IRS criminal investigators’ undercover travel expenses probed

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The Internal Revenue Service’s Criminal Investigation unit spent more than $1.3 million in fiscal year 2018 on undercover confidential operations, including travel costs, according to a new report. While those expenses were mostly backed up by sufficient documentation, the controls over them could be improved.

The report, released Monday by the Treasury Inspector General for Tax Administration, said it is critical for the IRS CI unit to maintain proper oversight over such cash funds, known as “imprest” funds, in order to promote the economic and efficient use of publicly funded resources and prevent improper payments.

Based on TIGTA’s review of 49 fiscal year 2018 vouchers that included undercover travel expenditures, the report said the expenses were generally supported by adequate documentation, but controls over undercover travel expenditures and the investigative imprest fund could be improved in some important areas. Specifically, CI’s procedures don’t require advance approval for hotel rooms that go over the maximum allowed per diem rate and the use of luxury rental cars. During TIGA’s review of the undercover confidential travel expenses, it discovered that 33 of the 49 vouchers (67 percent) it reviewed had one or more instances of agents renting hotel rooms with costs in excess of the limits set by the U.S. General Services Administration. TIGTA also uncovered the use of luxury vehicles without documented management approval.

Meanwhile, 26 of the 49 vouchers (53 percent) reviewed by TIGTA were supported by travel receipts for which the travel reservations contained the agents’ actual names and, in some cases, indicated that the agents were government employees or that the travel was government related. That would seem to be a positive in terms of supporting the expenses with adequate documentation, but TIGTA cautioned that “this practice raises concerns that either agent safety was potentially compromised or the imprest fund may have been used unnecessarily. “

Finally, the report pointed out that quarterly audits of CI imprest funds weren’t always staffed in such a way to maximize independence. As a result, the effectiveness of those reviews was compromised.

TIGTA recommended that the chief of the Criminal Investigation unit require management’s approval for reserving hotel rooms exceeding the applicable rate and the use of luxury vehicles, and the chief should require CI agents to include management’s prior approval in their travel voucher documentation. CI should also “periodically assess undercover travel on a function-wide basis to identify potential areas for improved efficiency, to identify best practices to ensure agents’ safety, and to ensure that the investigative imprest fund is only used when needed to maintain the security of undercover operations,” the report suggested.

The report also recommended that the commissioner of the IRS’s Small Business/Self-Employed Division clarify its internal guidance to make sure the audit team assigned to perform CI imprest fund audits rotates assignments in a way that maximizes independence.

IRS management agreed with TIGTA’s recommendations and has either taken or plans to take action to correct the issues.

“The IRS takes seriously our responsibility to ensure that all employee travel, including travel for undercover operations, are done with strict professionalism and efficiencies,” wrote Guy A. Ficco, executive director of operations policy and support at IRS Criminal Investigation, in response to the report. “We are committed to adhering to all federal laws, regulations, and IRS policies, procedures and guidelines that are applicable to our Undercover Travel Program.”

He added that the “environment of undercover operations is a unique one within IRS-CI. Its many nuances make it critical to have accountable procedures in place.” The process of altering those procedures to address the concerns in the report is already underway.

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IRS TIGTA Tax crimes Expense management