TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

 

 

Weaknesses in the Criminal Investigation Function’s Controls Leave Investigative Equipment Vulnerable to Loss

 

 

 

September 2005

 

Reference Number:  2005-10-163

 

 

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.

 

 

Web Site           |  http://www.tigta.gov

 

September 30, 2005

 

 

MEMORANDUM FOR CHIEF, CRIMINAL INVESTIGATION

 

FROM:                            Pamela J. Gardiner /s/ Pamela J. Gardiner

Deputy Inspector General for Audit

 

SUBJECT:                    Final Audit Report – Weaknesses in the Criminal Investigation Function’s Controls Leave Investigative Equipment Vulnerable to Loss (Audit # 200410037)

 

This report presents the results of our review to determine whether controls and procedures are effective in ensuring investigative equipment is adequately safeguarded against waste and loss.

Synopsis

In response to our request for suggestions for Fiscal Year (FY) 2004 audit coverage, the former Chief, Criminal Investigation (CI), cited controls over equipment as a management concern because budget shortfalls resulted in a lack of support staff in the field office locations.  According to documentation provided by the CI function, the number of nonspecial agents assigned to the field offices declined from 672 in FY 1999 to 589 in FY 2004. 

The CI function uses various types of investigative equipment[1] to accomplish its mission, such as radio communication equipment, electronic surveillance equipment, and firearms.  All investigative equipment valued at $500 or more is required to be entered into the CI function’s inventory control system.  Firearms, pocket commissions,[2] enforcement badges, and belt badges are required to be entered regardless of cost.

Our review determined weak internal controls within the CI function have created an environment susceptible to the loss of investigative equipment.  We could not locate or find support for 70 of the 700 investigative equipment items selected for review.  In addition to our review, the CI function Headquarters (HQ) office and 1 of the field offices in our review wrote off, or were prepared to write off as lost, 429 items (with an acquisition cost exceeding $1.3 million) during FYs 2004 and 2005.  We identified several conditions that resulted in a weak control environment over investigative equipment that contributed to the loss of equipment.  Specifically, the CI function did not effectively conduct the annual physical verifications, exercise proper separation of duties, maintain complete documentation to support equipment disposal transactions, and properly control equipment loaned by the CI function HQ office. 

In addition, badges and sequentially numbered pocket commission inserts purchased by the CI function were not properly controlled, resulting in unreliable data and missing pocket commissions.  Our review identified 2,850 pocket commissions that were not properly controlled on the Criminal Investigation Equipment Control System (CIECS),[3] resulting in the CI function being unable to locate 111 pocket commissions.  We also identified numerous enforcement and belt badges that have the same identification number.  This weakens the CI function’s ability to account for these items.  The CI function must improve the control of its identification media to prevent the loss or theft of pocket commissions and badges.  In the hands of an unauthorized person, these items could not only bring discredit and adverse publicity to the Internal Revenue Service (IRS) but could also be damaging to our nation’s homeland security.

Further, the CIECS did not contain accurate or complete information.  We determined the investigative equipment we physically verified contained inaccurate information on the CIECS; investigative equipment identified during our review, as well as equipment purchased during FY 2003, was not recorded on the system; and the CIECS contained duplicate records and records where the serial numbers were altered.

We also reviewed the physical security controls at the four offices in our review and identified weaknesses that left equipment vulnerable to theft or loss.  For instance, we identified that combinations to the firearms safes and vaults were not changed for at least 1 year, custody receipts were not maintained for keys allowing access to investigative equipment storage areas, and access to equipment storage areas was not restricted.  In addition, the environment for storing equipment at the CI function’s HQ offsite warehouse is of concern.  We believe the disarray observed at this facility, and the current procedure for relying on one’s memory for recalling where equipment is located, contributed to the loss of investigative equipment. 

The CI function is responsible for controlling over 40,000 investigative equipment items costing approximately $128 million.  Unless CI function management takes action to improve the controls and procedures over its equipment, they will continue to be at risk of losing control of more investigative equipment.

Recommendations

To improve the internal controls over investigative equipment, we recommended the Chief, CI, issue a memorandum to applicable CI function personnel reemphasizing the importance of an independent verification of all equipment during the annual inventory process, properly segregating investigative equipment duties, and maintaining supporting documentation for disposed items.  To ensure the annual inventory of investigative equipment was properly conducted, we recommended the Chief, CI, establish procedures requiring each office to submit the primary reconciliation document used during the inventory process along with the memorandum to the Director, Equipment and Technology Evaluation, and require each office attach a document listing the personnel that conducted the inventory verifications.

We also recommended procedures be established to periodically review the permissions of those personnel with access to the investigative equipment control system to ensure proper separation of duties.  To ensure each disposal of equipment was properly conducted, we recommended monitoring procedures be established requiring the review of supporting documentation.  Further, we recommended the Chief, CI, assess the viability of using bar coding nationwide to control investigative equipment that is conducive to such a process. 

In addition, we recommended the Chief, CI, ensure all pocket commissions are properly controlled on the inventory system, as well as ensure all missing pocket commissions are properly referred to the Treasury Inspector General for Tax Administration (TIGTA), Office of Investigations.  We also recommended the Chief, CI, determine if the current supply of belt and enforcement badges is sufficient to provide each special agent with a unique belt and enforcement badge identification number. 

To improve the accuracy and completeness of the CI function’s equipment control system, we recommended the Chief, CI, establish procedures to ensure all investigative equipment purchased is properly controlled.  We also recommended procedures be established to ensure changes to serial number information are appropriate and to resolve all instances where the serial numbers were altered based on information provided by the TIGTA during this review.  In addition, we recommended the Chief, CI, establish procedures to identify duplicate records in the control system.

To ensure physical security controls adequately safeguard investigative equipment from theft or loss, we recommended the Chief, CI, establish procedures to ensure functional security reviews of equipment storage areas are conducted annually.  We also recommended restricting access to investigative equipment storage areas to only those personnel responsible for maintaining the equipment.  Finally, we recommended the Chief, CI, establish procedures, such as incorporating a layout or schema, to ensure investigative equipment assigned to the CI function HQ offsite warehouse is effectively stored.

Response

Because the CI function is committed to perfecting its internal controls, it will convene an Investigative Equipment Control work group comprised of HQ and field personnel.  The work group will conduct a thorough review of the CI function’s equipment inventory control system and formulate detailed recommendations for improvement.  The Chief, CI, concurred with all the recommendations in this report.  Specifically, the Chief, CI, through the Director, Equipment and Technology Evaluation, will:

·         Issue a detailed memorandum clarifying the inventory system and the roles and responsibilities of all CI function employees.  Additional guidance will also be provided to all CI function managers. 

·         Revise the Property Management Handbook to require reconciliation documentation upon completion of the annual inventory.

·         Determine the specifications for bar coding investigative equipment nationwide.

·         Determine the appropriate levels of access for CIMIS users and how frequently these permissions are reviewed.

·         Ensure all reports of survey and supporting documentation are reviewed for completeness and accuracy.

·         Issue new pocket commissions and destroy and document those that were previously issued; ensure all missing pocket commissions are referred to the TIGTA, Office of Investigations; and issue uniquely serial-numbered enforcement and belt badges as necessary to prevent duplicates.

·         Evaluate current procedures for controlling equipment purchases and recommend necessary enhancements.

·         Resolve previously identified discrepancies where serial numbers were changed and review and recommend appropriate policy and procedural changes.

·         Create a report to identify records with exactly matching duplicate serial numbers and determine who will review the report and how often it will be reviewed.

·         Ensure functional security reviews of investigative equipment and firearms storage areas are conducted annually. 

·         Emphasize restricting access to investigative equipment areas to only necessary personnel.

·         Review the operations of the warehouse facility and make necessary recommendations to ensure implementation of a sound and secure inventory tracking system for all investigative equipment stored at that facility. 

Management’s complete response to the draft report is included as Appendix V.

