Tax Administration
IRS Experience Using Undercover Operations' Proceeds to Offset Operational Expenses Gao ID: GGD-91-106 July 3, 1991Pursuant to a legislative requirement, GAO evaluated the: (1) Internal Revenue Service's (IRS) use of proceeds from undercover investigative operations; (2) results of such operations; and (3) financial audits conducted by IRS.
GAO found that: (1) the undercover operation offset provision allows IRS to use income earned from an individual undercover operation to offset expenses and expand the range of activities for that particular operation; (2) the 19 undercover operations using the offset provision have produced about $545,000 in income and, as of May 1, 1991, IRS applied about $121,000 of it to operational expenses and returned $155,000 to the General Fund; (3) as of May 1, 1991, undercover operations using the offset provision resulted in the seizure of over $207 million in cash and significant amounts of drugs, and in 75 convictions; (4) none of the IRS undercover operations met the criteria requiring a detailed financial audit; (5) IRS conducts internal audits only of those undercover operations involving offsetting in which proceeds exceed $50,000 or expenditures exceed $150,000, and conducts detailed audits on only about one-third of the undercover operations using the offset authority; and (6) requiring IRS to report on the results of its detailed financial audits when the undercover operation's covert phase is completed, instead of waiting until the criminal proceedings are over, could enhance Congress' ability to oversee the offset authority.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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