Microsoft Word - TIGTA SAR for Web 12-2-03.doc

AUDIT REPORTS WITH SIGNIFICANT UNIMPLEMENTED CORRECTIVE ACTIONS

The Inspector General Act of 1978 requires identification of significant recommendations described in previous semiannual reports on which corrective actions have not been completed. The following list is based on information from the IRS Office of Management Control’s automated tracking system maintained by Treasury management officials.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
093602	April 1999	11/15/03 10/01/05 10/15/03	*The Internal Revenue Service Needs To Improve Treatment of Taxpayers During Office Audits* F-1, R-3, P-2. Require a separation of duties among auditors who identify Midwest Automated Compliance System (MACS) returns with potential tax changes, auditors who select MACS returns to be audited, and auditors who conduct the examinations. F-1, R-4, P-2. Ensure that all MACS data discs forwarded from the MACS Development Center to district offices are properly accounted for and secured. F-2, R-4, P-1. Clarify the Internal Revenue Manual to provide specific guidance for conducting correspondence audits in district office settings.
1999-20-063	August 1999	02/15/04	*The General Controls Environment Over the Internal Revenue Service’s Unisys 2200 Systems Can Be Improved* F-2, R-1, P-1. Standardize control settings for files common to the Unisys 2200 production mainframes.
2000-30-015	December 1999	01/01/04	*Consolidated Report on Opportunities for the Internal Revenue Service to Improve Service to Business Taxpayers* F-2, R-1, P-1. Expand the current Federal Tax Deposits alert reengineering effort to re-evaluate the cost effectiveness of the Program.
2000-30-059	March 2000	01/15/05 01/15/05 03/15/04	*The Internal Revenue Service Can Improve the Estate Tax Collection Process* F-2, R-2, P-1. Develop procedures to periodically reconcile tax liens on the Automated Lien System (ALS) with information shown on the taxpayer accounts. F-2, R-3, P-1. Clarify procedures to employees that all estate tax liens should be recorded on the ALS. F-3, R-4, P-1. Coordinate to develop a procedure to identify accounts with multiple assessments and collection statute dates to ensure partial abatements occur when the earliest Collection Statute Expiration Date is reached.
2000-20-094	June 2000	01/15/04 01/02/04 01/01/04	*A Comprehensive Program for Preventing and Detecting Computer Viruses Is Needed* F-2, R-1, P-1. Develop and implement IRS-wide procedures detailing the frequency and steps to be followed for reliably updating anti-virus software on both networked and portable notebook computers. F-2, R-2, P-1. Establish controls for ensuring all updates have been successfully accomplished. F-3, R-1, P-1. Develop a system for gathering information to help analyze and monitor the effectiveness of the program’s virus detection and prevention activities.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
2000-30-120	August 2000	04/15/04	*Expanding the Electronic Tax Law Assistance Program* F-1, R-1, P-1. To meet its Electronic Tax Administration goals, the IRS needs to redesign the Electronic Tax Law Assistance program to leverage technology that will provide enhanced access to tax information, maximize efficiency, and improve electronic customer service.
2000-30-130	September 2000	04/15/04	*Opportunities Exist to Enhance the International Field Assistance Specialization Program* F-2, R-1, P-1. Improve the management information system by linking the International Field Assistance Specialization Program indicator to specific issues listed in the International Case Management System.
2000-30-154	September 2000	01/01/04	*Significant Improvements Are Needed in Processing Gift Tax Payments and Associated Extensions to File* F-1, R-1, P-1. Require that all balance due notices generated for gift tax accounts be reviewed. Tax examiners should be instructed to review the taxpayers’ corresponding individual income tax and gift tax accounts to determine if the taxpayers’ gift tax payments and extensions were correctly processed.
2000-30-162	September 2000	11/15/03 P-1: 11/15/03 P-2: 11/15/03 P-1: 11/15/03 P-2: 11/15/03	*The Internal Revenue Service Needs to Better Address Bankruptcy Automatic Stay Violations* F-1, R-2, P-1. Provide additional computer programming enhancements to improve the value of litigation transcripts. F-2, R-1, P-1, P-2. Request that the Automated Insolvency System be reprogrammed so that the actual receipt date of the case can be input into the system to provide management with more accurate data on timeliness of input of new case information. F-2, R-2, P-1, P-2. Ensure that all employees review the Potentially Invalid Taxpayer report and resolve all cases promptly to ensure timely posting of the bankruptcy to the taxpayer’s account.
2001-30-014	November 2000	12/15/03	*The Internal Revenue Service Does Not Effectively Use the Trust Fund Recovery Penalty as a Collection Enforcement Tool* F-1, R-5, P-1. Make programming changes to the Automated Trust Fund Recovery System to ensure that delinquent tax returns are addressed when making trust fund recovery penalty calculations.
2001-10-027	January 2001	03/31/03	*Improved Case Monitoring and Taxpayer Awareness Activities Can Enhance the Effectiveness of the Tax Practitioner Disciplinary Proceedings Program* F-1, R-1, P-1. Upgrade the automated case management system to provide more timely and accurate data on case activities and the use of program resources.
2001-20-043	February 2001	10/15/03 11/15/03	*Electronic Signature Initiatives Could Be Better Defined and Evaluated* F-1, R-1, P-1. Finalize IRS requirements for the use of Personal Identification Numbers as alternative signatures for electronically filed returns based on evolving guidance and the draft IRS authentication security policy and implementation guide. F-1, R-2, P-1. Ensure that all operational alternative signature initiatives comply with the requirements.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
2001-30-052	March 2001	01/01/04 01/01/04 P-1: 01/01/07 P-2: 01/01/07	*Program Improvements Are Needed to Encourage Taxpayer Compliance in Reporting Foreign Sourced Income* F-1, R-1, P-1. Ensure the prior recommendations are implemented. Establishing a formal program with goals, objectives, processes and measure could help ensure that sufficient management attention is devoted to improving the use of the Routine Exchange of Information Program for compliance. F-2, R-1, P-1. Identify the highest risk foreign sourced income documents and use them to coordinate with tax treaty partners to positively identify the U.S. taxpayers involved. F-3, R-1, P-1, P-2. Improve systems that process data the IRS receives on foreign sourced income.
2001-30-099	June 2001	P-2: 02/15/04 P-3: 02/15/04	*Management Advisory Report: The Internal Revenue Service Could Reduce the Number of Business Tax Returns Destroyed Because of Missing Information* F-1, R-1, P-2, P-3. Make necessary modifications to tax forms and instructions to ensure taxpayers understand that their names, addresses, and taxpayer identification numbers are required on both their tax forms and payment vouchers.
2001-20-146	August 2001	01/15/04	*The Internal Revenue Service Is Making Progress, But Is Not Yet in Full Compliance With the Requirements of the Clinger-Cohen Act* F-1, R-1, P-1. Prepare an overall strategy, plan and schedule to bring the IRS in full compliance with the Clinger-Cohen Act.
2002-30-042	December 2001	10/15/03	*The Internal Revenue Service Has Made Some Progress, but Significant Improvements Are Still Needed to Reduce Errors in Manual Interest Calculations* F-1, R-2, P-1. Establish a national quality review process that includes all restricted interest cases.
2002-10-009	January 2002	10/01/03	*GPRA: Criminal Investigation Can Improve Its Performance Measures to Better Account for Its Results* F-2, R-1, P-1. Establish a process by which the Criminal Investigation Management Information System data will be verified and validated.
2002-30-050	February 2002	03/15/04 01/15/04 10/01/03	*Significant Efforts Have Been Made to Combat Abusive Trusts, but Additional Improvements Are Needed to Ensure Fairness and Compliance Objectives Are Achieved* F-2, R-1, P-1. Ensure the Abusive Trust Program consistently applies the accuracy-related penalty in accordance with IRS policy, in order to help ensure fair and equitable taxpayer treatment. F-2, R-2, P-1. Provide examiners with formal guidance on the appropriate application of the accuracy-related penalty, in order to help ensure its consistent application. F-4, R-1, P-1. Develop a system to capture the results of U.S. Income Tax Returns for Estates and Trusts (Form 1041) examinations that would provide management with information on emerging abusive trust issues, further noncompliance and allocate resources to maximize audit results.
2002-30-062	March 2002	01/01/04	*The Internal Revenue Service Continues to Owe Millions of Dollars in Interest to Taxpayers with Frozen Refunds* F-1, R-1, P-1. Modify the IRS’ computer system to systemically release the newly established Million Dollar Freeze for credit balances that fall below the $10 million threshold.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
2002-30-062	March 2002	P-1: 01/01/04 P-2: 01/01/04 P-1: 03/01/04 P-2: 03/15/04	*The Internal Revenue Service Continues to Owe Millions of Dollars in Interest to Taxpayers with Frozen Refunds* F-1, R-2, P-1, P-2. Establish indicators on key computer screens and generate periodic notices as alerts for employees to review accounts with Million Dollar Freeze and take appropriate resolution actions. F-2, R-1, P-1, P-2. Coordinate efforts to provide updated training for employees that manually initiate refunds.