Copies of this report are also being sent to the IRS managers affected by the report recommendations.  Please contact me at (202) 622-6510 if you have questions or Daniel R. Devlin, Assistant Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs), at (202) 622-8500.

 

 

Table of Contents

 

Background

Results of Review

Weak Internal Controls Have Created an Environment Susceptible to the Loss of Investigative Equipment

Recommendation 1:

Recommendations 2 through 5:

Badges and Pocket Commission Inserts Purchased by the Criminal Investigation Function Are Not Properly Controlled, Resulting in Unreliable Data and Missing Pocket Commissions

Recommendations 6 through 8:

The Criminal Investigation Equipment Control System Was Inaccurate and Incomplete

Recommendations 9 through 12:

Physical Security Controls Need to Be Improved to Reduce the Risk of Unauthorized and/or Undetected Access to Investigative Equipment

Recommendations 13 through 15:

Appendices

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Outcome Measures

Appendix V – Management’s Response to the Draft Report

 

 

Background

 

The Criminal Investigation (CI) function’s primary mission is to serve the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law. 

To accomplish their mission, CI function special agents use various types of investigative equipment[4] including, but not limited to, fleet vehicles, radio communication equipment, firearms, body armor, electronic surveillance equipment, night vision equipment, and optical equipment.  Accessories and supplies used by CI function special agents include pagers, cellular telephones, binoculars, camera lenses, tape recorders, and transcribers.

The Office of Management and Budget Management’s Responsibility for Internal Control, Circular A-123, requires that a management control system provide management with reasonable assurance that assets are safeguarded against waste, loss, unauthorized use, and misappropriation.

According to the Internal Revenue Manual (IRM), investigative equipment and investigative accessories and supplies valued at $500 or more will be entered into the Criminal Investigation Equipment Control System (CIECS).[5]  Those items valued less than $500 are considered disposable items and are not entered.  The exceptions are firearms, pocket commissions,[6] enforcement badges, and belt badges.

Table 1 represents the total assets and total asset acquisition cost for the investigative equipment categories recorded in the CIECS as of September 30, 2004.

 

Table 1:  CI Function Investigative Equipment

(in descending order of acquisition cost)

 

Category Description

Number of Items

Acquisition Cost

Motor Vehicle

3,021

$62,828,053

Radio

10,210

$37,040,290

Audio

3,076

$7,292,257

Video

3,044

$6,705,194

Firearms

7,573

$3,848,540

Miscellaneous Investigative Equipment[7]

12,756

$3,775,697

Telecommunication

479

$1,661,721

Training

462

$1,653,540

Photographic

1,149

$1,113,448

Microfilm

266

$716,998

Optical

221

$710,300

Tracking

150

$585,975

Shop

27

$92,396

Totals

42,434

$128,024,409

                                                        Source:  Treasury Inspector General for Tax Administration (TIGTA) analysis of the CIECS.

During our review, the CI function migrated the CIECS to an upgraded Criminal Investigation Management Information System (CIMIS)[8] on April 11, 2005.  The CIMIS upgrade was designed to integrate various CI function management information systems, including investigative equipment.  We used data from the CIECS as of September 30, 2004, for sample selection and data as of February 3, 2005, during our follow-up testing.

In response to our request for suggestions for Fiscal Year (FY) 2004 audit coverage, the former Chief, CI, cited controls over equipment as a management concern because budget shortfalls resulted in a lack of support staff in the field office locations.  According to documentation provided by the CI function, the number of nonspecial agents assigned to the field offices declined from 672 in FY 1999 to 589 in FY 2004 (a 12 percent decrease).

This review was performed at the CI function Headquarters (HQ) offices in Washington, D.C.; Chicago, Illinois; and Forestville, Maryland,[9] and the CI function field offices located in Chicago, Illinois; Houston, Texas; and Los AngelesCalifornia, during the period November 2004 through June 2005.  The audit was conducted in accordance with Government Auditing Standards.  Detailed information on our audit objective, scope, and methodology is presented in Appendix I.  Major contributors to the report are listed in Appendix II.

  

Results of Review

 

Weak Internal Controls Have Created an Environment Susceptible to the Loss of Investigative Equipment

 

We randomly selected 700 investigative equipment items to verify, including 125 firearms, at the CI function HQ office[10] and 3 field offices.  We could not locate or find support for 70 of these items and could not positively identify an additional 9 items.  Also, during FYs 2004 and 2005, the CI function HQ office and 1 of the field offices wrote off, or were prepared to write off as lost, 429 items with an acquisition cost exceeding $1.3 million.  This occurred because weak internal controls have created an environment susceptible to the loss of investigative equipment.

 

Results of physical verification

 

We conducted a physical verification of a sample of investigative equipment,[11] excluding vehicles, recorded on the CIECS as active equipment as of September 30, 2004.

Table 2 illustrates the results of our physical verification, including the total population and sample size of equipment included in our review. 

 

Table 2:  Results of Investigative Equipment Verification

 

 

Audit Results

Investigative Equipment & Firearms

 

Totals

HQ Office

Field Offices

Population Size[12]

4,371

3,476

7,847

Sample Size[13]

250

450

700

Items Verified

217

404

621

Items Not Verified

32

38[14]

70

Could Not Determine[15]

1

8

9

                                                                                Source:  TIGTA analysis of the CIECS and results of review.

The 70 items we could not verify had an acquisition cost of $241,718[16] and were purchased by the CI function between January 1983 and April 2003.  These items included mobile and portable radios, video equipment, photographic equipment, and secured fax machines.  The loss of sensitive investigative equipment, such as radios, could compromise ongoing investigations by allowing an unauthorized individual access to listen to radio transmissions.  Also included in the 70 items were 9 repeaters, duplexers, and base stations installed in remote locations such as mountain tops and roof tops.  Even though CI function personnel at the field offices indicated these items would be impractical to verify, they were unable to provide any evidence to support the items existed.

 

Investigative equipment previously lost by the CI function

 

The CI function HQ offices wrote off 224 items as lost during February 2004.  These items, with an acquisition cost of about $594,376,[17] included enforcement badges, radios, and video equipment.  Over 70 percent of these items (158 of 224) were assigned to the CI function HQ offsite warehouse.  In addition, the CI function HQ office was preparing to write off an additional 73 items during FY 2005, as a result of the FY 2004 inventory.  These items, with an acquisition cost of about $297,288, included secured fax machines, radios, and 1 belt badge; almost all (72 of the 73) were assigned to the offsite warehouse.  According to CI function management, the write off of equipment occurred because these items could not be located during the last several annual inventories.  They advised this was an effort to clean up the CIECS and not a regular practice.  While we understand that it may be necessary to write off equipment from time to time, this practice should not become routine. 

Further, 1 of the field offices in our review wrote off 68 items during February 2005.  These items, with an acquisition cost of approximately $145,400,[18] included audio and video equipment.  According to the report of survey prepared at that office, the items were either lost, damaged, stolen, or excessed without proper supporting documentation.  In December 2004, that same office also wrote off 64 dual-band radios costing about $286,500.[19]  The office theorized these items were transferred by the prior investigative technical agent[20] to the Drug Enforcement Administration (DEA).[21]  According to documentation provided by the CI function, neither the IRS nor the DEA could locate these radios after a search of their locations.

 

Internal control weaknesses contributed to lost investigative equipment

 

We attribute the conditions described above to a weak control environment over investigative equipment.  Specifically, our review showed the CI function did not:

  • Effectively conduct the annual physical verifications.
  • Exercise proper separation of duties.
  • Maintain complete documentation to support equipment disposal transactions.
  • Properly control equipment loaned by the CI function HQ office.

The CI function did not effectively conduct the annual physical verifications

According to the CI function’s Property Management Guidelines, each office is required to conduct an annual physical inventory of investigative equipment by the end of the fiscal year.  This inventory should not only include verifying all equipment recorded on the CIECS but also account for those items in an office’s possession that meet the CIECS reporting criteria.  The CIECS coordinator and backup coordinators[22] are prohibited from participating in the inventory verification, to maintain proper separation of duties. 

