former agencies. Justice, Treasury, and IRS do not know how many former employees are working in private tax practice. They do not monitor their former employees' subsequent involvement in Federal tax matters either to detect violations of the restrictions or to determine if postemployment problems exist. The number of former employees working in private sector tax jobs and facing conflict-of-interest situations is great enough to require that compliance with the postemployment restrictions be monitored to ensure that violations are detected. Once they are detected, violators must be disciplined in accordance with the applicable statute and regulations. Although Treasury has a system for disciplining violators, few suspected violations have been processed through the system. Final regulations have been issued which require that agencies: (1) establish education and counseling programs to cover postemployment matters, (2) take prompt and effective administrative actions to remedy actual or potential violations, and (3) periodically evaluate the adequacy and effectiveness of their postemployment enforcement systems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Attorney General and the Secretary of the Treasury should require separating employees to certify, in the presence of their supervisors, that they have read, understand, and will comply with the postemployment statute, the regulations governing practice before IRS, and the legal profession's code pertaining to former Federal employees.

    Agency Affected: Department of Justice

  2. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Attorney General and the Secretary of the Treasury should require separating employees to certify, in the presence of their supervisors, that they have read, understand, and will comply with the postemployment statute, the regulations governing practice before IRS, and the legal profession's code pertaining to former Federal employees.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Not Implemented

    Comments: Treasury is satisfied that the recommended action is being accomplished.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of Internal Revenue to emphasize the postemployment restrictions at seminars during which employee conduct is discussed.

    Agency Affected: Department of the Treasury

  4. Status: Closed - Not Implemented

    Comments: Justice and Treasury disagree with this recommendation and plan no action.

    Recommendation: The Attorney General and the Secretary of the Treasury should determine if postemployment conflicts of interest are a problem in the tax system by monitoring the postemployment activities of a sample of former employees.

    Agency Affected: Department of Justice

  5. Status: Closed - Not Implemented

    Comments: Justice and Treasury disagree with this recommendation and plan no action.

    Recommendation: The Attorney General and the Secretary of the Treasury should determine if postemployment conflicts of interest are a problem in the tax system by monitoring the postemployment activities of a sample of former employees.

    Agency Affected: Department of the Treasury

  6. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of Internal Revenue to revise the power of attorney form used at IRS to state that the person executing the form is aware of the postemployment restrictions applicable to former tax administration employees and their associates.

    Agency Affected: Department of the Treasury

  7. Status: Closed - Not Implemented

    Comments: The Director of Practice believes that this responsibility already exists although it has not been formalized.

    Recommendation: The Secretary of the Treasury should give the Director of Practice responsibility for ensuring that postemployment restrictions are not violated in identified conflict-of-interest situations.

    Agency Affected: Department of the Treasury

  8. Status: Closed - Not Implemented

    Comments: Treasury has established procedures for coordination.

    Recommendation: The Secretary of the Treasury should direct the Inspector General, the IRS Chief Counsel, and the Commissioner of Internal Revenue to establish procedures for coordinating their postemployment responsibilities with the Director of Practice.

    Agency Affected: Department of the Treasury

  9. Status: Closed - Not Implemented

    Comments: Treasury and Justice stated that they have no legal authority to take the recommended action.

    Recommendation: The Attorney General and Secretary of the Treasury should determine and establish the level of enforcement needed to reasonably ensure that conflicts of interest are resolved in compliance with the postemployment restrictions and that violations of the restrictions are detected.

    Agency Affected: Department of Justice

  10. Status: Closed - Not Implemented

    Comments: Treasury and Justice stated that they have no legal authority to take the recommended action.

    Recommendation: The Attorney General and Secretary of the Treasury should determine and establish the level of enforcement needed to reasonably ensure that conflicts of interest are resolved in compliance with the postemployment restrictions and that violations of the restrictions are detected.

    Agency Affected: Department of the Treasury

  11. Status: Closed - Not Implemented

    Comments: Treasury believes that the recommended action is being done.

    Recommendation: The Secretary of the Treasury should direct the Inspector General, the IRS Chief Counsel, and the Commissioner of Internal Revenue to coordinate their postemployment responsibilities with the Director of Practice and to inform him of the conflict-of-interest situations and potential violations of the postemployment restrictions that come to their attention.

    Agency Affected: Department of the Treasury

  12. Status: Closed - Not Implemented

    Comments: The Director of Practice stated that all statements received are being reviewed as GAO suggested.

    Recommendation: The Secretary of the Treasury should direct the Director of Practice to review isolation statements filed with his office and disapprove those which do not adhere to the minimum isolation procedures to be set forth or which would involve conditions for which isolation would not eliminate the appearance of impropriety.

    Agency Affected: Department of the Treasury

  13. Status: Closed - Not Implemented

    Comments: The Department of Justice plans no action.

    Recommendation: The Attorney General and the Secretary of the Treasury should establish uniform regulations to enforce the postemployment restrictions that apply to associates of former employees which set forth the minimum procedures that former employees' associates must follow to isolate former employees from participation in tax matters.

    Agency Affected: Department of Justice

  14. Status: Closed - Not Implemented

    Comments: Treasury feels that its rules relate to practice before IRS and apply to everyone, including Justice, while practice before courts is governed by the American Bar Association. Therefore, it believes that uniformity in that context does exist.

    Recommendation: The Attorney General and the Secretary of the Treasury should establish uniform regulations to enforce the postemployment restrictions that apply to associates of former employees which set forth the minimum procedures that former employees' associates must follow to isolate former employees from participation in tax matters.

    Agency Affected: Department of the Treasury

  15. Status: Closed - Not Implemented

    Comments: Justice rejected the recommendation and plans no action.

    Recommendation: The Attorney General and the Secretary of the Treasury should establish uniform regulations to enforce postemployment restrictions that apply to the associates of former employees which define the situations in which the disqualification of the former employees' associates should stand because isolation of the former employee would not remove the appearance of impropriety.

    Agency Affected: Department of Justice

  16. Status: Closed - Not Implemented

    Comments: Treasury contends that its rules and other statutory provisions and cognizant codes of ethics, such as ABA, contribute to uniformity. Therefore, Treasury rejects the recommendation.

    Recommendation: The Attorney General and the Secretary of the Treasury should establish uniform regulations to enforce postemployment restrictions that apply to the associates of former employees which define the situations in which the disqualification of the former employees' associates should stand because isolation of the former employee would not remove the appearance of impropriety.

    Agency Affected: Department of the Treasury

  17. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Attorney General should develop a postemployment manual which: (1) states the postemployment restrictions that apply to former Federal employees who practice in the tax system, the purpose of the restrictions, the former employee's responsibilities for complying with the restrictions, and the penalties for violating the restrictions; (2) explains how the restrictions apply to the functions performed by tax administration employees; and (3) instructs former employees to direct questions about the restrictions and their applicability to their agencies' ethics counselors.

    Agency Affected: Department of Justice

  18. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Secretary of the Treasury should develop a postemployment manual which: (1) states the postemployment restrictions that apply to former Federal employees who practice in the tax system, the purpose of the restrictions, the former employee's responsibilities for complying with the restrictions, and the penalties for violating the restrictions; (2) explains how the restrictions apply to the functions performed by tax administration employees; and (3) instructs former employees to direct questions about the restrictions and their applicability to their agencies' ethics counselors.

    Agency Affected: Department of the Treasury

 

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