Security Clearances: Additional Mechanisms May Aid Federal Tax-Debt Detection
Published: 2013-09-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As of October 2012, about 4.9 million civilian and military employees and contractors held a security clearance. Federal laws do not prohibit an individual with unpaid federal taxes from holding a security clearance, but tax debt poses a potential vulnerability. GAO was requested to review tax-debt detection during the clearance process. GAO examined (1) the number of individuals with unpaid federal taxes, if any, in the OPM security-clearance database and the magnitude of any federal tax debt, and (2) the extent to which federal agencies have mechanisms to detect unpaid tax debt during the security-clearance-approval process.
GAO compared OPM's security-clearance information to the IRS's known tax debts. To provide examples, GAO conducted a detailed review of IRS and security adjudication files of 13 individuals selected, in part, on the basis of tax debt amount and type of security clearance. GAO also reviewed relevant laws and regulations and interviewed officials from the Office of the Director of National Intelligence (ODNI), Treasury, OPM, and three selected federal agencies that represented more than half of the clearance holders in OPM's database.
section_title: What GAO Found
paragraphs: About 8,400 individuals adjudicated as eligible for a security clearance from April 2006 to December 2011 owed approximately $85 million in unpaid federal taxes, as of June 2012. This represents about 3.4 percent of the civilian executive-branch employees and contractors who were favorably adjudicated during that period. GAO found that about 4,700 of the approximately 8,400 individuals were federal employees while the remainder was largely federal contractors. Additionally, about 4,200 of these individuals had a repayment plan with the Internal Revenue Service (IRS) to pay back their debt. For this review, GAO used clearance data from the Office of Personnel Management (OPM) Central Verification System (CVS) database. The CVS database does not maintain information on the denial of security clearances on the basis of an individual's nonpayment of federal taxes. Thus, GAO was not able to determine the number of individuals who were denied security clearances for this reason.
Federal agencies have established mechanisms aimed at identifying unpaid federal tax debt of security-clearance applicants; however, these mechanisms have limitations. To detect federal tax debt for clearance applicants, federal investigators primarily rely on two methods: (1) applicants self-reporting tax debts; and (2) validation techniques, such as the use of credit reports or in-person interviews. Each of these methods has shortcomings in detecting unpaid federal tax debts of clearance applicants. For example, credit reports are the primary method for identifying tax debt that was not self-reported, but these reports only contain information on tax debts for which the IRS filed a lien on the debtor's property. According to GAO's analysis, 5 percent of the 8,400 delinquent taxpayers who were favorably adjudicated as eligible for security clearances had a tax lien filed on them. Additionally, federal agencies generally do not routinely review federal tax compliance of clearance holders. There is no process to detect unpaid federal tax debts accrued after an individual has been favorably adjudicated unless it is self-reported, reported by a security manager due to garnishment of wages, or discovered during a clearance renewal or upgrade. GAO's analysis found that 6,300 individuals (approximately 75 percent) accrued their tax debt after approval of the security clearance.
Additional mechanisms that provide large-scale, routine detection of federal tax debt could improve federal agencies' ability to detect tax debts owed by security-clearance applicants and current clearance holders, but statutory privacy protections limit access to this information. Federal agencies may obtain information on federal tax debts directly from the IRS if the applicant provides consent. In addition, federal agencies do not have a mechanism, such as one that the Department of the Treasury (Treasury) uses, to collect delinquent federal debts. Such information could help federal agencies perform routine, automated checks of security-clearance applicants to determine whether they have unpaid federal debts, without compromising statutory privacy protections. Such a mechanism could also be used to help monitor current clearance holders' tax-debt status. Gaining routine access to this federal debt information, if feasible, would better position federal agencies to identify relevant financial and personal-conduct information to make objective assessments of eligibility for security-clearance applicants and continued eligibility of current clearance holders.
section_title: What GAO Recommends
paragraphs: GAO recommends that ODNI study the feasibility of federal agencies routinely obtaining federal debt information from Treasury for the purposes of investigating and adjudicating clearance applicants, as well as for monitoring current clearance holders' tax-debt status. ODNI agreed with GAO's recommendation.

section_title: Letter
paragraphs: The Office of the Director of National Intelligence (ODNI) reported that, as  of October 2012, over 4.9 million federal employees (civilian and military)  and contractors held—or were individuals eligible to hold—a security  clearance due to a favorable adjudication. The number of personnel  holding clearances underscores the need for security-clearance  adjudicators to conduct thorough vulnerability assessments of security- clearance applicants as these clearances may allow government  personnel to gain access to classified information that, through  unauthorized disclosure, can in some cases cause exceptionally grave  damage to U.S. national security. Promulgated under the authority of  Executive Order 12968, adjudicative guidelines establish the criteria by  which an individual is evaluated for a security clearance determination.   The guidelines state that assessments should consider available, reliable  information about the person, past and present, favorable and  unfavorable, and carefully weigh a number of variables, including  whether the applicant has shown an inability or unwillingness to satisfy  debts or financial obligations or has failed to file annual required tax  returns. Federal law does not expressly prohibit an individual with unpaid  federal taxes from being granted a security clearance; however, tax debt  does pose a potential vulnerability that must be considered in making a  broader determination of whether an applicant should be granted a  security clearance. Specifically, federal adjudicative guidelines for  determining eligibility for access to classified information state that an  individual who is financially overextended is at risk of having to engage in  illegal acts to generate funds, and provide that adjudicating officials weigh  an individual’s debts, such as federal tax debts, as they relate to an  individual’s financial and personal conduct when making the security- clearance determination.
OPM officials noted that under the new standards issued in December 2012, it is a 5-year  cycle for both types of investigations, with reinvestigations conducted of a random sample of  clearance holders.  However, these standards have not yet been implemented. clearance process over the last several years, and highlighted progress  being made to improve the timeliness of the clearance process.
You asked us to review the security-clearance process and mechanisms  used to identify unpaid federal tax-debt information of applicants,  employees, and contractors. For this review, we focused on civilian  employees and contractors in the executive branch. We excluded  Department of Defense (DOD) employees and contractors and known  employees of intelligence agencies from this review. the following questions: (1) How many individuals with unpaid federal  taxes, if any, are in the OPM security-clearance database and what is the  magnitude of any unpaid federal tax debt; and (2) To what extent do  federal agencies have mechanisms to detect unpaid tax debt during the  security-clearance approval process? As part of this work, we are also  providing case-study examples of individuals with security clearances  with unpaid tax debt to highlight whether the tax debt was revealed during  the investigative or adjudicative processes, and, if so, how it was handled  during the adjudication. In addition, as agreed with your staff, we are  conducting a separate review of DOD security-clearance holders who  owe federal taxes and will issue a report on our results next year.
