Criminal Investigation Division Resources Devoted to Supporting Recommended Prosecutions Can Be Enhanced With a Stronger Strategic Focus
March 25, 2010
Reference
Number: 2010-30-036
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.
1 = Tax Return/Return
Information
Phone Number |
202-622-6500
Email Address | inquiries@tigta.treas.gov
Web Site |
http://www.tigta.gov
March 25, 2010
MEMORANDUM FOR CHIEF, CRIMINAL INVESTIGATION
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Criminal Investigation Division Resources Devoted to Supporting Recommended Prosecutions Can Be Enhanced With a Stronger Strategic Focus (Audit # 200810008)
This report presents the results of our review to evaluate the growth in
the Criminal Investigation (CI) Division’s prosecution referral pipeline inventory[1] and identify any potential
actions that could be taken to reduce the resources devoted to this area. This audit originated from CI Division
suggestions that we evaluate the steady increase in prosecution pipeline
inventory over a period of years. As a
result, this audit was included in our Fiscal Years 2008 and 2009 Annual Audit
Plans and addresses the major management challenge of Tax Compliance
Initiatives.
Impact on the Taxpayer
The current Administration and Congress have recently begun
to focus on reducing tax evasion as a way to reduce the tax gap and help ease
the current strain on Federal budgets, potentially resulting in increased
demand for CI Division resources. The
CI Division needs stronger oversight and coordination, both locally and
nationally, to effectively manage the prosecution pipeline process, help its management
to make sound decisions, and identify opportunities to reduce the resources
devoted to cases in prosecution pipeline inventory. The successful prosecution of a criminal tax
violation deters other taxpayers who might otherwise decide to not comply with
the tax law and promotes confidence in the
Synopsis
The United States Attorneys’ Offices rely on CI Division special agents to remain involved with their cases even after referral for prosecution. The number of cases in the prosecution pipeline increased quickly beginning in Fiscal Year 2003. This increase occurred because of increases in the number of cases referred for prosecution, as well as declines in the number of referrals closed with convictions. The CI Division was accustomed to having its open case inventory exceed its prosecution pipeline case inventory, but the difference between the number of open cases and the number of prosecution pipeline cases steadily diminished. These trends continued and, for the first time in at least 8 years, prosecution pipeline cases exceeded the number of open cases and prosecution pipeline cases accounted for 23.2 percent of all investigative time expended by special agents for Fiscal Year 2008. The CI Division believed the prosecution pipeline’s increase began when the Department of Justice shifted its operational priorities to focus on national security issues (e.g., immigration and terrorism). In addition, the Department of Justice experienced attorney staffing shortages nationwide. These factors limited the priority of Internal Revenue Service (IRS) prosecutions and contributed to a lower number of prosecution pipeline case closures. During the quarterly Business Performance Review process, the CI Division began reporting to the IRS Commissioner’s office that it expected performance measures to begin trending flat or cycling downward due to the need for its agents to spend time managing the prosecution pipeline inventory.
Because an increase in the percentage of investigative time spent on cases in prosecution pipeline status reduces the CI Division’s ability to initiate new cases or complete ongoing cases, we believe the CI Division should expand the monitoring of prosecution pipeline issues to identify opportunities for improvement on both a local and national basis. The CI Division has only a limited overall strategy to materially reduce and manage the prosecution pipeline inventory.
While the steady increases in the volume of prosecution pipeline cases and percentage of investigative time expended on prosecution pipeline cases are indicators to be used in identifying concerns or trends, these measures alone do not provide CI Division executives sufficient information for making sound management decisions. The CI Division’s management information system does not capture the nature of investigative time expended on cases in prosecution pipeline status. In addition, accumulating cases in prosecution pipeline inventory does not necessarily mean resources are being affected on a continuing basis.
Recommendations
The
Chief, CI Division, should 1) create a
structured oversight and coordination system to monitor and more effectively
manage the prosecution pipeline process, 2) create an ad hoc
strategic team to develop innovative policies and procedures to ensure tax
cases receive appropriate attention and resolution by the Department of
Justice, 3)
develop additional techniques that refine the prosecution pipeline volume and investigative time performance
measures and expand the information available for management purposes, and 4) ensure that necessary
information is added to the quarterly Business Performance Reviews to provide
the IRS Commissioner a clear depiction of the investigative resources
devoted to prosecution pipeline
inventory activities.
Response
IRS management agreed
with two recommendations, providing an alternate corrective action on one, and
disagreed with the other two recommendations.
The CI Division realizes it needs to ensure management is providing
the necessary oversight and direction to effectively manage the pipeline
inventory. Effective management and
oversight is a priority for all of the CI Division’s investigative
processes and programs, but administering the pipeline inventory is unique in
that many external factors control the progression of an investigation through
the adjudication process.
The CI Division agreed
with the finding relating to Recommendation 1, but will implement a corrective
action different from the recommendation to address the concerns we raise in
the report, and agreed with Recommendation 2.
The CI Division will create a strategic team to examine how a more
structured approach to the oversight process can be implemented that will
support a consistent pipeline methodology within all CI Division
management levels. The strategic team
will identify best practices implemented by field offices for the development
of innovative policies and procedures, as well as evaluate circumstances where
delays in prosecution cause the pipeline inventory to become unmanageable.
The CI Division does not agree with Recommendations 3 and 4 because modifying the CI Management Information System (CIMIS) to differentiate between time expended on management tasks and time expended on investigative actions would be cost prohibitive and would not impact the prosecution pipeline process. The CI Division explained that all investigative activity should at a minimum indirectly impact the progression of an investigation and would have to be timely completed regardless of how time is allocated. In addition, the CI Division will continue to rely on observations and comments provided by the Deputy Commissioner for Services and Enforcement to supplement pipeline inventory information contained in the Business Performance Review. CI Division management (and the Commissioner’s Office) is aware that seeing a case through prosecution requires significant steps beyond making a prosecution recommendation. Extensive pipeline analyses and Business Performance Review talking points are provided to the Chief, Criminal Investigation, Deputy Chief, and Directors, as needed, for reference/discussion in delivering the Business Performance Reviews to the Deputy Commissioner for Services and Enforcement. Management’s complete response to the draft report is included as Appendix VIII.
Office of Audit Comment
We believe the CI Division’s alternate action of examining, rather than specifically agreeing to create,
a more structured oversight and coordination
system will address the concerns we raise in the report related to Recommendation
1. An evaluation of various options is
inherently a prerequisite to creating any structured system.
The CI Division’s disagreement with Recommendation 3 is focused too narrowly on whether it is feasible to modify the CIMIS to differentiate between the nature of activities for expended time. We concede the CI Division’s conclusion that attempting to separately account for the nature of special agents’ time would not be effective. Our recommendation did not specify such a CIMIS modification. Rather, our recommendation was to develop additional data analysis and summary reporting techniques, which can be based on the CIMIS data that are already available. We reported examples that we believe show how the pipeline investigative time percentage measurement is nearly meaningless because of the variety of activities that get attributed to pipeline status. Any assumptions about the nature of the investigative time that makes up the prosecution pipeline percentage of total investigative time would inherently be misleading without determining underlying characteristics. For that reason, we continue to believe that the existing performance measures alone do not provide CI Division executives sufficient information for making sound business decisions.
