Management has the primary responsibility for providing a system of internal controls. Management is held accountable for internal controls. Management is liable for losses where it fails to provide proper internal controls. However, all personnel have a responsibility for understanding and ensuring that internal controls are functioning as intended.

All Service employees must take care to protect personally identifiable information (PII). Any loss of PII could result in information being compromised to perpetrate identity theft. PII information must be encrypted on computers and E-mail. Sanitize taxpayer PII or use secure messaging. If you suspect or know of a potential information loss, report it to your manager, the Treasury Inspector General for Tax Administration (TIGTA) at 1–800–366–4484, and the Computer Security Incident Response Center (CSIRC) at 1–866–216–4809.

All applicable laws relating to funds and appropriations must be complied with. Each fund or appropriation can only be used for the purpose authorized by law. Accounting records must be designed to show compliance with this requirement.

The Accounting system must provide financial records consistent with standards set by other agencies and the Department of the Treasury in connection with its central accounting and reporting responsibilities. The financial data must be accurate and reported timely to meet the needs of the President and Congress for budget activities.

Each Accounting system must maintain complete and reliable records for all funds, property, and other assets, as well as liabilities, obligations, receipts, and revenues. All financial transactions must have documents supporting a summary record and financial report. Procedures implemented in carrying out the operation should be simple, efficient, practicable, and must apply all legal and regulatory requirements. The responsibility for each accounting function, such as preparing documents, preparing journals, posting ledgers, reviewing, and balancing must be performed by separate units within the Operation to provide internal checks and minimize opportunities for fraudulent, unauthorized, or irregular acts.

The highest standards of truthfulness and honesty must be applied in accounting for the receipt, disbursement, and application of public funds. Management and the Congress must be able to rely on the accuracy of all transactions in future planning. To meet these standards competent leadership and qualified technicians are of prime importance.

When entrusted with or statutorily made responsible for public funds, government employees are, in effect, trustees for the taxpayers. These "accountable officers" encompass such officials as authorized certifying officers, civilian and military disbursing officers, collecting officers, and other employees who by virtue of their employment are responsible for or have custody of government funds. These officials are personally liable for the loss or improper payment of the funds for which they are accountable.

Directors are held accountable for losses occurring within their accounting jurisdictions until employee restitution is made or relief is granted.

It is important to distinguish between liability and "relief" . The basic legal liability of the accountable officer is strict, and automatic. Lack of fault or negligence does not remove liability, but may provide a basis for "relief" under the relief statutes discussed.

IRM Exhibit 3.0.167–1 contains a list of Directors who have been designated under Delegation Order 29, IRM 1.2.40.28 as accountable officers.

A Certifying Officer is one of several types of Accountable Officers. An Accountable Officer is any government employee or officer who by reason of employment is responsible for or has custody of government funds. However, a Certifying Officer is different from other accountable officers in one important way: a Certifying Officer does not have physical custody of public funds. In spite of this fact, the accountability for public funds rests primarily with the Certifying Officer.

A Certifying Officer is a government officer or employee whose job is or includes certifying vouchers for payment. This means verifying and certifying that payments made by the agency are legal, proper and correct.

Collecting officers are those who receive or collect money for the Government, such as certain officers of the Service. Officers who receive or collect money for the Government are accountable to the Government for all money collected. Service employees who receive or collect money for the government are responsible for the physical safety of taxes collected. These employees must pay over to the Government all taxes collected and must make good money lost, stolen, burned, etc., while in his custody unless relieved.

Under Delegation Order 29, IRM 1.2.40.28 the Commissioner has delegated to the Field Directors, Submission Processing the authority to certify and approve Internal Revenue Collections as an Accountable Officer. Other officials can be designated by a Division Commissioner.

Accountable Officers who have physical custody of Government funds are held to a standard of strict liability. They are, in effect, insurers of the public funds in their custody and are excusable only for losses due to acts of "God or the public enemy" .

An Accountable Officer is automatically liable at the moment either a physical loss occurs or an erroneous payment is made. The fact that a loss or deficiency has occurred raises a presumption of liability on the part of the accountable officer, and the burden of proof to rebut this presumption rests with the officer who has sustained the loss.