Security-clearance information from civilian agencies is maintained in OPM’s Central  Verification System (CVS).  Security-clearance information from DOD employees and  contractors is maintained in the Joint Personnel Adjudication System (JPAS). Security- clearance information from the intelligence community is maintained in the Scattered  Castles database. CVS is capable of providing a bridge or link to JPAS security-clearance  data, but the DOD data are not maintained in CVS. For our review, we did not study  legislative-branch agencies in the OPM CVS database. reinvestigation, from April 1, 2006, through December 31, 2011. We  used this time frame for the OPM Central Verification System (CVS) data  because prior to April 1, 2006, the provision of the date a clearance was  granted was not required and was therefore not consistently available for  analysis. We electronically matched federal tax-debt data from the  Internal Revenue Service (IRS) Unpaid Assessment database to these  individuals using Social Security numbers (SSN). The OPM CVS  database does not maintain information on the denial of security  clearances on the basis of an individual’s nonpayment of federal taxes.  Thus, we were not able to determine the number of individuals who were  denied security clearances for this reason. We included only those  individuals with legally enforceable tax debts of $100 or more. All  individuals in the IRS tax-debt data had unpaid federal taxes as of June  30, 2012. The June 30, 2012, Unpaid Assessment file was used because  it contained the most-recent unpaid-assessment information at the time  we conducted our analysis. We assessed the reliability of the OPM data  by performing electronic testing on the data and interviewing OPM  officials regarding the quality and accuracy of the data. To assess the  reliability of IRS unpaid-assessments data, we relied on the work we  performed during our annual audit of the IRS’s financial statements and  discussions with the audit team. We also interviewed knowledgeable IRS  officials about any data-reliability issues. We determined that both the  OPM and IRS data were sufficiently reliable to identify the individuals  eligible for clearances with unpaid federal tax debt, provide an  approximate overall amount of tax debt owed by these individuals, and  select our case studies. Our final estimate of tax debt does include some  debt that is covered under an active IRS installment plan or is beyond  normal statutory time limits for debt collection. Our analysis determined  the magnitude of known unpaid federal taxes owed by selected  individuals in the OPM database and cannot be generalized to individuals  that were granted eligibility for security clearances by DOD, the legislative  branch, or the intelligence community.
To determine to what extent federal agencies have mechanisms to detect  unpaid tax debt during the security-clearance approval process, we held  meetings with knowledgeable officials from OPM, ODNI, the IRS,  Department of Homeland Security (DHS), Department of Energy (DOE)  and Department of State (State). We selected DHS, DOE, and State  because these agencies had the highest number of security clearances,  collectively representing over 50 percent of clearances granted in OPM’s  CVS database, and also represented over 50 percent of the tax debt  owed. OPM conducts security-clearance investigations for most federal  agencies. ODNI serves as Security Executive Agent for the federal  government and has authority and responsibility over many aspects of the  security-clearance program. As such, we also reviewed and analyzed  applicable laws, regulations, and ODNI guidance, as well as applicable  policies and procedures for OPM, DHS, DOE, and State regarding the  investigation and adjudication of security clearances. Finally, we  conducted interviews with the Department of the Treasury’s Bureau of the  Fiscal Service (Fiscal Service) and the IRS on any initiatives and  challenges in sharing tax debt information. We compared verification  mechanisms with the fraud control framework we developed in our past  work and other fraud-control best practices. We also used Federal  Investigative Standards (see app. I) and the Revised Adjudicative  Guidelines for Determining Eligibility for Access to Classified Information  (see app. II) to evaluate the current mechanisms used to identify and  evaluate unpaid federal tax debt as part of the security-clearance  process.
To develop case-study examples, we identified a nonprobability sample of  13 individuals for detailed reviews from the above analyses of security- clearance holders from DHS, DOE, and State who had federal tax debt.  These three agencies were selected because they had the largest  number of individuals who were adjudicated as eligible for a security  clearance from April 1, 2006, to December 31, 2011. We stratified our  data matches using the following characteristics: (1) adjudicating agency;  (2) amounts of unpaid federal taxes in the IRS Unpaid Assessment  database as of June 30, 2012; (3) type of security clearance granted or  approved, clearance date, and dollar amount of unpaid tax debt; and (4)  whether tax debt was recorded prior to or after the security-clearance  grant date. We then randomly selected 12 cases on the basis of these  criteria. Additionally, we randomly selected one individual for whom IRS  records show the taxpayer was assessed a penalty. We requested and  obtained IRS notes, detailed account transcripts, and other records from  the IRS as well as background investigation and adjudicative record files  from DHS, DOE, and State for these 13 individuals. For 11 of the 13  individuals that had accrued debt before the adjudication, we reviewed  the background investigation and adjudicative record files and IRS  paperwork to determine whether the tax debt was revealed during the  investigative or adjudicative processes, and, if so, how it was handled  during the adjudication. For 2 of the 13 individuals that had accrued debt  only after favorable adjudication, we reviewed the adjudicative files to  determine whether the agency was aware of the federal tax debt through  its reinvestigation. These cases were selected to illustrate individuals with  unpaid federal tax debt that had been determined eligible for security  clearances but cannot be generalized beyond the cases presented. A  more-detailed description of the scope and methodology can be found in  appendix III.
We conducted this performance audit from November 2011 to September  2013 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our audit findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Unpaid Federal Tax Debt Owed
paragraphs: As of September 30, 2012, the tax debt of individuals and businesses that  owed the U.S. government was about $364 billion, according to the IRS.
The tax-debt inventory is the sum of all taxes owed to the IRS at a  particular point in time, including debts from the current year and debts  from previous years that fall within the 10-year statute of limitations on  collections. The inventory of tax debts comprises tax assessments that  are not collected along with related penalty and interest charges. Federal  taxes that are owed become tax debts when the tax is assessed but not  paid. Millions of individual and business taxpayers owe billions of dollars  in unpaid federal tax debts, and the IRS expends substantial resources  trying to collect these debts.
GAO, High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February 2013). workforce (approximately 312,000 individuals).contain a comparison of the delinquency rates of federal employees with  the general population.
section_title: Laws and Regulations Governing the Security- Clearance Process
paragraphs: Passed in 2004, the Intelligence Reform and Terrorism Prevention Act  (IRTPA) mandates the President to identify a single entity responsible for,  among other things, directing the day-to-day oversight of investigations  and adjudications for personnel security clearances throughout the U.S.  government. Additionally, agencies may not establish additional  investigative or adjudicative requirements without approval from the  selected entity, nor may they conduct an investigation where an  investigation or adjudicative determination of equal level exists.