Regarding the CI Division’s disagreement with Recommendation 4, we understand that CI Division management and the Commissioner’s Office are aware of the degree to which special agents continue to assist Federal prosecutors beyond making a prosecution recommendation. However, as explained in the report and in our comment regarding management’s response to Recommendation 3, we believe escalating volumes and percentages in the prosecution pipeline performance measures do not clearly depict to what extent the CI Division’s ability to balance its investigative workload is hindered by the requirements of successful adjudication of a case. Considering that a variety of investigative activities are applicable to prosecution pipeline status cases, resource use attributed to the pipeline cannot safely be assumed to be for the relatively advanced stages of administering the pipeline inventory or preparing the Government’s case for indictment or trial. We believe the CI Division’s manner of reporting their concerns about the demand for resources required to manage pipeline inventory could imply that pipeline inventory investigative time primarily relates to the advanced stages of prosecution. We do not believe that to be an accurate depiction. As reported, while the Business Performance Reviews are not publicly disseminated, it is possible that the statistics and statements could be conveyed to outside stakeholders.
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 Margaret E. Begg, Assistant Inspector General for Audit (Compliance and Enforcement Operations), at (202) 622-8510.
Stronger Oversight
and Coordination Is Needed to Effectively Manage the Prosecution Pipeline
Process
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix IV –
The Flow of Cases in the Prosecution Pipeline
Appendix
V – Criminal Investigation Division Performance Statistics
Appendix VI
– Status of 4,152 Prosecution Pipeline Cases As of July 31, 2008
Appendix
VII – Glossary of Terms
Appendix
VIII – Management’s Response to the Draft Report
Abbreviations
|
AUSA |
Assistant |
|
CI |
Criminal Investigation |
|
CIMIS |
Criminal Investigation Management Information
System |
|
DOJ |
Department of Justice |
|
FY |
Fiscal Year |
|
IRS |
Internal Revenue Service |
|
USAO |
|
The Internal Revenue Service (IRS) Criminal Investigation (CI) Division investigates potential criminal violations of the Internal Revenue Code and related financial crimes (e.g., money laundering, corporate fraud, and terrorism financing) to promote compliance with the tax law and confidence in the United States’ tax administration system. When the CI Division concludes that a criminal violation has occurred, a prosecution recommendation report is prepared. The report logically presents the evidence to support a recommendation for criminal prosecution and is referred to the Department of Justice (DOJ) for action. Law enforcement organizations, such as the CI Division, do not have the authority to charge people with crimes, negotiate plea agreements, or place individuals on trial. Federal indictments[2] and prosecutions are conducted by the DOJ, normally by attorneys of the various United States Attorneys’ Offices (USAO) across the country. Where a case is initially sent depends on whether the alleged criminal violations are for tax statutes or the alleged violations are for nontax statutes. Appendix IV illustrates the flow of IRS referrals to the DOJ Tax Division or USAOs.
To help prepare the Federal Government’s basis for indictment and
possible trial, CI Division special agents remain involved with the referred
cases. The USAOs rely on special agents
to collect additional information, interview witnesses and prepare them to
testify, prepare exhibits for trial, and assist in court procedures as legal
actions progress. Tax evasion cases can
involve complexities which require special agents to provide expert assistance
throughout the legal process. After
referral, the CI Division categorizes cases as being within its prosecution
pipeline inventory until the DOJ prosecution efforts are completed. For example, charges are dropped, pleas are
negotiated, or the court arrives at a conviction, acquittal, or dismissal.
However, the prosecution pipeline phase is the
stage in a criminal prosecution when the CI Division no longer has control over making
decisions on case progress. Once cases
are referred, DOJ attorneys
decide the prosecution strategy, evaluate the legal circumstances, and present
the time periods for action. The DOJ’s prosecutorial emphasis focuses on
significant national issues and, therefore, there is limited availability of Assistant
United States Attorneys (AUSA) to focus on cases where all alleged criminal
violations relate to tax statutes only. In complex situations, it is not unusual for
cases to be in the prosecution
pipeline
for multiple years and incur hundreds of hours of investigative time on the violations prosecuted. Therefore, a high value for investigative time or elapsed days in the prosecution pipeline does not mean that a prosecution
recommendation had been conducted inefficiently.
While the IRS and USAOs benefit from a close working relationship to help
fight financial crime, the CI Division became concerned that its overall
workload would be affected by the steady growth from 2,733 prosecution pipeline cases at the end of Fiscal Year (FY)
2002 to more than 4,000 cases during FY 2007. The CI Division declared that the expected
volumes of new and completed cases for FY 2008 and forward may not materialize
because of the high volume of cases in the prosecution pipeline that required special agents’ time.
For the past several years, the CI Division was
accustomed to having its open case inventory exceed its prosecution pipeline case inventory. As shown in Figure 1, the number of cases in
the prosecution pipeline increased
quickly beginning in FY 2003. This increase
occurred because FYs 2002 and 2003 had declines in the number of cases closed
with convictions, and FYs 2003 and 2004 had increases each year in the number
of cases referred for prosecution (see Appendix V). In FY 2004, the CI Division experienced
a sharp decline in the number of open cases. As
a result, the difference between the number of open cases and the number of prosecution pipeline cases steadily diminished. These trends continued and, for the first
time in at least 8 years, prosecution
pipeline cases
exceeded the number of open cases. Appendix VI
shows that the 4,152 cases in prosecution
pipeline
status as of July 31, 2008, were nearly equally divided between tax or nontax,
and indicted or not indicted. It also
presents additional information about the number of days elapsed and amounts of
investigative time charged since the IRS made the referrals. After peaking in FY 2008, the prosecution pipeline cases decreased by about 5 percent during
the first half of FY 2009 to 3,906 cases and remained near that level at the
end of FY 2009 at 3,915 cases.
Figure
1: Case Volumes, Percentage of
Investigative Time Spent on Prosecution Pipeline Cases, and Number of Field
Office Special Agents
Figure 1 was removed due to its size. To see Figure 1, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
The CI Division believed the prosecution pipeline’s increase began when the DOJ shifted its
operational priorities to focus on national security issues (e.g., immigration
and terrorism). This shift in focus potentially
caused DOJ attorneys to spend more case time on these significant cases. In addition, the DOJ experienced attorney
staffing shortages nationwide. For
example, an estimate reflected that at one point during FY 2006, there were 765 AUSA
vacancies which were approximately 13.5 percent of authorized
positions. As a result, some CI Division
field offices reported these factors limited the priority of IRS prosecutions
and contributed to a lower number of prosecution pipeline case closures.
