United States General Accounting Office

GAO Report to the Commissioner, Internal

Revenue Service

November 1997 TAX

ADMINISTRATION

IRS’ Efforts to Place

More Emphasis on

Criminal Tax

Investigations

GAO/GGD-98-16

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-275359 

November 6, 1997

The Honorable Michael Dolan

Acting Commissioner of Internal Revenue

Dear Mr. Dolan:

The Internal Revenue Service’s (IRS) Criminal Investigation Division (CID)

investigates tax fraud and assists other law enforcement agencies in

investigating financial crimes, such as money laundering associated with

narcotics trafficking. In the early 1990s, IRS studies raised questions about

CID’s investigative priorities because they increasingly comprised nontax

investigations that supported national drug and crime policies to the

detriment of tax investigations, even as the estimated tax gap grew to

about $128 billion for 1992.1

 This concern caused CID to revise its

investigative strategy, thereby focusing more resources on tax

investigations. As part of this revised strategy, in fiscal year 1995 CID

established fraud and narcotics as its main investigative program areas.

The fraud program was further subdivided between tax gap fraud and

other fraud, thus enabling CID to track resources applied specifically to tax

gap investigations.

This report, which we prepared under our basic legislative responsibilities,

discusses the actions CID has taken since the early 1990s to increase the

time spent on tax investigations versus nontax investigations. It also

highlights the investigations initiated by CID, as well as referrals to U.S.

Attorneys for prosecution and court sentences based on these

investigations, for fiscal years 1990 through 1996.

Results in Brief Between fiscal years 1990 and 1992, IRS data show that the percent of time

spent on tax gap investigations decreased by 10 percentage points,

continuing a downward trend since the early 1980s. On the basis of the

recommendations of two IRS studies done in the early 1990s, CID began in

October 1993 taking actions designed to increase the amount of time its

agents spent conducting tax investigations. Specifically, CID reorganized its

administrative functions and operations with the intent of better targeting

resource allocations. It also consolidated and recategorized its program

areas with an objective of better tracking its investigations. In addition, as

of fiscal year 1996 CID established goals for the percent of time to be spent

on its investigations, particularly for tax gap investigations.

1

The tax gap is defined as total tax liability less taxes paid voluntarily. IRS’ tax gap reports do not

indicate how much of the tax gap is attributable to fraud.

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Since these actions were initiated, the percent of time spent on tax gap

investigations has increased by 13 percentage points from a low of

46 percent in 1992 to 59 percent in 1996.2

 Overall, the 59 percent in fiscal

year 1996 represented a net increase of 3 percentage points over the fiscal

year 1990 level.

Between fiscal years 1992 and 1996, there was an increase in the percent

of tax gap investigations that CID initiated and in the percent of referrals to

U.S. Attorneys for prosecution based on tax gap cases; since fiscal year

1994, the percent of court sentences based on tax gap cases has also

increased. However, as of fiscal year 1996 the increases in these indicators

have not been enough to match fiscal year 1990 levels.

Background CID carries out IRS’ criminal law enforcement responsibilities under three

principal statutes. Under title 26 U.S.C., IRS has authority to investigate

alleged criminal tax violations, such as tax evasion and filing a false tax

return. Under title 18 U.S.C., IRS has authority to investigate a broad range

of fraudulent activities, such as false claims against the government and

money laundering. Under title 31 U.S.C., IRS is responsible for enforcing

certain recordkeeping and reporting requirements of large currency

transactions, such as cash bank deposits of more than $10,000. In carrying

out its responsibilities, CID coordinates as necessary with IRS’ District

Counsel, the Tax Division within the Department of Justice (Justice), and

local U.S. Attorneys to prosecute violators of these statutes.

Combating money laundering and other financial crimes is considered a

high priority by both Justice and the Department of the Treasury

(Treasury). According to Justice officials, because of CID’s expertise in

conducting detailed financial investigations, U. S. Attorneys and law

enforcement agencies routinely rely on CID’s assistance in investigating

financial crimes, particularly those involving money laundering related to

narcotics trafficking. In addition, CID agents have access to tax

information, which they can use to develop financial investigations more

fully. CID is also involved in ongoing efforts to identify and investigate

emerging financial crimes, such as health care and bankruptcy fraud.

According to CID officials, although such assistance places competing

2

At our request, CID staff used the characteristics defined in fiscal year 1995 for investigations

conducted under its main program areas—fraud and narcotics—to identify the amount and percent of

time applied to these types of investigations between fiscal years 1990 and 1994. The fraud program

was further broken out by tax gap and other fraud. They did the same for the number and percent of

(1) CID investigations initiated, (2) referrals to U.S. Attorneys for prosecution based on CID cases, and

(3) court sentences based on CID cases.

