We also reviewed the applicable provisions of the Restructuring Act, IRS interpretations of the act’s requirements, IRS procedures for selling seized assets, and seizure case files. This sample yielded sufficiently complete information on 115 taxpayers with a corresponding 139 seizures to evaluate IRS’ management and control over assets seized. We have summarized those comments in this letter and reprinted the written comments, in entirety, in appendix I.

	IRS Has Not Finalized Plans on How to Remove Revenue Officers From Asset Sales

As of October 1999, IRS had not finalized its plans for removing revenue officers from any participation in selling seized assets. As part of its discussions, the group recognized that any decisions reached would require consideration of a number of issues, including the following. The group considered the circumstances under which IRS should use private sector contractors or other government agencies to manage and sell assets. Little Progress in Addressing Control Weaknesses Identified in 1992

In our current review of IRS’ seized asset management and sales processes, we found little improvement from 1992 conditions in the 1997 seizures we reviewed. Our overall report on weaknesses in IRS’ seizure processes contains additional details. Sales Practices Provide Little Assurance of Maximum Proceeds

Similar to our 1992 review, we found that IRS’ sales practices provided little assurance that the maximum possible sales proceeds were achieved. However, the new system still did not provide IRS management with information useful for establishing accountability over seized assets or monitoring the management and sales of the assets as envisioned by federal financial management guidelines. More specifically, the automated inventory system did not require the entry of the full description of assets as recorded by revenue officers in their case files; did not provide data entry fields for capturing information on asset did not provide a data entry field for theft, loss, and damage expenses; did not consistently capture information on the value of the assets—in some instances valuing the assets at the amount of the taxpayer’s delinquency and in others, at the value of the taxpayer’s ownership interest in the assets; did not always coincide with the revenue officers’ files or the actual property on hand (in comparing system records, revenue officers’ files, and our physical inspection of assets involving 16 seizures in 4 IRS district offices, we found discrepancies in 15 seizures); and was not required to be updated in a timely manner. Conclusion

Regardless of whether seized asset sales are done “in-house” by an IRS specialist or contracted out to a private concern, IRS must have controls that provide for accountability over seized assets, security for assets, sales practices that protect the government’s and taxpayers’ interests, and information to allow for management oversight.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the Internal Revenue Service's (IRS) progress in eliminating asset management control weaknesses, focusing on: (1) the implementation of the IRS Restructuring and Reform Act's mandate to remove revenue officers from the asset sale function; and (2) other internal control weaknesses identified in GAO's 1992 testimony.

What GAO Found

GAO noted that: (1) as of October 1999, IRS had not finalized its plans for removing revenue officers from its process for selling seized assets; (2) after the passage of the Restructuring Act, IRS organized a study group to consider establishing a specialist position for both managing and disposing of assets after they were seized by revenue officers; (3) the group has been meeting and is considering the scope of the new position; (4) however, the scope of the position, including the extent to which private sector contractors may be used to manage and sell seized property, a position description, or procedures for governing the specialists' actions, has not been finalized; (5) GAO's review of a representative sample of 1997 nationwide seizure cases, selected as part of GAO's overall review of weaknesses in IRS' seizure processes, showed that the fundamental internal control weaknesses GAO identified in 1992 remained; (6) more specifically, GAO's review of case files showed the following: (a) similar to 1992, sufficiently complete information to establish accountability over assets was not always recorded by revenue officers when assets were seized; (b) as in 1992, IRS' security arrangements for seized assets were, in some instances, minimal or nonexistent; (c) similar to 1992, IRS' sale practices provided little assurance that the maximum possible sales proceeds were achieved; and (d) although installed after 1992, IRS' automated seizure information system still did not provide IRS management with information useful for establishing accountability over seized assets or monitoring the management and sales of the assets; and (7) regardless of the results of IRS' decisions on contracting out all or part of the asset management and sales function, IRS will remain responsible for assuring that assets are appropriately managed and sold.