IRS Seizures: Limited Progress in Eliminating Asset Management Control
Weaknesses (Letter Report, 11/29/1999, GAO/GGD-00-5).

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.

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.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-5
     TITLE:  IRS Seizures: Limited Progress in Eliminating Asset
	     Management Control Weaknesses
      DATE:  11/29/1999
   SUBJECT:  Taxpayers
	     Internal controls
	     Delinquent taxes
	     Debt collection
	     Assets
	     Tax law
	     Search and seizure
	     Inventory control systems
	     Accountability
	     Property disposal
IDENTIFIER:  IRS Automated Seizure Information System
	     IRS Automated Inventory Control System

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United States General Accounting Office
GAO

Report to the Chairman, Subcommittee on

Oversight, Committee on Ways and Means, House of

Representatives

November 1999

GAO/GGD-00-5

IRS SEIZURES
Limited Progress in Eliminating Asset Management

Control Weaknesses

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B-282991

Page 13   GAO/GGD-00-5 IRS Seized Asset Management
     B-282991

     November 29, 1999

The Honorable Amo Houghton
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives

Dear Mr. Chairman:

This responds to your request for a report on
whether IRS has made progress in eliminating
internal control weaknesses in the management of
property seized from delinquent taxpayers and sold
by IRS to pay down their tax debts.

In 1992 testimony before your Subcommittee,1 we
reported that IRS' controls over seized property
were inadequate to protect against theft, waste,
and misuse; and controls over sales practices did
not necessarily assure the highest sales price at
the lowest cost. Additionally, we commented that
the asset management and sales functions could
best be done by parties who specialize in those
functions rather than as additional duties
assigned to revenue officers, whose primary
responsibility is to collect unpaid taxes.

Since then, Congress enacted the IRS Restructuring
and Reform Act of 1998,2 which among other things,
required IRS to remove revenue officers from any
participation in asset sales by July 22, 2000. The
act also encouraged IRS to contract out this
function.

Accordingly, as agreed with the Subcommittee, this
report describes IRS' progress in (1) implementing
the Restructuring Act's mandate to remove revenue
officers from the asset sale function and (2)
addressing other internal control weaknesses
identified in our 1992 testimony. Also, as agreed
with the Subcommittee, we did the work for this
report as part of a broader review of IRS seizure
actions already being done for the Senate
Committee on Finance. A separate report on that
review is also being issued at this time: IRS
Seizures: Needed for Compliance but Processes for
Protecting Taxpayer Rights Have Some Weaknesses
(GAO/GGD-00-4, Nov. 29, 1999). Where appropriate,
we make reference to this overall report as a
source of additional details.

Results in Brief
As of October 1999, IRS had not finalized its
plans for removing revenue officers from its
process for selling seized assets. 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. The
group has been meeting and is considering the
scope of the new position. 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.

Our review of a representative sample of 1997
nationwide seizure cases, selected as part of our
overall review of weaknesses in IRS' seizure
processes, showed that the fundamental internal
control weaknesses we identified in 1992 remained.
More specifically, our review of case files showed
the following.

ï¿½    Similar to 1992, sufficiently complete
information to establish accountability over
assets (e.g., asset condition and identity
information, such as model number) was not always
recorded by revenue officers when assets were
seized.
ï¿½    As in 1992, IRS' security arrangements for
seized assets were, in some instances, minimal or
nonexistent.
ï¿½    Similar to 1992, IRS' sales practices
provided little assurance that the maximum
possible sales proceeds were achieved.
ï¿½    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.

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 (e.g., maintaining
a system of controls sufficient to protect against
theft, waste, and misuse and to assure the highest
sales price at the lowest cost). In our overall
report, we made recommendations for dealing with
these asset management and sales weaknesses that
we first identified in 1992. Those recommendations
are repeated at the end of this report.

Background
IRS' policy has long provided that, for taxpayers
who are unwilling to pay their tax debts in a
manner that is commensurate with their ability to
pay, IRS revenue officers were to initiate
enforced collection actions that could culminate
in the seizure of their property. In fiscal year
1997, IRS revenue officers seized property from
about 8,300 taxpayers who owed the federal
government an estimated $1 billion in unpaid
taxes3.