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demands on CID’s time, it also aids in establishing the cooperative

environment conducive to getting CID’s tax cases prosecuted and in

obtaining information that can lead to criminal tax investigations.

Historically, CID’s total staffing and budget have represented about 5

percent of IRS’ overall resources. As of the end of fiscal year 1996, CID had

the full-time equivalent of 4,504 staff, including 3,065 special agents, and a

budget of $366 million. CID is also reimbursed for some of the assistance it

provides to other law enforcement agencies, particularly Justice’s

Organized Crime Drug Enforcement Task Force (OCDETF) program.3

Scope and

Methodology

To determine the actions CID has taken since the early 1990s to increase

the time spent on tax investigations relative to nontax investigations, we

interviewed senior CID officials in IRS’ National Office, officials from both

the Tax and Criminal Divisions in Justice, and officials from the Office of

the Under Secretary for Enforcement in Treasury. We interviewed the CID

officials because of their responsibilities in managing CID operations and

setting division policies. Justice and Treasury officials were interviewed to

obtain their opinions regarding CID’s (1) assistance in narcotics and money

laundering investigations and (2) increased emphasis on tax

investigations. We also reviewed CID’s annual goals and objectives and

annual performance reports for fiscal years 1990 through 1996, as well as

relevant documentation on the reorganization of its administrative

functions and operations.

To determine the types of investigations initiated and the results of

referrals to U.S. Attorneys for prosecution and sentences resulting from

these prosecutions, we analyzed IRS’ Criminal Investigation Management

Information System (CIMIS) data. CID uses CIMIS data to track the status and

overall results of its criminal investigations, including the direct

investigative time (DIT) expended on investigations. DIT is the amount of

time that CID agents spend directly working on investigations. We selected

fiscal years 1990 through 1996 to identify CID’s investigative trends in order

to capture data from the time of the IRS studies that raised concerns about

CID’s investigative priorities through fiscal year 1996, the most recent

period for which data were available.

3

OCDETF is a federal interagency coordinated effort to investigate and prosecute major drug

organizations, particularly those with connections to organized crime. Under a reimbursement

agreement with Justice, CID is reimbursed up to the level allowed by Congress for the cost of its

agents’ salaries when assisting in OCDETF investigations. According to data provided by CID officials,

between fiscal years 1990 and 1996, CID provided $130 million in assistance to the OCDETF program

over and above the $205 million received in reimbursement from Justice.

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We obtained and analyzed CIMIS data to identify nationwide by fiscal year

(1) the number and results of various types of CID investigations, and

(2) the principal sources of information that led to CID investigations. CID

staff, at our request, reconfigured CIMIS data for fiscal years 1990 through

1996 to reflect the current IRS field alignment of 4 regions and 33 districts,

as well as CID’s current program areas—fraud and narcotics—with fraud

further broken out between tax gap fraud and other fraud. Other than

reconciling the totals from CIMIS data extracts to CID annual performance

reports, we did not verify the accuracy of the CIMIS data.

We did our work from October 1996 to August 1997 in accordance with

generally accepted government auditing standards. The work was done at

IRS’ National Office and Southeast Regional Office; IRS’ Georgia, South

Florida, and Delaware-Maryland District Offices; and at U. S. Attorney’s

offices in the Northern District of Georgia, the Southern District of

Florida, and the Maryland District. We selected the offices we visited

because of the proximity of our staff working on this assignment.

We requested comments on a draft of this report from the Acting

Commissioner of Internal Revenue and the Attorney General. Their

comments are discussed at the end of this letter.

Actions to Increase

Direct Investigative

Time Spent on Tax

Investigations

In the early 1990s, concerns raised in IRS studies regarding CID’s

investigative priorities spurred CID to take actions to increase the amount

of time its agents spent on tax investigations. Between fiscal years 1990

and 1992, the percent of DIT spent on tax gap investigations decreased

from 56 percent to 46 percent; since then, the percent of DIT spent on tax

gap investigations increased to 59 percent as of fiscal year 1996. CID has

established a range of 57 to 61 percent of DIT to be spent on tax gap

investigations as its goal for fiscal year 1997 and beyond.

Subsequent to hearings on IRS employee misconduct in 1989 before the

Subcommittee on Commerce, Consumer and Monetary Affairs, House

Committee on Government Operations, the Commissioner of Internal

Revenue appointed an independent panel to review various concerns

raised during the hearings, including issues relating to criminal

investigations. In its October 1990 report, the panel stated that there had

been a significant decrease in CID resources applied to tax investigations

and a corresponding increase in resources applied to nontax

investigations. The panel believed that CID’s work priorities were not

properly aligned with IRS’ strategic goal of increasing taxpayers’

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compliance with the tax laws. The panel recommended that CID

(1) establish a criminal enforcement policy in line with IRS’ overall efforts

to increase compliance with the tax laws, (2) ensure that its allocation of

resources and mix of cases are consistent with such a policy, and

(3) closely monitor and control implementation of this policy through the

National Office.

