US tax office staff rapped over unauthorised outside work

Employees at the Internal Revenue Service (IRS) are taking unauthorised second jobs putting them at risk of conflicts of interest, while the US tax authority does not have appropriate processes in place for handling this

The Treasury Inspector General for Tax Administration (TIGTA) carried out an audit to establish whether the IRS had implemented controls to provide reasonable assurance that outside employment activities are approved, tracked and reviewed for potential conflicts of interest.

This followed a report published in 2014 which found that around half of the estimated 6,000 full-time IRS employees who had outside employment did not have approval from the organisation's outside employment system (OES), as required. The IRS has around 73,519 equivalent full time staff, according to the IRS 2019 workforce data.

From the audit, TIGTA identified 167 employees who potentially engaged in prohibited activities such as tax preparation, and 2,196 employees who held positions that, depending on the nature of the outside employment activity, have a higher risk for a real or perceived conflict of interest.

For example, five employees received income from the tax preparation service company H&R Block, while 51 held accounting positions, 45 in legal services, 30 in financial services including Fidelity Investments, JPMorgan, and Charles Schwab, 25 in bookkeeping, and 22 had taxation roles, all outside the time they spent working for IRS.

In addition, TIGTA categorised more than 45,000 IRS employees as holding positions that would have a high risk of an actual or perceived conflict of interest if those employees engaged in outside employment. Of these, more than 3,700 (8%) engaged in outside employment, but under half of that total (42%) had an approved outside employment request on file with the IRS.

For example, approximately 10% (211 employees) of all IRS criminal investigators earned some kind of outside income without approval. Similarly, approximately 7% (727 employees) of all IRS revenue agents engaged in unapproved outside employment activities.

TIGTA’s analysis showed few IRS employees are disciplined for outside employment issues. Over the past five years, from 2014 to 2018, the IRS disciplined 40 employees for outside employment issues, and 13 were suspended or removed from service.

In addition, the audit raised a number of concerns about the operation and accuracy of the OES system. TIGTA found that two-thirds of the 14,155 employee requests in the OES in a sample period were not reviewed by managers on a timely basis - or were not reviewed at all.

As a result, TIGTA has recommended that the IRS review the activities of all those employees identified as having outside work which could result in a potential conflict of interest. It also said the tax authority should consider whether a legislative proposal is needed to enable the IRS to use tax data to identify employees engaged in outside employment activities that involve potentially prohibited activities.

In its response, IRS management agreed or partially agreed with most of the recommendations.

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