2002-10-078	March 2002	12/15/03 12/15/03 12/15/03	*The Internal Revenue Service’s Levy Process Can Be Improved to Ensure Compliance With the Internal Revenue Code* F-1, R-2, P-1. Ensure that revenue officers review available information to properly identify levies issued by Automated Collection System personnel and ensure the levies are appropriately released prior to closing a case Currently Not Collectible (CNC) (Hardship). F-1, R-3, P-2. Before approving a CNC (Hardship) case closure, the case files should be reviewed to ensure levies are released, if appropriate, in compliance with the Internal Revenue Code. The revenue officer should document in the case history the reason why a levy was closed rather than released. F-2, R-2, P-1. Ensure that a hardship determination is made before approving cases closed CNC.
2002-30-125	July 2002	06/15/03 02/01/04 05/15/04 02/01/04	*The Internal Revenue Service Does Not Always Address Subchapter S Corporation Officer Compensation During Examinations* F-1, R-1, P-1. Provide technical guidance and resources (such as software) to field personnel to aid in determining reasonable officer compensation. F-2, R-1, P-1. Submit a Request for Information Services (RIS) that would require the corporate distributions on the Schedule M-2 to be input to the IRS’ computer system during returns processing, and therefore available to the IRS Midwest Automated Compliance System (MACS) database. F-3, R-1, P-1. Submit a RIS to existing (and/or future) information systems (such as Examination Operational Database) to identify officer compensation-related adjustment assessments made to S Corporation employment tax accounts. F-4, R-1, P-1. Establish consistent materials for educating and informing taxpayers and representatives of their S Corporation officer compensation tax obligations.
2002-30-141	July 2002	10/01/03	*The Internal Revenue Service Successfully Processed Schedules K-1 for Its Matching Program. However, Tax Form Changes Would Reduce Unnecessary Notices to Taxpayers* F-3, R-1, P-1. Make changes to the U.S. Individual Income Tax Return, Supplemental Income and Loss (Form 1040, Schedule E) as recommended in the District Office Research and Analysis study. Consideration should be given to classifying and reporting pass through income to facilitate easier comparisons to Schedules K-1 and to make the matching program more effective and less subject to extensive manual screening.
2002-40-144	August 2002	03/15/04	*Computers Used to Provide Free Tax Help and That Contain Taxpayer Information Cannot Be Accounted For* F-1, R-1, P-1. Perform a physical inventory of all computers included in the IRS’ Volunteer Income Tax Assistance/Tax Counseling for the Elderly (VITA/TCE) Program. This inventory should include verification of computers presently recorded on the Information Technology Asset Management System (ITAMS) as well as identification of computers in the VITA/TCE Program that are not yet recorded on ITAMS.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
2002-40-144	August 2002	12/31/04	*Computers Used to Provide Free Tax Help and That Contain Taxpayer Information Cannot Be Accounted For* F-1, R-6, P-1. In the long term, pursue legislative changes that would allow IRS to transfer ownership of the computers to the VITA/TCE organizations.
2002-30-156	September 2002	07/01/04	*The Internal Revenue Service Does Not Penalize Employers that File Wage and Tax Statements with Inaccurate Social Security Numbers* F-1, R-1, P-1. Ensure that the IRS initiate, as proposed in their response to our memorandum dated February 1, 2002, a regularly scheduled program for proposing penalties for Wage and Tax Statements (Forms W-2) with inaccurate name/Social Security Number combinations.
2002-30-186	September 2002	P-1: 01/15/04 P-2: 01/15/04 P-1: 01/15/04 P-2: 01/15/04 01/15/04 01/15/04	*The Internal Revenue Service Needs to Simplify Filing Requirements and Clarify Processing Procedures for Small Business Corporate Returns* F-1, R-1, P-1, P-2. Simplify the process of filing election forms and U.S. Income Tax Returns for an S Corporation (Form 1120S) for new filers by determining if there are alternatives to make it easier for first-time filers to be granted elections and file their Forms 1120S, and by considering implementing alternatives and seeking modification of the legal requirements, as necessary. F-1, R-2, P-1, P-2. Develop procedures that would improve and simplify the process for approving, recording, and controlling elections and the related notification process to make it easier for taxpayers to file their Forms 1120S. F-2, R-1, P-1. Establish procedures for ensuring that IRS records accurately reflect the filing of Forms 1120S once the IRS subsequently verifies that an election was granted. Specific procedures should be developed for converting the Forms 1120 back to the originally intended Forms 1120S. F-2, R-2, P-1. Clarify Internal Revenue Manual procedures and assign responsibility for determining and assessing the correct taxes and issuing statutory notices of deficiency for small business corporate returns that could not be processed because the IRS could not verify that valid elections were filed.
2002-10-187	September 2002	02/15/04 02/15/04 01/15/05 01/15/05 01/01/04 01/01/04	*The New Suspension of Interest Provision Is Not Always Calculated Correctly* F-1, R-1, P-1. Create a systemic reminder when tax audits are completed that would prompt employees and managers to consider whether the suspension of interest provision applies. F-1, R-2, P-1. Incorporate review requirements for the suspension of interest provision in the Examination Quality Review Process system. F-2, R-1, P-1. Identify all taxpayers with under assessed interest caused by the original Master File computer programming, regardless of whether or not the interest had been reestablished on the accounts, and zero out any under assessed amounts to prevent burden on future disaster relief taxpayers or other taxpayers in special military conditions. F-2, R-2, P-1. Identify disaster relief taxpayers and refund the amounts that were automatically collected on the under assessed interest. F-3, R-1, P-1. Submit a request for information services that will change the Master File computer programming for this 1-day discrepancy when calculating suspension of interest. F-3, R-2, P-1. Determine the feasibility of an earlier anticipated operational date of the Master File computer programming modification involving weekend and holidays when calculating suspension of interest.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
2002-10-187	September 2002	01/01/04	*The New Suspension of Interest Provision Is Not Always Calculated Correctly* F-3, R-3, P-1. Identify taxpayers’ accounts for Tax Years 1998 and 1999 with disallowed Earned Income Tax Credit amounts that qualified for suspension of interest and reduce the amount of over assessed interest on these accounts.
2003-40-023	November 2002	10/01/05	*Trends in Customer Service in the Taxpayer Assistance Centers Show Procedural and Training Causes for Inaccurate Answers to Tax Law Questions* F-5, R-2, P-1. Explore other options such as the planned remote monitoring by Taxpayer Assistance Centers (TAC) managers, for conducting quality reviews of TAC employees on a regular basis.
2003-20-035	December 2002	03/15/04 03/15/05 01/15/04 10/01/03 01/15/04	*Additional Cost Savings and Increased Productivity in the Print Operation and Computer Support Function Can Be Achieved at the Campus Locations* F-1, R-1, P-1. Increased coordination should be required with users to discontinue printing reports that are currently available in both printed and electronic format and convert additional reports to the Electronic On-Line/Output Network System (EONS). F-1, R-2, P-1. Establish a process for migrating identified efficient report distribution processes to all campuses. F-1, R-4, P-1. Defer any upgrades of the new printers until the print requirements are re-evaluated based on additional reports being available or on the EONS and the transfer of notice printing to the consolidated print sites. F-2, R-2, P-1. Ensure that performance management reports are created for the print operation and computer support function based on the performance measures established in Recommendation 3. F-2, R-3, P-1. Ensure that managers compare results against performance measure goals and take actions to improve operational efficiency.
2003-40-022	December 2002	10/15/03 09/15/03 10/15/04	*Improvements Are Needed to Prevent the Potential Disclosure of Confidential Taxpayer Information* F-1, R-2, P-3. Evaluate the safeguard procedures to ensure the procedures address the content as well as the security of information shared under I.R.C. � 6103. F-3, R-1, P-2. IRS safeguard procedures should be revised to provide specific criteria on which contractors should have their facilities inspected and to ensure that these inspections are made. F-3, R-2, P-1. Internal safeguard and contract procedures should be revised to ensure they are in agreement and are in compliance with the appropriate laws concerning private contractors.
2003-30-039	January 2003	10/15/03 10/15/03 10/15/03 10/15/03	*Improvements to the Electronic Return Originator Monitoring Program Are Needed* F-1, R-2, P-1. Ensure that historical case documentation is maintained and re-enforce that the purpose of follow-up visits is to measure the impact of the Electronic Returns Originator (ERO) Monitoring Program compliance. F-4, R-1, P-1. Develop a process to determine the proper mix of random and mandatory ERO monitoring visits that also provides for broad geographic coverage. F-4, R-2, P-1. Develop uniform risk-based selection criteria that take advantage of available information and data for selecting EROs for random monitoring visits. F-7, R-1, P-1. Issue a memorandum reinforcing the importance of complete case documentation of ERO monitoring visits.