Also, to address concerns about whether CID’s workload was properly

balanced between tax and nontax investigative efforts, IRS convened a

study group that included representatives from Justice and Treasury. The

study group’s August 1991 report found that CID resources used for tax

investigations had declined about 18 percentage points between fiscal

years 1980 and 1990; on that basis, the study group recommended that

resources devoted to tax investigations be increased and that future

resources devoted to narcotics investigations be limited to the amount

expended in fiscal year 1991. The IRS Executive Committee agreed with

these recommendations, and in June 1992 CID initiated an action plan to

implement them.

The actions led to a reorganization of CID, which began in October 1993

and was fully implemented in October 1994. The reorganization was done

in part with the intent of giving CID’s national office a better means to

control and monitor field activities to keep them aligned with national

policies and objectives as recommended by the review panel and the study

group. In terms of its organizational structure, CID was reduced from 7

regions and 63 districts to 4 regions and 34 districts.4

 In addition, the

position of Director of Investigation (DI), reporting directly to the IRS

National Office Assistant Commissioner for Criminal Investigation, was

established in each region to oversee and coordinate investigative

activities. The DIs replaced seven former Assistant Regional

Commissioners for Criminal Investigation, who reported directly to the

Regional Commissioners. The DIs are responsible for ensuring that CID field

offices adhere to national office program objectives and policies.

Another action CID took to better track the allocation of its resources to

tax versus nontax investigations was to consolidate its major program

areas and to establish a specific category for tax gap investigations. In

fiscal year 1995, CID consolidated the five program areas under which

investigations had been categorized and tracked—narcotics, organized

crime, public corruption, financial compliance, and other illegal

4

CID was subsequently reduced to 33 districts when IRS’ district office reorganization took place in

fiscal year 1996.

Page 5 GAO/GGD-98-16 IRS’ Criminal Investigation Division
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crime—into two principal program areas—fraud and narcotics. The fraud

program was subdivided into tax gap fraud and other fraud. Tax gap fraud

pertains to investigations of legal industries with alleged criminal tax

violations.5

 The other fraud category involves investigations of illegal

industries or money laundering investigations with no tax-related charges.6

The narcotics program primarily relates to investigations of money

laundering activity by individuals and organizations involved in narcotics

trafficking.

Beginning in fiscal year 1996, CID set specific national goals for the percent

of DIT to be used on tax gap and narcotics investigations to help ensure

that additional resources would be allocated to tax gap investigations. The

fiscal year 1996 DIT goals were 58 percent for tax gap

investigations—1 percent higher than the actual DIT for fiscal year

1995—and 24 percent for narcotics investigations—the same as the actual

DIT for fiscal year 1995.

Since CID began taking these actions, DIT applied to tax gap investigations

has increased. (See fig. 1.) According to data provided by IRS, the percent

of time applied to tax gap investigations for fiscal years 1993 through 1996

increased 13 percentage points. As of fiscal year 1996, CID applied

59 percent of DIT to tax gap investigations, exceeding its goal by

1 percentage point, while applying 22 percent of DIT to narcotics

investigations, 2 percentage points short of its goal.

5

According to CID officials, although tax gap investigations usually result in prosecution and

sentencing for Title 26 violations, they may also involve certain Title 18 violations, such as defrauding

the government or filing a false claim. They further stated that they prefer prosecution and sentencing

under Title 26, but they will opt to use Title 18 when they feel certain that Title 26 charges will not hold

up in court.

6

Investigations of illegal industries with alleged criminal tax violations are included in the other fraud

program.

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Figure 1: Percent of Nationwide DIT by

Type of Criminal Investigation—Fiscal

Years 1990 Through 1996

1990 1991 1992 1993 1994 1995 1996

0

20

40

60

80

100

Percent

Fiscal year

Tax gap fraud

Narcotics

Other fraud

Source: GAO analysis of IRS data.

According to CID national office officials, the goal for the amount of DIT to

be allocated to tax gap investigations in fiscal year 1997 is a range of 57 to

61 percent, and the goal for narcotics investigations is a range of 23 to

25 percent. They stated that these goals, which are expected to be the

goals for the next few years, were developed with input from the DIs. It is

CID officials’ judgment that these goals will enable CID to (1) conduct

investigations in support of IRS’ strategic goal of increasing compliance

with the tax laws; (2) contribute to the government’s efforts in combating

narcotics and money laundering; and (3) continue allocating some of its

investigative time to cases involving emerging financial crimes, such as

health care fraud.

