IRS undercover operations should track expenses better, audit says

Undercover criminal investigations conducted by the Internal Revenue Service are respected by other law enforcement agencies but should be subject to stronger management controls, according to an audit released on Monday.

In a report redacted for security reasons, the Treasury Inspector General for Tax Administration said the IRS’ criminal investigation division’s covert work to expose tax evasion and money-laundering schemes needed stronger controls to track expenses and protect agent identities.

Responses to past TIGTA recommendations for strengthening controls were insufficient, and some expenses were not well-documented, according to the report, the first such review since 2002.

"TIGTA found that other federal law enforcement agencies respect CI's undercover program because of the financial expertise CI special agents bring to a joint investigation," IG J. Russell George said in a Monday release accompanying the report, which was dated Feb. 3. "We also found that CI's undercover practices appear to be more thorough in some aspects than those in other federal agencies."

IRS managers agreed with TIGTA’s five recommendations for corrective actions. The auditors were limited in the number of operations they could evaluate because information on some cases is subject to grand jury secrecy.