TIGTA Report on IRS Effort to Enforce FATCA (4/12/22)

TIGTA issued this report: TIGTA, Additional Actions Are Needed to Address Non-Filing and Non-Reporting Compliance Under the Foreign Account Tax Compliance Act (Report # 2022-30-019 4/7/22), here.  I excerpt the highlights below, but for those practicing in this area, there is a lot of detail.  Good stuff in those details.

Why TIGTA Did This Audit

While taxpayers can hold offshore accounts for a number of legitimate reasons, some taxpayers have also used such accounts to hide income and evade taxes. The passage of the Foreign Account Tax Compliance Act (FATCA) sought to reduce tax evasion by creating greater transparency and accountability with respect to offshore accounts and other assets held by U.S. taxpayers.

This audit was initiated to evaluate the IRS’s efforts to use information collected under FATCA to improve taxpayer compliance.

Impact on Tax Administration

Individual taxpayers are required to file Form 8938, Statement of Specified Foreign Financial Assets, with their income tax returns if the aggregate value of the assets exceeds certain dollar thresholds. Foreign financial institutions (FFI) are required to File Form 8966, FATCA Report, to report information about financial accounts in which U.S. taxpayers hold certain “ownership interests.”

The IRS established Campaign  896 - Offshore Private Banking, to address tax noncompliance related to taxpayers’ failure to report income generated and information reporting associated with offshore banking accounts, and Campaign 975 - FATCA Filing Accuracy, which seeks to identify the FFIs that maintain specified foreign financial accounts for U.S. individuals but did not submit Form 8966.

What TIGTA Found

Due to resource limitations, the IRS has significantly departed from its original comprehensive FATCA Compliance Roadmap in favor of a more limited compliance effort. As part of its effort, the Large Business and  International (LB&I) Division established two campaigns to identify noncompliance with the individual and FFI provisions of FATCA. The chart below reflects nearly $574 million of FATCA-related implementation and maintenance costs compared against the LB&I Division’s campaign compliance results from the IRS’s systemic approach to address FATCA noncompliance, as well as FATCA-related assessments from field examinations.

TIGTA Report on IRS Compliance Activity Bank Secrecy Act Delegated Authority Other than For FBARs (9/29/18)

TIGTA has issued a report titled "The Internal Revenue Service’s Bank Secrecy Act Program Has Minimal Impact on Compliance (Ref. Num. 2018-30-071 9/24/18), here.  Although included in the report, the highlights page is here.

The report note (p. 2) that the IRS has delegated authority over the following areas (emphasis supplied by JAT):

1) Enforce the criminal provisions of the BSA as provided in 31 C.F.R. § 1010.810(c)(2). 

2) Examine certain nonbank financial institutions to determine compliance as set forth under Title 31 BSA requirements in December 1992; however, the FinCEN retains the final authority to impose civil penalties.n3
   n3 Originally delegated under Department of the Treasury Directive 15-41, December 1, 1992, and as authorized under 31 C.F.R. § 1010.810(b)(8). This regulation authorizes the IRS to conduct most of its Title 31 BSA examinations, such as those with respect to nonbank financial institutions. It does not authorize the IRS to investigate Report of Foreign Bank and Financial Accounts violations; that authority is found in 31 C.F.R. § 1010.810(g). Also, final authority to assess civil penalties is delegated to the FinCEN per 31 C.F.R. § 1010.810. 

3) Examine and impose civil penalties for the Report of Foreign Bank and Financial
Accounts in April 2003.n4 (TIGTA’s review does not include a review of the Report of Foreign Bank and Financial Accounts program).
   n4 Memorandum of Agreement and Delegation of Authority for Enforcement of FBAR Requirements, April 2, 2003; and as authorized under 31 C.F.R. § 1010.810(g)

Accordingly, per 3), the report does not deal with the IRS's FBAR enforcement which has figured so prominently in this blog.  The report does cover other authorities related to tax crimes.