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Trends in the Number

and Results of CID

Investigations for

Fiscal Years 1990

Through 1996

CID considers completed investigations that merit referral to the U.S.

Attorneys for prosecution as an important step toward the eventual

prosecution, conviction, and sentencing for criminal tax violations and

related financial crimes. By publicizing convictions, CID hopes to deter

others from engaging in such criminal activity and to promote voluntary

compliance with the tax laws. Consequently, CID uses statistical data from

CIMIS to track the number and percent of investigations initiated, as well as

the number and percent of referrals made to U.S. Attorneys for

prosecution and sentences handed down by the U.S. courts based on CID

cases. CIMIS data show that the percent of tax gap investigations initiated,

the percent of tax gap cases referred to U.S. Attorneys for prosecution,

and the percent of court sentences based on tax gap cases have all begun

to increase since CID increased the time spent on tax gap investigations.

However, as of fiscal year 1996, the increases have not been enough to

match fiscal year 1990 levels for these indicators.

Trends in the Types of

Investigations Initiated

As shown in figure 2, tax gap investigations represented 54 percent of all

CID investigations initiated in fiscal year 1996. This is an increase over the

fiscal year 1992 level of 47 percent and just under the fiscal year 1990 level

of 55 percent. The figure also shows that between fiscal years 1990 and

1996, narcotics investigations decreased from 30 percent to 25 percent of

all CID investigations initiated. Other fraud investigations were

6 percentage points higher in fiscal 1996 than in fiscal year 1990.

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Figure 2: Percent of Criminal

Investigations Initiated Nationwide by

Type—Fiscal Years 1990 Through 1996

1990 1991 1992 1993 1994 1995 1996

0

20

40

60

80

100

N = 5,279 N = 5,218 N = 6,538 N = 6,148 N = 5,346 N = 5,000 N = 5,334

Fiscal year

Tax gap fraud

Narcotics

Other fraud

Percent

Source: GAO analysis of IRS data.

Trends in Investigations

Referred to the U.S.

Attorneys for Prosecution

Figure 3 shows that, in general, the percent of CID cases being referred to

the U.S. Attorneys for prosecution for tax gap fraud since fiscal year 1992

has increased, while the percent of other types of referrals—narcotics and

other fraud cases—either declined or remained somewhat stable.

Specifically, tax gap referrals represented 47 percent of all CID referrals in

fiscal year 1996 compared to 39 percent in fiscal year 1992 and 49 percent

in fiscal year 1990.

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Figure 3: Percent of Referrals for

Prosecution Nationwide by Type of

CID Investigation—Fiscal Years 1990

Through 1996

1990 1991 1992 1993 1994 1995 1996

0

20

40

60

80

100

N = 3,230 N = 3,677 N = 4,252 N = 4,267 N = 3,745 N = 3,615 N = 3,605

Fiscal year

Tax gap fraud

Narcotics

Other fraud

Percent

Note: Referrals for prosecution in a particular fiscal year do not necessarily relate to the year the

case was initiated.

Source: GAO analysis of IRS data.

Trends in Sentences From

Cases Referred to the U.S.

Attorneys for Prosecution

Court sentences—including incarceration, probation, and fines—based on

tax gap investigations decreased from 54 percent of all court sentences

based on CID investigations in fiscal year 1990 to a low of 37 percent in

fiscal year 1994. Since that time tax gap sentences have increased to

44 percent of all court sentences for CID cases as of fiscal year 1996.

Overall, sentences based on narcotics investigations increased from

32 percent to 39 percent of all court sentences based on CID investigations

between fiscal years 1990 and 1993, then decreased to 31 percent as of

fiscal year 1996. (See fig. 4.)

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Figure 4: Percent of Sentences

Nationwide by Type of CID

Investigation—Fiscal Years 1990

Through 1996

1990 1991 1992 1993 1994 1995 1996

0

20

40

60

80

100

N = 2,409 N = 2,785 N = 2,635 N = 3,052 N = 3,235 N = 2,801 N = 2,777

Fiscal year

Tax gap fraud

Narcotics

Other fraud

Percent

Note: Sentences in a particular fiscal year do not necessarily relate to the year the case was

initiated or referred to a U.S. Attorney for prosecution.

Source: GAO analysis of IRS data.

Additional information relating to CID’s investigations between fiscal years

1990 and 1996 is shown in appendixes I, II, III, and IV. Appendix I shows

the number of staff days applied nationwide by type of criminal

investigation. Appendix II contains information on the percent of DIT

applied to each type of criminal investigation by IRS location. Appendix III

shows the numbers of investigations, referrals to the U.S. Attorneys for

prosecution, and court sentences by type of criminal investigation.