Treasury Directive 32–04, dated February 16, 2007 http://www.treasury.gov/about/role-of-treasury/orders-directives/Pages/td32-04.aspx establishes requirements and responsibilities.

Each Submission Processing Campus selects a member of the Planning and Analysis Staff as a Remittance Security Coordinator.

Remittance Security Coordinator changes will be sent to the Headquarters Losses and Shortages Analyst.

The Remittance Security Coordinator will ensure that cases are controlled (Hardcore Payment Tracer Unit) and taxpayers are protected while potential embezzlement/theft cases are investigated.

The Remittance Security Coordinator is the TIGTA contact.

Ensure that the Hardcore Payment Tracer function inputs the proper STAUP to stop incorrect notices.

Ensure that any installment agreements do not default.

If necessary prepare manual billing for accounts where, if the potential loss was applied to the account, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Credit from the 7600 Account (Receipt Loss Coordinator).

Credit from the Lockbox Bank (Lockbox Field Coordinator).

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Losses that are the responsibility of the Receipt Loss Coordinator (formerly the 7600 Coordinator) require a Preliminary Report of Loss from the Field Director, Submission Processing, The report is due within 10 days of receipt of the memorandum from TIGTA.

Preliminary Report information can be found in IRM 3.0.167.8.6.

The Remittance Security Coordinator will provide the Headquarters Losses and Shortages Analyst an immediate E-mail report of all lockbox or direct deposit refund (employee fraud) losses and Campus or Field Office loss of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

The Remittance Security Coordinator will provide the Headquarters Losses and Shortages Analyst a monthly report by the 5th work day of the next month.

Employees identifying a revenue receipt shortage must immediately notify their supervisor of the shortage.

Supervisors upon receiving notification of a revenue receipt shortage, must immediately contact their Manager, Department Manager, TIGTA and the local Remittance Security Coordinator. If a counterfeit bill is discovered, this must also be reported to the Secret Service. Contact phone numbers for your local Secret Service can be found at www.secretservice.gov/field_offices.shtml. Losses of Tax Collections involving these specific circumstances must also be reported in writing immediately.

The supervisor must record differences, overages and shortages of each employee engaged in handling currency dealing with collections. He/she must report the shortages to the Submission Processing Campus Receipt and Control function by memorandum with the daily deposit. In the case of counterfeit bills:

The report includes the amount of the loss and identifies the type of tax (Tax Class) and injured taxpayer, if known, and where the loss appears to have occurred. When the TIGTA memorandum identifies an injured taxpayer or requests the transfer, the Manager, Accounting Control/Services Operation will satisfy the injured taxpayer's loss using the 7610 Account .

Supervisors must require the responsible employee(s) to write a detailed report within 5 days after the loss occurred. The report must contain the office location, functional area, date occurred or discovered, the name(s) and position title(s), amount, kind of tax or fund, circumstances and appropriate documents.

The Supervisor will determine if there was negligence on the part of any employee in regard to the loss or shortage. If the employee was negligent, he/she will be requested to make restitution. Supervisors must forward their employee's loss report with their own report, within 10 workdays to the Campus Submission Processing Director thru the Remittance Security Coordinator. The report will include a summary of internal controls, procedures and supervisory responsibilities in effect at the time the loss occurred.

Submission Processing Directors are responsible for reporting employee embezzlement losses to required officials and other agencies. All lost cash receipts will be referred to TIGTA regardless of the dollar amount. Forward preliminary reports of losses, within 10 days of the receipt of TIGTA's memorandum, as well as subsequent follow-up reports to the Director, Submission Processing W&I. See IRM Exhibit 3.0.167–2.

Preliminary reports are sent from the Field Director, Submission Processing to the Director, Submission Processing W&I.

Mail reports to:

The Losses and Shortages Analyst will open a case file for the preliminary report.

