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

Highlights

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.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Justice	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.	Closed – Implemented Please call 202/512-6100 for information.
Department of the Treasury	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.	Closed – Implemented Please call 202/512-6100 for information.
Department of the Treasury	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.	Closed – Not Implemented Treasury is satisfied that the recommended action is being accomplished.
Department of Justice	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.	Closed – Not Implemented Justice and Treasury disagree with this recommendation and plan no action.
Department of the Treasury	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.	Closed – Not Implemented Justice and Treasury disagree with this recommendation and plan no action.
Department of the Treasury	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.	Closed – Implemented Please call 202/512-6100 for information.
Department of the Treasury	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.	Closed – Not Implemented The Director of Practice believes that this responsibility already exists although it has not been formalized.
Department of the Treasury	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.	Closed – Not Implemented Treasury has established procedures for coordination.
Department of Justice	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.	Closed – Not Implemented Treasury and Justice stated that they have no legal authority to take the recommended action.
Department of the Treasury	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.	Closed – Not Implemented Treasury and Justice stated that they have no legal authority to take the recommended action.
Department of the Treasury	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.	Closed – Not Implemented Treasury believes that the recommended action is being done.
Department of the Treasury	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.	Closed – Not Implemented The Director of Practice stated that all statements received are being reviewed as GAO suggested.
Department of Justice	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.	Closed – Not Implemented The Department of Justice plans no action.
Department of the Treasury	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.	Closed – Not Implemented 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.
Department of Justice	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.	Closed – Not Implemented Justice rejected the recommendation and plans no action.
Department of the Treasury	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.	Closed – Not Implemented 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.
Department of Justice	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.	Closed – Implemented Please call 202/512-6100 for information.
Department of the Treasury	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.	Closed – Implemented Please call 202/512-6100 for information.

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