TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
Enhancements Could Be Made
to Minimize Internal Revenue Service Employee and Volunteer Return Preparation
Program Participant Integrity Issues
November 2005
Reference Number: 2006-40-005
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.
Phone Number |
202-927-7037
Email Address | Bonnie.Heald@tigta.treas.gov
Web Site
|
http://www.tigta.gov
November 1, 2005
MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT
DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Enhancements Could Be Made to Minimize Internal Revenue Service Employee and Volunteer Return Preparation Program Participant Integrity Issues (Audit # 200540015)
This report presents the results of our review to assess the adequacy of controls and
procedures related to ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)*** the Convenience Check
Program and the ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)*** in the Volunteer Return
Preparation Program (VRPP).[1]
Synopsis
The Treasury Inspector General for Tax Administration (TIGTA) initiated this review to assess the controls and procedures that may have facilitated integrity violations ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
The SB/SE Division Convenience Check Processing Guide requires Lien Imprest Fund Cashiers to reconcile their Citibank statements with their check register on a monthly basis. The cashier is to submit the reconciliation statement for review and approval by the Approving Official, who will then forward it to a Budget Analyst for final review. However, the Guide does not require Lien Imprest Fund Cashiers to submit any supporting source documentation with the monthly statement reconciliation.
***(b)(3): 26 U.S.C. 6103, (b)(7)(C)*** Requiring Lien Imprest Fund Cashiers to submit supporting source documentation may deter dishonest employees from preparing unauthorized checks. In addition to the Lien Program, the IRS also uses Convenience Checks in the Imprest Fund, the Procurement Program, the Property Appraisal and Liquidation Specialist Program, and the Public Transportation Subsidy Program. As a result, we believe Approving Officials should be required to review supporting source documentation in each of the programs that process Convenience Checks.
In addition, current Volunteer Income Tax Assistance (VITA)/TCE training materials provide minimal warnings on accepting payments for volunteer activities but do not adequately address the misuse of Government computers. As the IRS moves away from return preparation, it needs to take action to ensure VITA/TCE participants are cautioned about misusing Government computers and accepting payments for volunteer activities.
Recommendations
We recommended the Chief, Agency-Wide Shared Services, revise the Lien Program procedures and other Convenience Check Program procedures to require Approving Officials receive and review supporting source documentation during the monthly Citibank statement reconciliations. We also recommended the Commissioner, Wage and Investment Division, enhance existing training materials and information provided to VITA/TCE participants, reminding them that Government computers should not be used for personal business and that payments should not be accepted for preparing tax returns. In addition, VITA/TCE participant training should include this specific case as an example of activities that are contrary to VRPP policies.
Response
IRS management agreed with both recommendations. All actions are approved and in place to resolve the first recommendation. Convenience Check cardholders are required to provide supporting documentation for all payments appearing on their monthly Citibank statement and training programs have been updated to reflect that requirement. In addition, program guidelines for Approving Officials have been updated to provide additional guidance for conducting monthly reviews. Specifically, Approving Officials are now required to conduct detailed reviews and follow-up on any payment that is not specifically written to a county clerk’s office.
To address the second recommendation, a newly designed publication, Welcome to the IRS Computer Loan Program (Publication 4473), will be included with each computer provided to VITA/TCE participants. Although the publication has already been printed this year, it will be updated in 2006 to further emphasize the misuse of Government computers. In addition, while various training materials presently reinforce the prohibition of accepting payments for preparing tax returns, this specific case will be included in VITA/TCE participant training as an example of an activity that is contrary to VRPP policies. Management’s complete response to the draft report is included as Appendix IV.
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 Scott A. Macfarlane, Acting Assistant Inspector General
for Audit (Wage and Investment Income Programs), at (925) 210-7027, ext. 102.
Controls Could Be
Enhanced to Help Identify and Deter Unauthorized Convenience Checks
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
IV – Management’s Response to the Draft Report
This review was initiated in response to integrity violations by ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
The Treasury Inspector General for Tax Administration (TIGTA) initiated this review to assess the controls and procedures that may have facilitated integrity violations ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***Volunteer Income Tax Assistance (VITA)/TCE participants are required to annually sign a VRPP Standards of Conduct statement. In addition, VITA/TCE participants who are provided with Government computers are required to sign a Property Loan Agreement.