		PROJECTED	REPORT TITLE AND RECOMMENDATION SUMMARY
REFERENCE NUMBER	ISSUED	COMPLETION DATE	*(F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)*
2003-20-049	February 2003		*Employee Background Investigations Were Normally Completed; However, the Contractor Employee Background Investigation Program Needs Improvement*
		09/12/03	F-2, R-1, P-1. Ensure that policies and procedures are developed to ensure that contractor employee background investigations
			conducted by other government agencies (e.g. General Services
			Administration) are provided to the National Background Investigation
			Center.
		10/15/03	F-2, R-2, P-1. Ensure that a Contracting Officer’s Technical
			Representative (COTR) training supplement is developed to
			emphasize the IRS-specific background investigations requirements and COTR roles, responsibilities and procedures.
		09/12/03	F-2, R-3, P-1. Ensure that all contractor employees have properly paid
		P-2: 10/15/03 P-3: 10/15/03	their tax obligations. F-2, R-4, P-2. P-3. Ensure that background investigations are completed for active contractor employees that obtained
		07/15/04	identification badges without a background investigation. F-2, R-5, P-2. Ensure that personnel in the Real Estate and Facilities area of the Agency-Wide Shared Services are adequately trained
			regarding the requirements for issuing a contractor employee an IRS
		10/15/05	identification badge. F-3, R-1, P-1. Ensure that a consolidated or integrated system is implemented to effectively manage all background investigations
			and identification badges, incorporating the needs of all stakeholders
			and eliminating the use of stand-alone systems such as the Security
			Entry Tracking System and the Procurement Background Investigation
		10/15/05	Program. F-3, R-2, P-1. Ensure that until a single system is implemented, all COTRs
			are required to use the Procurement Background Investigation
			Program regardless of their organizational placement, and complete periodic reconciliations between the contractor employee
			background investigation information and the identification badge
			information at each IRS facility are conducted to detect the issuance
			of contractor employee identification badges without completion of required background investigations.
		10/15/03	F-4, R-1, P-1. Until a consolidated or integrated system is implemented, the systems application controls should be improved to ensure that all
			identification badge systems contain complete and accurate contractor employee information.
2003-10-054	March 2003		*The Internal Revenue Service Needs to Establish an Effective Process to*
			*Accurately Identify, Record, and Report Unemployment Trust Fund Administrative Expenses*
		02/15/04	F-1, R-1, P-1. Develop written procedures documenting a methodology, including the identification of all systems and sources of information, that would ensure the most reasonable and timely means of identifying and reporting all expenses associated with the IRS’ administration of all trust fund taxes.
		02/15/04	F-1, R-2, P-1. Establish controls to ensure that any amounts reported to the Bureau of the Public Debt are reviewed and approved by a senior level IRS executive.
		02/15/04	F-1, R-3, P-1. Ensure that the ability to record and report trust fund administrative expenses, as currently envisioned in the Integrated Financial System development plans is properly implemented.

REFERENCE NUMBER	ISSUED	PROJECTED COMPLETION DATE	REPORT TITLE AND RECOMMENDATION SUMMARY (F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)
2003-10-076	March 2003	P-1: 10/15/03 P-2: 10/15/03 P-1: 02/18/05 P-2: 02/18/05	*Improved Oversight of the Guard Services Contract Is Needed to Ensure Compliance With Contract Terms and Conditions* F-1, R-2, P-1, P-2. Consider changing the award fee plan to make compliance with all contract terms and conditions a prerequisite for the contractor’s award fee eligibility. F-1, R-3, P-1, P-2. Coordinate all remedies with the United States Attorney’s Office and the Office of Investigations regarding all appropriate legal actions.
2003-10-094	March 2003	10/15/03 10/15/03	*Improvements Are Needed in the Monitoring of Criminal Investigation Controls Placed on Taxpayers’ Accounts When Refund Fraud is Suspected* F-1, R-1, P-1. Consider providing future report listings to the Fraud Detection Center (FDC) in an electronic media format and consider changing the frequency of the report from quarterly to twice a year, during non-peak processing periods, to allow the FDC to focus their resources on taking necessary actions to resolve accounts. F-1, R-2, P-1. Ensure that regular reviews of the Questionable Refund Program are conducted to assess compliance with procedures and that feedback is provided regarding program effectiveness. Also, analyses of the FDCs control listing data should be analyzed to ensure reviews are done and accounts are resolved.
2003-20-082	March 2003	P-1: 10/15/03 P-2: 10/15/03 P-3: 10/15/03 P-4: 10/15/03 P-1: 10/15/03 P-2: 10/15/03 P-1: 10/15/03 P-2: 10/15/03 P-1: 10/15/03 P-2: 10/15/03	*Penetration Test of Internal Revenue Service Computer Systems* F-2, R-1, P-1, P-2, P-3, P-4. Assign strong passwords to all accounts, remove unnecessary accounts from all NT Domains, and set all passwords to expire on a regular interval. F-3, R-1, P-1, P-2. Assign strong passwords or use Windows only authentication instead of mixed-mode authentication. F-4, R-1, P-1, P-2. Enforce a lockout threshold in all NT Domains and maintain a consistent password policy for all NT Domains. F-5, R-1, P-1, P, 2. Apply proper security patches and/or registry settings.
2003-20-089	March 2003	01/15/04 01/15/04 01/15/04 06/15/03	*Adhering to Established Development Guidelines Will Help to Ensure the Customer Account Data Engine Meets Expectations* F-1, R-1, P-1. The Business Systems Modernization Office (BSMO) should require the PRIME contractor to complete the remaining work on the balancing, control, and reconciliation process and fully test these processes to ensure they meet the design requirements. F-1, R-3, P-1. The BSMO should monitor the completion of the remaining work contained in the detailed schedule to assess the progress in completing the balancing, control, and reconciliation process development. F-2, R-1, P-1. The BSMO should work with the PRIME contractor to incorporate minimum documentation standards and the Documentation Task Force’s findings into the Customer Account Data Engine (CADE) Release 1 and future releases. (The PRIME contractor is the Computer Sciences Corporation, which heads an alliance of leading technology companies assisting the IRS with modernizing its computer systems and related technology.) F-2, R-2, P-1. The BSMO should work with the PRIME contractor to incorporate these documentation standards into the Enterprise I Cycle (ELC).

		PROJECTED	REPORT TITLE AND RECOMMENDATION SUMMARY
REFERENCE NUMBER	ISSUED	COMPLETION DATE	*(F = FINDING NUMBER, R = RECOMMENDATION NUMBER, P = PLAN NUMBER)*
2003-20-089	March 2003		*Adhering to Established Development Guidelines Will Help to Ensure the Customer Account Data Engine Meets Expectations*
		10/15/03	F-3, R-1, P-1. Ensure that development of job and file naming standards is expeditiously completed by the IRS’ Enterprise Operations Services organization. The BSMO needs to work with the PRIME contractor to ensure that these naming standards are used in the development of future CADE releases and all other IRS modernization projects.