Executive Order 13467 (June 30, 2008) designates ODNI as the Security  Executive Agent and assigns responsibility for developing uniform and  consistent policies and procedures to ensure the effective, efficient, and  timely completion of investigations and adjudications related to  determinations of eligibility for access to classified information or eligibility  to hold a sensitive position. Executive Order 13467 also designates the  Director of OPM as the Suitability Executive Agent responsible for  developing and implementing uniform and consistent policies and  procedures for investigations and adjudications related to determinations  of suitability for federal employment, as well as eligibility for electronic and  physical access to secure facilities.outlines a process for continuous evaluation of individuals that are  determined to be eligible or currently have access to classified  information. Continuous evaluation means reviewing the background of  an individual who has been determined to be eligible for access to  classified information (including additional or new checks of commercial  databases, government databases, and other information lawfully  available to security officials) at any time during the period of eligibility to  determine whether that individual continues to meet the requirements for  eligibility for access to classified information. Executive Order 12968  (August 4, 1995) authorized establishment of uniform security policies,  procedures, and practices, including the Federal Investigative Standards  used by investigators conducting security-clearance investigations. In  December 2012, the Security and Suitability Executive Agents (ODNI and  OPM) jointly issued a revised version of Federal Investigative Standards  for the conduct of background investigations for individuals that work for  or on behalf of the federal government.
section_title: Security-Clearance Process
paragraphs: Personnel security clearances are required for access to classified  national-security information, which may be classified at one of three  levels: confidential, secret, or top secret. A top-secret clearance is  generally also required for access to Sensitive Compartmented  Information or Special Access Programs. The level of classification  denotes the degree of protection required for information and the amount  of damage that unauthorized disclosure could reasonably be expected to  cause to national security. Unauthorized disclosure could reasonably be  expected to cause (1) “damage,” in the case of confidential information;  (2) “serious damage,” in the case of secret information; and (3)  “exceptionally grave damage,” in the case of top-secret information.
As shown in figure 1, to ensure the trustworthiness and reliability of  personnel in positions with access to classified information, government  agencies rely on a personnel security-clearance process that includes  multiple phases: application, investigation, adjudication, and  reinvestigation (where applicable, for renewal or upgrade of an existing  clearance).
The application phase. To determine whether an investigation would be  required, the agency requesting a security-clearance investigation is to  first conduct a check of existing personnel-security databases to  determine whether there is an existing security-clearance investigation  underway or whether the individual has already been favorably  adjudicated for a clearance in accordance with current standards. If such  a security clearance does not exist for that individual, a security officer  from an agency is to (1) request an investigation of an individual requiring  a clearance; (2) forward a personnel-security questionnaire (SF-86) to the  individual to complete using OPM’s Electronic Questionnaires for  Investigations Processing (e-QIP) system; (3) review the completed  questionnaire; and (4) send the questionnaire and supporting  documentation, such as fingerprints, to OPM or another designated  investigative service provider.
The investigation phase. OPM conducts a majority of the government’s  background investigations; however, some agencies, such as State, are  delegated to conduct their own background investigations. Federal  investigative standards and agencies’ internal guidance are used to  conduct and document the investigation of the applicant (see app. II). The  scope of information gathered during an investigation depends on the  level of clearance needed. For example, federal standards require that  investigators collect information from national agencies, such as the  Federal Bureau of Investigation, for all initial and renewal clearances. For  an investigation for a confidential or secret clearance, investigators gather  much of the information electronically. For an investigation for a top- secret clearance, investigators gather additional information through  more-time-consuming efforts, such as traveling to conduct in-person  interviews to corroborate information about an applicant’s employment  and education. After the investigation is complete, the resulting  investigative report is provided to the agency.
The adjudication phase. Adjudicators from an agency use the  information from the investigative report to determine whether an  applicant is eligible for a security clearance. To make clearance-eligibility  decisions, national policy requires adjudicators to consider the information  against the 2005 Revised Adjudicative Guidelines for Determining  Eligibility for Access to Classified Information. The adjudication process  is a careful weighing of a number of variables, to include disqualifying and  mitigating factors, known as the “whole-person” concept. When a  person’s life history shows evidence of unreliability or untrustworthiness,  questions can arise as to whether the person can be relied on and trusted  to exercise the responsibility necessary for working in a secure  environment where protecting national security is paramount. As part of  the adjudication process, the adjudicative guidelines require agencies to  determine whether a prospective individual meets the adjudicative criteria  for determining eligibility, including personal conduct and financial  considerations. If an individual has conditions that raise a security  concern or may be disqualifying, the adjudicator must evaluate whether  there are other factors that mitigate such risks (such as a good-faith effort  to repay a federal tax debt). On the basis of this assessment, the agency  may make a risk-management decision to grant the security-clearance  eligibility determination, possibly with a warning that future incidents of a  similar nature may result in revocation of access.
The reinvestigation phase. Personnel cleared for access to classified  information may have their clearance renewed or upgraded if determined  necessary to the performance of job requirements. Reinvestigation covers  the period since the previous investigation. Renewal of a clearance at the  same level currently undergoes the above process every 10 years for  secret or 5 years for top secret. Applicants for clearance upgrades  undergo additional steps necessary to obtain the higher clearance level  (such as a subject interview for a top-secret clearance).
section_title: Improvements to the Federal Security-Clearance Process
paragraphs: We have previously reported on issues related to the federal security- clearance process. For example, in 2005, we designated DOD’s  personnel security-clearance program—which comprises the vast  majority of government wide clearances—as a high-risk area. This  designation continued through 2011 because of concerns regarding  continued delays in the clearance process and security-clearance  documentation, among other things.personnel security-clearance program as a high-risk area, DOD, in   Since we first identified the DOD  conjunction with Congress and executive-agency leadership, took actions  that resulted in significant progress toward improving the processing of  security clearances. Congress held more than 14 oversight hearings to  help oversee key legislation, such as the Intelligence Reform and  Terrorism Prevention Act of 2004 (IRTPA), which helped focus attention  and sustain momentum of the government-wide reform effort. In 2011, we  removed DOD’s personnel-security clearance program from our high-risk  list because of the agency’s progress in improving timeliness,  development of tools and metrics to assess quality, and commitment to  sustaining progress.
In 2012, we found that OPM’s reported costs to conduct background  investigations increased by about 80 percent, from about $600 million in  fiscal year 2005 to almost $1.1 billion in 2011 (in fiscal year 2011  dollars). OPM’s background investigation program has several cost  drivers, including investigation fieldwork and personnel compensation for  OPM’s background-investigation federal workforce. OPM attributed cost  increases to, in part, an increase in the number of top-secret clearance  investigations, which involve additional field work and more  comprehensive subject interviews and compliance with investigation  timeliness requirements.
section_title: More Than 8,000 Individuals Eligible for Security Clearances Owe about $85 Million in Federal Taxes; About Half Are on Payment Plans with the IRS
paragraphs: About 240,000 employees and contractors of civilian executive-branch  agencies, excluding known employees and contractors of DOD and  intelligence agencies, had a federal security clearance or were approved  for secret and top-secret clearances due to a favorable adjudication from  April 1, 2006, through December 31, 2011. These consist of both initial  investigations when an individual is applying for a clearance and  reinvestigations when an individual is upgrading to a higher clearance  level or renewing an existing clearance. About 8,400 of the 240,000  people (approximately 3.5 percent) had unpaid federal tax debt as of  June 30, 2012, totaling about $85 million. The characteristics and nature  of these 8,400 individuals with tax debt are discussed below.
