Tax Administration:

IRS' Management of Seized Assets

T-GGD-92-65: Published: Sep 24, 1992. Publicly Released: Sep 24, 1992.

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GAO reviewed the Internal Revenue Service's (IRS) management of seized assets. GAO noted that: (1) IRS has inadequate internal controls over seized assets; (2) IRS relies primarily on staff integrity to protect and process seized property, and few instances of staff thefts have been reported; (3) IRS administrative asset management procedural problems include untimely reporting, lack of property damage notation, inadequate security, and insufficient recordkeeping; (4) 80 percent of IRS collection cases and 34 percent of criminal cases lacked receipts identifying property location; (5) seized property is often sold at less than market value, leaving remaining debt to be paid by taxpayers; (6) seized property storage and sales costs could be reduced and revenue increased with property consolidation; (7) IRS often fails to properly dispose of property seized in criminal cases, resulting in depreciation and revenue loss; (8) IRS staff cannot manage all job requirements; and (9) asset management improvement options include staff specialization, consolidated storage and sales, and authorizing independent contractors or another agencies to manage storage and sales duties.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The IRS Criminal Investigation Division has revised its procedures to provide for separation of key duties and responsibilities for the seizure, physical custody, and inventory processes of seized property, including periodic reconciliation of assets in inventory. IRS has decided that its Collection Division cannot contract for managing seized assets. Thus, Collection is developing its own inventory-tracking system. Also, a Process Analysis and Improvement team evaluated Collection's entire seizure and sale program to identify specific changes needed. Collection issued supplemental guidance to revenue officers and issued a new seizure policy statement and revised another policy statement. Specialty seizure teams have been established in seven regions. By fiscal year 1996 Collection plans to increase the teams to 14 in total nationwide. Collection also identified three legislative changes needed to improve the seizure and sale program which IRS' General Litigation staff is working on.

    Recommendation: Regardless of the asset management option selected, the Commissioner of Internal Revenue should improve controls over the seizure process.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS' Criminal Investigation Division has completed arrangements to use the asset management contractor of the U.S. Customs Service to manage and dispose of property CID seizes as GAO recommended. IRS has decided, however, that it is not feasible for its Collection Division to use this contract because of workload problems, differences in funding mechanisms, regulations, and quality assurance procedures.

    Recommendation: The Commissioner of Internal Revenue should assess how well each of the agency or contractor options fits IRS operational requirements, choose one, and follow through to implement the change.

    Agency Affected: Department of the Treasury: Internal Revenue Service


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