January 08,2002

Grassley Seeks Accountability for Lost IRS Computers


WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, isasking the Office of Management and Budget to consider rejecting any funding increases for theInternal Revenue Service until the agency accounts for approximately 2,300 missing computers.

Following are:

(1) Senator Grassley’s letter this week to Mitch Daniels regarding the IRS’ budget
(2) the web address for the Treasury Inspector General for Tax Administration report SenatorGrassley requested about the missing computers
(3) some follow-up details from the Treasury Inspector General for Tax AdministrationJanuary 7, 2002

The Honorable Mitchell E. Daniels, Jr.
Director
Office of Management and Budget
725 17th St. NW
Washington, D.C. 20503

Dear Mr. Daniels:

As you put the final touches on the President's budget proposal for the coming year, I amwriting to you regarding the budget for the Internal Revenue Service (IRS).

I recognize that you receive many letters from members of Congress asking for increases inthe budgets of various federal agencies. Thus, I know it will be a welcome change of pace to receivea letter asking that you actually take a harder look in considering the funding for an agency.

A recent Treasury Inspector General for Tax Administration (TIGTA) report highlights forme what I believe is the trend at the IRS: historical poor management of money and personnel thatjustifies the administration scrutinizing the recent unquestioned budget increases given to the IRSyear-in and year-out.

TIGTA recently concluded a report at my request regarding missing or stolen items of IRSinventory. The results are shocking: in just the last three years alone, the IRS is missingapproximately 2,300 computers.

Capitol Hill has heard a relentless call about the need for IRS modernization and the Congresshas spent hundreds of millions of dollars in response. Now, we learn that the IRS is like the childwho asks for a doll all year and then loses it the day after Christmas -- or in this case loses 2,300dolls. Worse yet, the TIGTA report underscores what appears to be a carefree attitude by the IRSabout losing computers purchased with taxpayer money -- the IRS doesn’t even know how many ofthe computers are lost, stolen or damaged. Nor, does there appear to be any serious effort to holdaccountable those responsible for the missing computers.

Let me be clear that the 2,300 missing computers covers only a three-year period. Theproblem of poor inventory control at the IRS has been around for much longer. The TIGTA reportstates that the IRS has reported a material weakness in inventory controls every year since 1983. Inaddition, the General Accounting Office (GAO) reported recently that serious weaknesses in theinventory control systems continue to prevent the IRS from having equipment information availablefor management purposes, and from having reasonable assurance that the assets are properlysafeguarded. Finally, because of the lack of information it is unknown to what extent, if any, taxpayerinformation may be inappropriately released.

Sadly, all this from the IRS -- an agency that requires taxpayers to show every receipt -- can'tfind 2,300 computers. The IRS wouldn’t accept from a taxpayer the non-answer it has givenregarding the missing 2,300 computers. Just as a taxpayer would be held accountable for missingreceipts, so must the IRS be held accountable for missing 2,300 computers. It is my view that seriousconsideration should be given to placing a limitation on the IRS’ budget until there is realimprovement -- not real promises -- in inventory management.

Cordially yours,

Charles E. Grassley
Ranking Member

cc: The Honorable Paul O'Neill
Secretary
Department of Treasury

The Honorable Charles Rossotti
Commissioner
Internal Revenue Service

The Honorable Larry Levitan
Chairman
IRS Oversight Board

The report is available here:
http://www.ustreas.gov/tigta/2002reports/200210030fr.html
These are some follow-up questions Senator Grassley had, and TIGTA’s response:

In response to your questions of December 3, 2001, regarding our Management AdvisoryReport: Review of Lost or Stolen Sensitive Items of Inventory at the Internal Revenue Service(Reference Number: 2002-10-030; November 2001), we are providing the following comments.Please note that due to the short timeframe for our response, we did not provide IRS with an advancecopy of this document, nor did we subject this document to our normal internal quality reviewprocesses.

1) As of September 30, 2001, the IRS reported that it had approximately 163,000 laptopcomputers, microcomputers, and micro servers in its inventory (page 6). Does this amountinclude/exclude the 2,332 missing laptop computers, microcomputers, and micro servers for the pastthree years? How many computers should the IRS have?

TIGTA Comment: The 163,000 (rounded) amount does include the 2,332 missing laptopcomputers, microcomputers, and micro servers. Since the IRS could not positively identify whichcomputers were lost, stolen or damaged because of the coding situation, it decided to present a totalinventory amount that was inclusive of all status codes. Using actual numbers, the IRS reported thatit has 163,071 computers in inventory. Netting out the missing computers, results in a totalaccounted for of 160,639. The 2,332 missing computers is over a period of three years, and the163,000 (rounded) is an inventory amount as of September 30, 2001.