Appendix IV discusses the principal sources of information on which CID’s

investigations were based.

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Agency Comments

and Our Evaluation

IRS and the Department of Justice each provided comments on a draft of

this report. Each agency generally agreed with the information presented

in the report and offered technical comments, which we have incorporated

where appropriate.

Copies of this report are being sent to the Chairmen and Ranking Minority

Members of the Senate Committee on Finance, the Senate Committee on

Governmental Affairs, the House Committee on Ways and Means, and the

House Committee on Government Reform and Oversight; the Chairman

and Ranking Minority Member of the Subcommittee on Treasury, General

Government, and Civil Service, Senate Committee on Appropriations; and

the Chairman and Ranking Minority Member of the Subcommittee on

Treasury, Postal Service, and General Government, House Committee on

Appropriations; various other congressional committees; the Secretary of

the Treasury; the Attorney General; and other interested parties. We will

also make copies available to others upon request.

Major contributors to this report are listed in appendix VI. Please contact

me on (202) 512-9110 if you or your staff have any questions about this

report.

Sincerely yours,

Lynda D. Willis

Director, Tax Policy and

 Administration Issues

Page 12 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Page 13 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Contents

Letter 1

Appendix I 

Investigative Time

Applied Nationwide

by Type of Criminal

Investigation in Fiscal

Years 1990 Through

1996

18

Appendix II 

Percent of Direct

Investigative Time

Applied to CID

Investigations in

Fiscal Years 1990

Through 1996

19

Appendix III 

The Number and

Results of CID

Investigations in

Fiscal Years 1990

Through 1996

24

Page 14 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Contents

Appendix IV 

Sources of

Information That

Resulted in CID

Investigations in

Fiscal Years 1990

Through 1996

26

Appendix V 

Comments From the

Internal Revenue

Service

28

Appendix VI 

Major Contributors to

This Report

29

Tables Table I.1: Number of Direct Staff Days Applied Nationwide by

Type of Criminal Investigation in Fiscal Years 1990 Through 1996

18

Table II.1: Percent of Total DIT Applied to Tax Gap Investigations

by Location in Fiscal Years 1990 Through 1996

19

Table II.2: Percent of Total DIT Applied to Narcotics

Investigations by Location in Fiscal Years 1990 Through 1996

20

Table II.3: Percent of Total DIT Applied to Other Fraud

Investigations by Location in Fiscal Years 1990 Through 1996

22

Table III.1: Number of CID Investigations Initiated Nationwide in

Fiscal Years 1990 Through 1996

24

Table III.2: Number of CID Investigations Referred to the U.S.

Attorney for Prosecution Nationwide in Fiscal Years 1990

Through 1996

24

Table III.3: Number of Sentences Nationwide Resulting from CID

Investigations in Fiscal Years 1990 Through 1996

25

Figures Figure 1: Percent of Nationwide DIT by Type of Criminal

Investigation—Fiscal Years 1990 Through 1996

7

Page 15 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Contents

Figure 2: Percent of Criminal Investigations Initiated Nationwide

by Type—Fiscal Years 1990 Through 1996

9

Figure 3: Percent of Referrals for Prosecution Nationwide by

Type of CID Investigation—Fiscal Years 1990 Through 1996

10

Figure 4: Percent of Sentences Nationwide by Type of CID

Investigation—Fiscal years 1990 Through 1996

11

Figure IV.1: Percent of Investigations Initiated Nationwide by

Selected Sources—Fiscal Years 1990 Through 1996

26

Abbreviations

CID Criminal Investigation Division

CIMIS Criminal Investigation Management Information System

DI Director of Investigation

DIT Direct Investigative Time

IRS Internal Revenue Service

OCDETF Organized Crime Drug Enforcement Task Force

Page 16 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Page 17 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix I 

Investigative Time Applied Nationwide by

Type of Criminal Investigation in Fiscal

Years 1990 Through 1996

This appendix presents the nationwide number of staff days applied

directly to the major types of Criminal Investigation Division (CID)

investigations. This does not include staff days applied to noninvestigative

activities, such as training.

Table I.1: Number of Direct Staff Days Applied Nationwide by Type of Criminal Investigation in Fiscal Years 1990 Through

1996

Number of staff days by fiscal year

Type of investigation 1990 1991 1992 1993 1994 1995 1996

Fraud

Tax gap 273,192 262,544 253,245 278,261 301,640 328,595 361,494

Other 43,906 66,923 110,107 115,942 96,753 98,002 98,032

Narcotics 160,988 169,882 170,665 168,116 159,357 138,356 134,794

Information items 9,757 15,444 16,516 17,391 11,383 11,530 18,381

Total direct staff days 487,842 514,793 550,533 579,711 569,133 576,483 612,702

Note 1: Investigative time spent following up on information provided to CID that indicates

potential criminal violations prior to initiation of an investigation is categorized as information

items.