About half of the individuals are in a repayment plan with the  IRS. According to IRS data, about 4,200 of these 8,400 individuals  with tax debt had a repayment plan with the IRS to pay back their debt  as of June 30, 2012. plan was approximately $35 million.
The tax debt owed by those on a repayment
About half of individuals with tax debt were federal employees.
Repayment plans, or installment agreements, are monthly payments made to the IRS  that allow individuals or entities to repay their federal tax debt over an extended period. time frame (April 1, 2006, to December 31, 2011), while the others  were favorably adjudicated as eligible for a secret clearance.
Most individuals accrued tax debt after clearance adjudication.
Approximately 6,300 individuals (about 76 percent) accrued tax debts  only after the issuance of the security clearance. Approximately 2,000  individuals (about 25 percent) accrued their tax debt before the  approval for the security clearance.
Age and amount of tax debt ranges widely. About 16 percent of the  $85 million in unpaid federal taxes were delinquent more than 3 years,  and approximately 6 percent of the unpaid federal taxes were  delinquent more than 5 years. Further, the unpaid tax debt of each  individual ranged from approximately $100 to over $2 million, and the  median tax-debt amount owed by these individuals was approximately  $3,800.
In addition, we analyzed 13 nongeneralizable case examples—7 federal  contractors and 6 federal employees from the DOE, DHS, and State—to  determine whether existing investigative and adjudication mechanisms  detected unpaid tax debt during the security-clearance process. In 8 of  these 13 cases, the individual had a top-secret clearance, with the  remaining 5 having secret clearances. In 5 of the 13 cases, the individual  had a reinvestigation of the security clearance after the period of our  analysis (April 1, 2006, to December 31, 2011). In 11 of these 13 cases,  the individual’s tax debt accrued before the favorable adjudication of the  security clearance. For all 11 of these cases, the tax debt was identified  either through the initial investigation or through the reinvestigation. In 2  of the 13 cases, the individual’s tax debt accrued after the favorable  adjudication of the security clearance, and no indication of the federal tax  debt was found in the security clearance files. On the basis of our review  of IRS records, our analysis found that 12 of the 13 individuals filed their  tax returns late for at least 1 tax year, and 6 of the 13 individuals did not  file at least one annual tax return.discussed throughout the report.
section_title: Federal Agencies Have Mechanisms to Detect Tax Debt, but Opportunities Exist to Strengthen Detection Capabilities
paragraphs: To detect federal tax debt for clearance applicants, consistent with federal  law, federal investigators rely primarily on two methods: (1) applicants  self-reporting tax debts, and (2) validation techniques, such as the use of  credit reports or in-person interviews. Each of these methods has  shortcomings in detecting unpaid federal tax debts for clearance  applicants. Moreover, federal agencies do not routinely monitor  individuals after the security clearance is favorably adjudicated to identify  tax debt accrued subsequent to the clearance approval. Additional  mechanisms that provide large-scale, routine detection of federal tax debt  could improve federal agencies’ ability to detect tax debts owed by  security-clearance applicants and current clearance holders.
subsections: section_title: Investigation Mechanisms Include Self-Reporting and Validation Techniques
subsections: section_title: Self-Reporting
paragraphs: As part of the application-submission phase of the security-clearance  process, applicants must submit various background and biographical  information using OPM form SF-86. In addition, new federal employees  typically complete the Declaration for Federal Employment form (OF- 306). Both of these forms require applicants to disclose if they are  delinquent on any federal debt, including tax debts. The SF-86 is used in  conducting background investigations, reinvestigations, and continuous  evaluations of federal employees and contractors. The SF-86 requires  that applicants declare if they did not file or pay any federal taxes within  the past 7 years. The SF-86 also requires applicants to disclose whether  any liens were placed on their property for failure to pay tax debts and  whether they are currently delinquent on any federal debts (including tax  debts). Similar to the SF-86, the Declaration for Federal Employment  requires applicants to disclose if they are delinquent on any federal debt,  including tax debts. If the applicant is delinquent, the applicant is required  to disclose, among other things, the type and amount of debt and any  steps taken to repay the debt. An excerpt of the SF-86 where applicants  are required to disclose any tax issues are illustrated in figure 2.
Of the 13 individuals we examined from our nongeneralizable sample, 11  had accrued debt prior to the clearance being granted. Our review of the  SF-86 documentation for this sample of 11 selected cases found that 5  individuals did not properly disclose their tax debts. Each of these  individuals owed at least $12,000 at the time of our review. As discussed  later in this report, our past work has focused on the inadequacies of  relying on self-reported information without independent verification and  review.
During the investigative phase, the investigative agency can perform  several activities in an effort to validate applicants’ certifications about the  nature and extent of their tax debts, but each of the techniques has  limitations, as discussed below.
Obtaining credit reports of the applicants. According to OPM officials,  credit reports, which contain public records including federal tax liens, are  the primary method of identifying federal tax debts that were not self- reported. However, credit reports only contain information on tax debts  for which the IRS filed a lien on the debtor’s property, both real and  personal, for the amount of the unpaid tax. Circumstances do not warrant  a lien being filed in all cases, such as when the amount of the debt is in  dispute or when the IRS determines that filing a lien would hamper  collection of the debt because the debtor is trying to obtain a loan to pay it  off. In addition, the IRS generally does not file liens until after the debt  has moved out of the notice status and there is property on which a lien  can be placed. The amount owed can increase with interest and  penalties or can decrease as the debtor makes payments, but neither  change is reflected in the recorded tax lien amount. Our analysis found  that about 450 of the approximately 8,400 delinquent taxpayers (about 5  percent) who were favorably adjudicated as eligible for security  clearances had a tax lien filed on them. For the 13 cases that we  reviewed, 4 of the cases identified during the investigative process had  tax liens filed against the individuals.