APRIL 1, 2003 – SEPTEMBER 30, 2003

	INSPECTOR GENERAL CONGRESSIONAL TESTIMONY
REFERENCE NUMBER		HEARING TITLE

2003-OT-106		Hearing Before the Senate Finance Committee United States Senate on Tax
		Scams and Schemes

2003-OT-107		Hearing Before the U.S. House of Representatives Committee on Ways and
		Means Subcommittee on Oversight
2003-OT-128		Joint Hearing Before the Committees of the United States Senate and United
		States House of Representatives, The Strategic Plans and Budget of the IRS

2003-OT-153		Hearing Before the U.S. House of Representatives, Committee on the Budget

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE

2003-20-095	Operating System Controls on the Consolidated Mid-Range Computer Systems Can Be Improved
2003-40-098	Fiscal Year 2003 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester and Similar Designations (Taxpayer Rights & Entitlements: 321 taxpayers improperly identified; Reliability of Information: 110 IRM subsections prohibited references to Illegal Tax Protester designations.)
2003-1C-086	Assist Audit Report of Fiscal Years 1998 Through 2001 Incurred Costs on Subcontract Number 862067A
2003-1C-087	Estimating System Deficiencies Found During Audit of Proposed Fiscal Year 2003 Forward Pricing Labor Rates
2003-1C-100	Audit of Final Voucher TIRNO-95-D-00058, Delivery Order Number IR-96-TREA-090530
2003-20-084	Improvements Are Needed to Effectively Implement the Disaster Recovery Strategy for Consolidated Mid-Range Computer Systems

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE
2003-10-099	The Internal Revenue Service Should Closely Monitor the Small Purchase Card Program to Ensure Compliance With Established Rules and Regulations (Protection of Resources: $2.4 million in items purchased from restricted purchase list or that were split purchases.)
2003-40-105	Forms and Publications for the New Education and Retirement Tax Provisions
	Were Addressed for the 2003 Filing Season (Taxpayer Burden: one publication was not updated to reflect the new tuition and fees deduction included in the Economic Growth and Tax Reconciliation Act.)
2003-1C-085	Report on Forward Pricing Direct Labor Rates Effective July 6, 2002, Through
	June 30, 2003

2003-1C-101	Audit of Final Voucher TIRNO-95-D-00058, Delivery Order Number 0-7-TR-DO-TC-
	A23
2003-1C-102	TIRNO-00-D-00020 and TIRNO-95-D-00066 Cumulative Allowable Cost Worksheet
	Fiscal Years Ended June 30, 2000 and 2001
2003-40-110	Fiscal Year 2003 Statutory Review of Disclosure of Collection Activity With
	Respect to Joint Returns
2003-40-108	Controls Need to Be Improved to Ensure Accurate Direct Deposit of Tax
	Refunds (Revenue Protection - 56 million paper filed returns with $100 billion in refunds at risk of fraud.)
2003-10-103	Project Management Techniques Need to Be Followed to Effectively Develop
	the Tax Exempt Determination System
2003-30-097	Many Taxpayers Are Paying Self-Employment Tax for Which They Receive No Social Security Credit [Taxpayer Burden: $68 million reflecting the value of time for over 560,000 taxpayers to prepare the Self-Employment Tax (Schedule SE) form.]
2003-30-104	Small Business/Self-Employed Division Management Needs to Increase Staffing
	Commitments to Meet Its Electronic Filing Mission
2003-40-115	Fiscal Year 2003 Statutory Audit of Compliance With Seizure Procedures
2003-30-114	Significant Actions Were Taken to Address Small Corporations Erroneously
	Paying the Alternative Minimum Tax, but Additional Actions Are Still Needed
2003-20-117	Mainframe Computer Operations Efficiency and Effectiveness Should Be Improved (Funds Put to Better Use: $18.9 million.) Note: monetary benefit projected over a three-year period.
2003-40-120	Progress Was Made to Provide Taxpayers With Correct Answers to Tax Law Questions, but Improvements Are Needed to Ensure Referral Procedures Are Followed
2003-40-112	Computer Programming Requests for the 2003 Filing Season Were Timely
	Prepared and Generally Accurate
2003-20-119	The Security of the Integrated Collection System Needs to Be Strengthened
2003-20-109	End User Equipment and Services Enterprise Service Desk Efficiency and Effectiveness Can Be Improved (Inefficient Use of Resources: $23.6 million spent for staff that could be available for other tasks.)
2003-10-122	The Effectiveness of Management and Union Partnering Could Be Improved
2003-1C-121	Follow-Up Audit on Information Technology System General Internal Controls
2003-40-125	Improvements Are Needed in the Oversight and Administration of the Low-Income Taxpayer Clinic Program (Taxpayer Burden: over 62 million taxpayers may not be aware of the Low-Income Taxpayer Clinic Program.)

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE
2003-30-111	The Internal Revenue Service Has Opportunities to Provide Hearing-and
	Speech-Impaired Taxpayers With Easier Access to Toll-Free Telephone Services
2003-30-123	New Regulations Are Needed to Take Full Advantage of the Opportunities Offered by Filing Large Corporate Income Tax Returns Electronically (Funds Put to Better Use: $1 million; Increased Revenue: $182.8 million; Taxpayer Burden: 5.5 million taxpayers that would benefit from electronic filing.) Note: monetary benefit computed over a five-year period.
2003-40-124	Additional Effort Is Needed to Prevent Taxpayers’ Personal Exemptions and Tax Credits From Being Erroneously Denied (Taxpayer Rights and Entitlements: $34.8 million for 52,841 taxpayers denied spouses’ personal exemptions and Earned Income Tax Credits.)

2003-30-113	The Collection Inventory Replacement Initiative Was Generally Effective; However, Additional Attention Is Needed (Increased Revenue: $116.1 million for 40 accounts; Taxpayer Rights and Entitlements: 1,739 taxpayers requiring assistance.)
2003-1C-130	Follow-Up Audit on Estimating System and Internal Controls
2003-40-135	Not All Available Information Was Considered When Self-Employment Income
	Was Examined During the Fiscal Year 2000 Earned Income Tax Credit Initiative (Increased Revenue: $8.3 million; Taxpayer Rights and Entitlements: 3,457 taxpayers that lost Social Security credits; Inefficient Use of Resources: $460,000 for staff that would be available for other tasks.)
2003-20-133	Inappropriate Personal Use of the Internet Jeopardizes the Security and Privacy of Taxpayer Data
2003-40-131	Fiscal Year 2003 Statutory Review of Restrictions on Directly Contacting
	Taxpayers
2003-40-126	Taxpayers Were Assessed Additional Tax for Advance Earned Income Credit
	Payments Not Received (Taxpayer Burden: 106 taxpayers with tax abatements;
	Taxpayer Rights and Entitlements: $267,000 in taxes, for 35 taxpayers, should
	have been abated and 65,000 taxpayers that may have been incorrectly assessed approximately $26 million in tax for Advance Earned Income Credit
	Payments they did not receive.)
2003-10-134	The Structures of the Internal Revenue Service and the National Treasury
	Employees Union Are Not Effectively Aligned
2003-10-116	Oversight of Streamlined Critical Pay Authority Could Be Improved
2003-30-132	Budget Issues Are Delaying the Expanded Use of Predictive Dialer Systems for
	Contacting Delinquent Taxpayers
2003-10-137	Imminent Assessment Statute Expiration Cases For Exempt Organizations Are Adequately Monitored, but Management Can Better Adhere To Controls At
	The Group Level
2003-40-129	The Internal Revenue Service Does Not Have Controls Over Manual Levies to
	Protect the Rights of Taxpayers (Taxpayer Rights and Entitlements: 8 taxpayers whose appeal rights are not protected)
2003-40-136	Improvements Are Needed to Ensure Innocent Spouse Claims Are Accurately and Timely Processed (Increased Revenue: $219,000 for 32 taxpayers; Taxpayer Rights and Entitlements: 107,723 taxpayer claims may have been subjected to inaccurate processing; Taxpayer Burden: 10,732 taxpayer claims were not timely processed.)

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE
2003-40-139	Opportunities Exist to Improve the Administration of the Earned Income Tax Credit (Reliability of Information: the IRS budget includes $437 million used to administer the Earned Income Tax Credit program. Without long-term goals and measures, IRS cannot determine if its efforts to improve the administration of the EITC program are effective.)
2003-20-127	Security Testing and Certification of the Modernized Infrastructure Needs to Be
	Strengthened

2003-10-140	Systems Acceptability Testing for the Tax Exempt Determination System Was
	Planned and Executed As Intended
2003-20-118	Security Over Computers Used in Telecommuting Needs to Be Strengthened
2003-1C-144	Audit of Adequacy and Compliance of Disclosure Statement Revision 13,
	Dated April 2, 2003; Effective January 1, 2003
2003-30-142	The Internal Revenue Service Acted on Recommendations to Help Farmers
	Receive the Intended Benefit of the Farm Income Averaging Provision (Taxpayer Rights and Entitlements: $4.4 million for 4,266 taxpayers that did not receive the full intended benefit.)
2003-30-143	The Practitioner Priority Service Was Successful in Its First Year of Operation, but
	Action to Reduce Caller Wait Time Is Needed
2003-10-138	Three Violations of the Fair Debt Collection Practices Act Resulted in
	Administrative Actions
2003-30-146	Tax Returns With the Potential for Unreported Income Are Being Identified, but Some Challenges Still Exist With the Program
2003-30-147	Controls Over the Employer Abatement Program Cases Can Be Improved
	(Reliability of Information: 165 taxpayer accounts not identified on the management information system.)
2003-1C-145	Budget System and Financial Control Audit
2003-1C-148	Report on Audit of Compliance With Cost Accounting Standard 408,
	Accounting for Costs of Compensated Personal Absence
2003-1C-149	Report on Audit of Compliance With Cost Accounting Standard 404,
	Capitalization of Tangible Assets
2003-1C-150	Report on Compliance With Requirements Applicable to Major Programs and on Internal Control Over Compliance in Accordance With the Office of Management and Budget Circular A-133, Fiscal Year 2002, TIRNO-99-D-0005 (Questioned Costs: $1,069.)
2003-10-154	Despite Increased Accountability, Improved Control Is Needed Over Union
	Time
2003-10-156	Appeals Complied With the Legal Requirements for Collection Due Process and Equivalent Hearings (Taxpayer Rights and Entitlements: 4,777 taxpayers given equivalent hearings, not informed of the Appeals Officer’s or Settlement Officer’s involvement, and/or whose rights to judicial review were not disclosed.)
2003-20-151	The Implementation of Software Products to Manage and Control Computer Resources Needs Improvement (Inefficient Use of Resources: $5.5 million in resource savings by improved program management.)
2003-40-157	Taxpayer Assistance Center Employees Improved the Accuracy of Answers to Tax Law Questions but Answered Some Questions Beyond Their Level of Training

