The Office of National Drug Control Policy (ONDCP) distributed about $1.3 million to the Internal Revenue Service (IRS) in Fiscal Year 1998 for High Intensity Drug Trafficking Area (HIDTA) activities. HIDTA funds are intended to provide resources for the IRS’ participation in multi-agency task forces formed to disrupt drug trafficking organizations.

The Assistant Commissioner (Criminal Investigation) completed the corrective actions provided in the prior audit report. Based on our limited testing, we believe these actions have been effective in building a stronger control environment over HIDTA funds.

The Criminal Investigation Division (CID) revised its financial guidelines to provide better guidance and accountability for managers regarding the use of HIDTA resources. For the projects we reviewed, HIDTA funds were used for drug control activities consistent with ONDCP guidelines and strategies.

The CID is using the Project Cost Accounting Subsystem on the IRS’ Automated Financial System to track HIDTA expenditures by project, rather than by district office. Coding by project has increased the accuracy of reporting the costs of HIDTA operations to the ONDCP.

Other federal law enforcement agencies directly pay for certain HIDTA expenses of the IRS special agents. To minimize the risks of possible duplicate or excessive payments, the CID now uses Memoranda of Agreement to fix responsibility for the control and use of HIDTA funds in these situations.

Management’s Response: The Assistant Commissioner (Criminal Investigation) agreed to the facts in the report. Management’s complete response to the draft report is included as Appendix VI.