We cannot provide a precise figure of how many computers the IRS should have, as manyfactors enter into systems requirements. However, for perspective, we are providing the followinginformation. The IRS' Data Book 2000 reported 96,092 employees at the close of Fiscal Year 2000.Adding seasonal employees brings this total to 113,001. The IRS informed us that most IRSemployees have a personal computer, and that most employees who have a laptop computer alsomaintain a desktop computer. The IRS reported that its inventory records show 121,236 desktopcomputers, 38,726 laptop computers, and 3,109 computers that function as systems servers. Also,some of these computers are dedicated to specific IRS systems, such as the Integrated Data RetrievalSystem (IDRS), the Integrated Collection System (ICS), and the Automated Underreporter System(AUR).

2) Similarly (page 9), "As of September 30, 2001, the CI function reported that it hadapproximately 5,500 firearms in its inventory." Does this amount include/exclude the (missing)firearms and other sensitive items? How many firearms/sensitive items should the IRS have?TIGTA Comment: The 5,500 amount does not include the 5 stolen firearms and 1 lostfirearm. As above, the 6 missing firearms are over a period of three years, and the 5,500 is aninventory amount as of September 30, 2001.

The IRS' Data Book 2000 reported 2,746 special agents at the close of Fiscal Year 2000.Each special agent is assigned a firearm. A breakdown of the 5,500 amount (5,479 non-rounded) isas follows: 4,242 pistols, 963 shotguns, and 274 revolvers. Although we were unable to obtaininformation from CI on such short notice, we will continue our efforts to follow-up with CImanagement for their perspective on firearms requirements, and report to you later on any significantmatters.

3) For the past 3 years, IRS reported 2,332 missing computers, 5 lost or stolen firearms, and"502 other investigative items that were lost or stolen" to include 50 communications devices, 40identification badges, and 15 electronic surveillance devices that could compromise the public's safetyor ongoing investigations (see page 7). Do these amounts represent total losses during a 3-year timeframe? Otherwise stated, does this 3-year window apply to all items/amounts?

TIGTA Comment: The 3 year time frame applies to all items/amounts, except for the CIoffices that did not provide complete information on the number of lost or stolen firearms andsensitive investigative items of inventory. Also, these numbers are exclusive of any losses pertainingto the events of September 11, 2001.

4) "On April 26, 1999, a Special Agent was involved in a boating accident and his firearmsank to the bottom of the ocean and could not be recovered. The incident was not reported toTIGTA (page 8)." Was the Special Agent on duty? Was the Special Agent disciplined in any way?

TIGTA Comment: The CI investigative file indicated that the special agent was not on dutyat the time and, due to the circumstances surrounding the incident, the special agent was notdisciplined. The CI investigation disclosed that the accident was the fault of another boater who wasfound liable for the loss and reimbursed the government for the cost of the special agent's gear,including the firearm. Further, the file indicated that the agent believed that the gear would be saferon board the boat than if left in his vehicle.

5) Is this a fair statement: The amount of lost or stolen firearms could be higher since threeCI offices did not provide records, and the fiscal years associated with the three offices only providedrecords for FY 2001.

TIGTA Comment: It is true that the numbers could be higher, but without reviewing therecords that determination cannot be made. We believe the risk of the number being significantlyhigher is low, especially concerning any additional missing firearms. We will work with CI to obtainthe outstanding documentation to identify any additional items of sensitive inventory and report onour results to the committee.

6) Of the 2,332 missing computers, IRS only reported that 1,597 were forwarded to TIGTAfor investigation (page 9). Is this a problem? Is IRS required to report all to TIGTA?

TIGTA Comment: We do not believe this is a significant problem. The IRS, as a matterof practice, reports lost or stolen computers to TIGTA when their own internal investigation resultsin a situation that requires an independent investigation. We believe that this practice is not clearlypresented in the IRS' procedural manual, which was the impetus for our recommendation in the reportthat the manual be updated to clearly reflect this procedure.

Additional Question: IRS reports that 2,332 missing computers: 1,236 lost/theft/damaged,427 "Reserved for Facilities Management," and 669 Pending Resolution. What do these categoriesmean (in plain language): "Reserved for Facilities Management" and "Pending Resolution"?

TIGTA Comment: The "Reserved for Facilities Management" status is a relatively newcode. The IRS informed us that this code was used to classify items of inventory that were on thebooks, but that could not be located during physical inventories. Further, these missing items weremostly obsolete items and were most likely disposed of in previous years, but the proper paper workwas never processed to remove the items from the inventory. The IRS, in its response, chose toinclude these in the missing category, since it was unable to specifically identify the items' status.

The "Pending Resolution" status is used when an item is first identified as missing. The item retainsthis status until it is either located or an investigation is completed. We were informed by the IRSthat, at times, items are given this status code and no follow-up actions are ever performed; therefore,we recommended in our report that items in this status be periodically reviewed to ensure that promptand accurate action on these items is taken.