Note 2: Totals do not add due to rounding.

Source: GAO analysis of IRS data.

Page 18 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II 

Percent of Direct Investigative Time Applied

to CID Investigations in Fiscal Years 1990

Through 1996

This appendix shows the percent of direct investigative time (DIT) applied

to the major types of CID investigations nationwide, by regions, and by

district offices from fiscal years 1990 through 1996. For fiscal year 1996,

CID set national DIT goals of 58 percent for tax gap investigations and

24 percent for narcotics investigations. To achieve these goals, CID

requested that the Directors of Investigation for each region help to ensure

that the regional DIT was within a range of 58 to 60 percent for tax gap

investigations and 24 to 26 percent for narcotics investigations.

Table II.1: Percent of Total DIT Applied to Tax Gap Investigations by Location in Fiscal Years 1990 Through 1996

Percent of DIT by fiscal years

Location 1990 1991 1992 1993 1994 1995 1996

Nationwide 56 51 46 48 53 57 59

Midstates Region 51 45 40 43 47 54 56

Midwest 52 46 44 50 55 57 62

Arkansas-Oklahoma 55 40 34 43 49 57 57

Houston 55 50 45 52 54 56 49

Illinois 61 56 47 50 50 55 59

Kansas-Missouri 54 53 44 42 48 53 61

North Central 58 48 53 56 60 64 73

North Texas 47 38 37 33 33 49 56

South Texas 26 26 18 20 32 46 34

Northeast Region 61 57 53 53 56 58 61

Brooklyn 71 70 65 62 66 62 60

Connecticut-Rhode Island 61 60 58 58 64 69 74

Manhattan 55 44 50 47 51 52 56

Michigan 60 58 55 55 58 58 60

New England 49 51 44 48 49 50 58

New Jersey 64 62 57 54 63 64 64

Ohio 60 48 42 45 50 55 63

Pennsylvania 64 64 51 52 52 57 62

Upstate New York 72 64 64 64 66 63 64

Southeast Region 54 49 46 49 55 58 59

Delaware-Maryland 56 51 47 52 55 59 59

Georgia 59 50 47 59 56 57 60

Gulf Coast 65 54 57 57 64 64 61

Indiana 70 63 58 59 60 67 66

(continued)

Page 19 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II 

Percent of Direct Investigative Time Applied

to CID Investigations in Fiscal Years 1990

Through 1996

Percent of DIT by fiscal years

Location 1990 1991 1992 1993 1994 1995 1996

Kentucky-Tennessee 60 52 44 47 58 58 57

North-South Carolina 39 36 41 39 50 55 57

North Florida 46 45 41 40 46 49 52

South Florida 39 39 34 41 51 50 55

Virginia-West Virginia 61 55 53 50 60 65 64

Western Region 55 51 41 45 50 56 60

Central California 56 58 53 53 58 56 58

Los Angeles 60 52 45 50 60 62 68

Northern California 61 51 36 47 45 54 57

Pacific Northwest 49 50 43 47 50 49 57

Rocky Mountain 54 49 34 38 48 57 60

Southern California 51 48 41 37 42 53 58

Southwest 55 49 38 49 53 59 62

Note: Percentages have been rounded to the nearest whole percent.

Source: IRS Criminal Investigation Management Information System data.

Table II.2: Percent of Total DIT Applied to Narcotics Investigations by Location in Fiscal Years 1990 Through 1996

Percent of DIT by fiscal years

Location 1990 1991 1992 1993 1994 1995 1996

Nationwide 33 33 31 29 28 24 22

Midstates Region 37 38 36 35 32 25 26

Midwest 33 39 37 32 29 25 26

Arkansas-Oklahoma 21 28 27 25 21 19 16

Houston 34 35 37 32 33 30 40

Illinois 30 31 33 28 28 24 24

Kansas-Missouri 34 34 34 33 30 23 21

North Central 34 34 29 22 24 19 12

North Texas 33 34 36 41 39 22 19

South Texas 65 63 54 64 50 34 46

Northeast Region 28 29 28 26 26 25 23

Brooklyn 14 14 17 15 19 23 23

Connecticut-Rhode Island 31 25 23 21 19 13 10

Manhattan 38 43 36 36 35 35 32

(continued)