I cut and paste the highlights page:

Highlights

THE INTERNAL REVENUE SERVICE’S BANK SECRECY ACT PROGRAM HAS MINIMAL IMPACT ON COMPLIANCE 

Final Report issued on September 24, 2018 

Highlights of Reference Number:  2018-30-071 to the Commissioner of Internal Revenue. 

IMPACT ON TAXPAYERS 

The Currency and Foreign Transactions Reporting Act of 1970 requires U.S. financial institutions to assist U.S. Government agencies in detecting and preventing money laundering and to assist U.S. persons in reporting foreign bank and financial accounts.  The law has been amended several times and is now known as the Bank Secrecy Act (BSA).  The IRS received delegated authority to enforce the BSA’s criminal provisions and examine certain nonbank financial institutions.  The IRS also has authority to examine trades and businesses for compliance with Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, under Internal Revenue Code Title 26 and 31 and authority to assess penalties under Title 26.  However, the Financial Crimes Enforcement Network (FinCEN) retains the final authority to impose Internal Revenue Code Title 31 civil penalties. 

WHY TIGTA DID THE AUDIT 

This audit was initiated to evaluate the impact of the IRS’s compliance efforts related to its delegated authority under the BSA. 

WHAT TIGTA FOUND 

The IRS Small Business/Self-Employed Division conducts BSA compliance activities through its Specialty Examination function, which has a dedicated BSA Program.  TIGTA reviewed a statistically valid random sample of 140 compliance cases from a population of 24,212 closed cases worked by the BSA Program for Fiscal Years 2014 through 2016 and found that 105 (75 percent) were closed with 383 Title 31 violations in which the respective business only received a letter citing the violations found.  For the same fiscal year period, TIGTA found that 1) referrals to the FinCEN of Title 31 penalty cases go through lengthy delays and have little impact on BSA compliance; 2) the BSA Program spent about $97 million to assess approximately $39 million in penalties; and 3) while referrals were made to IRS Criminal Investigation, most of the investigations were declined and less than half of the cases were accepted. 

Additionally, a September 2016 TIGTA report addressed the need for the IRS to incorporate BSA Program personnel in developing its virtual currency strategy; however, the IRS has still not effectively used the BSA Program in this area.  TIGTA also found that until June 2017, the BSA Program did not require Publication 1, Your Rights as a Taxpayer, as a required enclosure to notify taxpayers of their rights when initiating a Form 8300, Title 26 examination, and some examiners still are unaware of the change that requires taxpayers to be notified of their rights. 

WHAT TIGTA RECOMMENDED 

TIGTA recommended that the IRS: 1) coordinate with the FinCEN on the authority to assert Title 31 penalties or reprioritize resources to more productive work; 2) leverage the BSA Program’s Title 31 authority and annual examination planning in the development of the IRS’s virtual currency strategy; 3) notify examiners of new appointment letter enclosures that includes Publication 1; 4)  evaluate the effectiveness of the newly implemented review procedures for FinCEN referrals; and 5) improve the process for referrals to IRS Criminal Investigation.  The IRS agreed with four of the five recommendations.  The IRS will incorporate its virtual currency strategy into its Title 31 compliance efforts; provide BSA examiners guidance on appointment letter enclosures; review and improve the FinCEN referral process; and review the BSA criminal referral criteria to maximize efficiency and enhance BSA referrals to Criminal Investigation.  However, the IRS disagreed with pursuing Title 31 penalty authority stating it was outside its purview and that the FinCEN intends to retain this authority.

TIGTA Report on CI (10/17/17)

TIGTA recently issued a report titled Declining Resources Have Contributed to Unfavorable Trends in Several Key Criminal Investigation Business Results (Ref. #  2017-30-073 9/13/17), here.

Here is the excerpt of the summary of the findings:

WHAT TIGTA FOUND 

Since FY 2011, reductions in staffing and available funding for CI activities contributed to a decrease in the number and size of CI field offices throughout the United States. While managing its core mission tax work with declining resources, the IRS continued to work general fraud, international, and Bank Secrecy Act (BSA) cases as well. 

For FY 2016, CI was budgeted approximately $576 million to fund programs that investigate potential criminal violations of the Internal Revenue tax laws and certain other laws, and recommend prosecution as warranted. Since FY 2012, the attrition of field special agents resulted in a decline in the number of cases initiated and completed. In FY 2016, CI initiated 3,395 cases, an overall decrease of 34 percent compared to the 5,125 cases initiated in FY 2012. 

Overall, special agents have consistently maintained inventory levels over an average of 5.30 cases per field special agent. Special agent inventories included a focus on international cases. In FY 2016, international cases resulting in sentencing improved approximately 33 percent from FY 2012.  

CI relies on a variety of internal and external sources to initiate cases. The percentage of cases initiated from functions within the IRS has decreased 5 percent from FY 2012 to FY 2016. The percentage of cases initiated from the United States Attorney’s Offices and other Government agency sources increased, representing 64 percent of the 3,395 initiations. 

Between FY 2012 and FY 2016, CI implemented policy changes that affected the BSA and identity theft cases. CI will no longer pursue seizure and forfeiture of funds related to legal source structuring cases under the BSA unless justified by exceptional circumstances. In September 2012, the Department of Justice implemented an expedited and parallel review of proposed indictments arising from stolen identity refund fraud cases resulting in a spike of initiations and completions for FY 2012 through FY 2013 of identity theft cases. 

TIGTA identified a trend of special agent inventory taking longer to turnover because of the increased time it takes for special agents to determine a case did not contain prosecution potential. In FY 2016, it took an average of 540 days (1.5 years) to determine that there was no prosecution potential, while it took an average of 422 days in FY 2012.

TIGTA made no recommendations, but did include IRS's response.  The following are key excerpts from the response:

TIGTA Report

TIGTA has released a recent report titled Taxpayer Referrals of Suspected Tax Fraud Result in Tax Assessments, but Processing of the Referrals Could Be Improved (2/20/13), Reference Number: 2013-40-022, here in pdf and here in html.

Highlights 

IMPACT ON TAXPAYERS 

When individuals want to report possible instances of Federal tax fraud by a taxpayer, the IRS instructs them to complete and mail Form 3949-A, Information Referral, or to provide this information via a letter.  During Fiscal Years 2010 through 2012, the Small Business/Self-Employed (SB/SE) and Wage Investment (W&I) Divisions received and screened 274,976 Forms 3949-A.  During that same time period, examinations initiated from Form 3949-A referrals resulted in more than $66.5 million in tax assessments.  However, TIGTA previously reported that the IRS misrouted referrals it sent to other functions.  While corrective actions will reduce the number of referrals received by the SB/SE and W&I Divisions, both divisions can more efficiently and effectively process Forms 3949-A. 

WHY TIGTA DID THE AUDIT 

This audit was initiated in coordination with a previous TIGTA audit based on a TIGTA Office of Investigations referral that reported thousands of identity theft cases reported on Form 3949-A were not being processed. 

WHAT TIGTA FOUND 

TIGTA determined that both the SB/SE and W&I Division screeners improperly screened Forms 3949-A.  While improvements to the processes and better communication with the Accounts Management function will reduce the number of referrals the divisions receive, other issues affect the screeners’ ability to research and identify referrals worthy of examination.  Neither division has a routine review process to evaluate screened referrals not selected for examination.  Routine checks of screened work would identify potential areas for improvement.  In addition, the SB/SE Division does not have specific guidelines for screeners.  More detailed guidelines would allow SB/SE Division screeners to be more consistent when evaluating referrals. 

The SB/SE and W&I Divisions spent approximately $211,041 to screen the 102,465 Forms 3949-A received for Fiscal Year 2012 and assessed more than $29 million.  The divisions should reevaluate the Form 3949-A program’s effectiveness once corrective actions are complete and determine how much of their limited resources they should devote to the program.  Increased efficiency may make it more cost efficient for the divisions to place a higher priority on these referrals.

TIGTA Report on Actions to Identify Potential Fraud During Civil Audits (4/17/13)

TIGTA issued a new report, Actions Can Be Taken to Reinforce the Importance of Recognizing and Investigating Fraud Indicators During Office Audits, here.  Here are the published highlights:

IMPACT ON TAXPAYERS 

Penalties, such as for civil fraud, are designed to promote voluntary compliance by imposing an economic cost on taxpayers who choose not to comply with the tax law. Because indicators of fraud are not always recognized and properly investigated, the IRS may be missing opportunities to further promote voluntary compliance and enhance revenue for the Department of the Treasury. 

WHY TIGTA DID THE AUDIT 

This audit was initiated to determine whether fraud is recognized and pursued during office audits of individual tax returns in accordance with IRS procedures and guidelines.  The review is part of our Fiscal Year 2013 Annual Audit Plan and addresses the major management challenge of Tax Compliance Initiatives.  

WHAT TIGTA FOUND 

TIGTA reviewed a statistical sample of 100 office audits, closed between October 2009 and September 2010, that involved high-income and sole proprietor taxpayers agreeing they owed additional taxes of at least $10,000.  The review identified 26 audits with fraud indicators that were not recognized and investigated in accordance with some key IRS procedures and guidelines.  When the sample results are projected to the population of 3,674 closed office audits meeting the above characteristics, TIGTA estimates that fraud indicators were not recognized and investigated in approximately 939 office audits during Fiscal Year 2010.  TIGTA estimates that additional assessments totaling approximately $5.8 million in civil fraud penalties may have been avoided by taxpayers. 

TIGTA’s evaluation indicates that a combination of factors caused the quality problems and that actions can be taken at the examiner and first-line manager levels to better ensure that fraud indicators are recognized and properly investigated.

TIGTA Report on IRS Offshore Accounts Initiative Administration (10/27/11)

TIGTA has a new report on the IRS's administration of the offshore account initiatives.  The full report, titled The 2009 Offshore Voluntary Disclosure Initiative Increased Taxpayer Compliance, But Some Improvements are Needed (TIGTA Report 2011-30-118  9/21/11), is here.  Here are  the "Highlights:"

HIGHLIGHTS
THE 2009 OFFSHORE VOLUNTARY DISCLOSURE INITIATIVE INCREASED TAXPAYER COMPLIANCE, BUT SOME IMPROVEMENTS ARE NEEDED
Highlights
Final Report issued on September 21, 2011
Highlights of Reference Number: 2011-30-118 to the Internal Revenue Service Deputy Commissioner for Services and Enforcement.
IMPACT ON TAXPAYERS
Taxpayers with undisclosed foreign accounts or assets who do not submit a voluntary disclosure run the risk of detection by the Internal Revenue Service (IRS). If caught, these taxpayers face the imposition of substantial penalties, including the fraud and foreign information return penalties, as well as an increased risk of criminal prosecution. By making an offshore voluntary disclosure, taxpayers can become compliant, avoid substantial civil penalties, and generally eliminate the risk of criminal prosecution.
WHY TIGTA DID THE AUDIT
This audit was initiated to determine whether the IRS’s voluntary disclosure practices were effective, especially with the high volume of cases received, and to determine whether all cases have been appropriately assigned and worked. The audit is included in our Fiscal Year 2011 Annual Audit Plan and addresses the major management challenge of Globalization.
WHAT TIGTA FOUND
The IRS’s voluntary disclosure practices were effective, and cases were being appropriately assigned and verified even with the unusually high volume of disclosure requests received and accepted. However, some improvements are needed.
Our review of 60 closed voluntary disclosure cases showed that 18 cases had no evidence of the taxpayers reconciling the unreported income in their offshore accounts to their amended or newly filed delinquent tax returns. In 28 cases, information from the taxpayers’ financial accounts and promoters either was not captured or was incorrectly transcribed on the data collection system used for current and subsequent data mining efforts. In 31 cases, voluntary disclosure agreements were not printed on IRS watermarked paper or initialed by revenue agents on each page to ensure no alterations to the original document were made by taxpayers.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the Commissioner, Large Business and International Division, implement a requirement for taxpayers to provide a detailed reconciliation of unreported income. The Commissioner, Large Business and International Division, and the Commissioner, Small Business/Self-Employed Division, should develop a quality review process to ensure all data relating to voluntary disclosures are properly transcribed for future data mining and require revenue agents to initial each page of the voluntary disclosure agreement before submitting it to taxpayers for their signature.
In their response to the report, IRS management agreed with two of the three recommendations. Management stated that a reconciliation of all unreported taxpayer income from offshore accounts is already a requirement of the 2011 Offshore Voluntary Disclosure Initiative. In addition, management plans to implement procedures to conduct a 100 percent review of inputs to the E-Trak Offshore Voluntary Disclosure Program system. However, management disagreed with our recommendation to require revenue agents to initial each page of the voluntary disclosure agreement before submitting it to taxpayers for their signature.

TIGTA Report on the State of IRS CI (10/17/11)

In August, TIGTA released its report titled Trends in Criminal Investigation’s Enforcement Activities Showed Improvements for Fiscal Year 2010, With Gains in Most Performance Indicators (Ref: 2011-30-068 7/25/11), here. I have finally found time to look at the report, which is an annual report on key areas of priority and statistics for IRS' Criminal Investigation ("CI"), the IRS division charged with investigating tax crimes. CI has other criminal investigation responsibilities, but after the Webster Report in the late 1990s, has been tasked with using more of its resources on criminal tax investigation and, within that category, legal source criminal tax investigations. The notion for focusing more on legal source criminal tax investigation is that that is where the IRS can get the most benefit from its limited resources in terms of supporting the overall tax system. Obtaining and publicizing legal source tax convictions will likely have much more ripple effect on compliance than with obtaining and publicizing illegal source tax convictions.

Most of the report is about statistics, usually presented in graph form (called figures). I caution readers to heed Benjamin Disreali's caution that: "There are three kinds of lies: lies, damned lies and statistics."

New TIGTA Report on Trends in IRS CI Investigation Activities

TIGTA has released a report, titled Trends in the Criminal Investigation Division's Enforcement Activities Showed Improvements; However, Some Goals Were Not Attained (Reference Number: 2010-30-074), which may be viewed here. The Report has some amazing information, much of it compiled in very informative charts. The following is from the Highlights section:

Highlights
Final Report issued on July 1, 2010
Highlights of Reference Number: 201030030 to the Internal Revenue Service Chief, Criminal Investigation.
IMPACT ON TAXPAYERS
The Criminal Investigation Division's (the Division) primary resource commitment is to develop and investigate legal source tax crimes. The prosecution of these cases is key to supporting the Internal Revenue Service's (IRS) overall compliance goals, enhancing voluntary compliance with the tax laws, and promoting fairness and equity in our tax system.
WHY TIGTA DID THE AUDIT
This audit was initiated as part of TIGTA's Fiscal Year (FY) 2010 Annual Audit Plan and addresses the IRS' major management challenge of Tax Compliance Initiatives. The overall objective of this review was to provide a statistical portrayal with trend analyses of the Division's enforcement activities for FYs 2000 through 2009.
WHAT TIGTA FOUND
The Division achieved its goal, spending 52.4 percent of its time on legal source tax and 72 percent on total tax investigations, both at a 10-year high. The Division also reported that the number of legal source tax investigation initiations increased by 13.3 percent and the number of tax-related initiations increased by 14.4 percent. Further, the number of subjects convicted of legal source tax crimes increased 2 percent from FY 2008 and has increased 17.5 percent since FY 2004. Similarly, the number of subjects sentenced for legal source tax crimes also increased 10.5 percent from FY 2008 and has increased 40.6 percent since FY 2004. These percentages validate that tax cases are a priority for the Division.
However, the Division did not meet its goal to complete 3,900 investigations, and instead only completed 3,848 investigations during FY 2009. According to Division management, increased resources that were devoted to the prosecution of investigations in the pipeline inventory during FY 2008 resulted in a significant decrease in FY 2008 subject investigation initiations and a related decrease in case completions during FY 2009. The Division also uses the number of convictions and the conviction rate as budgetary performance measures. The Division did not meet either of its established goals for these measures, reporting declines in both the number of convictions and the conviction rate in FY 2009. Increased numbers of dismissals during FY 2009 (resulting from efforts to reduce the pipeline inventory) caused the drop in the overall conviction rate.
In addition, the Division continues to work on increasing its special agent staffing and coordinating with the operating divisions to strengthen the Fraud Referral Program.
WHAT TIGTA RECOMMENDED
Although TIGTA made no recommendations in this report, IRS officials were provided an opportunity to review the draft report. IRS management did not provide any report comments.

The Charts are:

Figure 1 -- Special Agent and Field Special Agent Staffing at the End of Each Fiscal Year

Figure 2 -- Special Agent Direct Investigative Time Expended Each Fiscal Year

Figure 3 -- Percentage of Direct Investigative Time Spent on Legal Source Tax and Total Tax Investigations Each Fiscal Year

Figure 4 -- Number of Subject Investigations Initiated and the Number Initiated per Field Agent Each Fiscal Year

Figure 5 -- Number of Subject Investigations Initiated Each Fiscal Year for Tax-Related or Nontax-Related Violations and the Percentage That Is Tax-Related

Figure 6 -- Number of Subject Investigations Initiated Each Fiscal Year by Compliance Strategy Program and the Percentage That Is Legal Source Tax Crimes

Figure 7 -- Number of Subject Investigations Initiated Each Fiscal Year by Source of the Allegation or Information

Figure 8 -- Number of Fraud Referrals Received Each Fiscal Year and the Percentage Accepted

Figure 9 -- Number of Open Subject Investigations and the Total of All Investigations at the End of Each Fiscal Year and the Average Number of Each per Special Agent

Figure 10 -- Number of All Types of Investigations Open at the End of Each Fiscal Year

Figure 11 -- Number of Open Subject Investigations Each Fiscal Year for Tax-Related or Nontax-Related Violations and the Percentage That Is Tax-Related

Figure 12 -- Number of Open Subject Investigations Each Fiscal Year by Compliance Strategy Program and the Percentage That Is Legal Source Tax Crimes

Figure 13 -- Average Elapsed Days of Subject Investigations Discontinued and Referred for Prosecution Each Fiscal Year

Figure 14 -- Number of Subject Investigations Referred for Prosecution Each Fiscal Year for Tax-Related or Nontax-Related Violations and the Percentage That Is Tax-Related

Figure 15 -- Number of Subject Investigations Referred for Prosecution Each Fiscal Year by Compliance Strategy Program and the Percentage That Is Legal Source Tax Crimes

Figure 16 -- Number of Subjects Convicted and Sentenced for a Crime Each Fiscal Year

Figure 17 -- Number of Subjects Convicted of a Crime Each Fiscal Year by Compliance Strategy Program and the Percentage That Is Legal Source Tax Crimes

Figure 18 -- Number of Subjects Sentenced for a Crime Each Fiscal Year for Tax-Related or Nontax-Related Violations and the Percentage That Is Tax-Related

Figure 19 -- Number of Subjects Sentenced for a Crime Each Fiscal Year by Compliance Strategy Program and the Percentage That Is Legal Source Tax Crimes

Figure 20 -- Average Number of Months a Subject Is Incarcerated Each Fiscal Year by Compliance Strategy Program

Figure 21 -- Percentage of Investigations That Received Publicity Each Fiscal Year by Compliance Strategy Program

TIGTA Reports on IRS Criminal Tax Administration - Effects of Pipeline Inventory

The Treasury Inspector General for Tax Administration ("TIGTA") recently issued a report titled: Criminal Investigation Division Resources Devoted to Supporting Recommended Prosecutions Can Be Enhanced With a Stronger Strategic Focus (TIGTA Reference Number: 2010-30-036). The report discusses issues with respect to administration of CI resources for assistance prosecution pipeline cases inventory(cases after referral to DOJ Tax) in relation to its ordinary cirminal tax investigation case load (pre-referrral).

Since on the subject of TIGTA reports, TIGTA does annually produce a report with a statistical "portrayal) of CI acvitity over a multi-year period. The most recent report is titled Statistical Portrayal of the Criminal Investigation Division’s Enforcement Activities for Fiscal Years 2000 Through 2008 (TIGTA Reference Number 2009-30-053).  This report has a number of charts and graphs with useful information and analyses, particularly trends because of the multi-year information.  Among the items discussed is the effects of the increase in pipeline inventory which is the subject of the most recent TIGTA report noted above.  This annual report is dated March 26, 2009, so a new one with fye 2009 data should be forthcoming shortly.

TIGTA Report of IRS Enforcement Activities for FYE 2000 - 2008

TIGTA has produced its annual report on IRS Enforcement Activites. The report is here and the highlight report is here. The report presents key enforcement data is useful charts that help understand the year to year changes in the data. I may have some additional comment later, but wanted to get the report and the highlights out to readers as soon as possible.

The following is from the highlight report:

TIGTA previously reported that from FY 2006 to FY 2007 several key performance measures showed improvement. For example, the numbers of subject investigations initiated, completed, and recommended for prosecution all showed improvement.

In FY 2008, the Criminal Investigation Division (the Division) continued to demonstrate efficiencies processing investigations. For example, the number of days needed to close legal and illegal source investigations decreased by 2.9 percent from the previous year. However, some key performance measures that had improved the previous year declined: the number of subject investigations initiated decreased nearly 11 percent; the number of subject investigations completed decreased 5.3 percent; and direct investigative time showed a slight decrease.
TIGTA believes that one of the causes for the decreases in the numbers of subject investigations initiated and subject investigations completed was the continued rise in pipeline inventory (a subject investigation that has been recommended for prosecution and the subject has not been convicted or acquitted, or the investigation has not been dismissed) and the resources needed to address it. Pipeline inventory has steadily increased over the past 6 years and now stands at a 9-year high of 4,118 subject investigations. FY 2008 is the second consecutive year where there were more subject investigations in the pipeline than open subject criminal investigations. More direct investigative time is being spent to prepare investigations in the pipeline for adjudication instead of initiating new investigations.

Division management believes this is a positive trend since successful prosecutions generate publicity, foster deterrence, and enhance voluntary compliance. For FY 2009, the Division indicated that it would place a greater emphasis on the reduction of the pipeline inventory, which may result in even fewer investigations being initiated and completed during the upcoming year. TIGTA is currently conducting a separate review to evaluate the growth in pipeline inventory and to identify any potential actions that can be taken in the future to reduce the resources devoted to this area.
TIGTA believes another cause for the decreases in subject investigations initiated and completed is the continued loss of experienced special agents to attrition faster than they can be replaced. The number of special agents is currently at its lowest level in 30 years. The Division attributes this to its budgets being relatively flat in recent years, which have put pressure on its ability to replace agents lost through attrition because of the need to fund yearly salary increases.

TIGTA’s concern noted last year about the net loss of experienced special agents negatively impacting productivity was realized during FY 2008. During FY 2009, the Division plans to hire 192 special agents, but the new, inexperienced agents may not have a significant impact on the FY 2009 performance goals.