Summaries of Tax-Related Products Issued Other 1991 Annual Report on GAO'S Tax-Related Work GAO/GGD-92-57, 05/21/92 This report was prepared in compliance with a legislative requirement and GAO reported that (1) IRS had taken, or planned to take, action on most of Appendix II Summaries of Tax-Related Products Issued Congress May Wish to Extend the Offset Authority for 95 Summaries of Tax-Related Products Issued Congress May Wish to Incurred in Operations, Which GAO/GGD-91-106, 07/03/91 This report responded to section 3301 of the Crime Control Act of 1990. Section 3301 required that GAO study IRS undercover investigative operations that were done using the authority provided in section 7608(c) of the Internal Revenue Code of 1986. This authority exempts IRS undercover operations from certain laws and allows IRS to use the proceeds from undercover operations to offset necessary and reasonable expenses incurred in the operations. The Crime Control Act required that GAO evaluate (1) IRS' use of the proceeds in these operations, (2) the operations' results, and (3) IRS' financial audits of the operations. GAO reported that IRS had made limited use of the offset authority, which was due to expire on December 31, 1991. From November 1988 through May 1, 1991, IRS had approved the use of the offset authority in only 19 of its undercover operations-less than 5 percent of the total undercover operations initiated for the same period. The 19 undercover operations using the offset provision had produced about $545,000 in income. Of the income earned, approximately $121,000 was used to offset operational expenditures; $269,000 had not yet been offset against expenditures; and about $155,000 had been returned to the general fund. IRS reported that as of May 1, 1991, undercover operations using the offset provision had resulted in the seizure of over $207 million in cash and significant amounts of drugs, including cocaine and heroin, and 75 convictions. GAO noted that identifying a direct cause and effect relationship between the financing mechanism provided by the offset authority and the results of a given investigation was difficult, if not impossible, because many variables came into play. However, GAO concluded that the additional funds made available through the use of the offset provision allowed IRS to either undertake more investigations than it could without those funds or to expand the range of activities for each investigation. GAO raised questions about IRS' control over funds. None of the operations involving the offset provision had met the statutory criteria requiring a detailed financial audit. In some cases, IRS Internal Audit might not have sufficient access to all the information needed to do a thorough audit because it did not have complete access to information on investigations done under the control of a grand jury. Thirteen of the 19 operations using the offset authority were grand jury cases. Summaries of Tax-Related Products Issued Matter(s) for Recommendation(s) Actions(s) Taken And/or Further, GAO believed that IRS' use of Internal Audit to audit undercover operations using the offset provision should not be limited to those operations meeting a specific dollar threshold. IRS' use of Criminal Investigation Division employees to do audits of offset operations in which activity fell below the prescribed dollar thresholds raised questions of organizational independence, a general standard for government auditing. GAO said that such questions could be avoided by having Internal Audit do all the audits. In addition, the sensitivity of the activities being undertaken and the exemption of the expenditures from normal controls over appropriated funds increased the need for the audits to be done by an independent entity. GAO also said that Congress' understanding of the use and results of undercover operations involving the offset provision could be enhanced if IRS' reports to Congress contained additional details and were more timely. Should Congress decide to extend the offset authority, it might also wish The Commissioner of Internal Revenue should direct the Chief Inspector to ensure that Internal Audit expands its financial audits to include all undercover operations involving offsetting, regardless of the amount of expenditures or proceeds. The offset authority expired on December 31, 1991, thereby rendering our recommendations moot. As of December 31, 1992, this authority had not been reinstated. Summaries of Tax-Related Products Issued Before Fiscal Year 1992 With Open Recommendations to Congress as of December 31, 1992 Congress Should Consider Modifying the Targeted Jobs Tax Credit Program by Imposing New Eligibility Requirements If It Wishes to Encourage Employers Using the Program to Take Special Actions That Benefit Members of the Targeted Group GAO/HRD-91-33, 02/20/91 In 1977, Congress established the Targeted Jobs Tax Credit Program to induce employers to favor certain disadvantaged individuals facing barriers to employment. Over the past 10 years, employers had claimed an estimated $4.5 billion in tax credits under the program. Yet, little information was available on the employers using the program or the workers hired under it. In a report to two subcommittees of the House Committee on Education and Labor, GAO provided descriptive information on employers using the program and the individuals for whom the tax credits were claimed. GAO discussed (1) the extent to which employers made specific efforts to identify, hire, or retain eligible workers; and (2) differences in participants' earnings before and after their involvement in the program. This tax credit program is intended to increase employment opportunities for members of the targeted groups by providing a financial incentive to employers to recruit, hire, and retain target group members. GAO found that nearly half of the 60 employers it interviewed had made some special effort to do so. The other half had taken advantage of the tax credit without making special efforts to hire members of the targeted groups. GAO also determined that work experiences had a positive impact on participants' earnings. GAO did not find any substantial differences, however, in earnings changes resulting from participants' work experience when compared with the experience of other workers who were eligible for the program but did not participate. GAO's analysis of data from 13 states indicated that (1) retail stores and restaurants were the primary users of the tax credit program in 1988 and (2) most of the hirings under the program that year involved youths who were hired to fill entry-level jobs requiring minimal skills and paying low wages. Matter(s) for Congressional Consideration If Congress wishes a higher proportion of employers using the Targeted Jobs Tax Credit Program to take special actions that benefit members of the targeted groups, it could modify the program by imposing new requirements. For example, program requirements might involve employer outreach efforts to eligible populations, prescreening to determine |