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IRS should get tough with employees' financial disclosures, says GAO.

A recent internal audit showed 23 out of 1,200 Internal Revenue Service employees who were examining returns of large corporations owned stock in the companies they audited. Of these, 16 had stock worth over $1,000, and 1 had holdings worth $34,000. None of these employees had filed financial disclosure statements.

The General Accounting Office, concerned that potential conflicts of interest of IRS employees could undermine public confidence in the tax system, recommended in a recent report that the IRS tighten up on employee financial disclosure requirements.

Existing Treasury regulations require confidential financial disclosure by certain IRS employees; under these regulations holdings worth over $1,000 in an entity being audited pose a potential conflict of interest. The GAO said the IRS has not been complying with these rules and should do so.

According to the GAO report, 120,000 IRS personnel are vulnerable to conflicts of interest, yet only 662 employees were required to file financial disclosure statements for 1991. In addition to complying with existing regulations, the GAO recommended the IRS

* Require yearly disclosure from all revenue agents, revenue officers and criminal investigators.

* Find out whether other classes of employees are likely to face conflicts of interest and decide if they also should file.

* Make sure the disclosure statements contain enough information for the reviewing IRS manager to ascertain whether a potential conflict of interest exits.

The IRS says it has already begun to implement some of these recommendations. It also has taken other steps to prevent conflicts of interest, such as providing ethics training, doing background investigations and rotating assignments.
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Title Annotation:General Accounting Office
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Dec 1, 1992
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