Conducting in-person interviews. As part of the investigation,  investigators may conduct interviews with the applicant and his or her  friends, former spouses, neighbors, and other individuals associated with  the applicant. According to OPM, during the course of the in-person  interviews, the tax debt could be disclosed, but there is no systematic way  to identify tax debt during the interviews. For example, according to State  officials, state tax debt is usually an indicator that the individual also owes  federal taxes. Thus, during the course of their in-person interviews,  investigators will often inquire with the applicant whether he or she owes  federal taxes when a state tax debt is discovered. However the in-person  interviews can be a time-consuming and resource-intensive process, and  OPM does not have assurance that it identifies all tax debt information  through the interview process.
section_title: Agencies Do Not Routinely Monitor Current Clearance Holders for Tax Debt
paragraphs: Federal agencies generally do not have routine mechanisms to review  federal tax compliance for individuals who hold security clearances.  Specifically, there is no process to detect unpaid federal tax debts  accrued after an individual has been favorably adjudicated as eligible for  a security clearance unless it is self-reported, reported by a security  manager due to garnishment of wages, or discovered during a clearance  reinvestigation (renewal) or upgrade. Given that individuals who hold  security clearances are reinvestigated every 10 years for secret  clearances and every 5 years for top-secret clearances, if an individual  accrues tax debt after a security clearance is granted, the unpaid federal  tax debt may not be detected for up to 5-10 years. As previously  discussed, in 2 of our 13 case studies, the individuals’ tax debt accrued  after the favorable adjudication of the security clearance, and we found  no indication that the federal tax debt was identified in the security- clearance file. In addition, if the tax debt is not found in the initial  investigation, the federal agency may not detect the tax debt until the next  security clearance reinvestigation. In 5 of the cases that we reviewed,  existing federal tax debt was not identified in the original adjudication of  the security clearance but through the subsequent reinvestigation of the  security clearance, meaning the individuals had tax debt unknown to the  federal agency while holding a clearance for some period of time. This  gap represents a risk that could be mitigated by a mechanism to routinely  obtain tax-debt information, as discussed later in this report.
section_title: Opportunities Exist to Improve Detection of Tax Debt Owed by Security- Clearance Applicants and Clearance Holders
paragraphs: Additional mechanisms that provide large-scale detection of federal tax  debt could improve federal agencies’ ability to detect tax debts owed by  security-clearance applicants and security-clearance holders, but  statutory privacy protections limit access to this information. Specifically,  access to the federal tax information needed to obtain the tax payment  status of applicants is restricted under section 6103 of the Internal  Revenue Code, which generally prohibits disclosure of taxpayer data to  federal agencies and others, including disclosures to help validate an  applicant’s certifications about the nature and extent of his or her tax  debt. During our interviews, ODNI, DHS, DOE, and State officials  expressed interest in establishing additional mechanisms to provide  large-scale detection of unpaid tax debt owed by security-clearance  applicants. ODNI officials stated that they formed a working group in  2012, in collaboration with OPM and other federal agencies, to, among  other things, explore whether an automated process for reviewing federal  tax compliance can be established. However, restrictions to taxpayer  information under section 6103 may present challenges to their efforts.  For example, in 2011 and 2012, State requested the IRS to provide it a  listing of State employees who owed federal taxes. The IRS did not  formally respond in writing to the State letters, according to State officials,  but stated that the IRS could not provide them this list due to section 6103  restrictions. According to IRS officials, based on their analysis of the  applicable tax laws, IRS cannot disclose tax information of federal  employees without taxpayer consent request.
Federal agencies may obtain information on federal tax debts directly  from the IRS if the applicant provides consent. For example, agencies  can use IRS form 4506-T, Request for Transcript of Tax Return, to obtain  tax transcripts that provide basic taxpayer information, including marital  status, type of return filed, adjusted gross income, taxable income, and  later adjustments, if any, if the individual provides written consent.  However, this form may not be useful in conducting routine checks with  the IRS during the initial investigation and reinvestigation processes for  three reasons. First, the use of the IRS form 4506-T is a manual process  and thus it is not conducive to the large-scale detection of unpaid federal  taxes owed by security-clearance applicants, according to OPM, DHS,  and State officials. Instead, this method is typically performed when a  federal tax debt is disclosed by the applicant or discovered during the  investigation. Second, the IRS form 4506-T generally provides limited  visibility into an applicant’s overall tax debt status because the form  requires the requesting agency to identify the specific tax modules  (generally, time periods) that the agencies are requesting to be disclosed,  and, as such, agencies may not obtain the complete tax debt history of  the individual. Finally, the IRS form 4506-T has a 120-day time limit from  date of the applicant’s signature providing consent to process the form  with the IRS. Officials from State stated that this limited time frame could  hinder their ability to obtain the requested tax information if this form was  provided at the time the security-clearance application was completed. As  highlighted in our past work, it is important that the establishment of any  federal tax-compliance check not delay the timeliness of security- clearance decisions. Specifically, timeliness concerns were one of the  reasons that we designated the security-clearance process as high risk  from 2005 to 2011. As we concluded in July 2012, delays in the  security-clearance process could pose risks to national security, impede  the start of classified work and hiring the best-qualified workers, and  increase the government’s cost of national-security-related contracts.
The Department of the Treasury’s Offset Program (TOP), or a similar  mechanism, may provide an opportunity for federal agencies to perform  an automated check of both security-clearance applicants and current  clearance holders to determine whether they have unpaid federal debts  that would include tax debts, while not violating IRS section 6103  requirements. TOP is an automated process administered by the Department of the Treasury in which certain federal payments, such as  contractor and federal salary payments, are reduced to collect certain  delinquent tax and nontax debts owed to federal agencies, including the  IRS. Each week, the IRS sends the Department of the Treasury’s  Bureau of the Fiscal Service office (Fiscal Service) an extract of its tax- debt files, which are uploaded into TOP and matched against Fiscal  Service payment data (such as federal contractor payments, federal  salary payments, and Social Security Administration retirement  payments). If there is a match and the IRS has completed all statutory  notifications, any federal payment owed to the debtor is reduced (levied)  to help satisfy the unpaid federal taxes.
As we concluded in our past work, since TOP comingles information  regarding tax debt and nontax debt, the existence of an employee’s name  in TOP would generally not be considered taxpayer information subject to  section 6103 of the tax code. Thus, TOP could be used to identify  individuals who may owe federal debts, which includes federal taxes,  without compromising privacy protections provided by section 6103. TOP  currently reports a federal debt indicator (comprising both federal tax and  nontax debts) to the System for Award Management (SAM) on whether a  federal contractor or grant recipient has federal debts.
SAM is a  government-wide database used to track the status of agency  procurements.
As of September 2012, the IRS had referred approximately $167 billion  (approximately 44 percent) of the $373 billion of the total unpaid tax  assessment inventory in tax debts to TOP; thus, this program is an  important repository of tax-debt data for federal workers and contractors.  The IRS typically sends the tax debts to TOP except in cases where  (1) the IRS has not completed its notification process,(2) tax debtors have filed for bankruptcy protection or other litigation,  (3) tax debtors have agreed to pay their tax debt through monthly  installment payments or have requested to pay less than the full  amount owed through an offer in compromise,  (4) the IRS determined that the tax debtors are in financial hardship,  (5) tax debtors are filing an amended return, or  (6) the IRS determined that specific circumstances (such as a criminal  investigation) exist that warrant special exclusion from FPLP.
Thus, debts that are typically sent to TOP are those where the taxpayer  has not shown a willingness to resolve his or her tax debts. As such, it is  important that these individuals are identified because it can be an  important factor in determining whether an individual should be eligible for  a security clearance, as inability or unwillingness to satisfy debts is a  potentially disqualifying factor according to the adjudicative guidelines.  Our analysis found that 1,600 (approximately 20 percent) of the 8,400  taxpayers that had been granted security clearances during this 5-year  period had tax debts that were referred to TOP.