Supervisors, based on the TIGTA Report of Investigation (ROI), will determine if there was negligence on the part of the employee in regard to the loss or shortage. If the employee was negligent, the supervisor must request the employee make restitution. Supervisors must forward their employees' loss report with their own report about their knowledge of the loss and determination regarding negligence to the Department Manager and Operation Manager. The report will include a summary of internal controls, procedures and supervisory responsibilities in effect at the time the loss occurred. Management is held accountable for internal controls. Management is liable for losses where they failed to provide or enforce proper internal controls.

The Field Director, Submission Processing, based on the TIGTA ROI and the case file, will determine whether the loss was a result of negligence on the part of the accountable officer. Although the principles of law involved are simply stated, their application to a given case requires a careful analysis of the particular facts. A number of factors may bear on the conclusion in any given case, and the results will be determined by the interrelationship of these factors. The Field Director, Submission Processing and the Director, Submission Processing W&I ensure that the appropriate factors have been considered.

In evaluating the facts to determine whether or not the accountable officer was negligent for purposes of applying the relief statute, apply the standard of "reasonable care" . This is the standard of simple or ordinary negligence, not gross negligence. This standard has been stated as what the reasonable, prudent and careful person would have done to take care of his or her own property of like description under like circumstances. This is an objective standard, that is, it does not vary with such factors as the age and experience of the particular accountable officer.

If the facts indicate negligence on the part of an employee then the employee is ordered to make restitution. If the negligent employee does not make restitution or a court case against the employee is not pursued, the employee is assessed using IRC Section 7804(c) procedures. See IRM 3.0.167.5.5.

Embezzlement of tax collections can occur at any point within the Service. Caution must be taken to ensure that adequate internal controls exist to minimize or prevent instances of embezzlement. Adequate security, equipment, and facilities must be provided for the safeguarding of money, securities, etc. handled in the Deposit Activity.

Local TIGTA controls and coordinates embezzlement cases. The Special Agents Handbook contains detailed instructions for "Recovering Unjust Enrichments" and for "Coordination with the Service in Theft or Embezzlement Cases." TIGTA sends a memorandum to the Campus Field Director, Submission Processing on embezzlement cases, involving both Field Office and Campus employees. Injured taxpayer's account(s) are credited from the 7610 account . The 7610 account is debited for the loss amount. If the "injured" taxpayer is not identified, credit the Unidentified Account . The TIGTA "memorandum" provides the assigned case number, taxpayer's name, identification number, type of tax, period ending, amount and date of payment and the name and telephone number of the Special Agent conducting the investigation.

At the appropriate time when an employee has been identified as having embezzled government funds and in concurrence with the Department of Justice/Assistant United States Attorney (DOJ/AUSA), TIGTA sends a memorandum to flag the employee's retirement. TIGTA keeps the U.S. Attorney's office informed so that criminal prosecution is not impacted.

TIGTA sends the Final Case Information (ROI) to the Field Director, Submission Processing Campus. TIGTA will provide the U.S. Attorney's office the Submission Processing Campus Accounting addresses for application of restitution payments. Mailing labels will be provided. These addresses are in the Special Agent's Handbook.

The Field Director, Submission Processing is authorized by the TIGTA memorandum to debit Account 7610 and credit the injured taxpayer's account(s). The case number provided on the memorandum should be used on the case file and as the Document Identification (ID) when opening the case on the Redesign Revenue Accounting Control System (RRACS). See IRM 3.17.63, Accounting and Data Control - Interim Revenue Accounting Control System, for the specific journal instructions. The Field Director, Submission Processing forwards a copy of the memorandum to the Director, Submission Processing Wage and Investment (W&I) as part of the preliminary notification. The case is suspended until the ROI is received. The case is reviewed monthly by the Receipt Loss Coordinator and followed-up as appropriate with TIGTA.

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Upon receipt of the Final TIGTA Report final case information, the Receipt Loss Coordinator will initiate recovery.

The Receipt Loss Coordinator sends a memorandum from the Field Director, Submission Processing to the area that has the loss requesting a copy of the internal controls in place when the loss occurred. See IRM Exhibit 3.0.167–4 for a sample memo. The response must include deficiencies or changes made and copies of the controls in place.