We limited our review to evaluating the controls and procedures related to the ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***Convenience Check Program and the ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
This review was performed in the SB/SE Division Headquarters
in
The SB/SE Division Convenience Check Processing Guide required the Lien Imprest Fund Cashiers to reconcile their Citibank statements with their check register on a monthly basis. ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)*** The Guide did not require Lien Imprest Fund Cashiers to submit any supporting source documentation with the monthly statement reconciliation. ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
During Fiscal Year (FY) 2005, the SB/SE Division began
centralizing the processing of Convenience Checks for the Lien Program in its
Cincinnati Campus[4]
in
The draft Administrative Imprest Fund Handbook in the IRM states the Approving Official will ensure “supporting documentation for each transaction is appropriate and properly completed.” However, during the monthly reconciliation of the Citibank statements, the Approving Official still does not receive any of the supporting source documentation that could be used to identify suspicious checks. The IRS does require Approving Officials to have supporting documents when reconciling Citibank statements from the Purchase Card Program used by the IRS to procure small purchases.
***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***. Requiring the Lien Imprest Fund Cashiers to submit supporting source documentation may deter dishonest employees from preparing unauthorized checks. In addition to the Lien Program, the IRS also uses Convenience Checks in the Imprest Fund, the Procurement Program, the Property Appraisal and Liquidation Specialist Program, and the Public Transportation Subsidy Program. As a result, we believe Approving Officials should be required to review supporting source documentation in each of the Convenience Check processing programs.
Recommendation
Recommendation 1: To help ensure all Convenience Checks that are issued are authorized, the Chief, Agency-Wide Shared Services, should revise the Lien Program procedures and the other Convenience Check Programs procedures to require Approving Officials be provided supporting source documentation when reviewing monthly Citibank statement reconciliations.
Management’s Response: All actions are approved and in place to resolve this recommendation. Convenience Check cardholders are required to provide supporting documentation for all payments appearing on their monthly Citibank statement and training programs have been updated to reflect that requirement. In addition, program guidelines for Approving Officials have been updated to provide additional guidance for conducting monthly reviews. Specifically, Approving Officials are now required to conduct detailed reviews and follow-up on any payment that is not specifically written to a county clerk’s office.
Training Materials Could Be Enhanced to Help Deter Inappropriate
Activities by Volunteer Return Preparation Program Participants
Although the local Inventory Control and Self-Certification Form ensured VITA/TCE participants in the ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***area were aware that Government computers in the VRPP were not to be used for personal business, ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
Each year, VITA/TCE participants are required to sign the VRPP Standards of Conduct Form (Form 13615) that limits their activities to free voluntary tax return preparation. Specifically, the Standards of Conduct states:
I will not solicit business from taxpayers I
assist.
I will not accept payment for the services I provide.
During the 2003 Filing Season,[5]
VITA/TCE participants receiving
Government computers were also required to sign an Inventory Control and Self-Certification
Form that limited the use of these computers to voluntary tax preparation.
When the responsibility for controlling the Government
computers used in the VRPP was centralized at the end of the 2004 Filing Season,
the Modernization and Information Technology Services Division’s Computer Depot
at the Brookhaven Campus in
As the IRS moves away from return preparation, it needs to take action to ensure VITA/TCE participants are adequately cautioned about misusing Government computers and accepting payments for volunteer activities. Currently, VITA/TCE training materials provide minimal warnings on accepting payments for volunteer activities, but do not adequately address the misuse of Government computers. We believe the IRS should build on existing training materials and enhance the information provided to VITA/TCE participants to remind them that Government computers should not be used for personal business and that VITA/TCE participants should not accept payment from the public for preparing tax returns. In addition, we believe VITA/TCE participant training should include this specific case as an example of activities that are contrary to VRPP policies.
The success of the VRPP is dependent upon the reputation it creates in the public forum. Taxpayer confidence in the program will decrease as VITA/TCE participant misdeeds are brought to light in the newspapers and on television. ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
The picture was
removed due to its size. To see the picture,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Recommendation
Recommendation 2: To
preserve the good reputation of the VRPP, the Commissioner, W&I Division,
should enhance the training materials and information provided to VITA/TCE
participants reminding them that Government
computers should not be used for personal business and that payments should not
be accepted for preparing tax returns. In
addition, VITA/TCE participant training
should include this specific case as an example of activities that are contrary
to VRPP policies.
Management’s Response: A newly designed publication, Welcome to the IRS Computer Loan Program (Publication 4473), will be included with each computer provided to VITA/TCE participants. Although the publication has already been printed this year, it will be updated in 2006 to further emphasize the misuse of Government computers. In addition, while various training materials presently reinforce the prohibition of accepting payments for preparing tax returns, this specific case will be included in VITA/TCE participant training as an example of an activity that is contrary to VRPP policies.
Appendix I
Detailed Objective,
Scope, and Methodology
The objective of our review was to assess the adequacy of controls and
procedures related to ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)*** the Convenience Check
Program and ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***the Volunteer Return
Preparation Program (VRPP).[6] To accomplish our objective, we:
I.
Determined if
controls over the Convenience Check Program would timely identify ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***.
A.
