Tax Administration:

IRS Undercover Operations Management Oversight Should Be Strengthened

GGD-92-79: Published: Apr 21, 1992. Publicly Released: May 6, 1992.

Additional Materials:

Contact:

Jennie S. Stathis
(202) 512-5407
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) management and oversight of its undercover operations.

GAO found that: (1) the IRS Criminal Investigative Division (CID) often did not follow required operational and financial controls intended to aid in managing undercover operations and safeguarding government funds; (2) the process special agents use for approving undercover operations does not include a written assessment of alternative investigative techniques to ensure that an undercover investigation is the most cost-effective or appropriate way to achieve the intended results; (3) during fiscal year (FY) 1985, illegal tax shelters were the most frequently targeted criminal activity, but since FY 1986 money laundering has been the most frequently targeted illegal activity, involving about 45 percent of all undercover operations; (4) IRS has no way of ensuring that the lessons learned from a given operation are used to help improve future operational performance, since it does not use baseline measures to periodically evaluate completed operations; (5) although the Assistant Commissioner decides which Group I undercover operations are to be undertaken, he has little assurance that the projects are being carried out, since his staff does not always actively oversee those operations due to staffing or budgetary constraints; and (6) IRS uses operational closing reports to assess the results of individual undercover operations, but does not use data available from its new Criminal Investigation Management Information System (CIMIS) to develop benchmarks or to establish criteria to measure its performance in carrying out sensitive operations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In March 1993, CID's Office of Review and Information Systems Management began generating detailed reports from CIMIS concerning the status and overall results of IRS undercover operations. The reports are automatically generated and provided monthly to CI national office staff and are also available on an as-needed basis.

    Recommendation: To enhance IRS management oversight of its undercover operations, the Commissioner of Internal Revenue should direct the Assistant Commissioner (Criminal Investigation) to ensure that CIMIS provides data that are accurate, timely, and complete so that the Special Investigative Techniques Branch can better monitor, evaluate, and oversee undercover operations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: On May 4, 1992, IRS increased staffing in the National Office Criminal Investigation who will attend regional meetings of significant undercover operations. IRS also instituted semi-annual regional meetings and additional training.

    Recommendation: To enhance IRS management oversight of its undercover operations, the Commissioner of Internal Revenue should direct the Assistant Commissioner (Criminal Investigation) to ensure that the CID National Office staff more actively oversee the IRS undercover operations, such as attending preoperational and quarterly meetings, especially for more costly and sensitive Group I operations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: Effective December 21, 1992, the Criminal Investigation Division and Internal Audit completed procedures for determining which Group I undercover operations are the most costly and sensitive and therefore are to be audited by Internal Audit.

    Recommendation: In addition, the Commissioner of Internal Revenue should require that the IRS Internal Audit staff do financial audits of the most costly and sensitive operations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: The Internal Revenue Manual was revised on July 10, 1992, to expand what must be included in an undercover operations report.

    Recommendation: To ensure the consistent application of controls over undercover operations, the Commissioner of Internal Revenue should direct the Assistant Commissioner (Criminal Investigation) to require that the undercover operational closing report include an itemization of the expenses incurred in the operation and a comparison of the proposed costs versus the actual costs of the operation, as well as a statement concerning the reasonableness of the expenses incurred during the operation.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: The Internal Revenue Manual was revised on July 10, 1992, to include the requirement that undercover requests include a statement that alternatives were considered.

    Recommendation: To ensure the consistent application of controls over undercover operations, Commissioner of Internal Revenue should direct the Assistant Commissioner (Criminal Investigation) to require that the undercover operation request include a section detailing the alternatives considered and the reasons they were judged to be inappropriate.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Implemented

    Comments: IRS is institutionalizing benchmarks through the Annual Business Plan process. These benchmarks will be used to assist in the evaluation of the effectiveness of the investigations conducted. Once the CIMIS program is fully operational and the "Internal Revenue Manual" changes have been in effect for a sufficient time to allow for a meaningful statistical sampling, the use of benchmarks for measuring undercover operations will be reassessed.

    Recommendation: To enhance IRS management oversight of its undercover operations, the Commissioner of Internal Revenue should direct the Assistant Commissioner (Criminal Investigations) to establish benchmarks for evaluating operations and their results and use those benchmarks to measure the performance of individual regions and districts.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

Explore the full database of GAO's Open Recommendations »

Sep 13, 2016

Sep 6, 2016

Jul 29, 2016

Jul 7, 2016

Jun 27, 2016

Jun 23, 2016

Apr 19, 2016

Apr 13, 2016

Apr 7, 2016

Mar 28, 2016

Looking for more? Browse all our products here