At the conclusion of the physical inventory, each office should send a memorandum outlining the results to the Director, Equipment and Technology Evaluation (ETE).  The memorandum should note that 100 percent of all equipment was inventoried and should include an attachment listing all items that were reported as lost or stolen with the proper supporting documentation.

We reviewed the inventory procedures at four CI function offices and determined the offices did not always properly conduct the physical inventories. 

  • One of the offices had not completed its FY 2004 physical inventory at the time of our review.  Personnel from that office indicated they received an extension; however, the CI function HQ office stated the extension was not granted by its office.
  • There was no evidence that a verification of unassigned equipment inventory was conducted for a Special Agent in Charge.

The prior years’ annual inventories were not effective based upon several of the conditions identified during our review and described later in this report, including duplicate inventory records and inaccurate CIECS data.  In addition, we reviewed the status of 78 items that were classified as “pending disposal” on the CIECS as of September 30, 2004, and determined only 1 of these items was accurately categorized.  The remaining 77 had been previously disposed of.  Furthermore, separated employees in one of the offices we reviewed still had investigative equipment assigned to them.  One of these agents separated in November 2002.  These types of inaccuracies should have been identified and corrected during the annual inventory. 

To better control its equipment and improve the inventory process, the CI function should consider using bar coding on equipment conducive to such a process.  One of the offices in our review was planning to bar code its investigative equipment.  In addition, the Director, ETE, indicated the possibility of going forward with plans to bar code equipment at the CI function HQ offsite warehouse.  The CI function should analyze the results of these efforts to determine the feasibility of bar coding all of its investigative equipment.  The use of bar coding can reduce human error, as well as improve the efficiency of the physical inventory process.

The CI function did not exercise proper separation of duties

According to the Government Accountability Office Standards for Internal Control in the Federal Government, key duties and responsibilities need to be divided or separated among different people to reduce the risk of error or fraud.  This should include separating the responsibilities for authorizing transactions, processing and recording transactions, reviewing transactions, and handling any related assets.  No one individual should control all key aspects of a transaction or event.  In addition, the Property Management Guidelines state the CIECS coordinator and backup coordinators are prohibited from participating in the inventory verification to maintain proper separation of duties.

At three of the four offices reviewed, we identified the following instances where duties were not properly separated:

  • Several property custodians at the CI function HQ office had recordkeeping duties.  Not only did they have access to the CIECS database, but their permission levels allowed them to add records and change information on existing records. 
  • An employee of the CI function Finance section was responsible for purchasing, recording, and maintaining custody of enforcement badges and pocket commissions. 
  • Support staff at one office conducted their respective group inventories.  According to the IRM, an employee may not inventory equipment where he or she is responsible for maintaining that inventory.
  • The CIECS coordinator in one of the CI function field offices maintained custody of the keys to the surplus vehicles.
  • A backup CIECS coordinator in one office conducted the inventory of the lead technical agent’s equipment pool and the firearm coordinator’s pool.  Another backup coordinator at that same office conducted the inventory of one of the groups.

Internal reviews at the three offices noted weaknesses pertaining to separation of duties.  According to an October 2003 review[23] of the ETE section, property custodians had access to and could make changes in the CIECS database.  In addition, the Review and Program Evaluations conducted in May 2002 and April 2004 at two other offices noted weaknesses in the separation of duties during the performance of equipment inventories. 

CI function management needs to ensure the investigative equipment duties are properly separated to reduce the risk of error or fraud.

The CI function did not maintain complete documentation to support equipment disposal transactions

According to the Standards for Internal Control in the Federal Government, all transactions should be authorized, clearly documented, and readily available for examination.  Control activities, such as reviewing supporting documentation, help ensure all transactions are completely and accurately recorded.

Investigative equipment excessed during FY 2004 was not properly authorized and/or supported

The Property Management Guidelines state the disposal of an investigative equipment item can be made once the item has been offered to other field offices.  Local management can approve the disposals, except the Director, ETE, is required to approve the disposal of all technical agent equipment; radio equipment; and, undercover, surveillance, and special purpose vehicles.  Equipment that is excessed must be supported by a Report of Excess Property (Standard Form 120).

We judgmentally selected 89 items classified as excessed during FY 2004 and determined there was either no supporting documentation or the documentation was incomplete for almost one-half of these items.

Table 3:  Results of Review of Excessed Equipment

 

Audit Results

HQ Office

Field Offices

Totals

Total Number of Items Excessed During FY 2004

523

200

723

Sample Size

25

64

89

Supporting Documentation Complete[24]

22

26

48

Supporting Documentation Incomplete

3

13

16

No Supporting Documentation Provided

0

25

25

 

Source:  TIGTA analysis of the CIECS and results of review.

 

Investigative equipment disposed of as lost or stolen was not always properly documented

According to the Property Management Guidelines, any time investigative equipment is lost, stolen, or damaged a memorandum is prepared by the individual assigned the equipment documenting the circumstances of the loss.  This memorandum is then forwarded to the employee’s supervisor who determines if the loss was due to negligence.

A Report of Survey (Form 1933) must also be prepared to report equipment that is lost or stolen.  Special Agent in Charge and Director of Field Operations approvals are required for equipment assigned to the field offices.  Division Director approval is required for equipment assigned to their divisions.  All approved Forms 1933 must be forwarded to the Director, ETE.  The TIGTA, Office of Investigations (OI), must be contacted whenever a firearm, badge, or pocket commission is reported as lost or stolen. 

We reviewed a total of 59 items reported as lost or stolen during FYs 2003 and 2004 and determined the following:

·         In nine instances, the supporting documentation was incomplete, including the lack of the Director of Field Operations’ signature or the lack of a determination for financial liability.  There was also one instance where a security incident report was located, but there was no evidence this report was forwarded for proper approval.

·         In three of the nine instances, the TIGTA, OI, was not notified, as required, of a lost pocket commission, firearm, and belt badge.

·         In one instance, there was no supporting documentation.

In addition, there were 59 enforcement badges and pocket commissions included as part of the mass disposal of equipment by the CI function HQ office during February 2004 that were not forwarded to the TIGTA, OI, as required.

Current CI function procedures did not ensure equipment disposed of was properly supported or applicable information was properly reported.  For instance, annual inventory procedures did not require the review of supporting documentation for equipment that was excessed, lost, or stolen.  Documentation is needed to ensure all transactions are properly recorded and to ensure equipment is effectively controlled.  Equipment that is recorded on the CIECS as disposed of without supporting documentation could be an indication of an unauthorized alteration.  Also, badges, pocket commissions, and firearms that are lost or stolen need to be reported to the TIGTA, OI, to allow for appropriate investigative actions, including entering the information on national crime databases. 

The CI function did not properly control equipment loaned by the HQ office

According to the Property Management Guidelines, all loaned equipment must be tracked by the receiving office; that office must also verify all loaned equipment during the annual inventory process.

We attempted to physically verify 15 items that were loaned by the CI function HQ office to the 3 field offices in our review and could not locate 5 of these items costing $29,671.  These five items included an enforcement badge, video equipment, and a concealment item used for surveillance activities.  In addition, we selected 20 additional items that were in loaned status from the CI function HQ office to other field offices to determine if the HQ office verified these items during the last annual inventory.  In six instances, there was no indication the item was verified during the last annual inventory (FY 2004).

This occurred because procedures were not effective in ensuring equipment in loaned status was physically verified during the annual inventory process.  An item in loaned status would appear only on the loaner’s (in most instances, the CI function HQ office) Report 1.[25]  The equipment would not appear on the Report 1 of the office with physical custody of the item.

CI function management indicated the new CIMIS database should more effectively ensure loaned equipment is properly verified.  The new system now creates a temporary custody assignment of the loaned item.  Both parties should have control and be accountable.  The loaned item should now appear on both the loaner’s and receiving office’s Report 1.  Both parties are responsible for verifying the item during the inventory process. 

We agree these new procedures will help ensure equipment in loaned status is physically verified during the annual inventory process.  However, this verification is still dependent on the inventory procedures practiced at each office.