As the prosecution pipeline volume increased,
so did the percentage of investigative time expended by the special agents. In FY 2008, special agents spent 23.2 percent of
their investigative time on prosecution
pipeline cases,
leaving 76.8 percent of investigative time available for initiating new cases
or working ongoing cases. In contrast,
special agents spent 14.5 percent of their investigative time on prosecution pipeline cases in FY 2002, leaving 85.5 percent
of investigative time available for other cases. CI Division management acknowledged that a
certain amount of investigative time is always necessary to manage the prosecution pipeline inventory and essential for successful
prosecutions. However, prosecution pipeline investigative time was defined by the
fact that the case had been referred to the DOJ. There was no separation between time spent on
maintenance tasks such as keeping
information current, monitoring the continued viability of the recommended
charges, or otherwise sustaining the cases while they waited for DOJ resources, as contrasted with time spent by special agents
on continued original investigative steps contributing to the prosecution
effort.
During the FY 2008 quarterly Business Performance Review process, the CI
Division began reporting to the IRS Commissioner’s office that, “decreased
agent staffing, increased complexity of our investigations, and the demand for
resources required to manage the pipeline inventory has and will continue to
have a negative impact on our current investigative activity.” CI Division management cautioned that
performance measures (such as initiations, completions, prosecution
recommendations, and convictions) might begin trending flat or cycling downward
due to the need for their agents to spend time managing the prosecution pipeline inventory. Throughout these reviews, the CI Division
reported that, “materially reducing the pipeline inventory remains an issue of
paramount importance.”
This audit was performed during the period August 2008
through April 2009 by contacting CI Division personnel at the IRS National
Headquarters in
Stronger Oversight and Coordination Is Needed to Effectively Manage the Prosecution Pipeline Process
While the CI Division recognizes the steady growth of
the prosecution pipeline inventory as an issue of high importance, it has only a
limited overall strategy to materially reduce and manage the inventory. The CI Division’s concern is that increases in the
percentage of investigative time spent on cases in prosecution pipeline status
reduce its ability to initiate new cases or complete ongoing cases, thereby making it difficult
to balance its investigative workload. However, if
the CI Division expects to materially reduce the affect of the prosecution
pipeline on its current investigative workload, significant issues must be actively
considered on a strategic level. The Standards
for Internal Control in the Federal Government[3] addresses management’s need to
comprehensively identify risks and consider all significant interactions at
both the entity-wide and activity levels.
Risks should be analyzed for their possible effect and decisions made on
what actions should be taken.
Only
a limited overall strategy exists to materially reduce the prosecution pipeline
inventory
In its first quarterly FY 2009 Business Performance Review report, the CI Division indicated it had “placed greater emphasis on the material reduction of the pipeline inventory, which remains an issue of paramount importance.” However, the only formal emphasis described by CI Division’s management was the addition of a generally worded performance commitment for FY 2009 in the field office managers’ expectations to emphasize material prosecution pipeline reductions. During our interviews, field office managers indicated that CI Division Headquarters management did not communicate or specify techniques or practices on how to meet the commitment. As a result, each office’s management cadre is left to determine what is applicable to their particular locations. In the final quarterly FY 2009 Business Performance Review report, the CI Division summarized that prosecution pipeline inventory was reduced by recommending dismissal of investigations no longer considered viable for prosecution. At the end of FY 2009, there were 203 fewer pipeline cases than at the beginning of the fiscal year, and there had been 115 more case dismissals as compared to the prior year.
While creating a performance commitment and dismissing cases that are no longer viable for prosecution are ways to reduce the prosecution pipeline inventory, the CI Division did not have an overall, coordinated strategy. Even though field office management has responsibility for determining appropriate local action, successful techniques to reduce the prosecution pipeline inventory should be developed and communicated throughout the CI Division. While local knowledge is indispensable, the identification and use of best practices to reduce the prosecution pipeline inventory will provide opportunities to assist field office management in achieving desired expectations.
We did not identify any other overall strategies that the CI
Division had implemented even though both the IRS and DOJ personnel we
consulted described long-standing challenges that exist in the working
relationship between the two organizations.
Some of the most influential challenges are that the IRS’ tax priorities do not align directly
with the usual DOJ priorities and the significant nontax demands upon
finite USAO resources. For example, we determined during our interviews there
was a common belief that, at times, there
was “limited enthusiasm” for traditional criminal tax cases among some AUSAs as
they prioritized their caseloads. We were advised that some
AUSAs may not have high interest in tax cases due to various reasons, including
their preference for drug, currency, or money laundering cases from the IRS, their
inexperience with the inherent intricacy of tax litigation cases, or their
perception of the general deterrent potential of a tax crime prosecution. Some USAOs regulate the volume of IRS
referrals in these tax cases by raising the suggested dollar threshold for
taking prosecution action in a particular judicial district. Another scenario presented was that, at times,
an AUSA’s first choice was to delay the basic tax cases (i.e., return preparer
and refund fraud) if enough time remained on the statutory limitations period for
an indictment. These situations appear
to be more likely to occur in large metropolitan locations where there might be
more overall crime to address and more law enforcement agencies competing for a
USAO’s attention.
A
coordinated system is not in place to manage the prosecution pipeline inventory
During our interviews with CI Division field office managers, as well as
USAO officials, we determined there was a common belief that the efficiency of moving cases through the prosecution pipeline phase was mostly influenced by the individual relationships established
between the local CI Division management and USAO personnel. The CI Division field office managers arrange
meetings with the USAOs within the judicial districts of their field offices
to, among other things, discuss the IRS’ investigative priorities. However, the frequency of these contacts on
an annual basis is limited. At the
Headquarters level, there were regular meetings as part of a DOJ/IRS Strategic
Planning Commission, though we were advised these meetings did not focus on prosecution pipeline processing
issues. To facilitate the processing of prosecution
recommendations, more extensive communication was to occur on a
case-by-case basis between the AUSAs, special agents, and supervisory agents. Whenever necessary, significant problems in
maintaining progress on a case could be elevated within the CI Division
management chain for resolution with the corresponding USAO management
level. This effort is clearly an
appropriate and necessary practice.
However, it may not always occur timely.
Our review of documentation for a judgmental sample of 38 nongrand jury
tax cases identified significant delays and gaps in communication of 6 months to
16 months between the agents and the assigned AUSAs in 13 (34 percent ) of the
38 cases.
For FYs 2008 and 2009, the CI Division Headquarters relied on their field office managers to engage more with their USAO counterparts as a strategic effort to reduce prosecution pipeline inventory. The CI Division Headquarters assessment of that effort was that “some are better than others” at cultivating effective relationships. The managers we interviewed generally described that they recognize the importance of establishing an effective rapport and they make a concerted effort to enhance healthy working relationships with their USAO counterparts. Occasional comments in our interviews indicated that some personnel believed there were instances where relationships had a detrimental effect on moving cases through the prosecution pipeline phase. Another factor some personnel believed might be creating a detrimental effect on effective relationships is the frequency of management rotations at CI Division field offices, thus hindering a relationship building effort at those levels.