A mechanism similar to or using TOP could be useful in identifying  individuals who have not shown a willingness to resolve their tax debts  and who are applying for a security clearance or already have one. This  type of mechanism can be especially advantageous in monitoring  clearance holders to identify circumstances (such as the nonpayment of  federal taxes) that might warrant a reevaluation of an individual’s security- clearance eligibility.individuals (approximately 76 percent) had their tax debt accrued after the  approval for the security clearance.
As discussed earlier, our analysis found that 6,375  While ODNI officials reported forming a working group with OPM and  other federal agencies to explore an automated process for reviewing  federal tax compliance, ODNI, IRS, and Fiscal Service officials stated that  they have not explored the use of TOP for identifying individuals who owe  federal debts, including tax debts. ODNI officials stated that they would be supportive of processes that automatically checked security-clearance  applicants for federal tax debts. Fiscal Service officials stated that they  did not foresee any potential operational issues with using TOP more  broadly for these purposes. However, IRS and Fiscal Service officials  stated that a legal analysis would need to be performed to determine if  the TOP information could be used for the purpose of performing  background investigations.
Separate from TOP, agencies may determine that a change in law is  required to access taxpayer information without having to get consent  from the individual. If it is determined that a change in law would be  required, the IRS and federal agencies could consider various factors in  determining whether they should seek legislative action for disclosing  taxpayer information as part of the security-clearance process.  Specifically, as we concluded in December 2011, it is important that  Congress consider both the benefits expected from a disclosure of federal  tax information and the expected costs, including reduced taxpayer  privacy, risk of inappropriate disclosure, and negative effects on tax  compliance and tax-system administration.
While knowingly making false statements on federal security-clearance  forms is a federal crime and may deter some from lying about their tax  debt, much of our prior work has focused on the inadequacies of using  voluntary, self-reported information without independent verification and  review. detection and monitoring component of our agency’s fraud-prevention  framework and is a fraud-control best practice. Routinely obtaining  federal debt information from the Department of the Treasury would allow  investigative agencies to conduct this independent validation.
See, for example, GAO, Recovery Act Tax Debtors Have Received FHA Mortgage  Insurance and First-Time Homebuyer Credits, GAO-12-592 (Washington, D.C.: May 29,  2012); Service-Disabled Veteran-Owned Small Business Program: Governmentwide  Fraud Prevention Control Weaknesses Leave Program Vulnerable to Fraud and Abuse,  but VA Has Made Progress in Improving Its Verification Process, GAO-12-443T  (Washington, D.C.: Feb. 7, 2012); and Energy Star Program: Covert Testing Shows the  Energy Star Program Certification Process Is Vulnerable to Fraud and Abuse,  GAO-10-470 (Washington, D.C.: Mar. 5, 2010). holders to identify tax debt accrued after the initial clearance has been  approved without having to wait until the reinvestigation. Additionally,  we found that some individuals misrepresented the nature of their tax  debt to investigators and adjudicators. Reliance on self-reporting and the  relatively time-consuming and resource-intensive investigative  interviewing process presents vulnerabilities that may be mitigated by  additional mechanisms to expedite the security-clearance process. A  mechanism such as TOP may provide an opportunity for federal agencies  to improve their identification of federal debts, including tax debts, owed  by security-clearance applicants. Enhancing federal agencies’ access to  tax-debt information for the purpose of both investigating and adjudicating  security-clearance applicants, as well as ongoing monitoring of current  clearance holders’ tax-debt status, would better position agencies to  make fully informed decisions about eligibility. This could include further  exploration, through the existing working group, of routinely accessing  TOP, or otherwise developing a legislative proposal, in consultation with  Congress, to authorize access to tax-debt information.
section_title: Conclusions
paragraphs: Complete and accurate information on the tax-debt status of those  applying for federal security clearances is important in helping limit  potential vulnerabilities associated with granting clearances to those who  might represent a security risk. Additional mechanisms to help  investigative agencies access this information could help federal agencies  apply the adjudicative guidelines, which call for weighing an individual’s  federal tax debt as it relates to an individual’s financial and personal  conduct when making security-clearance determinations. OPM and ODNI  are currently overseeing several efforts to improve the investigative and  adjudication process, including the development of a working group to  explore options for establishing an automated process for reviewing  federal tax compliance. As part of this effort, exploring the feasibility of  investigative agencies routinely obtaining tax-debt information from the  Department of the Treasury, for the purposes of investigating and  adjudicating clearance applicants, as well as to conduct ongoing  monitoring of current clearance holders’ tax-debt status, could help  determine how, if at all, mechanisms such as TOP could be leveraged to  gain access to this information and enhance OPM’s ability to conduct  investigations and federal agencies’ ability to assess clearance eligibility.    If these methods are found to be impractical, developing a legislative  proposal, in consultation with Congress, to authorize access to tax-debt  information could address existing legal barriers to such information.
section_title: Recommendation for Executive Action
paragraphs: We recommend that, as part of its working group, the Director of National  Intelligence, as the Security Executive Agent, in consultation with OPM  and the Department of the Treasury, evaluate the feasibility of federal  agencies routinely obtaining federal debt information from the Department  of the Treasury’s TOP system, or a similar automated mechanism that  includes federal taxes, for the purposes of investigating and adjudicating  clearance applicants, as well as for ongoing monitoring of current  clearance holders’ tax-debt status. If this is found to be impractical, ODNI  should consider whether an exception to section 6103 is advisable and, if  so, develop a legislative proposal, in consultation with Congress, to  authorize access to tax-debt information.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft copy of this report to DHS, DOE, the IRS, ODNI,  OPM, State, and the Department of the Treasury’s Fiscal Service for their  review. Letters from DHS, ODNI, and OPM are reprinted in appendixes  IV, V, and VI. Both ODNI and OPM concurred with our recommendation.  In its response, ODNI stated that it will recommend that the working group  consider routine access of TOP for purposes of investigating,  adjudicating, and monitoring security-clearance holders and applicants.  This action will likely address the recommendation we proposed. If the  working group determines this action is not feasible, ODNI may want to  consider drafting a legislative proposal to authorize access to tax-debt  information. In addition, DHS, the IRS, and OPM provided technical  comments on our draft, which we incorporated as appropriate. In e-mails  received on August 12, 2013, August 9, 2013, and August 8, 2013,  officials from DOE, State, and the Department of the Treasury’s Fiscal  Service, respectively, said that they did not have any comments on the  draft report.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Homeland Security, the  Secretary of Energy, the Director of National Intelligence, the Director of  OPM, the Secretary of State, and the Secretary of the Treasury. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-6722 or LordS@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report.