Interviewed the
Small Business/Self-Employed (SB/SE) Division Level IV Coordinator, the Agency-Wide
Shared Services (AWSS) Financial Services Manager responsible for the
Convenience Check Program, ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***to identify
current and any planned changes to controls over the Convenience Check Program.
1.
Obtained,
reviewed, and analyzed existing Convenience Check Program policies and
guidelines to determine the sufficiency of current controls.
2.
Obtained,
reviewed, and analyzed any draft policies and guidelines concerning the SB/SE
Division’s plans to centralize the Convenience Check Program to identify any
weaknesses in the planned controls.
B.
Interviewed the
AWSS Financial Services Manager and various program managers responsible for
the Convenience Check Program to determine the status of the planned
centralization of the Convenience Check Program.
C.
Obtained
documentation from the AWSS Financial Services Manager responsible for the
Convenience Check Program on the number of checking transactions and the
related dollar amounts processed through the Convenience Check Program during
Fiscal Year (FY) 2004.
D. ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***
II.
Determined if
existing controls will deter Volunteer Income Tax Assistance (VITA)/Tax
Counseling for the Elderly (TCE) participants from misusing VRPP computers for
personal use.
A.
Interviewed the
national Wage and Investment (W&I) Division VRPP Manager and Seattle VRPP
management contacts and identified:
1.
The process by
which Government computers were provided to VITA/TCE participants
during FYs 2003, 2004, and 2005.
2.
What VRPP computer usage policies or guidelines currently
exist that prohibit the personal use of Government computers.
B.
Obtained from
the national W&I Division VRPP Manager and Seattle VRPP management contacts
any national and local VRPP computer usage policies, guidelines, computer loan
agreements, and Volunteer Agreements for FYs 2003, 2004, and 2005.
C.
Obtained
documentation from the national W&I Division VRPP Manager on the number of
Government computers provided to VRPP participants
during FY 2004.
D.
Reviewed and
analyzed any national and local VRPP computer usage
policies, guidelines, computer loan agreements, and Volunteer Agreements to:
1.
Determine what
computer usage policies, guidelines, computer loan agreements, and Volunteer
Agreements were in place during FY 2003***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***.
2.
Determine what
computer usage policies, guidelines, computer loan agreements, and Volunteer
Agreements were in place for FYs 2004 and 2005.
E.
Compared the
policies, guidelines, computer loan agreements, and Volunteer Agreements to
determine if:
1.
Past guidelines
were too vague and, as a result, ***(b)(3): 26 U.S.C. 6103, (b)(7)(C)***.
2.
Current
guidelines are specific enough to prohibit the misuse of Government computers
and/or if the wording could be reinforced.
Appendix II
Major Contributors
to This Report
Michael
R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income
Programs)
Scott
A. Macfarlane, Acting Assistant Inspector General for Audit (Wage and
Investment Income Programs)
Mary
V. Baker, Director
Bryce
Kisler, Audit Manager
James
Traynor, Lead Auditor
Kenneth
L. Carlson, Jr., Senior Auditor
Sylvia
Sloan-Copeland, Auditor
Appendix III
Commissioner C
Office of the
Commissioner – Attn: Chief of Staff C
Deputy Chief Financial Officer, Department of
the Treasury
Commissioner, Small Business/Self-Employed Division SE:S
Commissioner, Wage and Investment Division SE:W
Chief, Agency-Wide Shared Services OS:A
Director, Collection, Small Business/Self-Employed Division SE:S:C
Director, Communications, Liaison, and Disclosure, Small Business/Self-Employed Division
SE:S:CLD
Director, Customer Assistance, Relationships, and Education, Wage and Investment Division
SE:W:CAR
Director, Employee Support Services, Agency-Wide Shared Services OS:A:EES
Acting Director, Strategy and Finance, Wage and Investment Division SE:W:S
Director, Stakeholder Partnerships, Education, and Communication, Wage and Investment
Division SE:W:CAR:SPEC
Associate Director, Credit Card Services, Agency-Wide Shared Services OS:A:ESS:CCS
Chief Counsel CC
National Taxpayer Advocate TA
Appendix IV
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] This program provides free tax return preparation for eligible taxpayers. It includes the Volunteer Income Tax Assistance and Tax Counseling for the Elderly Programs.
[2] This program provides free tax return preparation for eligible taxpayers. It includes the Volunteer Income Tax Assistance Program and the Tax Counseling for the Elderly Program.
[3] This system supports revenue officers in field offices by tracking lien assignments and lien due dates.
[4] The data processing arm of the IRS. The campuses process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.
[5] The period from January through mid-April when most individual income tax returns are filed.
[6] This program provides free tax return preparation for eligible taxpayers. It includes the Voluntary Income Tax Assistance Program and the Tax Counseling for the Elderly Program.