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Treasury Inspector General for Tax Administration

Press Release

March 5, 2012
TIGTA - 2012-6
Contact: David Barnes
(202) 622-3062

TIGTA Report: IRS Criminal Investigation Can Strengthen Controls Over Its Undercover Operations

WASHINGTON - The Internal Revenue Service (IRS) could strengthen the controls over the undercover operations it uses to detect and investigate criminal tax activity, according to a report released publicly by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS's division of Criminal Investigation (CI) uses undercover operations as an essential technique in the detection and investigation of criminal activity involving tax and money laundering offenses.

TIGTA's review was conducted to determine whether CI has effective policies and procedures to ensure that undercover operations are properly monitored, that expenses are appropriate, and that any income earned is properly controlled.

In addition, TIGTA auditors evaluated the practices used to protect the safety of special agents working on undercover operations. The review is a follow-up to our Fiscal Years 2001 and 2002 reviews of CI undercover operations.

"TIGTA found that other Federal law enforcement agencies respect CI's undercover program because of the financial expertise CI special agents bring to a joint investigation," said J. Russell George, Treasury Inspector General for Tax Administration. "We also found that CI's undercover practices appear to be more thorough in some aspects than those in other Federal agencies."

Although CI took steps to strengthen controls over its undercover operations in response to our Fiscal Year 2002 review, we determined that internal control weaknesses continue to exist because corrective actions were not implemented sufficiently. In addition, some undercover expenditures that could be considered as questionable did not have documentation indicating the expenditures were preapproved.

Further, although CI's undercover agents said their training was sufficient and safety was emphasized, TIGTA believes that additional steps could be taken to protect the identity of undercover agents. We also determined that financial reviews of undercover operations that earned income were not conducted timely.

TIGTA made five specific recommendations to strengthen the undercover program. In their response to the report, IRS officials agreed with the recommendations and stated that they plan to take corrective actions.

Read the report.


Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.

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