TREASURY INSPECTOR GENERAL

FOR TAX ADMINISTRATION

The Treasury Inspector General for Tax Administration Can Rely Upon Data on the Electronic Disclosure Information Management System for Its Statutory Review

March 2001

Reference No. 2001-10-051

Executive Summary

Section 1102(d)(3)(a) of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98) requires the Treasury Inspector General for Tax Administration (TIGTA) to perform periodic audits of the appropriateness of the IRS’ denials of taxpayers’ written requests for information on the basis of Internal Revenue Code (I.R.C.) § 6103 (2000) or the Freedom of Information Act (FOIA) exemption (b)(7).

The IRS Disclosure function recently implemented a new management information system, the Electronic Disclosure Information Management System (E-DIMS), which contains data regarding written requests for information. The E-DIMS is a national database that allows Disclosure personnel to enter data directly into the system using the IRS Intranet and provides the local IRS offices with national query capabilities. The IRS is continuing to enhance this new management information system.

We reviewed the E-DIMS to determine if the TIGTA can rely upon the accuracy and completeness of IRS data regarding the population of cases from which the TIGTA will select its statistical samples when performing the statutorily mandated audit.

Results

Overall, the TIGTA can rely upon the information contained on the E-DIMS when performing the statutorily mandated audit of the appropriateness of the IRS’ denials of taxpayers’ written requests for information. The limited audit tests provided reasonable assurance that selected information on the E-DIMS is accurate and complete. For example, the system was 95 percent accurate for the information the TIGTA will use when performing its review of denied requests and 100 percent complete for the cases reviewed.

Corrective action is needed to ensure that revised response dates are accurately input to the E-DIMS. Although inaccurate revised response dates do not affect the TIGTA’s reliance on the system for its statutorily mandated audit work, accurate input would improve the reliability of information on the system and better protect taxpayers’ rights.

Information on the System Can Be Relied Upon for the Statutory Review

Limited testing of specific data on the E-DIMS identified a 95 percent accuracy rate for the information the TIGTA will use to perform its review of denied requests. Additionally, the audit tests provided reasonable assurance that the E-DIMS is complete. We selected a judgmental sample of 120 closed case files from 4 Disclosure sites and verified that all cases were recorded on the E-DIMS as required. These results provide reasonable assurance that the TIGTA can rely upon the information on the E-DIMS when performing its statutorily mandated audit of written requests for information that were denied based upon I.R.C. § 6103 or FOIA exemption (b)(7).

The audit tests also included a judgmental random sample of 140 cases from the E-DIMS at 4 Disclosure sites to determine the accuracy of specific data fields on the system. Seven of the 140 cases analyzed during the test had inaccuracies that affect the reliability of the population of cases from which the TIGTA will select its statistical samples for the statutorily mandated audit. In three of the seven cases, the case disposition (granted, no responsive records and partially denied) was not recorded accurately on the E-DIMS. In the remaining four cases, the type of case (FOIA or I.R.C. § 6103) was not accurately recorded on the system. We do not believe that these inaccuracies would materially affect the reliability of the system because there was only a five percent error rate and there was no systemic or common procedural cause for these inaccuracies. Accordingly, no corrective action is necessary.

Voluntary Extension Notification Procedures Should Be Changed to Ensure Revised Response Dates Are Accurately Input to the System

Disclosure personnel did not always accurately input the revised response date on the E-DIMS. A provision of the FOIA allows the IRS to ask for a voluntary extension of time to provide a response to a requester. If an extension is requested, Disclosure personnel must manually enter the revised response date on the E-DIMS because the system does not compute it automatically. Eight of 140 cases in the sample had revised response dates. In three of these cases, the revised response date was one day later than the extension period agreed to by the requester. This could affect a taxpayer’s right to a timely response to a request for information. In the three cases with inaccurate dates, Disclosure personnel entered a revised response date using the same day of the month as that on the extension letter, but for the subsequent month, which was not always correct. For example, if the letter to the requester asking for a 30-day extension was dated March 14, 2000, the revised due date was entered on the E-DIMS as April 14, 2000, which is 31 days. While these cases do not affect the TIGTA’s reliance on the system for its statutorily mandated audit work, clear guidance on establishing revised response dates could improve the reliability of information on the system and better protect taxpayers’ rights.

Summary of Recommendation

We recommend that IRS Disclosure management change their current procedures to require Disclosure personnel to state the actual response date in voluntary extension letters, instead of the number of additional calendar days they are requesting.

Management’s Response: Disclosure management agreed with our recommendation and has issued instructions to provide the actual date a response is expected on all voluntary extension letters and to input that date as the revised response date to the E-DIMS. A programming change will be made to ensure that the revised due date entered does not fall on a weekend or Federal holiday. Management’s complete response is included as an appendix to this report.