When we first reviewed IRS' management of seized
assets in 1992, we concluded that IRS' controls
over seized assets were not adequate to protect
against theft, waste, and misuse nor to assure
that the highest sales prices at the lowest cost
were obtained. These conclusions were based on the
following control weaknesses.

ï¿½    Little accountability. We found that IRS did
not (1) keep up-to-date records on property
seized, (2) obtain receipts to document asset
custody and storage location, (3) record physical
condition of the property seized, or (4) conduct
physical inventories of assets-on-hand to verify
inventory records or check on the assets.
ï¿½    Inadequate security. We found that some
seized assets had been stolen or were missing, and
in many cases, the value of the property was not
documented in the files. We also reported that by
not documenting the condition and value of seized
assets, IRS left itself open to claims of damage.
ï¿½    Sales not yielding highest price at lowest
cost. We found that IRS could have attracted more
buyers, and thus generated higher sales prices by
holding consolidated sales of seized assets.
Consolidated sales would also have allowed IRS to
reduce sales costs, such as advertising. We also
found that IRS did not always arrange for the
lowest cost storage of assets.
ï¿½    Little oversight. We found that IRS did not
know the total amount of property in its
possession because it lacked an adequate
information system. Moreover, IRS management knew
very little about the assets seized, including the
types of assets seized, the value or condition of
those assets, or where the assets were located.

In conclusion, we commented that the asset
management and sales functions could best be done
by parties who specialize in those functions, such
as other agencies or contractors, rather than as
additional duties assigned to revenue officers,
whose primary responsibility was to collect unpaid
taxes. We also said that IRS needed far better
information to oversee the management and sales of
seized assets.

Scope and Methodology
     To determine IRS' progress in removing
revenue officers from its process for selling
seized assets, we interviewed IRS National and
district officials concerning efforts to remove
revenue officers from asset sales. 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.

     To determine IRS' progress in correcting
internal control weaknesses, we discussed the 1992
findings with IRS National and district officials.
We reviewed statutory and procedural requirements
for conducting seizures and sales of taxpayer
assets and examined collection case files to
assess how those procedures were carried out.

     To make our case file review, we first
selected a random sample of taxpayers who had
property seized by IRS because of unpaid taxes. We
selected the random sample from a population of
about 8,300 taxpayers who had property seized by
IRS in fiscal year 1997.4 About 9,700 seizures
were associated with these 8,300 taxpayers. This
sample yielded sufficiently complete information
on 115 taxpayers with a corresponding 139 seizures
to evaluate IRS' management and control over
assets seized. We followed procedures to express
confidence in the precision of the results with a
95-percent confidence interval, separately
computed for each estimate and reported as
footnotes to the text of this report.

     Second, we randomly selected 16 cases with
assets still in IRS' possession from a population
of 76 cases in 4 IRS district offices. Because
this phase of our review involved examining the
seized assets, possibly stored hundreds of miles
from a district office, and reviewing the case
file with the revenue officer in charge of the
case, we established a maximum travel range of
about 100 miles from our work locations in making
our random selections.

     Our work was done principally in IRS district
offices located in Atlanta, GA; Chicago, IL; St.
Louis, MO; Oakland, CA; and the IRS National
Office in Washington, D.C. We did our work between
January 1998 and August 1999 in accordance with
generally accepted government auditing standards.

     We obtained written comments from IRS on a
draft of this report. 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 a
preliminary step to implement the Restructuring
Act mandate, IRS collection managers asked IRS
Chief Counsel for a legal interpretation of the
point at which revenue officer involvement in a
seized asset sale should end. Chief Counsel
concluded that many activities that take place
before the actual sale, such as the determination
of the minimum price that IRS would accept for an
asset, are "critical" to the sale of an asset and
should be considered as "involved" in the sale.

Accordingly, Chief Counsel concluded in its July
1999 interpretation that revenue officer
involvement should essentially end with the act of
seizing a taxpayer's assets and may begin again
after the sale of the assets has been completed.5
Chief Counsel also commented that an IRS study
group would have the best perspective to structure
any new IRS position related to asset sales.

Using Chief Counsel's interpretation as a starting
point, IRS convened a study group of IRS staff and
asset management and sales specialists from other
federal agencies. The group met in October 1999 to
discuss issues related to removing revenue
officers from asset sales and structuring an IRS
asset management and sales specialist position. As
part of its discussions, the group recognized that
any decisions reached would require consideration
of a number of issues, including the following.