We support the CI Division’s emphasis that all levels, from
case agents up through field office executive managers, must continuously
communicate with their USAO counterparts.
However, we believe the CI
Division should expand the monitoring
of prosecution pipeline inventory issues to identify opportunities for
improvement on both a local and national basis.
The CI Division routinely uses
coordinators to serve as subject matter experts and facilitate investigative processes. A similar concept could be introduced for managing
prosecution pipeline inventory issues. For example, at the national level, a
coordinator could assist with developing guidelines for timely followup with the
AUSAs or triggers for management involvement.
A local level coordinator could then monitor compliance with established
followup guidelines.
Figure 2: Potential Roles for Coordinators
|
National Level Activities |
Local Level Activities |
Example of Activities |
|
Develop a
strategy |
Apply the
strategy |
Current
Headquarters level liaison could be expanded to pursue DOJ buy-in to IRS
action items designed for mutual benefit. |
|
Monitor and
coordinate activities |
Serve as a
subject matter expert on local USAO matters |
Awareness of
which USAOs support certain techniques, such as whether bundling of refund
fraud charges for media attention during the filing season could identify
areas for improvement. |
|
Compile
nationwide data and statistics |
Compile local
data and statistics |
Useful data could
help manage the program and clarify prosecution pipeline measures. For example, an analysis of the ways that a
5 percent reduction in prosecution pipeline inventory was achieved in the
first half of FY 2009. |
|
Enhance working
relationships with DOJ Headquarters |
Enhance working
relationships with local USAOs |
In addition
to being an advocate for the progression of criminal cases, be an accessible
liaison for USAO inquiries on the potential tax code implications of ongoing,
non-IRS cases. |
|
Brief and
advise the Chief, CI Division |
Brief and advise
CI Division field office managers |
Regular
assessments of the ongoing nature of IRS criminal prosecution recommendations
are necessary to allow sound decisions. |
|
Evaluate
unresolved issues having a nationwide impact |
Assist in
resolving conflicts between agents and attorneys |
Should not
remove the special agent and supervisory agent from case management
responsibilities, but can assess the situation for consistent treatment,
acceptable resolutions, or the need to elevate to a higher level. |
|
Evaluate and share
best practices |
Suggest best
practices for evaluation |
For example,
one field office had developed a periodic “top-10” list of priority
prosecution pipeline cases from the IRS perspective that executive management
discussed with the USAO. One field office
had an agent as a liaison present at local USAOs on a rotating basis. |
Source: Our knowledge of the CI Division’s various
coordinator positions and interviews with CI Division management.
We recognize that sometimes tax cases may not warrant high-priority
treatment within a USAO’s workload. In
April 2007, the then IRS Commissioner acknowledged that the USAOs have to run a
balanced program and, obviously, there are higher priorities than tax
prosecutions. However, we believe
the CI Division
should manage its prosecution pipeline processing activities on a more strategic level. This additional emphasis is important
because the Administration and Congress have recently begun to focus on
reducing tax evasion as a way to reduce the tax gap and help ease the current
strain on Federal budgets caused by the economy, potentially resulting in increased demand for CI Division resources.
Recommendations
The Chief, CI
Division, should:
Recommendation
1: Create
a structured oversight and coordination system at National Headquarters, at
each geographic area Field Operations Office, and at select field office
locations that handle the most complex judicial workloads, to monitor and more
effectively manage the prosecution
pipeline process.
Management’s
Response:
IRS management agreed with this
finding but will implement a corrective action different from the recommendation. The CI Division recognizes that management
and oversight of investigations in the pipeline status is imperative to ensure
the appropriate investigative decisions are being made in a manner that is
commensurate with the timely and successful prosecution of the
investigation. The CI Division will
examine the creation of a structured oversight and coordination system to monitor
and more effectively manage the prosecution pipeline process.
Office of Audit
Comment:
We believe the CI Division’s alternate action of examining, rather than specifically agreeing to create,
a more structured oversight and coordination
system will address the concerns we raise in the report. An evaluation of various options is
inherently a prerequisite to creating any structured system. Therefore, a thoughtful examination of this
issue by the CI Division should result in determining what specific
actions are warranted.
Recommendation 2: Create an ad hoc
strategic team to develop innovative policies and procedures to
ensure tax cases receive appropriate attention and resolution by the DOJ.
Management’s
Response:
IRS management agreed with this
recommendation. The CI Division
will create a strategic team to examine how a more structured approach to the
oversight process can be implemented as referred to in Recommendation 1 that
will support a consistent pipeline methodology within all CI Division
management levels. The methodology will
define the pertinent progression of management involvement to ensure tax cases
receive the appropriate attention and resolution by the DOJ. The strategic team will also identify best
practices implemented by field offices for the development of innovative
policies and procedures, as well as evaluate circumstances where delays in
prosecution cause the pipeline inventory to become unmanageable.
More Relevant Performance Measures
Are Needed to Make Management Decisions and Provide a Clear Message to
Stakeholders
The CI Division’s management information system
does not capture the nature of the investigative time expended on cases in the
prosecution pipeline phase
In FY 2008, the CI
Division reported that 23.2 percent of all investigative time was applied
to prosecution pipeline cases, indicating this percentage was
too significant a portion of the total investigative time available. At the end of FY 2009, the CI Division
reported that increased resources had been devoted to the prosecution of
investigations in prosecution pipeline inventory during FYs 2008 and
2009, but the annual measurement of prosecution pipeline
time for FY 2009 went down only slightly to 22.3 percent of all
investigative time. General assessments based on this measurement
of investigative time are nearly meaningless because pipeline status is defined simply by the fact that
the case had been referred to the DOJ
and thus the measure includes time spent by special agents on cases
under a variety of circumstances.
For example, prosecution pipeline time includes tasks necessary to manage cases as they await legal action, such as contacting the AUSAs to determine the case status, ensuring the continued availability of witnesses during periods when attorneys are not actively working the case, and documenting case activity as required for periodic supervisory workload reviews. At the same time, prosecution pipeline time includes activities that are original investigative steps, such as assisting an AUSA by completing a request for additional information, attending court hearings, and preparing for trial. The CI Division cannot rely on this measure to focus on improving the efficiency of the time charged by special agents regarding the relatively basic tasks necessary to monitor and manage their prosecution pipeline cases because there currently is no way to separate the nature of hours applied to a prosecution pipeline case. Likewise, the CI Division cannot rely on this measure to disclose the actual portion of investigative time spent on cases that are developed into prosecution referrals to assist USAO prosecutors achieve a successful prosecution. Of the 4,152 cases in the prosecution pipeline as of July 31, 2008, there were 2,043 (49 percent) cases that had reached indictment status. Our analysis showed that 21.5 percent of the total investigative time on the 2,043 cases was applied during prosecution pipeline status just to obtain the indictment. Taking into consideration the additional investigative time that was applied after the indictments, the percentage increased (to 36.6 percent) and will ultimately be higher by the time these cases are fully decided in court.
