Review of the Effectiveness of Criminal Investigation's Strategic Planning Process

June 2001

Reference No. 2001-10-098

Executive Summary

In July 1998, the Internal Revenue Service (IRS) Commissioner appointed Judge William Webster to direct an independent review of the Criminal Investigation (CI) function. Judge Webster assembled a task force to assess the CI functionís effectiveness in accomplishing its mission as the IRSí criminal law enforcement arm. The CI function is the only federal law enforcement agency with the authority to investigate criminal tax violations. The task force determined that the CI function had drifted from its primary mission of investigating tax crimes affecting tax compliance and emphasized the need for the CI function to refocus its resources to investigate tax-related crimes.

The overall objective of our review was to assess the CI functionís ability to properly refocus its resources into legal source tax-related areas.


The CI function recognizes the need to establish an effective process to measure the shift in resources to legal source tax violations and develop a methodology for effectively allocating resources. The CI function has taken steps to refocus its resources into investigations involving legal sources of income. However, the full impact of these initiatives will not be realized for some time. Our review showed that the CI function had not developed and communicated a detailed compliance strategy, had not established an effective process to measure the shift in resources to legal source tax violations, and had not developed a methodology to ensure that resources are effectively allocated.

The Criminal Investigation Function Needs to Develop and Communicate a Detailed Compliance Strategy Based Upon the Criminal Investigation Strategy and Program Plan

The CI function is not operating within the framework of a current functional compliance strategy as envisioned by the Webster Report. This condition exists because the CI function did not revise its Interim Compliance Strategy for Fiscal Year (FY) 2001. The CI function is now required to develop a Strategy and Program Plan (SPP) to be aligned with the Strategic Planning and Budgeting Process. For FY 2000, the CI function had an Interim Compliance Strategy that defined the key investigative emphasis areas and provided guidelines for the identification, development, and investigation of cases in each program area. The CI function should develop and communicate the FY 2001 goals and priorities as defined in the CI SPP. Without a detailed compliance strategy in place, the CI function cannot determine whether its tax enforcement mission will be accomplished.

The Criminal Investigation Function Needs to Establish an Effective Process to Measure the Shift in Resources to Legal Source Tax Violations

The CI functionís current practices do not provide an effective means for measuring the success of shifting resources to legal source tax violations. Sound management practices dictate that the CI function use all appropriate information to determine the effectiveness of its program goals. Indicators used by CI management did not show conclusive evidence that the CI function was shifting resources to investigate more legal source tax violations because they relied on summary data at the national level. CI officials used either case initiations or direct investigative time (DIT) as indicators to determine if they were undergoing a successful shift in resources nationwide. However, our analysis of the Criminal Investigation Management Information System (CIMIS) data provided by the CI function showed that the indicators were not effective in measuring the shift in resources to investigate more legal source tax violations. In fact, our analysis showed very little change in the DIT among the field offices and showed that the number of cases initiated was ineffective in measuring any shift in resources. Without a combined analysis of field office process indicators, the CI function will be unable to determine whether it is refocusing its efforts to investigate legal source tax violations.

The Criminal Investigation Function Needs to Determine a Methodology for Effectively Allocating Resources

The CI function did not conduct a workload analysis to determine the optimal number, placement, and size of field groups. This condition existed because the CI modernization design teams were unable to evaluate the effectiveness of the CI functionís field structure to accomplish its tax enforcement mission and to implement the IRS Commissionerís mandate to shift resources to legal source tax violations. Consequently, the CI function has been staffing the organization without a workload analysis of the 35 field offices to ensure proper placement of resources. Placing resources within an organization without a workload analysis could jeopardize the CI functionís primary mission, which is to investigate tax crimes related to legally earned income.

Summary of Recommendations

The CI function needs to develop and communicate a detailed compliance strategy that will assure resources are being allocated to investigate more legal source tax violations. Also, an effective process needs to be established to ensure that management can adequately assess the progress of program initiatives, and a methodology needs to be developed to determine where resources should be allocated.

Managementís Response: To effectively communicate a detailed compliance strategy, the Director of Strategy will issue the Annual Compliance Guidance (ACG) beginning with FY 2002 and the Internal Revenue Manual will require the issuance of the ACG by October 1 of each fiscal year. The ACG will be distributed and discussed at the bi-annual Special Agent-in-Charge meetings, posted on the CI homepage, and announced to all CI employees on the weekly CI bulletin. Since the staffing of the Planning and Strategy Sections has been completed, a senior analyst is assigned to monitor CIMIS data on a monthly basis. The Directors of Planning, Strategy, and Research will meet with their respective staffs each fiscal year and, based on the results, assess the appropriateness of the diagnostic indicators used during the fiscal year. The CI function entered into a project agreement with the Office of Program Evaluation and Risk Analysis (OPERA) to develop workload and attrition models. A beta version of the models was completed in May 2001, and a contractor will test and validate the system during the fourth quarter. The workload model developed by the OPERA will be used to continuously validate current resource distribution; however, due to cost considerations, the CI function can only remedy inequities by distributing recently hired special agents.

Managementís complete response to the draft report is included as Appendix IV.