IRS Continued to Rehire Problem Employees Despite New Warning System

Despite promises to Congress, the Internal Revenue Service has yet to take advantage of a red-flag alert system designed to prevent it  from rehiring past employees with blots on their records, a watchdog found.

During the push to expand staff for the annual filing season, the tax agency is supposed to comply with a provision in the 2016 omnibus spending bill that requires a review of any rehire with past conduct or performance problems ranging from tax delinquency to falsification of documents to disruptiveness in the workplace.

But the Treasury Inspector General for Tax Administration found that more than 200 of 2,000-plus former employees “whom the IRS rehired between January 2015 and March 2016 had been previously terminated or separated from the tax agency while under investigation,” according to a report released on Thursday.

Internal Revenue Commissioner John Koskinen, the report noted, assured the Senate Finance Committee in February 2016 that the perennial problem of rehiring employees behind on their taxes would be addressed under a new warning system.

Auditors reviewed the records of 213 former employees brought back onboard in the Covington, Ky., office from July 2016 to March 2017 and found 96 had separated from the agency while being investigated.  Of those, 19 had potential tax code violations, 4 had accessed taxpayer accounts without authorization, 13 had falsified forms, 2 had misused email or equipment, and 6 had been accused of misconduct such as absences without leave, workplace disruption or failure to follow instructions. TIGTA found that 27 rehired employees had failed to disclose a prior termination or conviction on their application. “Some of these employees held positions with access to sensitive taxpayer information, such as contact representatives,” TIGTA said.

The chief problem, TIGTA said, is the IRS “has not effectively updated hiring policies to consider past IRS conduct and performance issues…...  Although the IRS follows specific criteria to disqualify applicants for employment, past IRS employment history is not provided to the selecting official for consideration in the hiring process.”

One reason, IRS officials said, is that it would be costly to go through such detailed consideration “before a hiring decision and tentative offer has been made,” the report said. Such reviews would likely increase the hiring “cycle time beyond the presidential mandate of 80 calendar days, require additional resources, and not likely yield a reasonable return on investment,” IRS officials told TIGTA.

But a formal cost-benefit analysis was not performed to reach this conclusion, the watchdog said, and the IRS was unable to provide documentation.

“Rehiring hundreds of employees with a track record of substantiated conduct and performance issues, including willful tax noncompliance and unauthorized access to tax records, is not prudent and unnecessarily increases the risk of internal fraud and abuse,” said J. Russell George, Treasury Inspector General for Tax Administration. “Given the threat of identity theft and the amount of sensitive information that the IRS manages, job offers should only be extended to applicants of great integrity.”

TIGTA recommended that the IRS Human Capital Officer increase hiring officials’ access to job candidates’ past performance records and require that the basis for rehiring them be clearly documented.

 E. Faith Bell, acting chief human capital officer, agreed with the recommendations.