Page 20 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II 

Percent of Direct Investigative Time Applied

to CID Investigations in Fiscal Years 1990

Through 1996

Percent of DIT by fiscal years

Location 1990 1991 1992 1993 1994 1995 1996

Michigan 27 26 27 25 24 26 25

New England 43 34 30 23 25 22 20

New Jersey 25 25 28 26 26 24 21

Ohio 26 32 29 31 26 26 22

Pennsylvania 26 25 30 28 29 25 25

Upstate New York 21 25 21 22 23 17 12

Southeast Region 34 35 30 28 26 23 21

Delaware-Maryland 35 36 31 30 30 23 26

Georgia 29 32 29 23 27 25 21

Gulf Coast 27 30 25 24 23 20 22

Indiana 18 18 20 20 21 18 17

Kentucky-Tennessee 25 26 18 21 19 16 14

North-South Carolina 43 45 34 35 30 23 23

North Florida 37 35 29 25 22 17 12

South Florida 56 52 46 39 33 35 27

Virginia-West Virginia 30 31 30 29 25 21 19

Western Region 33 31 32 28 28 23 19

Central California 36 34 26 19 21 19 14

Los Angeles 36 34 31 31 29 21 19

Northern California 28 28 33 26 28 22 22

Pacific Northwest 35 28 27 24 26 26 20

Rocky Mountain 33 32 32 27 27 21 18

Southern California 41 39 39 35 34 29 24

Southwest 25 27 37 30 26 17 12

Note: Percentages have been rounded to the nearest whole percent.

Source: IRS Criminal Investigation Management Information System data.

Page 21 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II 

Percent of Direct Investigative Time Applied

to CID Investigations in Fiscal Years 1990

Through 1996

Table II.3: Percent of Total DIT Applied to Other Fraud Investigations by Location in Fiscal Years 1990 Through 1996

Percent of DIT by fiscal years

Location 1990 1991 1992 1993 1994 1995 1996

Nationwide 9 13 20 20 17 17 16

Midstates Region 11 15 21 19 18 19 17

Midwest 11 11 16 13 11 15 10

Arkansas-Oklahoma 20 30 36 29 28 22 25

Houston 9 13 17 14 12 12 10

Illinois 6 8 16 18 18 17 14

Kansas-Missouri 10 10 19 22 19 22 15

North Central 7 16 17 20 15 15 13

North Texas 18 25 27 25 27 28 24

South Texas 9 10 28 15 18 19 20

Northeast Region 8 11 16 18 15 14 13

Brooklyn 13 12 15 19 12 12 13

Connecticut-Rhode Island 5 12 16 19 15 16 14

Manhattan 6 9 10 13 11 10 9

Michigan 10 13 14 15 14 11 12

New England 6 12 22 25 23 24 20

New Jersey 8 9 13 18 10 11 13

Ohio 10 16 23 20 20 15 11

Pennsylvania 7 9 18 19 17 16 10

Upstate New York 6 10 13 12 10 19 22

Southeast Region 9 13 21 20 16 17 18

Delaware-Maryland 6 9 19 16 14 16 13

Georgia 8 15 22 17 16 18 18

Gulf Coast 6 13 15 16 9 15 16

Indiana 8 15 17 16 13 10 12

Kentucky-Tennessee 14 20 35 29 20 23 26

North-South Carolina 16 18 24 24 18 21 19

North Florida 14 17 26 31 27 30 31

South Florida 4 7 16 15 12 11 15

Virginia-West Virginia 7 12 15 18 13 13 15

Western Region 8 15 24 25 19 19 19

Central California 7 6 18 27 19 23 27

Los Angeles 2 12 22 17 9 14 11

(continued)

Page 22 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II 

Percent of Direct Investigative Time Applied

to CID Investigations in Fiscal Years 1990

Through 1996

Percent of DIT by fiscal years

Location 1990 1991 1992 1993 1994 1995 1996

Northern California 8 17 28 25 24 22 18

Pacific Northwest 12 18 27 27 21 22 20

Rocky Mountain 10 18 32 33 24 20 20

Southern California 3 8 16 25 20 15 15

Southwest 15 20 22 19 18 20 23

Note: Percentages have been rounded to the nearest whole percent.

Source: IRS Criminal Investigation Management Information System data.

Page 23 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix III 

The Number and Results of CID

Investigations in Fiscal Years 1990 Through

1996

This appendix presents information on the number of CID investigations

that were initiated, the number of investigations in which CID

recommended prosecution, and the number of sentences resulting from

prosecutions from fiscal year 1990 through fiscal year 1996. According to

CID officials, completing an investigation and subsequently prosecuting and

sentencing the subject of the investigation may take a year or more. As a

result, the number of prosecution recommendations and sentences shown

in a particular fiscal year in tables III.2 and III.3 may not have resulted

from the investigations initiated in the corresponding fiscal year in table

III.1.