Figure 3: Examples
of Large Scale Cases in Prosecution Pipeline Status
|
Case Number |
Program Area |
Hours Before IRS Referral to the
DOJ |
Hours From IRS Referral to
Indictment |
Hours After Indictment to July
31, 2008 |
Total Hours |
Percentage of Total Hours in Prosecution Pipeline[4] |
|
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
|
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
|
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
|
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
***1*** |
Source: Our
analysis of the CI Management Information System (CIMIS).
In addition, in certain situations, the CI Division updates new cases
almost immediately to prosecution
pipeline
status. For example, this scenario
occurs when a USAO asks for the CI Division’s assistance in joining another Federal
agency’s ongoing grand jury investigation.
Another situation is when additional culpable persons are identified and
added as related cases to a CI Division case that has already been referred.
As a result, these types of cases had
nearly all their investigative time recorded as occurring in the prosecution pipeline phase, distorting the measurements of prosecution pipeline activities in the sense that normally the CI Division initially conducts an
investigation, next develops a prosecution recommendation, and then incurs prosecution pipeline status investigative time.
Figure 4: Cases That Quickly Went Into Prosecution Pipeline
Status
|
|
Prosecution Pipeline Inventory on |
Cases to the USAO in 50 Calendar Days or Less |
Cases to the USAO in 10 Calendar Days or Less |
|
Number of Cases |
4,152 |
971 |
546 |
|
Percentage of the
Prosecution Pipeline Inventory |
100 percent |
23.4 percent |
13.2 percent |
|
Number With Zero Hours
Prior to Prosecution Pipeline Status |
747 |
648 |
512 |
|
Percentage With Zero Hours
Prior to Prosecution Pipeline Status |
18 percent |
66.7 percent |
93.8 percent |
|
Percentage of Investigative
Time in Prosecution Pipeline Status |
24 percent |
90.6 percent |
98.6 percent |
|
Portions That Are Money
Laundering |
45.1 percent |
72.1 percent |
76.2 percent |
|
Portions That Are
Narcotics Related |
21.7 percent |
48.7 percent |
57 percent |
Source: Our
analysis of the CIMIS.
Accumulating
cases in prosecution pipeline inventory does not necessarily mean the
CI Division’s resources are being affected on a continuing basis
Figure 5: Cases in
the Prosecution Pipeline for Multiple Years
|
|
Prosecution Pipeline Inventory on |
Cases in Prosecution Pipeline |
Cases in Prosecution Pipeline |
|
Number of Cases |
4,152 |
908 |
448 |
|
Percentage of Prosecution Pipeline Inventory |
100 percent |
21.9 percent |
10.8 percent |
|
Median Years in Prosecution Pipeline Status |
1 year |
3 years |
3.9 years |
|
Percentage With No Status Change Within the Previous 1 Year |
32.3 percent |
77.2 percent |
82.6 percent |
|
Percentage With Investigative Time Applied During the Previous 28-Month
Period of: |
|
|
|
|
10 Hours or Less Total |
4.5 percent |
19.9 percent |
29.5 percent |
|
3 Hours or Less Per Month on Average |
9.7 percent |
39 percent |
50.4 percent |
Source: Our
analysis of the CIMIS.
Our analyses determined the prosecution pipeline process included a variety of circumstances that diminishes the relevance of the performance indicators currently used by the CI Division and communicated to the IRS Commissioner. While the CI Division’s program reports in the Business Performance Reviews are not publicly disseminated, it is possible that these statistics and statements could be conveyed to outside stakeholders. For example, in February 2007, the United States Senate Committee on Finance asked the IRS for information about the perception that the DOJ might have been prosecuting an insufficient number of IRS criminal referrals. The Committee was concerned that such circumstances could potentially lead to increased criminal behavior because taxpayers think the chances of being criminally sanctioned are low. More recently, in October 2009, within the context of the high degree of interest in tax law enforcement on international tax havens, Congress considered a legislative amendment to specify that the DOJ should direct enough money to the Tax Division to ensure a backlog of inactive cases does not develop due to a lack of resources. For these reasons, we believe the CI Division needs to communicate a clear message about its prosecution pipeline role and situation, making internal and external stakeholders aware of the degree that special agents continue to assist Federal prosecutors. In addition, it is important that the CI Division develop ways to refine its measuring and reporting of the potential affects of the extent that investigative time is spent monitoring or managing a prosecution pipeline case versus actively working on a case to assist the DOJ attorneys to a successful prosecution.
Recommendations
The Chief, CI Division, should:
Recommendation 3: Develop additional data analysis and summary reporting techniques that refine the prosecution pipeline volume and investigative time performance measures, and expand the information available for management purposes.
Management’s
Response:
IRS management disagreed with
this recommendation because modifying the CIMIS to differentiate between time
expended on management tasks and time expended on investigative actions would
be cost prohibitive and would not impact the prosecution pipeline process. The CI Division explained that all
investigative activity should at a minimum indirectly impact the progression of
an investigation and would have to be timely completed regardless of how time
is allocated. Pipeline direct
investigative time measures the amount of actual time utilized on cases that
are in pipeline status. Regardless of
whether it is full-blown activity or simple management activity, the time for
the specific activity required, whatever that may be, would be reported as pipeline
direct investigative time.
Office
of Audit Comment: The CI Division’s disagreement with our
recommendation is focused too narrowly on whether it is feasible to modify the
CIMIS to differentiate between the
nature of activities for expended time. We
concede the CI Division’s conclusion that attempting to separately account
for the nature of special agents’ time would not be effective. Our recommendation did not specify such a CIMIS
modification. Rather, our recommendation
was to develop additional data analysis and summary reporting techniques, which
can be based on the CIMIS data that are already available.
As we reported, we believe the relevance of the existing prosecution pipeline performance measures is diminished by a closer analysis of the data. For example, comparing the type of investigation with how quickly it was placed into prosecution pipeline status reveals that many money laundering and narcotics related cases had all or nearly all of the case investigative time charged to pipeline status. The frequency of this scenario would drive upward the percentage of investigative time applied on prosecution pipeline cases even though it was the CI Division’s initial work on the cases. A contrasting scenario would be when the CI Division conducts an investigation, develops a prosecution recommendation, and then subsequently devotes time in prosecution pipeline status to perfect the case for prosecution. We reported additional examples that we believe show how the pipeline investigative time percentage measurement is nearly meaningless because of the variety of activities that get attributed to pipeline status. Any assumptions about the nature of the investigative time that makes up the prosecution pipeline percentage of total investigative time would inherently be misleading without determining underlying characteristics. For that reason, we continue to believe that the existing performance measures alone do not provide CI Division executives sufficient information for making sound business decisions.
Recommendation 4: Ensure that necessary information is added to the quarterly Business Performance Reviews to provide the IRS Commissioner a clear depiction of investigative resources devoted to prosecution pipeline inventory activities.