The CI function is responsible for controlling over 40,000 investigative equipment items costing approximately $128 million.  Unless CI function management takes action to improve the controls and procedures over this equipment, they will continue to be at risk of losing control of more investigative equipment.

 

Recommendations

 

The Chief, CI, should:

Recommendation 1:  Issue a memorandum to applicable CI function personnel reemphasizing the importance of independently verifying all equipment during the annual inventory; not relying on oral statements made by the property custodians; physically verifying the serial number of each item; ensuring each item is properly recorded on the CIMIS; properly segregating investigative equipment duties; maintaining supporting documentation for disposed of items; and notifying the TIGTA, OI, when badges, pocket commissions, or firearms are lost or stolen.

Management’s Response:  The Chief, CI, agreed with this recommendation, stating the results of our audit were discussed and inventory procedures were reemphasized during the recent Special Agent in Charge and Assistant Special Agent in Charge meeting.  A detailed memorandum clarifying the inventory system and the roles and responsibilities of all CI function employees will be issued to all CI function personnel, and additional guidance on these topics will be provided to all CI function managers.

Recommendation 2:  Establish procedures requiring each office to submit the primary reconciliation document used during the inventory process along with the memorandum that is submitted to the Director, ETE.  These procedures should also require each office to attach a document listing the personnel that conducted the inventory verifications.  This information should be used by the Director, ETE, in ensuring each item was properly inventoried and an independent verification was conducted.

Management’s Response:  The Chief, CI, agreed with this recommendation and will revise the Property Management Handbook to require reconciliation documents and a list of personnel conducting inventories as attachments to the annual certification memorandum.  In addition, the Investigative Equipment Control (IEC) work group will recommend any additional policy and procedure changes necessary.

Recommendation 3:  Consider whether the use of bar coding would be an effective method of controlling the CI function’s investigative equipment.  The CI function can assess the viability of using bar coding nationwide by studying its effectiveness at the one field office in our review and at the offsite warehouse, if it is implemented.

Management’s Response:  The Chief, CI, agreed with this recommendation, stating the use of a bar coding inventory system is currently under review by the CI function and the IEC work group will continue to address this area.

Recommendation 4:  Establish procedures to periodically review the permissions of those users with access to the investigative equipment application of the CIMIS to ensure property custodians and those conducting the inventories have read-only access.  

Management’s Response:  The Chief, CI, agreed with this recommendation.  The IEC work group will determine the appropriate level and frequency of reviews of the CIMIS roles and permissions.

Recommendation 5:  Establish monitoring procedures to require the review of supporting documentation to ensure all disposals (including lost or stolen items) are properly conducted and consider incorporating procedures requiring each disposal (identified from the CIMIS) to be analyzed by an independent person as part of the annual inventory process.

Management’s Response:  The Chief, CI, agreed with this recommendation and will review all reports of survey and supporting documentation beyond the field level for completeness and accuracy.  Further disposal review requirements will be considered by the IEC work group.

 

Badges and Pocket Commission Inserts Purchased by the Criminal Investigation Function Are Not Properly Controlled, Resulting in Unreliable Data and Missing Pocket Commissions

 

Our review determined that pocket commission inserts were not always controlled on the CIECS, as required.  As a result, the CI function could not locate 111 pocket commission inserts.  In addition, we identified numerous enforcement and belt badges that had the same identification number.  This weakened the CI function’s ability to properly control the badges.  The CI function must improve the control of its identification media to prevent the loss or theft of pocket commission inserts and badges.  In the hands of an unauthorized person, these items could not only bring serious discredit and adverse publicity to the IRS but could also be damaging to our nation’s homeland security. 

Each special agent should be issued an enforcement badge together with a belt badge and a pocket commission containing the special agent’s sequentially numbered insert.  The CI function is responsible for establishing and maintaining necessary controls and records to adequately govern the issuance, control, and recovery of badges and pocket commissions authorized and issued to employees under its jurisdiction.  Records should be such that they account for all badges and pocket commissions at all times.  The Property Management Guidelines required that all enforcement badges, belt badges, and pocket commission inserts be recorded in the CIECS.  At the time of our review, the CI function Finance section was responsible for maintaining the badges and pocket commission inserts. 

 

Pocket commission inserts were not always controlled on the CIECS, resulting in missing commissions

 

The CI function purchased 6,000, sequentially numbered, pocket commission inserts during 1999.  We identified 2,850 that were not controlled on the CIECS, as required.  CI function management stated their practice was to record the pocket commission inserts in the CIECS when they were issued to special agents, rather than spending the time to record the blocks as received. 

According to CI function personnel, 2,050 of the 2,850 inserts were kept in a locked cabinet.  They said an additional 65 inserts containing the signature of the former Chief, CI, were awaiting destruction.  Of the remaining 735 pocket commission inserts not controlled on the CIECS, the CI function advised they were able to account for 610, leaving 111 still missing.  At the time of our audit, the Director, ETE, stated the CI function was in the process of issuing new pocket commission inserts, and the ETE section will be responsible for maintaining the enforcement badges and pocket commissions in the future. 

In the response to this report, the Chief, CI, acknowledged that control over identification media is critical.  CI function management indicated they have located all but 4 of the 111 missing pocket commissions.  Further, they believe, based upon available documentation and statements from HQ office and field office personnel, it is very likely that all unissued and inactive pocket commissions were destroyed.  CI function management also noted there is no evidence to suggest that any of the pocket commissions were unknowingly taken outside the agency or misused in any way.  Therefore, they are confident the four pocket commissions missing from the inventory system do not present a substantial risk to the agency or the country.  In this day and age of identity theft, we believe there is a risk associated with the inability to account for the location of even one pocket commission. 

 

Enforcement badges and belt badges with the same identification numbers weaken accountability

 

We identified numerous enforcement and belt badges that had the same identification numbers.  According to the CIECS data, there were 162 enforcement badges and 489 belt badges where at least 2 of each type had the same number.  There are 12 instances where as many as 4 special agents have the same belt badge number and another 29 instances where there were at least 4 of the same belt badge number; however, not all of these were assigned to a special agent.  

According to CI function management, the field offices were previously responsible for purchasing and issuing the enforcement and belt badges.  In some instances, the sequences of badge numbers were the same. 

Enforcement badges and belt badges with the same identification numbers weaken the controls for accountability of these items.[26]  The CI function should ensure each special agent has unique enforcement and belt badge identification numbers. 

 

Recommendations

 

The Chief, CI, should:

Recommendation 6:  Ensure all pocket commissions are properly controlled on the CIMIS, with the following exception.  The blocks of 2,050 pocket commission inserts currently stored at the CI function HQ office should be promptly destroyed when the new pocket commission inserts are issued.  Prior to their destruction, an inventory should be taken to ensure each commission is properly accounted for and documented.

Management’s Response:  The Chief, CI, agreed with this recommendation, indicating the CI function is issuing new enforcement commissions and prior revisions will be destroyed.  The Chief, CI, acknowledged that control over identification media is critical.  CI function management indicated they have located all but 4 of the 111 missing pocket commissions.  Further, they believe, based upon available documentation and statements from HQ office and field office personnel, it is very likely that all unissued and inactive pocket commissions were destroyed.  CI function management also noted there is no evidence to suggest that any of the pocket commissions were unknowingly taken outside the agency or misused in any way.  Therefore, they are confident the four pocket commissions missing from the inventory system do not present a substantial risk to the agency or the country. 

Office of Audit Comment:  We still believe there is a risk associated with the 111 missing pocket commissions because the CI function indicated these were resolved primarily by relying on statements made by CI function personnel and not through supporting documentation.  Also, we continue to believe any missing law enforcement identifying credential, in the hands of an unscrupulous person, presents an unacceptably high risk that it could be misused to the detriment of national security.

Recommendation 7:  Ensure all missing pocket commissions are referred to the TIGTA, OI.

Management’s Response:  The Chief, CI, agreed with this recommendation and will ensure all pocket commissions suspected of loss and/or theft are reported to the TIGTA, OI.

