Tax Administration

IRS Undercover Operations Management Oversight Should Be Strengthened Gao ID: GGD-92-79 April 21, 1992

While the Internal Revenue Service (IRS) has procedures to help minimize the risks associated with undercover operations, GAO found that these procedures are often ignored, increasing IRS' vulnerability to the operational breakdowns and misuse of funds alleged in Project Layoff. During that effort, IRS agents established a Las Vegas bookmaking business in the mid-1980s to identify unreported gambling income. GAO believes that IRS' existing procedures are solid but could be enhanced to better protect against operational vulnerability. Further, more management attention and priority needs to be given to the oversight of these projects.

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

Our 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.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.