Table III.1: Number of CID Investigations Initiated Nationwide in Fiscal Years 1990 Through 1996

Number of investigations initiated by fiscal year

Type of investigation 1990 1991 1992 1993 1994 1995 1996

Fraud

Tax gap 2,895 2,530 3,098 2,927 2,602 2,506 2,857

Other 781 822 1,345 1,396 1,103 1,201 1,144

Narcotics 1,603 1,866 2,095 1,825 1,641 1,293 1,333

Total investigations 5,279 5,218 6,538 6,148 5,346 5,000 5,334

Source: IRS Criminal Investigation Management Information System data.

Table III.2: Number of CID Investigations Referred to the U.S. Attorney for Prosecution Nationwide in Fiscal Years 1990

Through 1996

Number of investigations referred by fiscal year

Type of investigation 1990 1991 1992 1993 1994 1995 1996

Fraud

Tax gap 1,574 1,561 1,642 1,805 1,535 1,579 1,708

Other 430 605 937 1,009 889 891 865

Narcotics 1,226 1,511 1,673 1,453 1,321 1,145 1,032

Total referrals for prosecution 3,230 3,677 4,252 4,267 3,745 3,615 3,605

Source: IRS Criminal Investigation Management Information System data.

Page 24 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix III 

The Number and Results of CID

Investigations in Fiscal Years 1990 Through

1996

Table III.3: Number of Sentences Nationwide Resulting From CID Investigations in Fiscal Years 1990 Through 1996

Number of sentences by fiscal year

Type of investigation 1990 1991 1992 1993 1994 1995 1996

Fraud

Tax gap 1,310 1,344 1,203 1,225 1,194 1,104 1,223

Other 333 402 459 630 805 736 691

Narcotics 766 1,039 973 1,197 1,236 961 863

Total sentences 2,409 2,785 2,635 3,052 3,235 2,801 2,777

Source: IRS Criminal Investigation Management Information System data.

Page 25 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix IV 

Sources of Information That Resulted in CID

Investigations in Fiscal Years 1990 Through

1996

CID relies on various sources of information for initiating its investigations,

including information from (1) within IRS, such as from the Examination

Division; (2) other government sources, such as U.S. Attorneys;

(3) currency transaction reports; and (4) the public. Although information

from other government sources may result in various types of CID

investigations, including tax fraud, information from within IRS

predominantly results in tax fraud investigations. Information provided

from within IRS and by other government sources accounted for about

75 percent of the total CID investigations initiated each year for fiscal years

1990 through 1996. As shown in figure IV.1, investigations based on

information provided by other government sources increased from about

45 percent in fiscal year 1990 to about 51 percent in fiscal year 1996.

Investigations based on information provided from within IRS fluctuated

from about 32 percent in fiscal year 1990 to about 29 percent in fiscal year

1996.

Figure IV.1: Percent of Investigations

Initiated Nationwide by Selected

Sources—Fiscal Years 1990 Through

1996

1990 1991 1992 1993 1994 1995 1996

20

40

60

80

100

Fiscal year

IRS referrals

Government non-IRS referrals

Percent

Source: GAO analysis of IRS data.

Page 26 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix IV 

Sources of Information That Resulted in CID

Investigations in Fiscal Years 1990 Through

1996

In 1991, a study group convened to examine CID’s workload and to

recommend changes to better balance, direct, and strengthen its future

investigative activities recommended that IRS reemphasize its internal

fraud referral program. In an effort to increase the quality of internal fraud

referrals from other IRS groups to CID that may lead to tax fraud

investigations, IRS established formal fraud referral procedures effective

for fiscal year 1996. This included establishing the position of fraud

coordinator in each district office to act as a focal point for fraud referrals.

According to CID officials, the objective of these procedures is to increase

coordination between CID and other IRS functions, particularly the

Examination Division, in an effort to ensure that only cases involving

potential criminal fraud, rather than civil fraud, are referred to CID. CID

officials further stated that it is too soon to determine the overall success

of the new procedures.

Page 27 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix V 

Comments From the Internal Revenue

Service

Page 28 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix VI 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

Charlie Daniel, Assistant Director

Mark Gillen, Assistant Director

Robert McKay, Evaluator-in-Charge

James O’Donnell, Evaluator

Charles W. Woodward, III, Senior Evaluator

Atlanta Field Office A. Carl Harris, Assistant Director

Clarence Tull, Senior Evaluator

Sally P. Gilley, Evaluator

(268768) Page 29 GAO/GGD-98-16 IRS’ Criminal Investigation Division
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