Recommendation 8:  Determine if the current supply of belt and enforcement badges is sufficient to provide each special agent with a unique belt and enforcement badge identification number.

Management’s Response:  The Chief, CI, agreed with this recommendation and will issue uniquely serial-numbered enforcement/belt badges as necessary to ensure no duplicate numbers exist among the special agents.  New belt badges will be acquired and issued containing identification numbers that correspond with each special agent’s enforcement badge.  The ETE section will collect and properly dispose of excess badges.

 

The Criminal Investigation Equipment Control System Was Inaccurate and Incomplete

 

According to the Property Management Guidelines, the field offices are responsible for maintaining an accurate record of investigative equipment.  Any management information system should readily provide CI function management with accurate information about their equipment and operations.  We determined:

  • Investigative equipment physically verified contained inaccurate information on the CIECS.
  • Items selected for verification from the “floor” were not recorded on the CIECS.
  • Equipment purchased during FY 2003 was not always recorded on the CIECS.
  • Duplicate records, and records where serial numbers had been altered, were contained in the CIECS.

 

Investigative equipment physically verified contained inaccurate information on the CIECS

 

Of the 700 items in our original sample, we were able to verify 621.  However, 81 of the 621 contained 1 of the following types of errors: 

  • Eleven items with inaccurate serial numbers.
  • Fifty-eight items with inaccurate model numbers.
  • Seven items with inaccurate assignment locations (four of these were firearms).
  • Five items that were properly disposed of but were still listed on the CIECS as active (one was a firearm).

Incorrect equipment-identifying information in the CIECS makes the physical verification process more difficult for CI function personnel. 

 

Items selected for verification from the “floor” were not recorded on the CIECS

 

We also judgmentally selected 118 investigative equipment items, including 21 vehicles, during our CI function HQ office and field office verification testing and traced the items to determine if they were recorded and controlled on the CIECS.

  • Ten items were not controlled on the CIECS as required.  These items included three hand-held radios, two secured fax machines, a freeze-frame video recorder, a video cassette recorder, a concealment device used in undercover operations, a playback monitor, and a portable receiver.  The estimated cost of these items was approximately $25,460.
  • Five items were incorrectly controlled on the CIECS.  These items were controlled on the CIECS by the “kit”[27] container housing the equipment.  According to the Property Management Guidelines, the serial number of the main component of each “kit” should have been recorded in the CIECS to control the equipment. 
  • Three items had inaccurate assignment locations, according to the CIECS.

These items were at risk of loss because they were not controlled or not correctly controlled on the CIECS.  In addition, CI management could not rely on the information reports generated from the CIECS because they were incomplete.

 

Equipment purchased during FY 2003 was not always recorded on the CIECS

 

We identified 249 investigative equipment purchases made by the CI function HQ office during FY 2003 from procurement documentation[28] to determine if the items were properly controlled on the CIECS.  Over 18 percent (46 of 249) of the equipment purchases, with an acquisition cost of about $116,221, were not controlled on the CIECS.  These items included secured fax machines, telephones, safes, and video equipment.  This occurred because procedures current at the time of our review did not ensure all investigative equipment purchased by the CI function HQ office was entered into the CIECS.  Equipment purchased as part of a standard model (for example, a hand-held radio is part of the special agent’s model) did not have to be approved by the Director, ETE.  The ETE section would only be aware of equipment shipped directly to the field by the manufacturer (known as being “drop shipped”) when a copy of the packing slip was provided to the ETE section upon receipt of the equipment.  There were no procedures in place to verify that investigative equipment purchased and drop shipped  to the field had been entered into the CIECS.

An internal review of the ETE section conducted in October 2003 also noted that no validation of drop shipped equipment was being performed.  The review noted much of the investigative equipment was purchased and shipped directly to the field from the manufacturers.

We provided the results of our analysis to the CI function.  CI function management provided the following response to the 46 investigative equipment items we could not locate:

  • For 26 of the items, they were taking the necessary steps to add the equipment information to the CIMIS.
  • A total of 11 items were radio components that did not have serial numbers and were purchased to replace components that were broken or damaged.  While the purchase price may have been in excess of $500, these items should not have been entered on the CIMIS because they were part of a “kit.” 
  • A total of five of the equipment items were safes and shredders.  The CI function indicated these items were not required to be entered into the CIECS.  (However, our review of CIECS information identified similar safes and shredders that were controlled on the system.  A determination should be made to either add or remove these types of items from the CIMIS, consistent with Property Management Guidelines.)
  • In four instances, supporting documentation could not be located to determine if the equipment should have been entered into the CIECS.

These items were also at risk of loss because they were not controlled on the CIECS.  In addition, CI function management could not rely on the information reports generated from the CIECS because they were incomplete.

 

Duplicate records, and records where serial numbers had been altered, were contained in the CIECS

 

The serial number on the CIECS is the equipment’s principal identifier and is used by the CI function during the inventory process to verify the equipment.  We identified numerous investigative equipment records where the serial numbers were altered without detection.  The CIECS permission levels allowed changes to the serial number, and there was no audit trail to identify who made the changes.  As a result, the CI function lost control of several items, and 1 firearm went unrecorded on the CIECS for 7 to 11 months.  In addition, we identified duplicate equipment records in the CIECS because the System did not prevent the creation of duplicate records. 

Serial numbers were altered on the CIECS, resulting in equipment left uncontrolled

At 1 of the field offices in our review, we identified 12 instances where the serial number of a CIECS record was altered.  We believe this occurred in response to the results of the annual inventory conducted in 2004.  When changes in the assignments of investigative equipment were noted, the CIECS coordinator changed the serial numbers of the records instead of the employee assignments.  The records that were altered controlled various equipment, including a firearm, pocket commissions, and a belt badge.

The firearm was returned to the firearms coordinator in March 2004 with a broken frame.  We concluded that sometime after that, the CIECS coordinator altered the serial number instead of changing the assignment.  We believe the firearm went unrecorded on the CIECS for 7 to 11 months since it was not on our download of CIECS information dated September 30, 2004.  It did appear on our February 3, 2005, download as being assigned to the firearms coordinator.  We physically verified the firearm at the office during fieldwork.

The 12 instances also included 8 pocket commissions and 1 belt badge where serial numbers were altered.  We were unable to verify these commissions at the field office.  The office indicated these items were most likely destroyed.

We conducted an analysis of the CIECS information and identified an additional 83 instances where serial numbers were altered in some way between September 30, 2004, and February 3, 2005.  Most of these were minor corrections; however, there were 12 instances where the serial numbers were noticeably different.  One of these items was a shotgun assigned to an office not included in our review.  That office indicated the serial number was changed because the previous number was erroneously entered for that weapon. 

CI function management stated there are legitimate business reasons for changing serial numbers and, like the CIECS, the new CIMIS will allow users to change this information.  However, the new CIMIS has an audit trail feature that records information about these changes.  CI function management also advised us reports should be available that will show these changes.  The CI function’s Security Officer is responsible for reviewing these reports. 

While we agree the use of an audit trail will help the CI function eventually detect inappropriate changes to investigative equipment information, changes may go undetected until audit trail reports are generated.  Since the serial number is the main equipment identifier, we believe the ability to make changes to this information should be limited. 

Duplicate records were created in the CIECS, resulting in unreliable data

As previously discussed, the existence of duplicate records should have been identified during the annual inventory process.  Our analysis of the CIECS data identified 95 instances where there were duplicate records for an investigative equipment item.  In 49 instances, the same item was assigned to 2 different offices.

This occurred because the CIECS did not prevent duplicate records from being created.  CI function personnel indicated the new system will prevent the creation of a duplicate record if the record has the same information in all of the following fields:

  • Serial number.
  • Model Number.
  • Manufacturer.
  • Category.
  • Subcategory. 

We agree this will assist in preventing some duplicate records from being created.  However, if information such as the model number is incorrect, a duplicate could still be created.