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE

2003-40-159	The Internal Revenue Service Should Expand the Successful Automation of
	Payment Processing to Include Additional Documents (Inefficient Use of
	Resources: IRS issued 1,283,883 levies in FY 2002. Machine scanable posting
	vouchers supplied with levies would allow payments to be processed through IRS' automated systems.)
2003-20-161	Improvements to the Modernized Infrastructure Are Needed to Support the Deployment of Business Systems Modernization Projects (Reliability of Information: project cost increases of $267.8 million may be controllable if cost information was timely coordinated and based on accurate and complete information.)
2003-30-152	The New Process for Managing Requests for Tax Records During Examinations
	of Large Businesses Can Reduce Taxpayer Burden if Implemented Consistently
2003-30-162	The Regulations for Granting Extensions of Time to File Are Delaying the Receipt
	of Billions of Tax Dollars and Creating Substantial Burden for Compliant Taxpayers (Funds Put to Better Use: $42.1 million; Increased Revenue: $6.9 billion;
	Taxpayer Burden: $806.9 million for 15.1 million taxpayers from reduction in
	extension form submission time; Taxpayer Rights and Entitlements: $7.7 billion in
	reduced penalties and interest.) Note: monetary benefit projected over a five-
	year period.
2003-40-163	Limited English Proficient Taxpayers Need Improved Written Products to Help Them Understand and Comply With Tax Laws (Taxpayer Burden: 21 million taxpayers with limited English proficiency do not have the benefit of translated tax documents.)
2003-40-158	Trends in Customer Service in the Taxpayer Assistance Centers Continue to Show Procedural Causes for Inaccurate Answers to Tax Law Questions (Taxpayer Burden: 93 questions not correctly answered; Reliability of Information: The IRS cannot rely upon its management information system to provide accurate, valid, and relevant financial and operational data for its taxpayer assistance program whose FY 2003 budget is $132 million.)
2003-1C-166	Report on Audit of Direct and Indirect Costs for FY 2002
2003-40-165	Improvements Are Needed to Ensure Individual Taxpayers Have an Easy, No-Cost Option to e-file Their Tax Returns (Funds Put to Better Use: the IRS could save $37.3 million by processing e-filed, rather than paper, returns; Taxpayer Burden: 126.6 million taxpayers would benefit from timely and accurate e-file participation information. Taxpayers would pay $402.6 million if free e-file were not offered.)
2003-30-160	The Offshore Credit Card Project Shows Promise, but Improvements Are
	Needed to Ensure That Compliance Objectives Are Achieved
2003-10-172	Tax-Exempt Bond Examination Results Are Used to Focus Customer Education
	Programs
2003-30-169	Processing Changes Would Enhance Service to Taxpayers Filing Amended U.S. Corporation Income Tax Returns (Funds Put to Better Use: $1.1 million; Increased Revenue: $2,238 for 4 taxpayers; Revenue Protected: $1.3 million for 7 taxpayers; Taxpayer Burden: 40 taxpayers with unnecessary contacts; Taxpayer Rights and Entitlements: 12 taxpayers with delayed refunds.)
2003-10-177	Procedures Established to Ensure Compliance With the Rural Development Act
	of 1972 Were Not Consistently Followed

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE
2003-10-141	The Tax Exempt and Government Entities Division Could Improve the Efficiency of Its Advance Ruling Follow-Up Process (Taxpayer Burden: 14,502 taxpayers that may not have to submit financial information; Inefficient Use of Resources: 10.73 staff years that could be reallocated if Form 990 information was used; Reliability of Information: 22 public charities whose accounts were not correctly updated.)
2003-10-164	Opportunity For Improvements Exists for Compliance With the Freedom of Information Act and Related Procedures (Taxpayer Rights and Entitlements: 2,741 FOIA, Privacy Act and I.R.C. Section 6103 requests were improperly withheld or not timely provided.)
2003-10-170	Inadequate Planning Leads to Costly Enterprise License Agreements for Software
	(Funds Put to Better Use: $8 million; Inefficient Use of Resources: $17.6 million.)
2003-IC-167	Incurred Costs Audit for Fiscal Year 2001
2003-IC-168	Agreed-Upon Procedures for Subcontract Number S800603, Prime Contract
	Number TIRNO-99-D-00001
2003-1C-188	Audit of Accounting System and Related Internal Controls
2003-1C-189	Audit of Final Vouchers, TIRNO-95-D-00063
2003-10-181	The Accuracy of the Federal Activities Inventory Can Be Improved
2003-30-176	Interest Paid to Large Corporations Could Significantly Increase Under a Proposed New Revenue Procedure (Funds Put to Better Use: $1.84 billion.) Note: monetary benefit projected over a five-year period.
2003-40-185	More Information Is Needed to Determine the Effect of the Discretionary Examination Program on Improving Service to All Taxpayers (Reliability of information: the Discretionary Examination Program, with a FY 2003 budget of $38 million, does not have established goals needed by management and the Congress to make informed program decisions.)
2003-10-171	Taxpayers’ Refund Claims Received Near the Refund Statute Expiration Date Were Appropriately Processed, but Enhancements Could Be Made (Funds Put to Better Use: $461,000; Taxpayer Rights and Entitlements: $3.4 million for 119,142 taxpayers with refund claims inappropriately disallowed or who were not informed about the financial disability provision.)
2003-10-155	Suspension of Interest and Failure-to-Pay Penalties Were Not Always Calculated Correctly for Tax Credits (Taxpayer Rights and Entitlements: $16.7 million for 1.3 million taxpayers with interest and penalties not correctly calculated.)
2003-10-179	Requirements Definition of the Integrated Financial System
2003-30-183	Improvements Are Needed to Ensure Large Dollar Manual Refunds Are Issued Accurately and Timely (Funds Put to Better Use: $1.8 million; Taxpayer Rights and Entitlements: $238.3 million for 8 taxpayers with manual refunds were not accurate.)
2003-40-180	More Information Is Needed to Determine the Effect of the Automated Underreporter Program on Improving Voluntary Compliance (Reliability of Information: the Automated Underreporter Program, with a FY 2003 budget of $32 million, requires long-term goals and measures to determine the effectiveness of the program in improving voluntary compliance.)

2003-10-184	Employee Misconduct Allegations Were Accurately Reported
2003-30-173	Improved Screening of Potentially Fraudulent Employment Tax Refunds Would
	Reduce Significant Processing Delays for Legitimate Refunds