section_title: Appendix I: Federal Investigative Standards
paragraphs: The Office of Personnel Management (OPM), federal, or contract  investigators conduct security-clearance investigations by using  government-wide standards. OPM conducts background investigations  for the majority of federal employees to determine their suitability for  federal employment. OPM also conducts background investigations as  part of the security-clearance process. For all these investigations,  information that applicants provide on electronic applications is checked  against numerous databases. Many investigation types contain credit and  criminal-history checks, while top-secret investigations also contain  citizenship, public-record, and spouse checks, as well as reference  interviews and an in-person, Enhanced Subject Interview to gain insight  into an applicant’s character. Although it is not standard, the Enhanced  Subject Interview can also be triggered for lower-level investigations if an  investigation contains issues that need to be resolved in accordance with  the Federal Investigative Standards. Table 1 highlights the investigative  components generally associated with the suitability, and with the secret  and top-secret clearance levels.
section_title: Appendix II: Revised Adjudicative Guidelines for Determining Eligibility for Access to Classified Information
paragraphs: In making determinations of eligibility for security clearances, the national- security adjudicative guidelines require adjudicators to consider (1)  guidelines covering 13 specific areas of concern; (2) adverse conditions  or conduct that could raise a security concern and factors that may  mitigate (alleviate) the condition for each guideline; and (3) general  factors related to the whole person.
First, the guidelines state that eligibility determinations require an overall  common-sense judgment based upon careful consideration of the  following 13 guidelines in the context of the whole person: allegiance to the United States; personal conduct, such as deliberately concealing or falsifying  foreign influence, such as having a family member who is a citizen of  a foreign country;  foreign preference, such as performing military service for a foreign  country;  sexual behavior; alcohol consumption; drug involvement; emotional, mental, and personality disorders; outside activities, such as providing service to or being employed by a  relevant facts when completing a security questionnaire;  financial considerations;  criminal conduct;  security violations; misuse of information-technology systems.
Second, for each of these 13 areas of concern, the guidelines specify (1)  numerous significant adverse conditions or conduct that could raise a  security concern that may disqualify an individual from obtaining a  security clearance; and (2) mitigating factors that could allay those  security concerns, even when serious, and permit granting a clearance.  For example, the financial consideration guideline states that individuals  could be denied security clearances on the basis of having a history of  not meeting financial obligations. However, this security concern could be  mitigated if one or more of the following factors were present: the  behavior was not recent, resulted from factors largely beyond the  person’s control (such as loss of employment), or was addressed through  counseling.
Third, the adjudicator should evaluate the relevance of an individual’s  overall conduct by considering the following general factors:  the nature, extent, and seriousness of the conduct;  the circumstances surrounding the conduct, to include knowledgeable  participation;  the frequency and recency of the conduct;  the individual’s age and maturity at the time of the conduct;  the voluntariness of participation;  the presence or absence of rehabilitation and other pertinent  behavioral changes;  the motivation for the conduct;  the potential for pressure, coercion, exploitation, or duress; and  the likelihood of continuation or recurrence.
When the personnel-security investigation uncovers no adverse security  conditions, the adjudicator’s task is fairly straightforward because there is  no security condition to consider.
section_title: Appendix III: Scope and Methodology
paragraphs: Our objectives were to determine: (1) how many individuals with unpaid  federal taxes, if any, are in the Office of Personnel Management (OPM)  security-clearance database and what is the magnitude of any unpaid  federal tax debt? and (2) to what extent do federal agencies have  mechanisms to detect unpaid tax debt during the security-clearance  approval process?
To determine the magnitude of unpaid federal taxes owed by individuals  approved for a security clearance, we obtained and analyzed OPM data  of individuals eligible for a secret or top-secret security clearance due to a  favorable adjudication, either during an initial investigation or a  reinvestigation, from April 1, 2006, to December 31, 2011. Our review did  not include the review of confidential clearance holders or public-trust  positions. Department of Energy (DOE) and U.S. Nuclear Regulatory  Commission (NRC) “Q” and “L” clearances are equivalent to the top- secret and secret clearances. Thus, for the purposes of our report, we  considered “Q” and “L” clearances issued by DOE and NRC to be treated  as top-secret and secret clearances, respectively. We identified the OPM  Central Verification System (CVS) database as the appropriate data for  our analysis after meeting with OPM officials and discussing the types of  data available. We used this time frame because prior to April 1, 2006,  the provision of the date a clearance was granted was not required and  was therefore not consistently available for analysis. OPM provided us  with an extract of the OPM database that included information only on  executive-branch, non–Department of Defense (DOD), and non- intelligence-community employees and contractors who were eligible for a  clearance during our time frame. The OPM CVS database does not  maintain information on the denial of security clearances on the basis of  an individual’s nonpayment of federal taxes. Thus, we were not able to  determine the number of individuals who were denied security clearances  for this reason.To determine the extent to which individuals eligible for a  security clearance had unpaid federal taxes, we used the taxpayer  identification number (TIN) as a unique identifier and electronically  matched the Internal Revenue Service’s (IRS) tax-debt data to the OPM  data of individuals eligible for a security clearance. Specifically, we used  the IRS Unpaid Assessment file as of June 30, 2012, to match against the  OPM CVS data. The IRS Unpaid Assessment file used for our analysis  contains all tax modules that are unpaid as of June 30, 2012. The June  30, 2012, file was used because it contained the most-recent unpaid  assessment information at the time we conducted our analysis. To avoid  overestimating the amount owed and to capture only significant unpaid  federal taxes, we excluded from our analysis tax debts meeting specific  criteria to establish a minimum threshold in the amount of tax debt to be  considered when determining whether a tax debt is significant.
The criteria we used to exclude tax debts are as follows: (1) unpaid  federal taxes the IRS classified as compliance assessments or memo  accounts for financial reporting, and (2) recipients with total unpaid  federal taxes of $100 or less. Specifically, compliance assessments or  memo accounts were excluded because these taxes have neither been  agreed to by the taxpayers nor affirmed by the court, or these taxes could  be invalid or duplicative of other taxes already reported. We excluded tax  debts of $100 or less because the IRS considers it a de minimis amount.  Additionally, for the purposes of our engagement, we included individuals  from the Business Master File (BMF) and Non-Master File (NMF), who  were an exact Social Security number (SSN)/TIN match, as well as an  exact name match with the OPM CVS data. We only included exact  matches so we would be able to match and use the information from the  OPM CVS database. Additionally, the Spouse Individual Master File (IMF)  was not used in the magnitude analysis. This is because we were unable  to determine which agency each spouse was affiliated with on the basis  of the information available in both the IRS and OPM data. Additionally,  the debt of a spouse may not have any effect on the security-clearance  adjudication determination. As a result, the results reported may be  understated.