 

Recommendations

 

The Chief, CI, should:

Recommendation 9:  Establish procedures to ensure all investigative equipment purchased is properly controlled on the CIMIS.  For example, the ETE section should be notified by the CI function Finance section at the time investigative equipment is procured.  

Management’s Response:  The Chief, CI, agreed with this recommendation, stating current procedures require the Finance section to notify the ETE section at the time investigative equipment is procured.  The IEC work group will evaluate the current procedures and determine/recommend necessary enhancements.

Recommendation 10:  Resolve all instances where the serial numbers were changed based on information provided by the TIGTA during our review. 

Management’s Response:  The Chief, CI, agreed with this recommendation and will resolve the serial number changes identified during the audit.  Additionally, the IEC work group will review the issue of serial number changes and recommend appropriate policy and procedural changes.

Recommendation 11:  Establish procedures to ensure changes to serial number information in the CIMIS are appropriate.  The ability to change a serial number should be limited to personnel at the CI function HQ office or each Director of Field Operations.  A request documenting the reason for changing a serial number should be sent to those personnel.

Management’s Response:  The Chief, CI, agreed with this recommendation and will update the necessary policies and procedures once determined by the IEC work group.

Recommendation 12:  Establish procedures to identify duplicate records in the CIMIS.  A report listing all items with duplicate serial numbers should be generated periodically and provided to the Director, ETE, for review.

Management’s Response:  The Chief, CI, agreed with this recommendation and will create a report to identify equipment records containing exactly matching serial numbers.  The IEC work group will make recommendations concerning the level at which and the frequency with which this report should be reviewed. 

 

Physical Security Controls Need to Be Improved to Reduce the Risk of Unauthorized and/or Undetected Access to Investigative Equipment

 

Our review of the physical security controls at the four offices[29] identified weaknesses that left equipment vulnerable to theft or loss.  This occurred because management did not ensure physical security controls were properly maintained.  This included not ensuring functional security reviews[30] were conducted, as required.  In addition, the procedure for storing investigative equipment at the HQ offsite warehouse did not ensure equipment was adequately controlled.  As a result, investigative equipment, such as firearms, was not properly secured. 

According to the Standards for Internal Control in the Federal Government, an agency must establish physical control to secure and safeguard assets.  Access to resources and records should be limited to authorized individuals, and accountability for their custody and use should be assigned and maintained.

In addition, the IRM states the safeguarding of investigative equipment (other than firearms) carries a “Normal Security” designation, signifying that equipment should be maintained in either a locked perimeter area, a locked interior area, or a locked container.  Firearms, when not in use, should be protected as follows:  one to four firearms - security container; five or more firearms - safe or vault.  Access to a locked area, room, or container can be controlled only if the key, keycard, or combination is controlled. 

The number of keys or knowledge of the combinations to a secured area must be kept to the absolute minimum.  A Custody Receipt for Government Property (Form 1930) should be used to record the issuance of all keys (including keycards for electronic access controls systems).  Combination locks, which rely on something the individual knows, have been used in the past for controlling access.  If the combinations are widely disseminated and not changed frequently, unauthorized accesses may occur and may not be easily detected.  Combinations must be changed at least once a year, or when a person who knows the combination terminates employment, and documentation of these changes should be maintained.

We reviewed the physical security controls at the four offices and identified the following weaknesses:

  • Combinations for keypads allowing access to investigative equipment storage areas were not changed for at least 1 year, as required.  CI function personnel could not recall when the combinations were last changed (two offices).
  • Combinations to the firearms safes or vaults were not changed for at least 1 year; 1 of the combinations had not been changed since 1996.  CI function personnel could not recall when the other combinations were last changed (two offices).
  • A safe storing several shotguns was broken (one office).
  • Control custody receipts or control logs were not maintained for keys allowing access to investigative equipment and firearms storage areas (three offices).
  • The new firearms were not stored in a safe or vault.  Instead, they were stored in the firearms storage area.  The office cited a lack of space as a reason for not storing the firearms in a safe or vault; however, accessibility to this area was unknown because custody receipts indicating who had keys allowing access to this area were not maintained (one office).
  • The CIECS coordinator and several computer investigative specialists had access to a garage storage area housing various radio and video equipment (one office).
  • Several CI function personnel, including executives and an individual who was previously assigned temporarily, had access to the CI function HQ offsite warehouse. 

Further, we could not find evidence the functional security reviews were performed at the four offices in our review during FY 2004.  One office indicated a review was conducted; however, the report was not provided.  When properly conducted, functional security reviews will help ensure security standards are met.  If these security controls are not effective, investigative equipment is vulnerable to risk of loss or unauthorized use.

In addition to our physical security concerns, the current environment for storing equipment at the CI function HQ offsite warehouse concerns us.  This facility is used to store equipment purchased by the CI function HQ office until it is sent to the field offices for use.  According to the CIECS, as of February 3, 2005, a total of 1,834 investigative equipment items with an acquisition cost exceeding $4 million was assigned to the warehouse.  This included radios, video equipment, and firearms.  The CI function advised us these firearms were never physically stored at the warehouse.  They were erroneously recorded as assigned to the warehouse on the CIECS.

As previously mentioned, the CI function HQ office wrote off, or was prepared to write off as lost, a total of 230 items during FYs 2004 and 2005.  In addition, we were unable to verify 24 items assigned to the warehouse.  We believe the disarray observed at this offsite warehouse facility contributed to the loss of equipment.  Items were haphazardly stored in multiple locations throughout the facility, and some items were obscured from view.  Also, the current procedure for relying on one’s memory to recall where equipment is located is not proper, effective, or efficient.

Properly managing the storage facility for investigative equipment is necessary to ensure equipment is adequately controlled.  This can be accomplished by developing a layout or schema for storing investigative equipment that will allow the CI function to more easily track and locate items.

 

Recommendations

 

The Chief, CI, should:

Recommendation 13:  Establish procedures to ensure functional security reviews of investigative equipment and firearms storage areas are conducted on an annual basis.

Management’s Response:  The Chief, CI, agreed with this recommendation and will take the necessary steps to ensure functional security reviews of investigative equipment and firearms storage areas are conducted on an annual basis throughout the CI function.  The IEC work group will look at this area and make the necessary recommendations for improvement.  Additionally, the Review and Program Evaluations will continue to check functional security review certifications for completeness, accuracy, and timeliness during periodic reviews, paying particular attention to the components of the certifications addressed in this report.

Recommendation 14:  Restrict access to investigative equipment storage areas to only those personnel responsible for maintaining the equipment.  This includes limiting access to the CI function HQ offsite warehouse to only those CI function personnel with a requisite need.

Management’s Response:  The Chief, CI, agreed with this recommendation and will place renewed emphasis on restricting access to investigative equipment to necessary personnel only.  The Director, ETE, will monitor warehouse card key access assignments to ensure only necessary personnel have access.  The IEC work group will make recommendations for further procedural improvements as needed.

Recommendation 15:  Establish procedures to ensure investigative equipment assigned to the CI function HQ offsite warehouse is effectively stored.  This should include the use of a layout or schema to document where equipment is located at the site.  The location should then be noted in the CIMIS database.

Management’s Response:  The Chief, CI, agreed with this recommendation, stating the IEC work group will scrutinize the operations of the warehouse facility and make necessary recommendations to ensure the CI function implements a sound and secure inventory tracking system for all investigative equipment and supplies stored at that facility.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this audit was to determine whether controls and procedures are effective in ensuring investigative equipment is adequately safeguarded against waste and loss.  To accomplish our objective, we obtained extracts from the Criminal Investigation Equipment Control System (CIECS)[31] for the periods ending September 30, 2004, and February 3, 2005.  One of the purposes of our audit was to verify the accuracy of the data maintained in the system.  Specifically, we:

I.                   Evaluated and discussed procedures for ensuring unassigned investigative equipment was adequately stored and safeguarded.

II.                Evaluated policies and procedures to ensure investigative equipment duties were adequately separated.  We also reviewed the permissions of those employees with access to the CIECS.