Management’s
Response:
IRS management disagreed with
this recommendation and will continue to rely on observations and comments
provided by the Deputy Commissioner for Services and Enforcement to supplement
pipeline inventory information contained in the Business Performance
Review. CI Division management (and the
Commissioner’s Office) is aware that seeing a case through prosecution requires
significant steps beyond making a prosecution recommendation. Extensive pipeline analyses and Business
Performance Review talking points are provided to the Chief, Criminal
Investigation, Deputy Chief, and Directors, as needed, for reference/discussion
in delivering the Business Performance Reviews to the Deputy Commissioner for Services
and Enforcement.
Office
of Audit Comment: We understand that CI Division
management and the Commissioner’s Office are aware of the degree to which special
agents continue to assist Federal prosecutors beyond making a prosecution recommendation. However, as explained in the report and in
our comment regarding management’s response to Recommendation 3, we believe escalating
volumes and percentages in the prosecution pipeline performance measures do not
clearly depict to what extent the CI Division’s ability to balance its investigative workload is
hindered by the requirements of successful adjudication of a case. Considering that a variety of investigative
activities are applicable to prosecution pipeline status cases, resource use
attributed to the pipeline cannot safely be assumed to be for the relatively
advanced stages of administering the pipeline inventory or preparing the Government’s
case for indictment or trial. We believe
the CI Division’s manner of reporting their concerns about the demand for
resources required to manage pipeline inventory could imply that pipeline
inventory investigative time primarily relates to the advanced stages of
prosecution. We do not believe that to be an accurate depiction. As reported, while the Business Performance
Reviews are not publicly disseminated, it is possible that the statistics and
statements could be conveyed to outside stakeholders.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective
of this review was to evaluate the growth
in the CI Division’s prosecution pipeline inventory[6] and identify any
potential actions that could be taken to reduce the resources devoted to this
area. To accomplish our
objective, we:
I.
Determined
the ways in which prosecution pipeline
inventory issues could diminish the CI Division’s ability to initiate new cases,
complete ongoing cases, or otherwise sustain positive productivity levels in
the future.
A.
Interviewed
CI Division National Headquarters personnel and obtained their perspective
regarding current conditions, circumstances, and influences and how the growth
in prosecution pipeline
inventory has affected the Division’s ability to meet program goals.
B.
Interviewed
three assigned Special Agents in Charge and seven assigned Assistant Special
Agents in Charge in the field offices judgmentally selected in Step III.A. and
obtained their perspectives about the context and the hindering influence of prosecution
pipeline inventory issues relative to
other factors also detrimental to their performance.
C.
Interviewed
10 Supervisory Special Agents in the judgmentally selected field offices focusing
on the general impact on the local program.
D.
Interviewed
representatives from the DOJ, Tax Division and from the Executive Office of the
USAO in
E.
Interviewed
six representatives from Judicial Districts that correspond with the
judgmentally selected field offices in the USAOs from the Northern District of
Illinois (Chicago, Illinois); the Southern District of New York
(Manhattan, New York); the Eastern District of New York (Brooklyn, New
York); and the Eastern District of North Carolina (Raleigh, North Carolina)
and determined if the CI Division’s efforts to coordinate with these
offices facilitates a high degree of acceptance of criminal referrals for
prosecution and subsequent timely case resolution.
F.
Evaluated
the CI Division’s prior and current efforts to resolve the prosecution pipeline growth by reviewing the 10 most
recently conducted field office Review and Performance Evaluations and the quarterly
Business Performance Reviews for FYs 2006 through 2009.
II.
Determined
statistical trends and the correlation between prosecution pipeline issues and program performance
measurements.
A.
Obtained
an extract of the CIMIS as of July 31, 2008, and determined if the CIMIS tracks
sufficient data to enable management to manage and monitor the resources
expended on managing the prosecution pipeline inventory.
B.
Requested
and received illustrations using current CIMIS data that showed case
initiations, completions, cycle time, and other relevant productivity measures.
III.
Determined
the nature of investigative time and other resources that are required to
manage the prosecution pipeline
inventory to evaluate if they are used efficiently.
A.
Using
the CIMIS data, we determined that the population of cases in the prosecution
pipeline was 4,152 as of July 31, 2008.
We judgmentally selected three CI Division field offices for site
visitations. These locations included
B.
Reviewed
detailed CIMIS data to identify the attributes of the local prosecution pipeline inventory in the three audit sites
to the case-by-case level.
1.
Using these data for the 3 selected sites,
we judgmentally selected a sample of 53 nongrand jury cases from 137 cases
in inventory as of July 31, 2008.
After discussion with CI Division management, we determined nine cases
were since classified as grand jury. In
addition, we excluded five cases because they were related to another in
the sample and one case because we did not receive the documentation
timely. Our case review consisted of 38 cases. We used a judgmental sample in this Step and
in Step III.A. because we did not plan to project our results.
a.
Obtained
and reviewed the case file source documents and reconciled investigative time charges
to case agent history notes and workload.
b.
Interviewed
10 Supervisory Special Agents from the 3 audit sites to determine:
i.
The type of
actions taken by the special agents on the 38 cases while in prosecution
pipeline status.
ii.
If the actions
taken are at the direction of USAO personnel.
iii.
Why would some
cases (grand jury or nongrand jury) have the majority of their investigative
time charged while in the prosecution pipeline?
IV.
Did not
conduct audit tests to determine the accuracy and reliability of the CIMIS data
we received from the CI Division. In
prior audits, our overall assessment has been that CIMIS data are of
undetermined reliability. However, in
our opinion, using the data did not weaken our analysis. During case reviews, we scanned some of the
data and are satisfied that the data we used during this review provide a
reasonable basis for our findings and conclusions.
Internal
controls methodology
Internal controls relate to management’s plans, methods, and
procedures used to meet their mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program
operations. They include the systems for
measuring, reporting, and monitoring program performance. We determined that the following internal
controls were relevant to our audit objective:
the CI Division’s policies, procedures, and practices for managing the prosecution pipeline inventory, including its
automated management information system and established periodic performance
review techniques. We evaluated these
controls by interviewing CI Division and DOJ personnel, reviewing the
CI Division’s self assessments contained in its performance reports, and
reviewing selected source documents for
a judgmental sample of nongrand
jury cases.
Appendix II
Major Contributors to This Report
Margaret E.
