TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
SCREENING TAX-EXEMPT ORGANIZATIONSí FILING INFORMATION PROVIDES MINIMAL ASSURANCE THAT POTENTIAL TERRORIST-RELATED ACTIVITIES ARE IDENTIFIED
Issued on May 21, 2007
Highlights of Report Number:† 2007-10-082 to the Internal Revenue Service Commissioner for the Tax Exempt and Government Entities Division.
IMPACT ON TAXPAYERS
The Internal Revenue Service (IRS) uses a manual process and a limited terrorist watch list to identify instances in which charitable and other nonprofit organizations may be linked to individuals and/or entities whose assets have been frozen because they have committed or pose a significant risk of committing acts of terrorism.† As a result, the IRS provides only minimal assurance that tax-exempt organizations potentially involved in terrorist activities are being identified.† If the IRS does not use all available information to detect possible links of charities and nonprofit organizations with known or suspected terrorist organizations or individuals, there is a risk that these charities will not be reported to the Federal Government authorities fighting terrorism.
WHY TIGTA DID THE AUDIT
Uncovering the root of terrorist financing has become
one of the biggest challenges facing the
WHAT TIGTA FOUND
The IRS does not systemically match filing data of tax-exempt organizations against a comprehensive list of potential terrorists to identify instances in which charitable and other nonprofit organizations may be linked to terrorist activities.† Instead, IRS personnel manually review all tax-exempt documents and compare information from them to a United States Department of the Treasury terrorist watch list.† This list, however, is incomplete compared to the more comprehensive terrorist watch list available for use by all Federal Government agencies.† As a result of using a manual process and a limited terrorist watch list, the IRS provides only minimal assurance that tax-exempt organizations potentially involved in terrorist activities are being identified.
WHAT TIGTA RECOMMENDED
recommended the Director, Exempt Organizations, in
coordination with key IRS and external stakeholders, develop and implement a long-term
strategy to automate the matching of filing data of tax-exempt organizations against
a consolidated terrorist watch list to initially identify potential terrorist
activities related to tax-exempt organizations.†
In addition, Exempt Organizations function management should evaluate
whether more comprehensive terrorist watch lists, including any applicable
In their response to the report, IRS officials agreed with our recommendations.† They are planning to take adequate corrective actions.
READ THE FULL REPORT
To view the report, including the scope, methodology, and full IRS response, go to:†
Email Address:†† Bonnie.Heald@tigta.treas.gov
Phone Number:†† 202-927-7037
Web Site:†† http://www.tigta.gov