IRS Seizures

GAO testified before Congress in 1992 that the Internal Revenue Service's (IRS) controls over seized property fell short in protecting against theft, waste, and misuse and that controls over sales practices did not necessarily guarantee the highest sales price at the lowest cost. (See GAO/T-GGD-92-65, Sept. 1992.) GAO also indicated that asset management and sales could best be done by specialists rather than by revenue officers, whose primary responsibility is to collect unpaid taxes. Since then, Congress has passed legislation requiring IRS to remove revenue officers from participating in asset sales by July 2000. The legislation also encouraged IRS to contract out this job. GAO found that, as of October 1999, IRS had not finalized plans for removing revenue officers from its process for selling seized assets. A GAO review of a nationwide sample of seizure cases found that basic internal control weaknesses cited in 1992 persist. Regardless of whether seized assets are done "in-house" by an IRS specialist or by a private contractor, IRS must have controls to provide accountability over seized assets, security for those assets, sales practices that protect the interests of the government and taxpayers, and information to assist management oversight. Without these controls, the interests of taxpayers who have their assets seized may suffer--for example, from asset sales that fail to maximize net proceeds

GAO noted that: (1) as of October 1999, IRS had not finalized its plans for removing revenue officers from its process for selling seized assets; (2) after the passage of the Restructuring Act, IRS organized a study group to consider establishing a specialist position for both managing and disposing of assets after they were seized by revenue officers; (3) the group has been meeting and is considering the scope of the new position; (4) however, the scope of the position, including the extent to which private sector contractors may be used to manage and sell seized property, a position description, or procedures for governing the specialists' actions, has not been finalized; (5) GAO's review of a representative sample of 1997 nationwide seizure cases, selected as part of GAO's overall review of weaknesses in IRS' seizure processes, showed that the fundamental internal control weaknesses GAO identified in 1992 remained; (6) more specifically, GAO's review of case files showed the following: (a) similar to 1992, sufficiently complete information to establish accountability over assets was not always recorded by revenue officers when assets were seized; (b) as in 1992, IRS' security arrangements for seized assets were, in some instances, minimal or nonexistent; (c) similar to 1992, IRS' sale practices provided little assurance that the maximum possible sales proceeds were achieved; and (d) although installed after 1992, IRS' automated seizure information system still did not provide IRS management with information useful for establishing accountability over seized assets or monitoring the management and sales of the assets; and (7) regardless of the results of IRS' decisions on contracting out all or part of the asset management and sales function, IRS will remain responsible for assuring that assets are appropriately managed and sold.

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.

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