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE
2003-10-194	Audit of Personnel Classification Support Services Contract (Questioned Costs: $37,947; Protection of Resources: weaknesses in the contractor’s controls over timekeeping put $310,000 at an increased risk for error and manipulation.)
2003-30-175	A Reliable Management Information System Is Needed Before Making Funding Decisions to Address Underreporting of Taxes on Employer’s Quarterly Tax Returns
2003-30-182	Continued Progress Is Needed to Improve the Centralized Offer in Compromise Program
2003-40-198	Taxpayer Assistance Center Employees Continued to Improve the Accuracy of
	Answers to Tax Law Questions During May and June 2003
2003-10-191	Substantial Efforts Were Made to Manage the Increased Telephone Call
	Demand, but Additional Actions Are Needed to Address Continued Increases
2003-1C-192	Labor Floor Checks for Fiscal Year 2003
2003-30-186	Some Automated Collection System Business Results Have Recently Improved, but More Emphasis on Nonfilers Is Needed
2003-40-193	Fiscal Year 2003 Statutory Audit of Compliance With Notifying Taxpayers of Their
	Rights When Requested to Extend the Assessment Statute (Taxpayer Rights and
	Entitlements: 134 taxpayers that may not have been properly notified of their rights.)
2003-10-190	Additional Strategies Are Needed to Ensure the Employee Plans Compliance
	Resolution System Will Accomplish Its Intended Purposes
2003-30-174	Current Trends in the Administration of International Transfer Pricing by the
	Internal Revenue Service
2003-1C-206	Report on Audit of Cost Accounting Standard 410, Allocation of Business Unit
	General and Administrative Expenses to Final Cost Objectives
2003-30-195	Procedures for Granting Installment Agreements to Self-Employed Taxpayers Can Be Improved (Increased Revenue: $713,000 that may be due from taxpayers not current with their estimated taxes and 47 cases that did not have a proper financial analysis and/or were not properly approved.)
2003-30-199	Preparations Were Successful for Implementation of Two New Business Tax
	Credits
2003-1C-205	Report on Audit of Direct and Indirect Costs for Contractor’s Fiscal Year 2002
2003-10-202	Appeals Could Take Additional Actions to Improve the Timeliness of Collection Due Process Cases (Taxpayer Burden: 2,735 taxpayer accounts with delays in initial contacts.)
2003-10-204	Additional Emphasis Is Needed to Reduce the Burden for Tax Exempt and
	Government Entities Division Customers During Returns Processing
2003-20-178	Testing Practices for Business Systems Modernization Projects Need Improvement
2003-20-209	The Modernization, Information Technology and Security Services Organization
	Needs to Take Further Action to Complete Its Human Capital Strategy
2003-1C-207	Audit of the Contractor’s General Services Administration Time and Materials
	Labor Practices
2003-30-196	More Effective Actions Can Be Taken When Collecting Accounts of Defunct
	Businesses
2003-40-216	Toll-Free Tax Law Assistance to Taxpayers Is Professional and Timely, but Improvement Is Needed in the Information Provided (Taxpayer Burden: 57 taxpayers that did not receive correct and complete answers to their tax law questions.)

	AUDIT PRODUCTS
REFERENCE NUMBER	REPORT TITLE
2003-10-201	Lead Development Centers Do Not Significantly Contribute to Increases in
	Legal Source Cases (Inefficient Use of Resources: 928 staff days available for
	other priority work.)
2003-10-213	Improvements Are Needed in the Process and Information Used to Manage Workers’ Compensation Claims (Protection of Resources: $798,000 in Worker's Compensation paid though there was no indication of actions to return the employees to work or to verify disability; Reliability of Information: $2.4 million overstated cost avoidance performance measure.)
2003-10-200	Clarifying Goals and Refining Processes Would Improve the Employee Plans Risk Assessment Program (Inefficient Use of Resources: 32,678 staff days available for other priority work.)
2003-10-210	The Tax Fraud Hotline Has Not Been an Effective Source for Criminal Tax
	Investigations (Funds Put to Better Use: $2,678; Revenue Protection: $3,352.)
2003-20-211	Key Security Controls of the Currency and Banking Retrieval System Have Not
	Been Implemented
2003-30-197	The Process for Notifying Taxpayers Regarding Their Elections to File As Small Business Corporations Should Be Improved (Taxpayer Burden: 604,000 taxpayers that may not have been notified of the acceptance or denial of their Forms 1120S elections.)
2003-1C-215	Audit of Final Vouchers, TIRNO-95-D-00063
	Information on Employee Training Is Not Adequate to Determine Training Cost
2003-10-212	or Effectiveness (Reliability of Information: training costs budgeted at $111
	million, cannot be determined from the information provided.)
2003-10-217	The Tax Exempt and Government Entities Division Should Pursue Additional Methods to Identify Potential Fraudulent Activities
2003-10-218	Interest and Penalties for Taxpayers Affected by Natural Disasters Are Not Always Prevented or Abated (Taxpayer Rights and Entitlements: 79,288 taxpayers who were overassessed or accrued interest, Failure to File and Failure to Pay Penalties totaling $10.7 million.)
2003-20-208	Annual Assessment of the Business Systems Modernization Program
2003-20-219	The Cost and Schedule Estimation Process for the Business Systems Modernization Program Has Been Improved, but Additional Actions Should Be
	Taken
2003-10-187	The National Taxpayer Advocate Could Enhance the Management of Systemic Advocacy Resources (Taxpayer Burden: 16.7 million taxpayers affected by delays in completion of systemic advocacy projects.)
2003-20-220	The Information Technology Services Organization Needs to Complete Its Business Resumption Planning

APPENDIX V – STATUTORY TIGTA REPORTING REQUIREMENTS

Thirty-nine statutory audit reports that dealt with the adequacy and security of IRS technology were issued during this fiscal year. In FY 2003, TIGTA completed its fifth round of statutory reviews that are required annually by Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98). The following table reflects the status of the FY 2003 RRA 98 statutory reviews.

REFERENCE TO STATUTORY	EXPLANATION OF THE
COVERAGE	PROVISION	COMMENTS/TIGTA AUDIT STATUS
Enforcement Statistics Internal Revenue Code (I.R.C.) � 7803(d)(1)(A)(i)	An evaluation of IRS’ compliance with restrictions under Section 1204 of RRA 98 on the use of enforcement statistics to evaluate IRS employees.	*Reference No. 2003-40-090, March 2003* IRS is generally complying with the law. A review of 74 judgmentally sampled enforcement employees’ performance and related supervisory documentation prepared between October 1, 2001, and August 31, 2002, revealed no instances of the use of records of tax enforcement results, production quotas, or goals to evaluate employee performance. There was also improvement over the previous year in documenting the evaluation of employees on the fair and equitable treatment of taxpayers. In addition, a review of 21 statistically sampled appropriate supervisors showed the IRS completed the required consolidated office certification memorandums on whether records of tax enforcement results were used in a prohibitive manner.
Restrictions on Directly Contacting Taxpayers I.R.C. � 7803(d)(1)(A)(ii)	An evaluation of IRS’ compliance with restrictions under I.R.C. �i> 7521 on directly contacting taxpayers who have indicated that they prefer their representatives be contacted.	*Reference No. 2003-40-131, June 2003* As in the prior reviews, TIGTA could not determine whether IRS employees followed proper procedures to stop an interview if the taxpayer requested to consult with a representative. Neither IRS nor TIGTA could readily identify cases where the taxpayer requested a representative or the IRS contacted the taxpayer directly and bypassed the representative. IRS management information systems do not separately record or monitor direct contact requirements, and the Congress has not explicitly required IRS to do so. TIGTA does not recommend the creation of a separate tracking system.

REFERENCE TO STATUTORY	EXPLANATION OF THE
COVERAGE	PROVISION	COMMENTS/TIGTA AUDIT STATUS

Filing of a Notice of Lien I.R.C. � 7803(d)(1)(A)(iii)	An evaluation of IRS’ compliance with required procedures under I.R.C. � 6320 upon the filing of a notice of lien.	*Reference No. 2003-40-066, February 2003* IRS did not completely comply with the law. A review of 300 Notices of Federal Tax Liens (NFTLs) identified 12 NFTLs (4%) where IRS did not comply with all the provisions of I.R.C. � 6320. IRS correctly mailed the lien notices; however, it did not mail all of them timely. In addition, for another 16 NFTLs (5%), TIGTA could not determine if IRS complied with the law because it did not provide proof of timely mailing. In 59 (20%) of the 300 NFTLs, IRS did not follow its own internal guidelines when issuing lien notices, including its guidelines for notifying taxpayer representatives and receipting and maintaining certified mail registers.
Extensions of the Statute of Limitations for Assessment of Tax I.R.C. � 7803(d)(1)(C) I.R.C. � 6501(c)(4)(B)	Include information regarding extensions of the statute of limitations for assessment of tax under I.R.C. � 6501 and the provision of notice to taxpayers regarding the right to refuse or limit the extension to particular issues or a particular period of time.	*Reference No. 2003-40-193, September 2003* Most related case files documented that taxpayers or their representatives were advised of their rights regarding assessment statute extensions. IRS employees properly advised taxpayers of their rights to refuse or restrict the scope of the statute extension in most of the related case files (113 of 153) reviewed. However, in some cases (40 of 153) employees did not document in the related case files whether or not taxpayers were advised of their rights. Also, employees did not always document that both taxpayers who jointly filed returns (37 of 59) were separately notified of their rights to extend the statute. In addition, where taxpayers made a declaration of representation, there was no documentation in the related case files (57 of 109) that the IRS had provided both the taxpayers and their representatives with the advice of rights.