ï¿½    Seizure workload. Since enactment of the
Restructuring Act, the number of IRS asset
seizures has dropped from about 10,000 per year to
about 200 for 1999. As discussed in our overall
report, IRS expects the number of seizures to
rebound as IRS staff become more familiar with the
act's collection provisions. Considering the
uncertainty regarding the workload for a
specialist position, the group discussed issues
related to ensuring that the number and location
of specialist staff are commensurate with the
workload.
ï¿½    Allocation of duties and responsibilities.
Although the Restructuring Act mandates that
revenue officers are to be removed from any
participation in sales, the group considered
whether a revenue officer or other IRS employee,
such as the specialist, should be present at all
asset sales in order to stop a sale from being
consummated, if appropriate. For example, a sale
should be stopped if a taxpayer pays the tax debt
or declares bankruptcy-currently the
responsibility of the revenue officers involved in
the seizures. The group also considered how the
requirement for removing revenue officers from
sales would affect supervisory responsibilities.
Since many supervisory employees of the collection
function are revenue officers, the group
considered whether it would be permissible for
those collection officials to supervise the
specialists.
ï¿½    Contracting out. The group considered the
circumstances under which IRS should use private
sector contractors or other government agencies to
manage and sell assets. One option was for the
specialists to determine, on a case-by-case basis,
whether it would be better for the specialist to
manage or sell the assets, assign the functions
somewhere else in IRS, or contract out the
functions.

As of the end of October 1999, IRS' Collection
Division management was continuing to review
options for structuring the specialist position.

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. As in 1992, we found (1)
little accountability over seized assets, (2)
little or no security for some assets, (3) little
assurance that IRS' sales produced maximum
proceeds, and (4) little useful management
information for monitoring seized assets. The
following summarizes the problems found. Our
overall report on weaknesses in IRS' seizure
processes contains additional details.

IRS' Controls Over Seized Assets Not Sufficient to
Assure Accountability
With respect to establishing accountability over
seized assets, little had changed from our review
in 1992. As detailed in our overall report on
weaknesses in IRS' seizure processes, asset
control information documented by revenue officers
in their seizure case files was not as
comprehensive as the control information specified
by federal financial

management guidelines.6 Among other details, the
guidelines explain that information should be
sufficiently specific to allow the independent
verification that each asset exists and that the
recorded physical condition, geographic location,
and asset value are accurate.

We estimate, based on our review of sampled
seizure cases, that revenue officers in preparing
inventory documents omitted some information on
the

ï¿½    identity of assets seized in about 25 percent7
of seizure cases (i.e., asset descriptions used by
revenue officers were not detailed enough, such as
by identifying make, model, or serial number, to
differentiate the items seized from other like
items);
ï¿½    quantity of assets seized in about 15 percent8
of seizure cases;
ï¿½    condition of assets seized in about 74
percent9 of seizure cases;
ï¿½    value of assets seized in about 12 percent10
of seizure cases;
ï¿½    location of assets seized in about 10 percent11
of seizure cases; and
ï¿½    custodian of assets seized in about 47
percent12 of seizure cases.

Moreover, we estimate that revenue officers did
not obtain receipts in 51 percent13 of the cases
when the revenue officer file indicated that the
seized assets were stored at contractor locations.
Also, IRS did not make periodic physical
inventories of assets in the possession of revenue
officers or contractors.

     The omission of detailed information on
assets (such as asset identity, quantity, or
condition) reduces accountability. Even if IRS
made physical inventories, without such
information, there would be little basis for
determining that all assets seized were still
under IRS or third-party custody or appropriately
protected against loss or deterioration.

Little Assurance Some Assets Are Protected Against
Loss
     Regarding asset protection, little has
changed from our review in 1992. As detailed in
our overall report on weaknesses in IRS' seizure
processes, we found that an estimated 12 percent14
of seizure cases involved assets that required
safeguards but the revenue officers' files did not
indicate security arrangements were made. For
example, in one case, the revenue officer file
contained no documentation on where a taxpayer's
$17,000 vehicle was stored or how the vehicle was
safeguarded. In another case, the revenue officer
seized personal property-jewelry, furniture, and
clothes valued at about $10,000-but did not
indicate how the assets were protected against
loss or damage.