Begg, Assistant Inspector General for Audit (Compliance and Enforcement
Operations)
Nancy
A. Nakamura, Assistant Inspector General for Audit (Management Services and Exempt Organizations)
Jeffrey
M. Jones, Director
Marybeth
H. Schumann, Director
Michael
J. Hillenbrand, Acting Audit Manager
Diana
M. Tengesdal, Audit Manager
Timothy
A. Chriest, Lead Auditor
Janice
A. Murphy, Senior Auditor
Ahmed
M. Tobaa, Senior Auditor
Andrea
R. McDuffie, Auditor
LaToya
R. Penn, Auditor
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Deputy Chief, Criminal Investigation SE:CI
Director, Operations Policy and Support,
Criminal Investigation SE:CI:OPS
Director, Strategy, Criminal
Investigation SE:CI:S
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 Internal Control OS:CFO:CPIC:IC
Audit Liaison: Director, Planning and Strategy, Criminal Investigation SE:CI:S:PS
Appendix IV
The Flow of Cases in the Prosecution Pipeline
.The chart was removed due to its size. To see the chart, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
CI Division Responsibilities
In a tax case, the CI Division typically makes the
initial selection, gathers and evaluates the evidence to determine that a tax
crime is present, assembles a prosecution recommendation that is subject to
internal reviews, and ultimately refers the report and associated materials to
the DOJ Tax Division. In contrast, the IRS
refers directly to a USAO those financial cases involving only nontax
violations within the CI Division’s jurisdiction.
Tax Division Responsibilities
The DOJ Tax Division is a national level centralized control
over the flow of tax cases to provide uniformity in the enforcement of tax laws. The Tax Division reviews and evaluates tax
prosecution recommendations, authorizes prosecution, and normally refers the case
to a USAO to be prosecuted. Small
portions of the authorized cases are kept for preparation and trial by
attorneys within the Tax Division or the two DOJ components may handle a
prosecution jointly.
USAO Responsibilities
The USAOs evaluate the strength of the Government’s
legal case and as appropriate determine the need for supplemental investigative
actions, negotiate pleas, prepare the cases for trial, and try the cases in
court. Nontax cases are usually
investigated using a grand jury. This
means an AUSA directs the scope and oversees the progress of the case. The USAOs have broad discretion in managing
their casework and generally can decide to prosecute or not to prosecute in
nontax cases. However, authorized tax
prosecutions cannot be declined without Tax Division approval.
Appendix V
Criminal Investigation Division Performance Statistics[7]
Number of Subject
Investigations Initiated, Referred for Prosecution, Indicted, and Convicted
Each Fiscal Year. Because actions on a specific investigation may cross
fiscal years, the data shown in investigations initiated may not always
represent the same universe of investigations shown in other actions within the
same fiscal year.
The chart
was removed due to its size. To see the
chart, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Appendix VI
Status of 4,152 Prosecution Pipeline Cases As of July 31, 2008
The charts were removed due to
their size. To see the charts, please go
to the Adobe PDF version of the report on the TIGTA Public Web Page.
.
|
·
Tax Cases – 63 percent of those at the Tax Division had been referred
for 180 calendar days or less, 47 percent of those at a USAO but not
yet indicted had been referred more than 1 year ago, and 39 percent of
those at a USAO and indicted had been referred more than 2 years ago. |
·
Tax Cases – 69 percent of those at the Tax Division and 53 percent of
those at a USAO but not yet indicted had 50 investigative hours or less accrued
after being referred, and 58 percent of those at a USAO and indicted had
more than 200 investigative hours accrued after being referred. |
|
·
Nontax Cases – 39 percent of those at a USAO but not yet indicted and
51 percent of those at a USAO and indicted had been referred more than 1
year ago. |
·
Nontax Cases – 56 percent of those at a USAO but not yet indicted had
50 investigative hours or less accrued after being referred and 47 percent of
those at a USAO and indicted had more than 100 investigative hours accrued
after being referred. |
Appendix VII
Business Performance Review – The process establishes a framework
for measuring, reporting, and reviewing a business unit’s performance against
plans established within the Strategic Planning and Budget process. Reported quarterly to the IRS Commissioner’s
Office, the Business Performance Review is one of several communication
vehicles which provide insight into the “big picture,” as well as previews of
potential future workloads.
Field Office – Offices within the four CI Division geographical areas throughout the country with boundaries that range from a portion of a single State to inter-State areas. There were 26 CI Division field offices at the time of our audit. Each field office has a special agent in charge to direct, monitor, and coordinate the criminal investigation activities within that office’s area of responsibility. Several post-of-duty cities are located within each field office.
Indict/Indictment – The official written accusation on behalf of the government outlining charges against a person accused of a criminal offense.
Grand Jury Investigative Process – When attorneys of the USAOs direct the course of an investigation and present evidence to a body of citizens (the jurors of a grand jury) who then determine whether there is probable cause to believe a crime was committed. The courts over the years have established special investigative powers that can make using a Federal grand jury more efficient than not having a prosecutor involved during the investigation. The grand jury process has a secrecy rule under the Federal Rules of Criminal Procedure, 18 U.S.C. Rule 6. Special agents working under the direction and authority of a prosecutor cannot disclose matters occurring before the grand jury. Due to the nature of nontax crimes within the CI Division’s jurisdiction, most cases are conducted jointly with at least one other Federal Government law enforcement agency and use the grand jury process to facilitate the cases.
Open Case Inventory – An investigation of an individual or
entity alleged to be in noncompliance with the laws enforced by the IRS where a
determination has not yet been made whether a crime was committed or the case
warrants a recommendation for
prosecution.
Prosecution Pipeline Inventory – Cases where the IRS CI Division has
made criminal prosecution recommendations and the DOJ has either 1) not declined
the case for prosecution or 2) not yet completed the legal process to arrive at
a conviction, acquittal, or dismissal in court. In other words, the CI
Division’s prosecution pipeline inventory is part of the “open inventory” at the
DOJ (Tax Division) or at a USAO. The CI
Division’s role in prosecution pipeline status cases is to assist DOJ attorneys
to prepare the Federal Government’s case for indictment and possible trial. The calculation of prosecution pipeline
statistics does not include fugitives, cases awaiting sentencing, or cases
under appeal.
Special Agent – A duly sworn CI Division Federal Government law enforcement officer trained as a financial investigator.
Tax Gap - The difference between the annual
Federal tax obligation and the amount of tax the taxpayer pays voluntarily and
timely.
Appendix VIII
Management’s Response to the Draft Report
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
Criminal
Investigation
March 8, 2010
MEMORANDUM FOR MICHAEL R. PHILLIPS
DEPUTY INSPECTOR GENERAL FOR AUDIT
FROM: for Victor S.O. Song /s/ Rick Raven
Chief, Criminal Investigation (SE:CI)
SUBJECT: Criminal Investigation Division Resources Devoted to Supporting Recommended Prosecutions Con Be Enhanced With a Stranger Strategic: Focus (Audit # 200810008)
The following is Criminal Investigations (CI) response to the above named report. Please incorporate this memorandum in the response to the Treasury Inspector General for Tax Administration (TIGTA).
Criminal Investigation realizes the impact of an escalating prosecution pipeline inventory has on its investigative resources, as well as the need to ensure that management is providing the necessary oversight and direction to effectively manage the pipeline inventory. Effective management and oversight is a priority for all CI’s investigative processes and programs, but administering the pipeline inventory is unique in that, as reflected in the report, once referred for prosecution many .external factors control the progression of .an investigation through the adjudication process. Nevertheless, CI management has initiated efforts to more effectively address the pipeline concerns with the Department of Justice (DOJ) and United States Attorney Offices (USAO).