REFERENCE TO STATUTORY	EXPLANATION OF THE
COVERAGE	PROVISION	COMMENTS/TIGTA AUDIT STATUS
Collection Due Process I.R.C. � 7803(d)(1)(A)(iii) and (iv)	An evaluation of IRS’ compliance with required procedures under I.R.C. Ё 6320 and 6330 regarding the taxpayers’ rights to appeal lien or levy actions.	*Reference No. 2003-10-156, July 2003* The Appeals Officers and Settlement Officers (hearing officers) were in compliance with the requirements of the law when conducting Collection Due Process (CDP) hearings and Equivalent Hearings (EH). The hearing officers appropriately verified that the IRS followed the applicable laws or administrative procedures during the lien and levy process. They considered the challenges the taxpayers raised and determined whether the proposed collection actions properly balanced the need for efficient collection of taxes with any legitimate taxpayer concerns. The hearing officers addressed these provisions in the CDP determination letters and the EH decision letters. In addition, the hearing officers followed guidelines from the Appeals manual by including information such as in which court the taxpayers must file their request for judicial review, as well as information about any agreements reached during the hearing, and any subsequent actions to be taken by the IRS or the taxpayer.
Seizures I.R.C. � 7803(d)(1)(A)(iv)	An evaluation of IRS’ compliance with required procedures under I.R.C. Ё 6330 through 6344 when conducting seizures.	*Reference No. 2003-40-115, May 2003* Based on TIGTA’s review of a sample of 102 seizures performed during October 2001 through June 2002, TIGTA determined that actions taken by the IRS when seizing taxpayers’ property for payment of delinquent taxes were in accordance with the applicable legal provisions. In addition, IRS employees generally followed all internal guidelines. However, for two seizures, the IRS did not complete all internal procedural requirements timely. TIGTA does not believe that IRS’ actions in these cases resulted in violations of the taxpayer’s legal rights.

REFERENCE TO STATUTORY	EXPLANATION OF THE
COVERAGE	PROVISION	COMMENTS/TIGTA AUDIT STATUS
Taxpayer Designations – Illegal Tax Protester Designation and Nonfiler Designation I.R.C. � 7803(d)(1)(A)(v)	An evaluation of IRS’ compliance with restrictions under Section 3707 of RRA 98 on designation of taxpayers.	*Reference No. 2003-40-098, April 2003* In general, IRS is in compliance with the prohibition on using Illegal Tax Protester (ITP) or similar designations. IRS has not reintroduced past ITP codes on the IRS’ Master File and has not reassigned any similar ITP designations to formerly coded ITP taxpayer accounts. IRS has effectively updated or made obsolete any publications containing ITP references and is taking steps to remove references from the Internal Revenue Manual. IRS employees continue to label taxpayers as ITPs and other similar designations in case narratives. However, IRS has taken actions to discourage the use of these designations. In response to the report, IRS stated, based on an opinion by IRS Chief Counsel, that notations in case histories to taxpayers as “tax protesters” and other similar designations are not “designations” within the meaning of the law. According to IRS, to be a prohibited “designation,” there must be an intent to set apart that person for a purpose, such as denying the taxpayer an administrative opportunity that is available to other taxpayers. Merely making references to taxpayers or their actions does not constitute a “designation” because those taxpayers continue to receive the same administrative remedies as all other taxpayers. Because TIGTA is required to annually evaluate IRS’ compliance with this provision of the law, TIGTA elevated the disagreement about whether employees are labeling taxpayers as ITPs to the Department of the Treasury.
Disclosure of Collection Activities With Respect to Joint Returns I.R.C. � 7803(d)(1)(B) I.R.C. � 6103(e)(8)	Review and certify whether or not IRS is complying with I.R.C. �i> 6103(e)(8) to disclose information to an individual filing a joint return on collection activity involving the other individual filing the return.	*Reference No. 2003-40-110, May 2003* This is the fifth year that TIGTA could not determine whether IRS is complying with the statutory requirements for responding to written requests from joint filers because both TIGTA and IRS are still unable to readily identify joint filer requests received nationwide. IRS management has decided not to develop a new management control process to track joint filer requests. IRS management information systems do not separately record or monitor joint filer requests, and Congress has not explicitly required the IRS to do so. TIGTA does not recommend the creation of a separate tracking system.

REFERENCE TO STATUTORY	EXPLANATION OF THE
COVERAGE	PROVISION	COMMENTS/TIGTA AUDIT STATUS
Taxpayer Complaints I.R.C. � 7803(d)(2)(A)	Requires TIGTA to include in each of its Semiannual Reports to Congress the number of taxpayer complaints received and the number of employee misconduct and taxpayer abuse allegations received by IRS or TIGTA from taxpayers, IRS employees and other sources.	*Reference No. 2003-10-184, September 2003* The process the IRS used to provide information on employee misconduct allegations for TIGTA’s September 2002 Semiannual Report to Congress was effective. The information provided to TIGTA accurately reflected the employee misconduct allegation information contained on the Automated Labor and Employee Relations Tracking System (ALERTS).
Administrative or Civil Actions With Respect to the Fair Debt Collection Practices Act of 1996 I.R.C. � 7803(d)(1)(G) I.R.C. � 6304 Section 3466 of RRA 98	Include information regarding any administrative or civil actions with respect to violations of the fair debt collection provision of I.R.C. �i> 6304, including a summary of such actions, and any resulting judgments or awards granted.	*Reference No. 2003-10-138, July 2003* Based on a review of information recorded as potential Fair Debt Collection Practices Act (FDCPA) violations on the IRS computer systems, TIGTA identified three FDCPA violations that occurred after July 22, 1998, and resulted in administrative actions being taken against employees for the period January 1 through December 31, 2002. In addition, the IRS had no closed cases in which the IRS paid any money to taxpayers for civil actions resulting from FDCPA violations.
Denial of Requests for Information I.R.C. � 7803(d)(1)(F) I.R.C. � 7803(d)(3)(A)	Include information regarding improper denial of requests for information from IRS, based on a statistically valid sample of the total number of determinations made by IRS to deny written requests to disclose information to taxpayers on the basis of I.R.C. �i> 6103 or 5 U.S.C. �i> 552(b)(7).	*Reference No. 2003-10-164, August 2003* The IRS improperly withheld information from requesters in 7.4% of the Freedom of Information Act (FOIA) and Privacy Act (PA) requests, and 9.3% of the I.R.C. � 6103 requests reviewed. Additionally, the IRS did not respond timely to requesters in 43.5% of the cases included in TIGTA’s sample of information that was denied or where the IRS replied that responsive records were not available. TIGTA’s statistically valid samples were taken from cases closed during the period January 1 through June 30, 2002. TIGTA estimated that information was improperly withheld from responses to 320 FOIA and PA requests and 540 I.R.C. � 6103 requests during the sample period. TIGTA also estimated that responses to 1,881 FOIA and PA requests were not processed timely during the same period.

SEMIANNUAL REPORT TO CONGRESS SEPTEMBER 30, 2003

APPENDIX VI – SECTION 1203 STANDARDS

In general, the Commissioner of Internal Revenue shall terminate the employment of any employee of IRS if there is a final administrative or judicial determination that in the performance of official duties such employee committed the misconduct violations outlined below. Such termination shall be a removal for cause on charges of misconduct.

Misconduct violations include:

• Willful failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer’s home, personal belongings, or business assets.

• Providing a false statement under oath with respect to a material matter involving a taxpayer or taxpayer representative.

• Violating, with respect to a taxpayer, taxpayer representative, or other employee of the IRS, any right under the Constitution of the United States, or any civil right established under Title VI or VII of the Civil Rights Act of 1964; Title IX of the Education Amendments of 1972; Age Discrimination in Employment Act of 1967; Age Discrimination Act of 1975; Section 501 or 504 of the Rehabilitation Act of 1973; or Title I of the Americans with Disabilities Act of 1990.

• Falsifying or destroying documents to conceal mistakes made by any employee with respect to a matter involving a taxpayer or taxpayer representative.

• Committing assault or battery on a taxpayer, taxpayer representative, or other employee of the IRS, but only if there is a criminal conviction, or a final judgment by a court in a civil case, with respect to the assault or battery.

• Violating the Internal Revenue Code of 1986, Treasury regulations, or policies of the IRS (including the Internal Revenue Manual) for the purpose of retaliating against, or harassing a taxpayer, taxpayer representative, or other employee of the IRS.

• Willfully misusing provisions of Section 6103 of the Internal Revenue Code of 1986 for the purpose of concealing information from a Congressional inquiry.

• Willfully failing to file any return of tax required under the Internal Revenue Code of 1986 on or before the date prescribed therefore (including any extensions), unless such failure is due to reasonable cause and not to willful neglect.