III.             Determined whether the inventory of investigative equipment is adequately controlled by the Criminal Investigation (CI) function on its equipment information system.

A.    Analyzed the CIECS as of September 30, 2004, and identified 42,434 investigative equipment items with an acquisition cost of approximately $128 million.  We also reviewed disposed of equipment information including items noted as lost or stolen.  The CI function Headquarters (HQ) offices in Washington, D.C.; Chicago, Illinois; and Forestville, Maryland, [32] and the CI function field offices located in Chicago, Illinois; Houston, Texas; and Los Angeles, California, were judgmentally selected based upon factors such as the total number and cost of investigative equipment currently assigned to each office, the total number of items reported as lost or stolen since January 2002, and the total number of items with a pending disposal status.  We also considered the geographic location of the offices.  

B.     Conducted a physical verification of investigative equipment, excluding vehicles, listed on the CIECS as assigned to the four offices in our review, as of September 30, 2004. 

1.      Analyzed the CIECS, for the period ending September 30, 2004, and identified investigative equipment from the following equipment categories:  Firearms (Category Number 10), Audio (20), Video (21), Photographic (23), Telecommunication (25), Optical (26), Radio (60), Tracking (70), and select subcategories from Miscellaneous Investigative Equipment (28).

2.      Randomly selected 200 of 2,518 investigative equipment items (from the categories listed in Step III.B.1.) assigned to the CI function HQ offices, specifically the Equipment and Technology Evaluation section.  We also selected 50 of the 1,853 firearms.  For the 3 field offices, we randomly selected a total of 375 of 2,785 investigative equipment items and 75 of the 691 firearms.  We used random nonstatistical sampling techniques because we determined statistical sampling techniques would have been cost prohibitive as well as an inefficient use of our resources.

3.      Physically verified 621 of the 700 investigative equipment items at the 4 offices.  We provided a listing of those items we could not verify to each of the offices. 

C.     Evaluated each office’s inventory procedures and determined whether an annual inventory of investigative equipment was properly performed in Fiscal Year (FY) 2004. 

Note:  Based upon our initial results, we expanded testing and identified instances where the serial numbers were changed in the CIECS database by comparing the September 30, 2004, and February 3, 2005, database information.  We conducted appropriate follow-up, such as verifying equipment.

D.    Obtained procurement documentation[33] for 249 investigative equipment purchases (excluding vehicles and body armor) made by the CI function during FY 2003.  We then queried the February 3, 2005, CIECS information and determined whether the equipment was recorded. 

Note:  Based upon our initial results, we expanded testing to include all pocket commission inserts to determine whether they were adequately controlled on the CIECS.  We obtained documentation from the CI function Finance section noting the purchase of 6,000 sequentially numbered pocket commission inserts.  We queried the February 3, 2005, CIECS data and identified 2,850 pocket commission inserts that were not properly controlled.  We coordinated efforts with the CI function HQ office to account for these pocket commission inserts. 

E.     Selected a judgmental sample of 89 of 723 investigative equipment items, including firearms, that were excessed during FY 2004 for the offices selected in our review and determined whether each was properly approved and documented.  We also judgmentally selected 78 of 547 investigative equipment items classified in pending disposal status, for at least 1 year, and determined whether the pending status was accurate.  We used this sampling methodology because we did not intend to project our results to the entire universe.

F.      Judgmentally selected 59 of 240 investigative equipment items that were listed on the CIECS as lost or stolen since January 2002 and determined whether each was properly approved and documented and whether they were referred to the Treasury Inspector General for Tax Administration, Office of Investigations, when necessary.  We used this sampling methodology because we did not intend to project our results to the entire universe.

G.    Evaluated and discussed procedures pertaining to equipment loaned by CI function offices.  We selected all 15 investigative equipment items listed on the CIECS as loaned by the CI function HQ office to the 3 field offices in our review and verified the existence of this equipment. 

H.    Randomly selected from the “floor” a total of 118 investigative equipment items, including 21 vehicles, from the 4 offices and determined whether the equipment was properly controlled on the CIECS.  We used this sampling methodology because we could not project results to an unknown universe.

I.       Verified the firearm, enforcement badge, belt badge, and pocket commission noted on the Custody Receipt for Government Property (Form 1930) for a total of 76 special agents at the 3 CI function field offices in our review.  In addition, we selected a sample of 11 special agents that separated during FY 2004 from the 3 CI function field offices and determined whether the equipment on their Forms 1930 was properly returned.

J.       Analyzed the February 3, 2005, CIECS information and identified all CIECS records for equipment in active status that contained duplicate serial numbers.  We then manually reviewed the resulting information and identified those instances where there was a duplicate record for one investigative equipment item. 

 

Appendix II

 

Major Contributors to This Report

 

Daniel R. Devlin, Assistant Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs)

John R. Wright, Director

Diana M. Tengesdal, Audit Manager

Jeffrey K. Jones, Lead Auditor

James S. Mills, Jr., Senior Auditor

Janice A. Murphy, Senior Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Deputy Commissioner for Services and Enforcement  SE

Director, Operations Policy and Support, Criminal Investigation  SE:CI:OPS

Director, Equipment and Technology Evaluation, Criminal Investigation SE:CI:OPS:ETE

Chief Counsel  CC

National Taxpayer Advocate  TA

Director, Office of Legislative Affairs CL:LA

Director, Office of Program Evaluation and Risk Analysis  RAS:O

Office of Management Controls  OS:CFO:AR:M

Audit Liaison:  Director, Planning and Strategy, Criminal Investigation  SE:CI:S:PS

 

Appendix IV

 

Outcome Measures

 

This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration.  These benefits will be incorporated into our Semiannual Report to the Congress.

 

Type and Value of Outcome Measure:

 

  • Protection of Resources – Actual; 70 investigative equipment items costing $241,718 could not be located or positively identified (see page 4).

 

Methodology Used to Measure the Reported Benefit:

 

We randomly selected 700 investigative equipment items, including 125 firearms, to physically verify.  We could not locate or find support for 70 items.  The items we could not verify included audio and video equipment and secured fax machines.  These items had an acquisition cost of $241,718.[34] 

 

Type and Value of Outcome Measure:

 

  • Protection of Resources – Actual; 2,850 pocket commission inserts were not properly controlled on the Criminal Investigation Equipment Inventory System (CIECS).  As a result, the Criminal Investigation (CI) function could not locate 111 pocket commission inserts (see page 13).

 

Methodology Used to Measure the Reported Benefit:

 

We conducted an analysis of the CIECS to determine if the pocket commissions were numerically sequenced.  We initially identified over 400 missing numbers.  We subsequently obtained the purchasing information relating to the numeric sequence of the pocket commissions purchased by the CI function.  We compared this information to the listing of pocket commissions recorded in the CIECS and identified 2,850[35] pocket commission inserts that were not properly controlled on the CIECS, as required.  The CI function could not locate 111 pocket commissions.

 

Type and Value of Outcome Measure:

 

·         Protection of Resources – Actual; 10 investigative equipment items, with an acquisition cost of about $25,460, were not controlled on the CIECS, as required (see page 16).

 

Methodology Used to Measure the Reported Benefit:

 

We judgmentally selected 118 investigative equipment items to determine if the items were properly controlled on the CIECS.  We identified 10 items that were not controlled on the CIECS, as required.  These items had an acquisition cost of approximately $25,460 and consisted of various radio and video equipment.

 

Type and Value of Outcome Measure:

 

·         Protection of Resources – Actual; 46 investigative equipment items purchased by the CI function during Fiscal Year 2003 were not controlled on the CIECS, as required (see page 16).

 

Methodology Used to Measure the Reported Benefit:

 

We judgmentally selected a sample of 249 investigative equipment purchases made by the CI function during Fiscal Year 2003 using procurement documentation, such as purchase orders, credit card statements, and various receipts.  We subsequently queried the CIECS to determine if these items were properly controlled.  We determined that 46 of these purchases were not properly controlled on the CIECS.  These items cost approximately $116,221 and included secured fax machines, telephones, safes, and video equipment. 