Management requests that field offices review there pending prosecution pipeline to assess the prosecution potential of the many investigations where activity has been dormant. As a result, there is a mutual understanding with the DOJ and the USAO that CI may purge from its pipeline inventory investigations where the prosecution potential has diminished.
Because successful prosecution of tax evaders is the indispensable element of fostering deterrence and enhancing voluntary compliance, the expenditure of investigative resources on the pipeline inventory is essential for successful adjudication of CI criminal cases. Preparing the government’s case for indictment and trial, while providing the taxpayer with due process of law, is both time consuming and resource intensive. As the special agent workforce continues to decline, the percentage of direct investigative time expended on the pipeline will continue to increase. As more time and investigative resources are expended on the pipeline inventory, fewer resources are available to initiate and complete investigations. Criminal Investigation will continue to aggressively monitor the progress of investigations through the pipeline prosecution process, and its impact on special agents’ ability to effectively conduct new and existing investigations.
Listed below are comments related to the specific recommendations contained in your report.
Recommendation 1:
Create a structured and coordinated oversight system at National Headquarters, at each geographical area Field Operation, and at selected field office locations that handle the most complex judicial workloads, to monitor and more effectively manage the prosecution pipeline process.
Corrective
Action(s)
Criminal Investigations recognizes that management and oversight of investigations in the pipe1ine status is imperative to ensure the appropriate investigative decisions are being made in a manner that is commensurate with the timely and successful prosecution of the investigation. Criminal Investigation will examine the creation of a structured oversight and coordination system to monitor and more effectively manage the prosecution pipeline process.
Implementation Date:
Completed: __________ Proposed: 08/15/2010
Responsible Official: Director, Operations, Policy and Support
Corrective Action Monitoring Plan: N/A
Recommendation 2:
Create an ad hoc strategic team to develop innovative policies and procedures to ensure tax cases received appropriate attention and resolution by the DOJ.
Corrective
Action(s)
Criminal Investigation will create a strategic team to examine how a more structured approach to the oversight process can be implemented as referred to in Recommendation 1 that will support a consistent pipeline methodology within all Criminal Investigation management levels. The methodology will define the pertinent progression of management involvement to ensure tax cases receive the appropriate attention and resolution by the DOJ. The strategic team will also identify best practices implemented by field offices for the development of innovative policies and procedures, as well as evaluate circumstances where delays in prosecution cause the pipeline inventory to become unmanageable.
Implementation Date:
Completed: __________ Proposed: 08/15/2010
Corrective Action Monitoring Plan: N/A
Recommendation 3:
Develop additional data analysis and summary reporting techniques that refine the prosecution pipeline volume and investigative time performance measures, and expand the information available for management purposes.
Corrective
Action(s)
Criminal Investigation does not agree with the recommendation to modify CIMIS to separately account for time expe3nded in managing the investigation through the various legal processes. The report differentiates the application of time in an “inactive mode” or the general management of the case through the prosecution cycle versus time expended towards the more “positive attributes” of the investigation. Examples of basic management asks reflected on page 10, par. 1 may appear to be diminutive, but failure to complete these tasks might result in negative consequences when it is time to indict and vital witnesses cannot be located. Even time expended during supervisory workload reviews should be considered investigative as guidance and direction provided by the supervisor is instrumental in the completion of pipeline activities. It is agreed there are ancillary tasks that musts be performed during the period of an investigation is in the pipeline status, but many of the same ancillary tasks performed during the investigation before being referred are recorded in CIMIS as direct investigative time. There is not any separation of time expended for management or investigative activities in the pre-referral process, nor should be for activities occurring during the post referral process because all actions are considered integral to the successful prosecution of the investigation.
As all investigative activity should at a minimum indirectly impact the progression of an investigation, it would be difficult to distinguish or define additional measures within the CIMIS reporting process or create an application that would account for case management versus investigative time. It would also put the special agent in a compromising position to properly account for time expended on a pipeline action where subjectively time expended might be viewed as investigative, but actually should be categorized as management time. Page 12 of TIGTA’s report states,” Accumulating cases in pipeline inventory does not necessarily mean the CI Division’s resources are being impacted on a continuing basis”. While that may be true, Pipeline DIT does measure the amount of actual time utilized on cases that are in pipeline status. Regardless of whether it is full-blown activity or simple management activity, the time for the specific activity required, whatever that may be, would be reported as Pipeline DIT.
The preparation of Ad Hoc reports for management that can delineate time expended for each stage in the prosecution process from the referral of the investigation until the final adjudication process can be provided by CI’s Research section. However, to differentiate “management” tasks and investigative actions would be cost prohibitive and would not impact the prosecution pipeline process as both are part of the investigation process performed to sustain a successful indictment and prosecution, and would have to be timely completed regardless of how time is allocated.
Implementation Date
Completed: N/A Proposed: N/A
Responsible Official: Director, Strategy
Corrective Action Monitoring Plan: N/A
Recommendation 4:
Ensure that necessary information is added to the quarterly Business Performance reviews to provide the IRS Commissioner a clear depiction of investigative resources devoted to prosecution pipeline inventory activities.
Corrective Action(s)
Criminal Investigation will continue to rely on observations and comments provided by the Deputy Commissioner to supplement pipeline inventory information contained in the BPR. Criminal Investigation management (and the Commissioner’s Office) is aware that seeing a case through prosecution requires significant steps beyond making a prosecution recommendation (i.e., assisting in the interview of and/or preparation of witnesses for grand jury testimony; assisting in responses to motions and preparation of plea agreements; trial preparation and assistance; etc…). In past Quarterly Business Performance Review reports (BPR), CI has completed extensive pipeline analyses and provided BPR talking points to the Chief, Deputy Chief, and Directors, as needed, for reference/discussion in delivering the BPRs to the Deputy Commissioner.
Implementation Date
Completed: N/A Proposed: N/A
Responsible Official: Director: Strategy
Corrective Actions Monitoring Plan: N/A
If you have any questions, please contact Kay Jernigan, Acting Director of Planning and Strategy (SE:CI:S:PS), at (202) 927-0120, or John Cooney, Acting Assistant Director, Planning and Strategy (SE:CI:S:PS) at (202) 622-3263.
[1] See Appendix VII for a glossary of terms.
[2] See Appendix VII for a glossary of terms.
[3] GAO/AIMD-00-21.3.1, dated November 1999.
[4] Percentage derived by adding hours before and after indictment and dividing by the total hours.
[5] This number includes the 546 cases that went into a pipeline status within only 10 calendar days or less from the date the case was initiated.
[6] See Appendix VII for a glossary of terms.
[7] Statistical Portrayal of the Criminal Investigation Division’s Enforcement Activities for Fiscal Years 2000 Through 2008, page 31 (Reference Number 2009-30-053, dated March 26, 2009).