Although we only found a few seizures that
resulted in loss or alleged loss or damage to
property, we could not determine the magnitude of
the loss nor who bore responsibility for the loss
because of limited documentation in the revenue
officers' files. For example, a piece of seized
artwork was damaged while a storage company was
moving the assets. The revenue officer did not
document the dollar amount of the damage or who
was liable for the loss. In another instance, a
taxpayer complained that various personal items
located in seized real estate were missing. The
revenue officer's file provided no further
information on the amount of the alleged loss.

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. As
detailed in our overall report, this is
attributable to two reasons. First, many assets
were sold without competitive bidding, and second,
IRS' minimum acceptable price for an asset was
often established in an arbitrary manner.

We estimate that about 51 percent15 of the sales
attracted no more than one bidder, and only 42
percent16 of the cases sold for more than the IRS-
established minimum price.

In general, IRS did not do much to attract
bidders. IRS did not hold consolidated asset sales
that might attract more prospective buyers.
Rather, revenue officers held separate sales for
property seized from different taxpayers, mostly
during weekday work hours, with minimal
advertising (e.g., posting in two public places
and a legal notice in a local paper). IRS seldom
used professional auctioneers or commercial
markets that specialize in selling pre-owned
assets.

In setting a minimum price, revenue officers
followed a formula that provided for reducing the
assets' fair market value by up to 40 percent.

Our assessment of the minimum price-setting
formula, the revenue officers' use of the formula,
and exceptions to the formula, showed that minimum
prices were often arbitrarily set.

ï¿½    First, we found little documentation
supporting revenue officer estimates of the fair
market value of the assets seized-the starting
point for computing the minimum acceptable price
for the assets. We estimate that only about 4
percent17 were based on professional appraisals and
about 71 percent18 of seizure case files contained
no documentary evidence for the amounts recorded
by the revenue officers. Moreover, as indicated by
revenue officer file notations, about 35 percent19
of the recorded values were set on the basis of
revenue officer judgment.
ï¿½    Second, we found instances where the recorded
estimates of asset fair market value were not used
as the starting point in setting the minimum
price. For example, a revenue officer noted in the
case file that, on checking courthouse records,
the value of the seized property was about
$93,000. In computing the minimum acceptable price
for the property, however, the revenue officer
used a value of $80,000 without explanation.
Without appraisals, neither IRS nor we can be
certain of the value of the taxpayer property.
ï¿½    Third, we found little justification for the
maximum percentage reduction allowed in the
formula used to compute the minimum price.
National Office officials responsible for program
guidance advised us that they were not aware of
the origins of the reductions. And while the
guidance suggested that these were maximum
reductions that needed to be supported, revenue
officers used the maximum reduction an estimated
69 percent20 of the time with little detailed
justifications shown.
ï¿½    Fourth, the percentage reductions used by the
revenue officers did not necessarily reflect the
different risks to buyers based on the type of
asset. Often we found that revenue officers
applied the same maximum reductions to both real
property and personal property, yet the conditions
associated with the sale of these assets varied
substantially. For personal property, such as a
car, ownership and control of the asset passed at
sale. For real property, such as a taxpayer's
residence, the taxpayer had 6 months to reclaim
the asset after sale, and the purchaser usually
did not have access to the property during the 6-
month period.
ï¿½    Fifth, IRS' policies limited the minimum
price to no more than the taxpayer's tax liability
plus the estimated expenses of seizure and sale.
Under this policy, the minimum price could be set
much lower than the formula's maximum percentage
reduction would allow. In one case that we
reviewed, use of the tax debt amounted to another
20 percent reduction below the formula-determined
price.

Little Information Available to Management to
Monitor Seized Asset Program
     After 1992, IRS installed an automated system
to inventory and monitor the property seized from
delinquent taxpayers. 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.21 Moreover, the
system was not Year 2000 compliant and will not be
used beginning January 2000. The first phase of a
replacement system, currently under development,
will not become operational until about July 2000.
In the interim, IRS will rely on an as-yet-
unspecified paper-based tracking system.

