Tax Administration

The Internal Revenue Service (IRS) has not complied with regulations governing financial disclosure requirements. As a result, thousands of its employees with possible conflicts of interest are not filing annual financial disclosure statements. IRS required about 650 employees to file financial disclosure statements in 1991. The agency has since expanded the filing requirements to more than 5,000 workers in grades 13 and above. Although this move should bolster detection and prevention of conflicts of interest by higher-level IRS employees, GAO is concerned that thousands of employees below grade 13--individuals with direct access to taxpayer information and who determine the amount of taxes owed and collected--are still not required to file. This situation could erode public confidence in the integrity of the tax system. Even when financial disclosure documents were filed, some statements did not provide enough information, and IRS managers sometimes failed to act upon possible conflicts of interest.

GAO found that: (1) IRS does not require financial disclosure statements from many employees who are vulnerable to conflicts of interest; (2) IRS did not comply with Department of the Treasury regulations regarding confidential financial disclosure statements; (3) the IRS Internal Audit Division identified managers and examiners who had financial conflicts of interest with the corporations they examined; (4) IRS has taken steps to require financial disclosure statements, but needs to broaden its coverage to include more employees; and (5) IRS will use financial disclosure reporting and information on employees' work assignments to prevent conflicts of interest.

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: