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Approaches for Establishing Fraud Risk Assessment Programs and Conducting Fraud Audit Risk Assessments Within the Department of Defense

July 25, 2014 Comments off

Approaches for Establishing Fraud Risk Assessment Programs and Conducting Fraud Audit Risk Assessments Within the Department of Defense
Source: U.S. Department of Defense, Office of Inspector General

Objective
The objective of the review was to identify approaches for establishing fraud risk assessment programs and conducting fraud risk assessments within the DoD. The review focused on various DoD activities including procurement, retail, and financial operations.

What We Found
We identified numerous innovative approaches for conducting fraud risk assessments. Of the 33 DoD organizations we interviewed,* 13 were conducting entity-wide risk assessments, 26 were conducting fraud risk assessments when performing audit-related work, 23 were providing fraud awareness training, and 3 were concentrating on internal control evaluations.

DoD entities are encouraged to modify any of the described approaches to suit their specific mission, size, and fraud vulnerabilities. The approaches were developed through research and interviews with 100 subject matter experts representing DoD organizations, academic institutions, private companies, and nonprofit organizations.

Fraud risk assessment approaches developed by the Marine Corps Nonappropriated Funds Audit Service; Army and Air Force Exchange Service, Audit Division; and the Army Audit Agency are highlighted within this report. Additionally, entity-wide fraud risk assessment approaches developed by the DoD Investigative Organizations; Naval Exchange Service Command, Office of Internal Audit; and the Naval Sea Systems Command Office of the Inspector General are also discussed in detail. The report also contains information on auditor and entity-wide fraud risk assessment approaches developed by external DoD organizations.

We used documentation obtained from the subject matter experts to develop example documents included in the report Appendixes. Example documents include audit organization fraud risk assessment policies, financial statement audit fraud interview questionnaire, and an entity-wide fraud risk assessment report. The report also provides information on auditor fraud brainstorming and interviewing techniques and DoD fraud case study examples.

Management Comments and Our Response
We have incorporated draft report comments received from the Commander, Naval Sea Systems Command; Naval Audit Service; Defense Health Agency; Defense Information Systems Agency, Office of the Inspector General; Air Force Office of Special Investigations; and Board of Regents of the University System of Georgia. No further comments are required.

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EU — Fighting fraud: Major progress in anti-fraud policy but Member States must do more to combat fraud

July 18, 2014 Comments off

Fighting fraud: Major progress in anti-fraud policy but Member States must do more to combat fraud
Source: European Commission

Member States must step up their work to prevent, detect and report fraud affecting EU funds, according to the Commission’s annual report on the protection of financial interests (PIF report). The report sets out detailed recommendations on areas that national authorities should particularly focus on in this respect. The report finds that detected fraud in EU spending accounts for less than 0.2% of all funds. Nevertheless, the Commission believes that greater efforts at national level both on combatting and detecting fraud should be deployed. The annual PIF report therefore recommends, amongst other things, that Member States review their controls to ensure they are risk-based and well-targeted.

On the positive side, the report notes that good progress is being made at national level to implement new rules and policies which will strengthen the fight against fraud in the years ahead. Moreover, at EU level, the past 5 years have seen major advances in shaping a stronger anti-fraud landscape. These initiatives can have a marked impact on fraud levels, once they are fully implemented.

New From the GAO

July 16, 2014 Comments off

New GAO Reports and Testimonies
Source: Government Accountability Office

Reports

1. Medicaid: Assessment of Variation among States in Per-Enrollee Spending. GAO-14-456, June 16.
http://www.gao.gov/products/GAO-14-456
Highlights – http://www.gao.gov/assets/670/664114.pdf

2. Special Education: Additional Federal Actions Could Help Address Unique Challenges of Educating Children in Nursing Homes. GAO-14-585, July 16.
http://www.gao.gov/products/GAO-14-585
Highlights – http://www.gao.gov/assets/670/664821.pdf

3. Coastal Zone Management: Opportunities Exist for NOAA to Enhance Its Use of Performance Information. GAO-14-592, July 16.
http://www.gao.gov/products/GAO-14-592
Highlights – http://www.gao.gov/assets/670/664805.pdf

4. Supplemental Security Income: Wages Reported for Recipients Show Indications of Possible SSN Misuse. GAO-14-597, July 16.
http://www.gao.gov/products/GAO-14-597
Highlights – http://www.gao.gov/assets/670/664795.pdf

Testimonies

1. U.S. Launch Enterprise: Acquisition Best Practices Can Benefit Future Efforts, by Cristina Chaplain, director, acquisition and sourcing management, before the Senate Committee on Commerce, Science, and Transportation and the Subcommittee on Strategic Forces, Senate Committee on Armed Services. GAO-14-776T, July 16.
http://www.gao.gov/products/GAO-14-776T

2. High-Containment Laboratories: Recent Incidents of Biosafety Lapses, by Nancy Kingsbury, Ph.D., managing director, applied research and methods, before the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce. GAO-14-785T, July 16.
http://www.gao.gov/products/GAO-14-785T
Highlights – http://www.gao.gov/assets/670/664800.pdf

CRS — The U.S. Secret Service: History and Missions (updated)

July 8, 2014 Comments off

The U.S. Secret Service: History and Missions (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The U.S. Secret Service has two missions—criminal investigations and protection. Criminal investigation activities have expanded since the inception of the Service from a small anticounterfeiting operation at the end of the Civil War, to now encompassing financial crimes, identity theft, counterfeiting, computer fraud, and computer-based attacks on the nation’s financial, banking, and telecommunications infrastructure, among other areas. Protection activities, which have expanded and evolved since the 1890s, include ensuring the safety and security of the President, Vice President, their families, and other identified individuals and locations.

FTC Alleges T-Mobile Crammed Bogus Charges onto Customers’ Phone Bills

July 1, 2014 Comments off

FTC Alleges T-Mobile Crammed Bogus Charges onto Customers’ Phone Bills
Source: Federal Trade Commission

In a complaint filed today, the Federal Trade Commission is charging mobile phone service provider T-Mobile USA, Inc., with making hundreds of millions of dollars by placing charges on mobile phone bills for purported “premium” SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers.

The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. According to the FTC’s complaint, T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.

In a process known as “third-party billing,” a phone company places charges on a consumer’s bill for services offered by another company, often receiving a substantial percentage of the amount charged. When the charges are placed on the bill without the consumer’s authorization, it is known as “cramming.”

The FTC’s complaint alleges that in some cases, T-Mobile was charging consumers for services that had refund rates of up to 40 percent in a single month. The FTC has alleged that because such a large number of people were seeking refunds, it was an obvious sign to T-Mobile that the charges were never authorized by its customers. As the complaint notes, the refund rate likely significantly understates the percentage of consumers who were crammed. The complaint also states that internal company documents show that T-Mobile had received a high number of consumer complaints at least as early as 2012.

HHS OIG — Performance Data for the Senior Medicare Patrol Projects: June 2014 Performance Report

June 26, 2014 Comments off

Performance Data for the Senior Medicare Patrol Projects: June 2014 Performance Report
Source: U.S. Department of Health and Human Services, Office of Inspector General

WHY WE DID THIS STUDY
This memorandum report presents performance data for the Senior Medicare Patrol (SMP) projects, which receive grants from the Administration for Community Living (ACL) to recruit and train retired professionals and other senior citizens to recognize and report instances or patterns of health care fraud. (ACL was established in 2012, bringing together the Administration on Aging (AoA) and two other offices.) In July 2010, AoA requested that OIG continue to collect and report performance data for the projects to support its efforts to evaluate and improve their performance. OIG currently reports this performance data on an annual basis.

HOW WE DID THIS STUDY
We based this review on data reported by the SMP projects. In addition, we requested and reviewed documentation from the projects for expected recoveries of funds for the Medicare and Medicaid programs. We also requested and reviewed documentation for actual savings to beneficiaries and others that were attributable to the projects, as well as for cost avoidance. We did not review documentation for the other performance measures.

WHAT WE FOUND
In 2013, the 54 SMP projects had 5,406 active volunteers, a 5-percent increase from 2012. These volunteers conducted 148,235 one-on-one counseling sessions, a 31-percent increase from 2012. They also conducted 14,924 group education sessions in 2013, compared to 14,748 in 2012.

In 2013, expected Medicare and Medicaid recoveries that were attributable to the projects were 9.1 million, a 50-percent increase from 2012. However, total savings to beneficiaries and others decreased from $133,971 in 2012 to $41,718 in 2013. Finally, cost avoidance on behalf of Medicare, Medicaid, beneficiaries, and others increased by 26 percent, from $113,692 in 2012 to $143,282 in 2013.

We continue to emphasize that it is not always possible to track referrals to Medicare contractors or law enforcement from beneficiaries who have learned to detect fraud, waste, and abuse from the projects. Therefore, the projects may not be receiving full credit for savings attributable to their work. In addition, the projects are unable to track the substantial savings derived from a sentinel effect whereby fraud and errors are reduced by Medicare beneficiaries’ scrutiny of their bills.
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New From the GAO

June 25, 2014 Comments off

New From the GAO
Source: Government Accountability Office

Reports

1. Information Security: Additional Oversight Needed to Improve Programs at Small Agencies. GAO-14-344, June 25.
http://www.gao.gov/products/GAO-14-344
Highlights – http://www.gao.gov/assets/670/664420.pdf

2. Aviation Safety: Additional Oversight Planning by FAA Could Enhance Safety Risk Management. GAO-14-516, June 25.
http://www.gao.gov/products/GAO-14-516
Highlights – http://www.gao.gov/assets/670/664401.pdf

3. Traffic Safety: Alcohol Ignition Interlocks Are Effective While Installed; Less Is Known about How to Increase Installation Rates. GAO-14-559, June 20.
http://www.gao.gov/products/GAO-14-559
Highlights – http://www.gao.gov/assets/670/664282.pdf

4. Diplomatic Security: Overseas Facilities May Face Greater Risks Due to Gaps in Security-Related Activities, Standards, and Policies. GAO-14-655, June 25.
http://www.gao.gov/products/GAO-14-655
Highlights – http://www.gao.gov/assets/670/664423.pdf
Podcast – http://www.gao.gov/multimedia/podcasts/664325

Testimonies

1. Export-Import Bank: Status of GAO Recommendations on Risk Management, Exposure Forecasting, and Workload Issues, by Mathew J. Scirè, director, financial markets and community investment, before the House Committee on Financial Services. GAO-14-708T, June 25.
http://www.gao.gov/products/GAO-14-708T
Highlights – http://www.gao.gov/assets/670/664379.pdf

2. Medicare Fraud: Further Actions Needed to Address Fraud, Waste, and Abuse, by Kathleen M. King, director, health care, before the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce. GAO-14-712T, June 25.
http://www.gao.gov/products/GAO-14-712T
Highlights – http://www.gao.gov/assets/670/664382.pdf

We’re helping long-term care facilities protect older Americans from financial exploitation

June 20, 2014 Comments off

We’re helping long-term care facilities protect older Americans from financial exploitation
Source: Consumer Financial Protection Bureau

We’ve heard a lot of stories about vulnerable adults falling prey to con artists, family members, fiduciaries, and professional advisers who steal their nest eggs and threaten their financial security.

A son steals $315,000 from his elderly mother’s retirement accounts and frequents casinos. When he doesn’t pay his mother’s rent, she’s evicted from her assisted living facility.

The pastor of a 77-year-old man with Alzheimer’s and Parkinson’s diseases makes 130 withdrawals from the man’s bank account but fails to make nursing home payments on his behalf for nine months. The man was nearly discharged from his nursing home.

These stories are all too common. We’d like to equip assisted living and nursing facility staff with the know-how to prevent and spot the warning signs of abuse, so we’re releasing a guide to protecting residents from financial exploitation.

Our action-oriented guide gives staff the tools to:

  • Prevent financial exploitation and scams by educating staff, residents, and family members about warning signs and precautions
  • Recognize, record, and report financial abuse as early as possible using a model protocol and a team approach
  • Get help from first responders in the community

Canada — Learn how to identify genuine bank notes

May 23, 2014 Comments off

Learn how to identify genuine bank notes
Source: Canadian Federation of Independent Business

Victims of counterfeiting are not compensated for their losses, so it pays to verify your bills. Be aware that the $20 bill is the most widely used and counterfeited bank note.

The Office of Inspector General’s Cases of Employee Misconduct at the Environmental Protection Agency

May 12, 2014 Comments off

The Office of Inspector General’s Cases of Employee Misconduct at the Environmental Protection Agency (PDF)
Source: Environmental Protection Agency, Office of Inspector General (via Committee on Oversight and Government Reform, U.S. House of Representatives)

Good morning, Chairman Issa, Ranking Member Cummings and members of the committee. I am Allan Williams, Deputy Assistant Inspector General for Investigations for the U.S. Environmental Protection Agency (EPA). Thank you for inviting me to appear before you today to discuss our investigations of employee misconduct involving time-and-attendance fraud.

See: EPA Employee Spent 2-6 Hours per Day at Work Watching Porn (Fedblog)

Report: Charter School Vulnerabilities to Waste, Fraud & Abuse

May 9, 2014 Comments off

Report: Charter School Vulnerabilities to Waste, Fraud & Abuse
Source: Integrity in Education

“Charter School Vulnerabilities to Waste, Fraud And Abuse,” authored by the Center for Popular Democracy and Integrity in Education, echoes a warning from the U.S. Department of Education’s Office of the Inspector General. The report draws upon news reports, criminal complaints and more to detail how, in just 15 of the 42 states that have charter schools, charter operators have used school funds illegally to buy personal luxuries for themselves, support their other businesses, and more. The report also includes recommendations for policymakers on how they can address the problem of rampant fraud, waste and abuse in the charter school industry. Both organizations recommend pausing charter expansion until these problems are addressed.

CRS — Obstruction of Justice: an Overview of Some of the Federal Statutes that Prohibit Interference with Judicial, Executive, or Legislative Activities

May 1, 2014 Comments off

Obstruction of Justice: an Overview of Some of the Federal Statutes that Prohibit Interference with Judicial, Executive, or Legislative Activities (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Obstruction of justice is the impediment of governmental activities. There are a host of federal criminal laws that prohibit obstructions of justice. The six most general outlaw obstruction of judicial proceedings (18 U.S.C. 1503), witness tampering (18 U.S.C. 1512), witness retaliation (18 U.S.C. 1513), obstruction of congressional or administrative proceedings (18 U.S.C. 1505), conspiracy to defraud the United States (18 U.S.C. 371), and contempt (a creature of statute, rule and common law).

The laws that supplement, and sometimes mirror, the basic six tend to proscribe a particular means of obstruction. Some, like the perjury and false statement statutes, condemn obstruction by lies and deception. Others, like the bribery, mail fraud, and wire fraud statutes, prohibit obstruction by corruption of public employees or officials. Some outlaw the use of violence as a means of obstruction. Still others ban the destruction of evidence. A few simply punish “tipping off” those who are the targets of an investigation.

New From the GAO

May 1, 2014 Comments off

New GAO Reports and Testimonies
Source: Government Accountability Office

April 30

Reports

1. National Institutes of Health: Research Priority Setting, and Funding Allocations across Selected Diseases and Conditions. GAO-14-246, March 31.
http://www.gao.gov/products/GAO-14-246
Highlights – http://www.gao.gov/assets/670/662135.pdf

2. U.S. Department of Agriculture: Workforce Decisions Could Benefit from Better Linkage to Missions and Use of Leading Practices. GAO-14-288, March 31.
http://www.gao.gov/products/GAO-14-288
Highlights – http://www.gao.gov/assets/670/662176.pdf

3. Office of Personnel Management: Agency Needs to Improve Outcome Measures to Demonstrate the Value of Its Innovation Lab. GAO-14-306, March 31.
http://www.gao.gov/products/GAO-14-306
Highlights – http://www.gao.gov/assets/670/662136.pdf

4. Missile Defense: DOD’s Report Provides Limited Insight on Testing Options for the Ground-based Midcourse Defense System. GAO-14-350R, April 30.
http://www.gao.gov/products/GAO-14-350R

5. Advanced Imaging Technology: TSA Needs Additional Information before Procuring Next-Generation Systems. GAO-14-357, March 31.
http://www.gao.gov/products/GAO-14-357
Highlights – http://www.gao.gov/assets/670/662145.pdf

6. Nuclear Weapons: Actions Needed by NNSA to Clarify Dismantlement Performance Goal. GAO-14-449, April 30.
http://www.gao.gov/products/GAO-14-449
Highlights – http://www.gao.gov/assets/670/662841.pdf

7. National Institutes of Health: Fiscal Year 2013 Research Funding Allocations across Selected Diseases and Conditions. GAO-14-490R, April 23.
http://www.gao.gov/products/GAO-14-490R

Testimonies

1. Defense Acquisitions: Addressing Incentives is Key to Further Reform Efforts, by Michael J. Sullivan, director, acquisition and sourcing management, before the Senate Committee on Armed Services. GAO-14-563T, April 30.
http://www.gao.gov/products/GAO-14-563T
Highlights – http://www.gao.gov/assets/670/662838.pdf

2. Commercial Aviation: Status of Air Service to Small Communities and the Federal Programs Involved, by Gerald L. Dillingham, Ph.D, director, physical infrastructure issues, before the Subcommittee on Aviation, House Committee on Transportation and Infrastructure. GAO-14-454T, April 30.
http://www.gao.gov/products/GAO-14-454T
Highlights – http://www.gao.gov/assets/670/662830.pdf

3. Financial Literacy: Overview of Federal Activities, Progress, and Challenges, by Alicia Puente Cackley, director, financial markets and community investment, before the Subcommittee on Financial Institutions and Consumer Credit, House Committee on Financial Services. GAO-14-556T, April 30.
http://www.gao.gov/products/GAO-14-556T
Highlights – http://www.gao.gov/assets/670/662834.pdf

4. Medicare Fraud: Progress Made, but More Action Needed to Address Medicare Fraud, Waste, and Abuse, by Kathleen M. King, director, health care, before the Subcommittee on Health, House Committee on Ways and Means. GAO-14-560T, April 30.
http://www.gao.gov/products/GAO-14-560T
Highlights – http://www.gao.gov/assets/670/662846.pdf

—–

May 1

Reports

1. DOE Loan Programs: DOE Should Fully Develop Its Loan Monitoring Function and Evaluate Its Effectiveness. GAO-14-367, May 1.
http://www.gao.gov/products/GAO-14-367
Highlights – http://www.gao.gov/assets/670/662945.pdf

2. Defense Transportation: DOD Needs to Take Actions to Improve the Transportation of Hazardous Material Shipments. GAO-14-375, May 1.
http://www.gao.gov/products/GAO-14-375
Highlights – http://www.gao.gov/assets/670/662907.pdf

3. Defense Acquisitions: Observations on Whether the Military Service Chiefs’ Role in Managing and Overseeing Major Weapon Programs Should Be Expanded. GAO-14-520, May 1.
http://www.gao.gov/products/GAO-14-520
Highlights – http://www.gao.gov/assets/670/662913.pdf

Office of the Special Inspector General for the Troubled Asset Relief Program — Quarterly Report to Congress — April 30, 2014

April 30, 2014 Comments off

SIGTARP — Quarterly Report to Congress — April 30, 2014 (PDF)
Source: Office of the Special Inspector General for the Troubled Asset Relief Program

Recovery from a crisis comes in two equally important stages: immediate triage, followed by longer-term thoughtful planning and action to reduce vulnerabilities, strengthen infrastructure, and mitigate future harm. With the financial system and TARP in this second stage, there has been some progress through reforms that have been implemented, but there is much more work to be done. Our nation needs continued progress in eliminating a significant legacy of TARP that has left our nation vulnerable — moral hazard — the belief by bailed-out institutions that they can play by their own set of rules without regard for consequences. Moral hazard is not just a concern for the largest TARP banks, but of TARP recipients of any size who believe that they can play by a different set of rules without consequences. Ending moral hazard requires important ongoing work by regulators on rules to strengthen the financial system and reduce vulnerabilities, and necessitates a change in culture by some institutions. SIGTARP has reported on cultures at TARP institutions that were vulnerable to moral hazard, including, for example, reports on the culture of profit-seeking and risk-taking at select large TARP companies that left them near failure, cultures at TARP companies that resulted in them fighting against limits on executive compensation while in TARP, and cultures that resulted in large TARP companies pushing to exit TARP short of capital requirements set by Federal banking regulators.

A necessary part of the second stage of long-term crisis recovery is law enforcement, another area where SIGTARP plays a crucial role as a criminal law enforcement agency. Our law enforcement successes help end moral hazard by bringing consequences to those who did not play by the rules, but instead broke the law. This important work also reduces vulnerabilities in the financial system and mitigates future harm by removing from the system those who have already shown a willingness to break the law. It deters those who may contemplate breaking the law in the future. These are the broader reasons why SIGTARP’s work matters, whether related to a large or small TARP recipient. They matter to taxpayers who funded the bailout. They matter to the communities TARP institutions serve. They matter to instill confidence in the financial system, and make it stronger for the future.

Recouping funds lost to TARP-related crime or civil violations of the law is a vital part of long-term recovery from the crisis, and SIGTARP’s investigations have already resulted in court orders for the return of money to the Government or victims (including the Government as a victim) of $4.77 billion. Not all crimes investigated by SIGTARP will result in a direct loss to Treasury. In some cases, bank insiders committed bank fraud by falsifying books and records that banking regulators relied on in reviewing a bank’s TARP application, but the bank ultimately did not receive TARP funds. For example, after uncovering that TARP-applicant Colonial Bank was engaged in a massive fraud scheme with Taylor, Bean and Whitaker, SIGTARP was able to prevent $550 million in TARP funds already approved by Treasury from going to Colonial, all of which would have been lost when the bank failed. While SIGTARP prevented the loss to Treasury, the FDIC estimated it would suffer a $4.5 billion loss from the bank failure — a failure due to the fraud. SIGTARP’s investigation led to prison sentences for eight senior officers and court orders for the return of $3.5 billion. In other cases, a TARP bank may become a victim of a crime or civil fraud (by those inside or outside the bank) and suffer losses but may still be able to repay TARP or may be acquired by another bank that repays TARP. Sometimes, Treasury will suffer a loss from crime.

TARP-related crime can have a ripple effect through the financial system and economy. One lesson learned from TARP is that our financial system is built on institutions that are interconnected as counterparties and investors. Fraud at one institution in this chain spreads risk to an institution’s shareholders and counterparties. Law enforcement is critical to the second stage of crisis recovery, because it makes our system and economy less vulnerable to that ripple effect.

Cigarette Smuggling: A National Problem and Lucrative Criminal Enterprise

April 24, 2014 Comments off

Cigarette Smuggling: A National Problem and Lucrative Criminal Enterprise
Source: Tax Foundation

Increased excise taxes on cigarettes have created lucrative incentives for black market trafficking between states, with illegal sales on the rise nationwide, according to the latest report from the nonpartisan Tax Foundation.

Released this morning, the report’s key findings include:

  • Large differentials in cigarette taxes across states create incentives for black market sales.
  • Smuggled cigarettes make up substantial portions of cigarette consumption in many states, and greater than 25 percent of consumption in twelve states.
  • The highest inbound cigarette smuggling rates are in New York (56.9 percent), Arizona (51.5 percent), New Mexico (48.1 percent), Washington (48 percent), and Wisconsin (34.6 percent).
  • The highest outbound smuggling rates are in New Hampshire (24.2 percent), Wyoming (22.3 percent), Idaho (21.3 percent), Virginia (21.1 percent), and Delaware (20.9 percent).
  • Cigarette tax rates increased in 30 states and the District of Columbia between 2006 and 2012.

Taxation — Interim Results of the 2014 Filing Season

April 21, 2014 Comments off

Interim Results of the 2014 Filing Season
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
The filing season, defined as the period from January 1 through mid-April, is critical for the IRS because it is during this time that most individuals file their income tax returns and contact the IRS if they have questions about specific laws or filing procedures.

WHY TIGTA DID THE AUDIT
The closure of Government operations between October 1 and October 16, 2013, reduced the time the IRS had to implement tax law changes and bring tax return processing systems online. The objective of this review was to provide selected information related to the IRS’s 2014 Filing Season. TIGTA plans to issue the final results of our analysis of the 2014 Filing Season in September 2014.

WHAT TIGTA FOUND
As a result of the Government closure, the IRS delayed the start of the filing season from January 21, 2014, to January 31, 2014. As of March 7, 2014, the IRS had received more than 67.1 million tax returns—more than 62.2 million (92.6 percent) were filed electronically and nearly five million (7.4 percent) were filed on paper. The IRS has issued more than 55.4 million refunds totaling more than $164 billion.

The IRS continues to expand identity theft filters to identify fraudulent tax returns. As of February 28, 2014, the IRS reports that it identified and confirmed 28,076 fraudulent tax returns involving identity theft. In addition, the IRS identified 57,316 tax returns with $385 million claimed in fraudulent refunds and prevented the issuance of $336 million (87.3 percent) of the fraudulent refunds it identified. The IRS also identified 36,801 prisoner tax returns for screening.

The use of the split refund option to direct deposit a refund into multiple bank accounts continues to grow. Through March 6, 2014, a total of 585,331 individuals chose to split refunds totaling more than $2.6 billion into multiple accounts. However, TIGTA continues to identify that some taxpayers and return preparers misuse this option to direct a portion of a tax refund to a preparer for payment of services.

TIGTA also found that some paid tax return preparers continue to be noncompliant with Earned Income Tax Credit due diligence requirements, but the number has decreased substantially when compared to the same period last filing season.

Finally, the IRS plans to assist 5.6 million taxpayers through face-to-face contact at the Taxpayer Assistance Centers during Fiscal Year 2014, which is one million fewer taxpayers than were assisted during Fiscal Year 2013. As of March 8, 2014, approximately 46.3 million taxpayers had contacted the IRS by calling one of the various toll-free Customer Account Services lines. The IRS continues to offer more self-assistance options that taxpayers can access 24 hours a day, seven days a week, including its IRS2Go app; YouTube channels; interactive self-help tools on IRS.gov; and Twitter, Tumblr, and Facebook accounts. However, the IRS did not always ensure that the self-help tools were updated with the most current tax information before the start of the filing season.

WHAT TIGTA RECOMMENDED
This report was prepared to provide interim information only. Therefore, no recommendations were made in the report.

Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets

April 15, 2014 Comments off

Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets
Source: Journal of Finance, forthcoming (via SSRN)

We empirically investigate one form of illegal investor-level tax evasion and its effect on foreign portfolio investment. In particular, we examine a form of round-tripping tax evasion in which U.S. individuals hide funds in entities located in offshore tax havens and then invest those funds in U.S. securities markets. Employing Becker’s (1968) economic theory of crime, we identify the tax evasion component in foreign portfolio investment data by examining how foreign portfolio investment varies with changes in the incentives to evade and the risks of detection. To our knowledge, this is the first empirical evidence of investor-level tax evasion affecting cross-border investment in equity and debt markets.

Companies are missing opportunities to mine big data to reduce fraud risk and improve anti-bribery compliance

March 28, 2014 Comments off

Companies are missing opportunities to mine big data to reduce fraud risk and improve anti-bribery compliance
Source: Ernst & Young

EY’s 2014 global forensic data analytics survey, Big risks require big data thinking, highlights that 63% of senior executives surveyed at leading companies around the world, agree that they need to do more to improve their anti-fraud and anti-bribery procedures, including the use of forensic data analytics (FDA). The survey polled over 450 executives in 11 countries, including finance professionals, heads of internal audit, compliance and legal, about their use of FDA in anti-fraud and anti-bribery compliance programs.

The survey also finds that 87% of respondents indicate that regulatory requirements, including anti-corruption laws and recent enforcement trends, are a driving force behind the design and use of FDA, with almost half indicating that these regulatory developments are a top five factor. Bribery and corruption is reported as the top perceived risk at 65%, which aligns well with the finding that 74% report using FDA to combat bribery and corruption. Other perceived significant fraud risk areas, such as asset misappropriation and financial misstatement, are also priority areas for FDA attention.

Audit of the Department of Justice’s Efforts to Address Mortgage Fraud

March 18, 2014 Comments off

Audit of the Department of Justice’s Efforts to Address Mortgage Fraud (PDF)
Source: U.S. Department of Justice, Office of Inspector General

DOJ and its components have repeatedly stated publicly that mortgage fraud is a high priority and during this audit we found some examples of DOJ-led efforts that supported those claims. Two such examples are the Criminal Division’s leadership of its mortgage fraud working group and the FBI and USAOs’ participation on more than 90 local task forces and working groups. However, we also determined during this audit that DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements. For example, the Federal Bureau of Investigation (FBI) Criminal Investigative Division ranked mortgage fraud as the lowest ranked criminal threat in its lowest crime category.1 Additionally, we found mortgage fraud to be a low priority, or not listed as a priority, for the FBI Field Offices we visited, including Baltimore, Los Angeles, Miami, and New York. We also found that while the FBI received $196 million in appropriated funding to investigate mortgage fraud activities from fiscal years 2009 through 2011, in FY 2011 the number of FBI agents investigating mortgage fraud as well as the number of pending investigations decreased.

FTC Announces Top National Consumer Complaints for 2013

March 14, 2014 Comments off

FTC Announces Top National Consumer Complaints for 2013
Source: Federal Trade Commission

Identity theft continues to top the Federal Trade Commission’s national ranking of consumer complaints, and American consumers reported losing over $1.6 billion to fraud overall in 2013, according to the FTC’s annual report on consumer complaints released today.

The Commission received more than two million complaints overall, as reported in the agency’s Consumer Sentinel Network Data Book 2013, of which 290,056, or 14 percent, were identity theft related. Thirty percent of these incidents were tax- or wage-related, which continues to be the largest category within identity theft complaints.

The highest reported age group for identity theft is 20-29, with 20 percent of complaints. Rich says that educating consumers on this topic is a top priority for the agency. Some of the FTC resources include Signs of Identity Theft, Immediate Steps to Repair Identity Theft, and How to Keep Your Personal Information Secure.

Of the more than 1.1 million fraud complaints (classified separately from identity theft) the Commission received, 61 percent of consumers reported an amount of money they had paid, which collectively added up to more than $1.6 billion.

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