As we detailed in our overall report on weaknesses
in IRS' seizure processes, IRS' system to track
seized assets did not include all the information
set out by federal financial management
guidelines, and the information it did contain was
not always current or accurate. More specifically,
the automated inventory system

ï¿½    did not require the entry of the full
description of assets as recorded by revenue
officers in their case files;
ï¿½    did not provide data entry fields for
capturing information on asset condition or
custody;
ï¿½    did not provide a data entry field for theft,
loss, and damage expenses;
ï¿½    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;
ï¿½    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
ï¿½    was not required to be updated in a timely
manner.

Given the above limitations, the system could
produce little useful oversight information that
management could use to monitor seized assets.
Moreover, the system had limited information-
reporting capabilities. It did not even have the
capability to produce a report on the total
inventory of seized assets held by IRS.

IRS is in the process of developing a replacement
information system, largely because the existing
system was not Year 2000 compliant. Because of
Year 2000 complications, IRS will cease using the
existing system by January 2000 but does not plan
to have a new system in place at that time. In
designing the new system, for an estimated
implementation in July 2000, IRS took into
consideration the financial management guidelines
and input from us. While IRS has not completed its
system design work, IRS officials told us that the
July implementation will not provide for
information reporting beyond the limited
capabilities of the existing system. They also
said that any enhancements to these capabilities
would follow in later phases of development of the
system.

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.
Without such controls, taxpayers who have their
assets seized are at risk of having their
interests suffer-for example, from asset sales
that fail to maximize net proceeds. To this end,
we have made a number of recommendations in our
overall report. This report summarizes the
information supporting those recommendations.

Recommendations
This report repeats the recommendations detailed
in our overall report. The recommendations are as
follows.

To improve IRS' process for controlling assets
after seizure, we recommend that the Commissioner
fully implement federal financial management
guidelines to include

ï¿½    ensuring that revenue officers document basic
asset control information, including detailed
asset identity descriptions, asset condition, and
custody information;
ï¿½    ensuring that basic control information is
entered in a timely manner and included in the
revised automated inventory control system;
ï¿½    ensuring asset security and accountability
through scrutiny of decisions regarding security
and periodic reconciliation of inventory records
to assets-on-hand (periodic physical inventories);
and
ï¿½    requiring revenue officers to record and
account for all theft, loss, and damage expenses
of each asset and document efforts to obtain
reimbursement for the expenses in collection case
files.

To strengthen the sales process for assuring that
the highest prices are obtained from seized asset
sales, we recommend that the Commissioner

ï¿½    develop guidelines for establishing minimum
asset prices to preclude the use of arbitrary
percentage reductions or the amount of the
delinquency as the minimum price and
ï¿½    take the steps necessary to promote
reasonable competition among potential buyers
during asset sales.

To strengthen oversight of seizure activities, we
recommend that the Commissioner establish a method
for providing IRS senior managers with useful
information to monitor the use of seizure
authority, including the quality of asset
management and disposal activities.

Agency Comments and Our Evaluation
In written comments on a draft of this report, IRS
agreed with the report's findings and said it was
working to address them. More specifically, IRS
said that it needed to strengthen its requirements
for documenting the property seized and its
process for marketing assets. IRS also noted that,
as discussed in our overall report, certain
conditions associated with the sale of seized
assets (e.g., sale of assets in "where is" and "as
is" condition) may depress the price at which the
assets may be sold. Additionally, IRS acknowledged
that, in the short term, it will not have an
information system that will provide IRS
management with all of the asset management
information needed. But IRS said that it expects
to expand the capabilities of the management
information system so that, in the long term, IRS
will have an automated system that will meet all
of the federal financial management guidelines.
For additional comments on individual
recommendations, IRS referred to its response to
our overall report. In those comments, IRS
generally agreed with most of the recommendations
but said it was impractical, at this time, to
implement those associated with monitoring the
quality of seizure decisionmaking and the results
of seizures (see IRS Seizures: Needed for
Compliance but Processes for Protecting Taxpayer
Rights Have Some Weaknesses, (GAO/GGD-00-4, Nov.
29, 1999)).

