TREASURY INSPECTOR GENERAL

FOR TAX ADMINISTRATION

The Criminal Investigation Function Needs to Improve Its Oversight During Implementation of the Webster Report Recommendations

June 2001

Reference No. 2001-10-100

Executive Summary

In July 1998, the Commissioner of the Internal Revenue Service (IRS) appointed Judge William Webster to assemble a task force and perform an independent review of the Criminal Investigation (CI) functionís operations. The CI Division Review Task Force (Webster Commission) focused on the following areas: the CI functionís mission, methods of investigation, personnel-related issues, and organizational structure.

The Webster Commission completed the review and issued its report in April 1999. The Commission determined that the CI functionís focus had drifted from its primary mission of investigating potential violations of the federal internal revenue laws concerning legal source income. The Commission made recommendations to strengthen and support the CI function in accomplishing its primary mission. The IRS Commissioner concurred with the broad conclusions of the Webster Report, which included 25 basic recommendations in its "Executive Summary." In addition, the IRS Commissioner appointed a CI design team to perform further analysis and design work, particularly on the recommendations concerning organizational structure.

The objective of this audit was to determine if the CI function implemented the 25 basic recommendations contained in the "Executive Summary" of the Webster Report.

Results

The CI function has completed a significant number of actions relating to the 25 basic recommendations reflected in the "Executive Summary" of the Webster Report. The CI function has also appointed a Modernization Executive with responsibility for ensuring the completion of all outstanding action items. The Modernization Executive has recognized the need to control this process and has begun to take steps to assess the status of the action items. The CI function must now ensure that sufficient controls are established to effectively monitor the completion of the remaining actions. Otherwise, the CI function will be at risk of not fulfilling the intent of the Webster Report recommendations, which include the need to give more focus to the CI functionís primary mission of investigating violations of internal revenue laws concerning legal source income. The CI function needs to take additional steps to ensure that mission critical initiatives are successfully implemented and that special agentsí search warrant activities are appropriately monitored.

Criminal Investigation Management Needs to Establish Controls to Monitor the Completion of Mission Critical Initiatives

The CI function has not established an effective monitoring process to ensure appropriate actions are taken timely to resolve outstanding mission critical action items. The successful completion of the critical action items is essential for the CI function to accomplish its primary mission of investigating potential violations of federal internal revenue laws. Although the Chief, CI, has given oversight responsibility to the Modernization Executive, a formal monitoring process, which includes milestone and follow-up dates, has not yet been established.

We determined, and the responsible CI officials agreed, that the 25 basic Webster Report recommendations included 107 action items requiring their attention. We did not assess the status of action on seven Government Performance and Results Act of 1993 (GPRA) action items because they are being addressed in a separate Treasury Inspector General for Tax Administration (TIGTA) audit. For the remaining 100 items, the CI function has completed action on 63 and has taken several steps to address the other 37.

Criminal Investigation Management Needs to Monitor Special Agentsí Search Warrant Activities

The CI function needs to enhance its existing practices for ensuring special agentsí search warrant activities are appropriately monitored. This process must be effective to ensure the special agentsí use of search warrants is the least intrusive means necessary to obtain evidence. In November 2000, the CI function completed a review of search warrant documentation. It concluded that adequate documentation was not prepared to support the use of search warrants as the least intrusive means to obtain evidence and that the Risk Assessment Guide was often inadequately completed. The CI function has also not required periodic reviews to ensure the consistent preparation of search warrant and risk assessment documentation. Periodic reviews of search warrant documentation are essential to ensure that the CI function is not at risk of jeopardizing its criminal investigations.

Summary of Recommendations

The Chief, CI, should ensure that appropriate processes are developed to effectively monitor the successful completion of the corrective actions initiated in response to the Webster Report. The Chief, CI, also needs to establish a process to monitor the effectiveness of the actions taken. In addition, the Chief, CI, should require periodic reviews to ensure the consistent preparation of special agentsí search warrant and risk assessment documentation. These reviews should ensure that appropriate documentation is maintained in the investigative administrative files.

Managementís Response: CI management agreed with the recommendations presented in this report and has implemented corrective action. The CI Modernization Executive will continue oversight to ensure the desired results are achieved. The ongoing management processes developed and implemented by the CI function will be used to evaluate the effectiveness of the implementation of the Webster Report recommendations. The CI function and Criminal Tax Division have implemented new management processes requiring detailed reviews and oversight of search warrants.

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