• Willfully understating Federal tax liability, unless such understatement is due to reasonable cause and not to willful neglect.

• Threatening to audit a taxpayer for the purpose of extracting personal gain or benefit.

In general, the Commissioner of Internal Revenue may take a personnel action other than employment termination for the misconduct violations outlined above. The exercise of this authority shall be at the sole discretion of the Commissioner and may not be delegated to any other officer. The Commissioner, in his/her sole discretion, may establish a procedure that will be used to determine whether an individual should be referred to the Commissioner for a determination by the Commissioner. Any determination of the Commissioner in these matters may not be appealed in any administrative or judicial proceeding.

SEMIANNUAL REPORT TO CONGRESS SEPTEMBER 30, 2003

REPORTS WITH QUESTIONED COSTS		QUESTIONED
(4/1/03 œ 9/30/03)	NUMBER OF	COSTS2	UNSUPPORTED COSTS
REPORT CATEGORY	REPORTS	(IN THOUSANDS)	(IN THOUSANDS)

1. For which no management decision
had been made by the beginning of
the reporting period	2	$ 5,273	$0
2. Which were issued during the reporting period	2	$ 39	$ 38
3. Subtotals (Item 1 plus Item 2)	4	$ 5,312	$ 38
4. For which a management decision
was made during the reporting period
- Dollar value of disallowed costs	2	$ 5,3113	$ 0
- Dollar value of costs not disallowed	2	$ 4,643	$ 38
5. For which no management decision had been made by the end of the reporting period (Item 3 minus Item 4)	1	$ 1	$ 0
6. For which no management decision
was made within six months of report
issuance	0	$ 0	$ 0

REPORTS WITH RECOMMENDATIONS THAT FUNDS BE
PUT TO BETTER USE	NUMBER
(4/1/03 œ 9/30/03) REPORT CATEGORY	OF REPORTS	AMOUNT (IN THOUSANDS)
1. For which no management decision has been made by the beginning of the reporting period	1	$ 2,240
2. Which were issued during the reporting period	9	$ 1,912,309
3. Subtotals (Item 1 plus Item 2)	10	$ 1,914,549
4. For which a management decision was made during the reporting period Dollar value of recommendations that were agreed to by management - Based on proposed management action - Based on proposed legislative action Dollar value of recommendations that were not agreed to by management	5 0 3	$ 4,348 $ 0 $ 1,865,861
5. For which no management decision has been made by the end of the reporting period (Item 3 minus Item 4)	2	$ 44,340
6. For which no management decision was made
within six months of issuance	1	$ 2,240

REPORTS WITH ADDITIONAL
QUANTIFIABLE IMPACT ON TAX
ADMINISTRATION	NUMBER OF	NUMBER OF	NUMBER
(4/1/03 œ 9/30/03)	REPORTS IN	TAXPAYER	OF	DOLLAR VALUE
OUTCOME MEASURE CATEGORY	CATEGORY1	ACCOUNTS	HOURS	(IN THOUSANDS)	OTHER7
Taxpayer Rights and Entitlements at Risk	16	2 1,593,597		$ 8,008,619	2, 8
Reduction of Burden on Taxpayers	11	3 38,483,489		$ 874,900	9
				4
Increased Revenue	7	126		$ 7,208,103
Revenue Protection	2	4		$ 1,275
Taxpayer Privacy and Security	0
				5	10
Inefficient Use of Resources	7			$ 47,160
				6
Protection of Resources	3			$ 3,523
Reliability of Management Information	4	187			11

INVESTIGATIONS OPENED AND CLOSED
Total Investigations Opened	2249
Total Investigations Closed	2595

FINANCIAL ACCOMPLISHMENTS
Embezzlement/Theft Funds Recovered	$3,153,794
Court Ordered Fines, Penalties and Restitution	$14,492,545
Out-of-Court Settlements	$0

STATUS OF CLOSED CRIMINAL INVESTIGATIONS
	EMPLOYEE	NON璄MPLOYEE	TOTAL
Criminal Referrals1
Referred – Accepted for Prosecution	31	198		229
Referred – Declined for Prosecution	416	486		902
Referred - Pending Prosecution Decision	20	89		109
Total Criminal Referrals	467	773		1240
No Referrals	589	787		1376

CRIMINAL DISPOSITIONS1
	EMPLOYEE	NON-EMPLOYEE	TOTAL
Guilty	23	158	181
Nolo-Contendere	1	1	2
Pre-trial Diversion	3	5	8
Deferred Prosecution2	2	3	5
Not Guilty	0	2	2
Dismissed3	1	20	21
TOTAL CRIMINAL DISPOSITIONS	30	189	219

ADMINISTRATIVE DISPOSITION ON CLOSED TIGTA INVESTIGATIONS1
Removed, Terminated or Other		145
Suspended/Reduction in Grade		91
Oral or Written Reprimand/Admonishment		143
Closed – No Action Taken		286
Clearance Letter Issued		181
Employee Resigned Prior to Adjudication		100
TOTAL ADMINISTRATIVE DISPOSITIONS		946

COMPLAINTS/ALLEGATIONS RECEIVED BY TIGTA
Complaints Against IRS Employees		2352
Complaints Against Non-Employees		1682
Number of Complaints/Allegations		4034

STATUS OF COMPL	AINTS/ALLEGATIONS RE	CEIVED BY TIGTA

Investigations Initiated		1644
In Process Within TIGTA1		20
Referred to the IRS for Action		116
Referred to the IRS for Information Only		1185
Referred to a Non-IRS Entity2		17
Closed With No Referral		747
Closed With All Actions Completed		305
	TOTAL COMPLAINTS	4034

REPORT OF EMPLOYEE MISCONDUCT FOR THE PERIOD 4/01/03 œ 9/30/03
SUMMARY BY DISPOSITION GROUPS
	TIGTA	ADMINISTRA�/span>	EMPLOYEE	BACKGROUND
	INVESTI�/span>	TIVE	TAX MATTER	INVESTI�/span>
DISPOSITION	GATIONS	CASES1	CASES2	GATIONS3	TOTAL
Removal	54	121	8	1	184
Separation of Probationary Employees	6	386	16	37	445
Separation of Temporary Employees	0	10	2	15	27
Resignation/Retirement	84	141	57	37	319
Suspensions	85	172	45	9	311
Reprimands	88	303	350	26	767
Counseling	45	314	1044	170	1573
Alternative Discipline	12	71	19	2	104
Clearance	162	109	8	9	288
Closed Without Action	352	347	301	299	1299
Forwarded to TIGTA	0	23	0	0	23
TOTAL	888	1997	1850	605	5340

REPORT OF EMPLOYEE MISCONDUCT FOR THE PERIOD 4/1/03 œ 9/30/03 NATIONAL SUMMARY
CASE TYPE	OPENING INVENTORY	CONDUCT CASES RECEIVED	CASES CLOSED			CLOSING INVENTORY
CASE TYPE	OPENING INVENTORY	CONDUCT CASES RECEIVED	CONDUCT ISSUES	DUPLICATES	NON-CONDUCT CASES
TIGTA Investigations – ROI (I)1	763	799	(888)	(6)	(1)	667
Administrative Case (A)2	721	1992	(1997)	(13)	(7)	696
Employee Tax Compliance Case (C)3	808	2650	(1850)	(125)	(0)	1483
Background Investigations (E)4	286	593	(605)	(7)	(0)	267
TOTAL	2578	6034	(5340)	(151)	(8)	3113

	*IRS SUMMARY OF SUBSTANTIATED � 1203* INQUIRIES RECORDED IN ALERTS**
	FOR THE PERIOD 4/1/03 œ 9/30/03

				REMOVED		IN
� 1203 VIOLATION	REMOVALS	RESIGNED/ RETIRED	PROBATION/ SEPARATION	ON OTHER GROUNDS	PENALTY MITIGATED	PERSONNEL PROCESS	TOTAL
Seizure Without Approval	0	1	0	0	0	0	1
False Statement
Under Oath	0	0	0	0	0	0	0
Constitutional &
Civil Rights
Issues	0	0	0	0	0	0	0
Falsifying or Destroying Records	0	0	0	0	0	3	3
Assault or Battery	0	0	0	0	0	0	0
Retaliate or
Harass	0	0	0	0	0	0	0
Misuse of 6103	0	0	0	0	0	0	0
Failure to File
Federal Tax
Return	2	6	4	1	15	53	81
Understatement of Federal Tax Liability	7	4	0	1	2	31	45
Threat to Audit
for Personal
Gain	0	0	0	0	0	0	0
TOTAL	9	11	4	2	17	87	130