Using these criteria, we identified about 8,400 of these individuals who  had unpaid federal tax debt as of June 30, 2012. Our final estimate of tax  debt does include some debt that is covered under an active IRS  installment plan or beyond normal statutory time limits for debt collection.  Our analysis determined the magnitude of known unpaid federal taxes  owed by individuals in the OPM database and cannot be generalized to  individuals that were granted eligibility for security clearances by DOD,  the legislative branch, or the intelligence community.
To determine whether existing investigative and adjudication mechanisms  detect unpaid tax debt during the security-clearance process and possible  additional improvements to federal tax-debt detection mechanisms, we  interviewed knowledgeable officials from the Office of the Director of  National Intelligence (ODNI), which serves as Security Executive Agent  for the federal government and has authority and responsibility over  security-clearance protocols, and from OPM, which conducts security- clearance investigations for most federal agencies. In addition, we  conducted interviews with officials from the Department of Homeland and  Security (DHS), Department of Energy (DOE), and Department of State  (State). DHS, DOE, and State were selected because these agencies had  the highest number of security clearances adjudicated from April 1, 2006,  to December 31, 2011, collectively representing over 50 percent of  clearances granted in OPM’s CVS database, and also represented over  50 percent of the tax debt owed. In addition, we also reviewed and  analyzed applicable laws, regulations, and ODNI guidance, as well as  applicable policies and procedures for OPM, DHS, DOE, and State  regarding the investigation and adjudication of security clearances.  Finally, we conducted interviews with the Department of the Treasury’s  Bureau of the Fiscal Service (Fiscal Service) and the IRS to obtain their  views on any initiatives and barriers in sharing tax-debt information. We  compared verification mechanisms with the fraud control framework we  developed in our past work and other fraud control best practices. We  also used Federal Investigative Standards (see app. I) and the  Adjudicative Guidelines for Determining Eligibility for Access to Classified  Information (see app. II) to evaluate the current mechanisms used to  identify and evaluate unpaid federal tax debt as part of the security- clearance process.
To develop case-study examples, we identified a nonprobability sample of  13 individuals for detailed reviews from the above analyses of security- clearance holders from DHS, DOE, and State who had federal tax debt.  We stratified our matches using the following characteristics: (1)  adjudicating agency; (2) amounts of unpaid federal taxes in the IRS  Unpaid Assessment database as of June 30, 2012; (3) type of security  clearance granted or approved, clearance date, and dollar amount of  unpaid tax debt; and (4) whether tax debt was recorded prior to or after  the security-clearance grant date. We selected 12 cases from these four  strata. Additionally, we randomly selected one case with indications that  IRS was assessing a trust-fund recovery penalty. Once the nonprobability  sample was selected, we requested all investigative and adjudicative  case-file notes from the adjudicating agency; IRS notes, detailed account  transcripts, and other records from the IRS; and security-clearance files  from DHS, DOE, and State for these 13 individuals. For 2 of the 13  individuals that had accrued debt only after favorable adjudication, we  reviewed the adjudicative files to determine whether the agency was  aware of the federal tax debt through its reinvestigation. The clearance  files and IRS paperwork were systematically reviewed using a structured  data-collection instrument, looking at whether the tax debt was revealed  in the investigative or adjudicative processes, and, if so, how it was  handled in the adjudication. Each case file was independently reviewed  by two analysts. After completion of each case review, the files were  compared to identify discrepancies. Potential discrepancies between  case-file reviews were resolved by a third-party reviewer. These cases  were selected to illustrate individuals with unpaid federal tax debt that had  security clearances but the results cannot be generalized beyond the  cases presented.
subsections: section_title: Data-Reliability Assessment
paragraphs: To assess the reliability of record-level IRS unpaid assessments data, we  used the work we perform during our annual audit of the IRS’s financial  statements and interviewed knowledgeable IRS officials about any data- reliability issues. While our financial-statement audits have identified  some data-reliability problems associated with tracing the IRS’s tax  records to source records and including errors and delays in recording  taxpayer information and payments, we determined that the data were  sufficiently reliable to address this report’s objectives.
To assess the reliability of record-level OPM security-clearance data, we  reviewed documentation from OPM, interviewed OPM officials who  administer these information systems, and performed electronic testing of  required elements. We determined that the data were sufficiently reliable  to identify the individuals eligible for clearances with unpaid federal tax  debt and select cases to illustrate potential vulnerabilities.
We conducted this performance audit from November 2011 to September  2013 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our audit findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
section_title: Appendix IV: Comments from the Department of Homeland Security
section_title: Appendix V: Comments from the Office of the Director of National Intelligence
section_title: Appendix VI: Comments from the Office of Personnel Management
section_title: Related GAO Products
paragraphs: Personnel Security Clearances: Further Actions Needed to Improve the  Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June  20, 2013.
Medicaid: Providers in Three States with Unpaid Federal Taxes Received  over $6 Billion in Medicaid Reimbursements. GAO-12-857. Washington,  D.C.: July 27, 2012.
Security Clearances: Agencies Need Clearly Defined Policy for  Determining Civilian Position Requirements. GAO-12-800. Washington,  D.C.: July 12, 2012.
Personnel Security Clearances: Continuing Leadership and Attention Can  Enhance Momentum Gained from Reform Effort. GAO-12-815T.  Washington, D.C.: June 21, 2012.
Recovery Act: Tax Debtors Have Received FHA Mortgage Insurance and  First-Time Homebuyer Credits. GAO-12-592. Washington, D.C.: May 29,  2012.
Recovery Act: Thousands of Recovery Act Contract and Grant Recipients  Owe Hundreds of Millions in Federal Taxes. GAO-11-485. Washington,  D.C.: April 28, 2011.
Federal Tax Collection: Potential for Using Passport Issuance to Increase  Collection of Unpaid Taxes. GAO-11-272. Washington, D.C.: March 10,  2011.
Medicare: Thousands of Medicare Providers Abuse the Federal Tax  System. GAO-08-618. Washington, D.C.: June 13, 2008.
Tax Compliance: Federal Grant and Direct Assistance Recipients Who  Abuse the Federal Tax System. GAO-08-31. Washington, D.C.:  November 16, 2007.
Medicaid: Thousands of Medicaid Providers Abuse the Federal Tax  System. GAO-08-17. Washington, D.C.: November 14, 2007.
Tax Compliance: Thousands of Organizations Exempt from Federal  Income Tax Owe Nearly $1 Billion in Payroll and Other Taxes.  GAO-07-1090T. Washington, D.C.: July 24, 2007.
Tax Compliance: Thousands of Organizations Exempt from Federal  Income Tax Owe Nearly $1 Billion in Payroll and Other Taxes.  GAO-07-563. Washington, D.C.: June 29, 2007.
Tax Compliance: Thousands of Federal Contractors Abuse the Federal  Tax System. GAO-07-742T. Washington, D.C.: April 19, 2007.
Medicare: Thousands of Medicare Part B Providers Abuse the Federal  Tax System. GAO-07-587T. Washington, D.C.: March 20, 2007.