 

Type and Value of Outcome Measure:

 

·         Reliability of Information – Actual; 81 (of the 621) investigative equipment items physically verified during testing contained inaccurate information on the CIECS, including inaccurate serial numbers, assignment locations, and equipment status.  Additionally, 8 (of 118) items identified at the 4 offices were not accurately controlled (see page 16). 

 

Methodology Used to Measure the Reported Benefit:

 

We captured certain equipment-identifying information (e.g., serial number, model number, and location) recorded in the CIECS for each of the 700 investigative equipment items we sampled and verified that information to the particular equipment item.  In addition, we judgmentally selected 118 investigative equipment items to determine if the items were properly controlled on the CIECS.  We identified eight items that were not controlled accurately on the CIECS.

 

Type and Value of Outcome Measure:

 

  • Reliability of Information – Actual; 95 instances where there were duplicate records for an investigative equipment item (see page 16).

 

Methodology Used to Measure the Reported Benefit:

 

We conducted an analysis of the data obtained from the CIECS dated February 3, 2005, and identified all CIECS records of equipment that contained the same serial number.  We selected only those equipment records where the CIECS indicated the items were still in active status.  We manually reviewed the resulting information and identified those instances where there was a duplicate record for one investigative equipment item. 

 

Type and Value of Outcome Measure:

 

·         Reliability of Information – Actual; 95 instances where the serial number of a CIECS record was altered, resulting in the loss of 8 pocket commissions and 1 belt badge (see page 16).

 

Methodology Used to Measure the Reported Benefit:

 

We reviewed the Fiscal Year 2004 inventory supporting documentation at 1 office and identified 12 instances where a change in the assignment of equipment was noted.  Our further analysis, including a review of CIECS data, determined in these 12 instances the serial number instead of the assignment number was changed in the CIECS.  We then conducted an analysis of the data obtained from the CIECS dated September 30, 2004, and February 3, 2005.  We compared the serial numbers of the CIECS records from the September 30, 2004, information to the serial numbers for those same records from the February 3, 2005, information to identify those records where the serial numbers had been changed.

 

Appendix V

 

Management’s Response to the Draft Report

 

The response was removed due to its size.  To see the response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.



[1] Investigative equipment is defined as equipment required by the CI function for carrying out its investigative and enforcement responsibilities.

[2] Pocket commissions are special agent identification media consisting of a photograph and a sequentially numbered certification for authority.

[3] The CIECS is a standardized nationwide online investigative equipment inventory system that allows management to track where its investigative equipment and accessories are located, to track to whom it is assigned, and to generate reports.  It also tracks equipment loaned outside of the CI function and the disposal of equipment.

[4] Investigative equipment is defined as equipment required by the CI function for carrying out its investigative and enforcement responsibilities.

[5] The CIECS is a standardized nationwide online investigative equipment inventory system that allows management to track where its investigative equipment and accessories are located, to track to whom it is assigned, and to generate reports.  It also tracks equipment loaned outside of the CI function and the disposal of equipment.

[6] Pocket commissions are special agent identification media consisting of a photograph and sequentially numbered certification for authority.

[7] This category includes enforcement and belt badges, pocket commissions, motion detectors, and fingerprint kits.

[8] The CIMIS is a database that tracks the status and progress of criminal investigations and the time expended by special agents.  It is also used by management to provide the basis for decisions of both local and national scope.

[9] We performed fieldwork at these three offices within the HQ office.  Unless otherwise noted, references made in this report to the HQ office reflect the results of our fieldwork at these three offices. 

[10] We selected equipment assigned to the Equipment and Technology Evaluation section.

[11] We selected equipment from the following categories on the CIECS:  Firearms (Category Number 10), Audio (20), Video (21), Photographic (23), Telecommunication (25), Optical (26), Radio (60), Tracking (70), and select
subcategories from Miscellaneous Investigative Equipment (28).

[12] This reflects the population of investigative equipment and firearms that we selected our samples from for the offices in our review.

[13] A sample of 125 firearms (50 – HQ, 75 – field) was selected for verification.  All 125 were verified during our review.

[14] According to CI function field office personnel, this included one item that was stolen during 2003.  The office provided the memorandum prepared by the employee noting the loss; however, a Report of Survey (Form 1933) was not prepared, as required.

[15] We could not verify these items because the serial numbers were not visible or not found on the equipment.  This included items installed in a surveillance van.

[16] This figure was based upon the best available information we had at the time of our review and does not account for depreciation.

[17] The CI function HQ office estimated the loss at $286,441, after the items were depreciated.

[18] The field office asserted that these items had a remaining value of approximately $6,000.

[19] The field office asserted that these items had no remaining value.

[20] The CI special agent that is responsible for maintaining investigative equipment at the field offices.

[21] The prior technical investigative agent at that office resigned during FY 2004.  The TIGTA Office of Investigations, in conducting a related investigation, disclosed that 60 excessed dual-band radios designated to be given to the DEA were missing.  The disposal of these radios was under the supervision of that agent.  Eventually a total of 64 radios were disposed of as lost.

[22] We considered backup coordinators as all personnel who had the ability to add, change, and delete information in the CIECS.

[23] This review was requested by the Director and Deputy Director, Operations, Policy, and Support, and was conducted by an ad hoc team comprised of personnel from the HQ office and various field offices.

[24] This category includes three HQ and five field office items that were either excessed as a duplicate record or inaccurately classified as disposed of.

[25] This report is generated by the current CIMIS (and was also generated by the CIECS), is used by each office as the beginning inventory, and serves as the primary reconciliation document.

[26] We recognize that, in the event of a lost or stolen badge, the CI function eventually would be able to determine to whom it belonged through either canvassing each agent who was assigned the number or self-reporting by the agent to whom the lost or stolen badge belonged.  However, accountability is more effective if all badge numbers are unique, especially if a claim of potential misconduct is made against an agent and the only identifier was the badge number.

[27] Assembled kits consist of related equipment components that are used collectively as one unit.  Examples include surveillance vans, camera kits, and radio repeaters.

[28] This documentation included purchase orders, credit card statements, and various receipt documentation for the purchase of equipment from financial accounting sub-object codes 3184 (Capitalized Radio Equipment) and 3185 (Capitalized Criminal Investigative Equipment).  However, our review was hampered because some of the documentation was incomplete.  For example, many of the credit card statements did not contain related documentation such as purchase orders and corresponding evidence of receipt.

[29] Each office consisted of multiple sites where we reviewed the physical security controls.  For instance, we also reviewed the controls at the Laguna Niguel, California, site, which is part of the Los Angeles field office.

[30] According to the IRM, functional security reviews measure adherence to security requirements and procedures that apply to each manager’s office or functional area.  These reviews do not represent technical assessments of the security program but are a means to ensure the existing security procedures and requirements are in place on a day-to-day basis.  First-line managers, on an annual basis, will conduct these reviews of areas for which they are responsible.  Upper levels of management are responsible for reviews of their immediate work areas.

[31] The CIECS is a standardized nationwide online investigative equipment inventory system that allows management to track where its investigative equipment and accessories are located, to track to whom it is assigned, and to generate reports.  It also tracks equipment loaned outside of the CI function and the disposal of equipment.

[32] We performed fieldwork at these three offices within the Headquarters office.  Unless otherwise noted, references made in this report to the HQ office reflect the results of our fieldwork at these three offices. 

[33] This documentation included purchase orders, credit card statements, and various receipt documentation for the purchase of equipment from financial accounting sub-object codes 3184 (Capitalized Radio Equipment) and 3185 (Capitalized Criminal Investigative Equipment).  However, our review was hampered because some of the documentation was incomplete.  For example, many of the credit card statements did not contain related documentation such as purchase orders and corresponding evidence of receipt.

[34] These items were purchased between January 1983 and April 2003.

[35] Of these pocket commissions, 2,115 belong to numerically sequenced blocks and were maintained in a locked cabinet at the CI function Headquarters office; 65 of these are awaiting destruction.