As agreed with your office, unless you publicly
announce its contents earlier, we plan no further
distribution of this report until 30 days from the
date of this letter. At that time, we will send
copies to Representative William J. Coyne, Ranking
Minority Member, Subcommittee on Oversight, House
Committee on Ways and Means; the Honorable Charles
O. Rossotti, Commissioner of Internal Revenue;
other interested congressional committees; and
other interested parties. We will also make copies
available upon request.

This work was done under the direction of Thomas
M. Richards. Other major contributors are listed
in appendix II. If you have any questions, you may
contact me on (202) 512-9110.

Sincerely yours,

James R. White
Director, Tax Policy
  and Administration Issues

_______________________________
1See Tax Administration: IRS' Management of Seized
Assets (GAO/T-GGD-92-65, Sept. 24, 1992).
2P.L. 105-206, July 22, 1998.
3As noted in the Scope and Methodology section of
this report, the results of our analyses of a
random sample of taxpayers whose assets were
seized by IRS are presented as estimates within
certain intervals computed at the 95-percent
confidence level. The estimates are cited in the
report text and the confidence intervals in
footnotes. For example, regarding the amount of
taxes owed by these taxpayers, we can be 95-
percent confident that the interval of $1.1
billion plus or minus about $300 million contains
the actual value of taxes owed. The format adopted
for reporting confidence intervals in this report
follows: 95-percent confidence interval: $800
million to $1.4 billion.
4The random sample of seizure cases was chosen
from 1997 because it was the most recent year of
closed collection case files that would have
allowed sufficient time to elapse so that (1) case
file information would be available on the
disposition of the assets seized and (2) case
files would be available to us at the time we
started our case file review in late 1998. This
random sample is the same sample used to prepare
our report to the Senate Committee on Finance.
5Specifically, Chief Counsel ". . . concluded that
revenue officer involvement should cease after
notice of seizure has been provided to the
taxpayer as required by section 6335(a) and may
begin again, at the earliest, after the sale has
been completed. In addition, [Chief Counsel]
strongly advise[d] that [IRS] consider removing
revenue officers from post-sale matters as well."
6Joint Financial Management Improvement Program,
Federal Financial Management System Requirements,
Seized/Forfeited Asset System Requirements (FFMRS-
4, 3/93). The program established uniform
requirements for seized property systems operated
by federal agencies, such as documenting the type
of asset, value, physical condition, geographic
location, and responsible custodian. The
guidelines indicate that agencies may develop
additional requirements as necessary to support
unique mission requirements.
795-percent confidence interval: 18 to 32 percent.
895-percent confidence interval: 8 to 21 percent.
995-percent confidence interval: 65 to 82 percent.
1095-percent confidence interval: 6 to 17 percent.
1195-percent confidence interval: 6 to 15 percent.
1295-percent confidence interval: 36 to 58 percent.
1395-percent confidence interval: 35 to 66 percent.
1495-percent confidence interval: 6 to 17 percent.
1595-percent confidence interval: 36 to 67 percent.
1695-percent confidence interval: 29 to 56 percent.
17 95-percent confidence interval: 1 to 9 percent.
18 95-percent confidence interval: 62 to 80
percent.
19 95-percent confidence interval: 26 to 45
percent.
2095-percent confidence interval: 59 to 78 percent.
21Federal financial management guidelines, in
addition to specifying the types of information to
be included in an inventory control system, also
stated that the system should generate periodic
reports that provide performance results so that
management can monitor areas of concern, evaluate
results, and take appropriate corrective action
when necessary.

Appendix I
Comments From the Internal Revenue Service
Page 15   GAO/GGD-00-5 IRS Seized Asset Management

Appendix II
GAO Contacts and Staff Acknowledgments
Page 16   GAO/GGD-00-5 IRS Seized Asset Management
GAO Contacts
James R. White (202) 512-9110
Thomas M. Richards (202) 512-9110

Acknowledgments
     In addition to those named above, Wendy
Ahmed, Julie Cahalan, Sharon Caporale, Kevin Daly,
Sally Gilley, Leon Green, Mary Jankowski, Joseph
Jozefczyk, Stuart Kaufman, Ann Lee, Mary Jo
Lewnard, John Mingus, George Quinn, Julie
Scheinberg, Sidney Schwartz, Samuel Scrutchins,
James Slaterback, Shellee Soliday, Clarence Tull,
Margarita Vallazza, and Thomas Venezia made key
contributions to this report.

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