IRC Section 7804(c) assessment is for a case that does NOT go to trial and court cases where the court sentence orders restitution by 7804(c) assessment. IRC Section 7804(c) imposes liability against any officer or employee of the Treasury Department who fails to account for and pay over any amount of money or property collected or received by him/her in connection with the Internal Revenue laws. Management is held liable for lack of proper internal controls. The statute does not require any specific intent or intentional misconduct such as willfulness. Thus, the Service may issue a notice and demand and a resulting assessment as soon as there is evidence of loss of money or property and evidence that the employee had a duty to account and pay over such money or property. If the employee fails to make payment, the Service can exercise its broad administrative powers to collect the amount owed as if it were a tax.

The rights of the employee are not violated by such summary collection action since he can challenge the assessment by filing a claim and suit for refund of any amount collected under Section 7804(c).

Delegation Order 152, IRM 1.2.40.39 determines who can order a 7804(c) assessment.

If authorized and there is not a court case, the Receipt Loss Coordinator will prepare a notice and demand as shown in IRM Exhibit 3.0.167–3. An Accounting return envelope is provided for payments or response. The notice and demand is issued prior to 7804(c) assessment to afford the employee the opportunity to pay the liability before the assessment billing. The amount of the notice is the full amount of the loss. The amount of the notice should also include any charges that are the result of any offset. The amount offset will be short by that amount. As every case is unique, the notice and demand letter is tailored to suit the case. The notice reflects interest from the loss date to the notice date. The notice indicates the year of loss as a tax year. A separate 7804(c) is issued for each tax year. If full payment is received, it clears the 7610 Account loss and will not be assessed. The interest is deposited as General Fund Receipts.

7804(c) assessment is Non-Master File. Letters will be numbered as Tax Class 6, Document Code 54, Blocking Series is designated by tax class with 200 series for individual and MFT 20 Abstract 004.

The Non-Master File assessment is mailed to:

The employee is sent the final notice of intent to levy. The Taxpayer Delinquent Account (TDA) will then be accelerated to Collection. The employee is not sent the notices as with normal TDA's. At the time of the TDA preparation, the Cincinnati Non-Master File (NMF) unit contacts the Receipt Loss Coordinator at the Campus requesting the assessment and a memorandum to accompany the TDA.

A ≡ ≡ ≡ ≡ ≡ is input on the perpetrator's account to offset any future Master File refund. Payments received by Receipt and Control are numbered with a 6 [27] Document Locator Number (DLN); 200 blocking series and controlled on a separate 813. Form 3244 , Payment Posting Voucher is prepared if copy of letter is not attached and deposited as individual income tax 20–0110 . The deposit package is forwarded to Accounting.

The NMF Unit contacts the Receipt Loss Coordinator (formerly the 7600 Coordinator) for each payment posted to the NMF account and the coordinator works with RRACS to journal the transaction.

Where a court has ordered restitution on an employee embezzlement case (7610 Account ), a memorandum is sent to the Kansas City Department of Justice Lockbox Coordinator at:
IRS-RACS
Attn: Mail Stop 6261
333 W. Pershing Road
Kansas City, MO 64108
The memorandum provides the name and social security number (SSN) of all persons ordered to make restitution, amount of restitution payments and the case number. Employee embezzlement cases are monitored monthly by the Receipt Loss Coordinator to insure that payments are made. If payments are not received, contact TIGTA Special Agent in Charge (SAC). If payments are made but not transferred from Kansas City Department of Justice Lockbox, secure the payment information from the probation officer (use the TIGTA SAC) and contact the Kansas City Department of Justice Lockbox Coordinator at 816–325–3805.

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When the court orders administrative recovery, IRC Section 7804(c) assessment procedures are followed. See IRM 3.0.167.5.6.

Supplemental reports are submitted by the Field Director, Submission Processing to the Director, Submission Processing W&I when TIGTA discovers additional embezzlements or perpetrators and when full employee restitution is received after the Preliminary Report has been forwarded. If TIGTA issues another memorandum, this information is sent forward. See IRM Exhibit 3.0.167–5.

Mail reports to:

It is the responsibility of the Receipt Loss Coordinator to obtain all documents required for the case file. The case file documents the case and attempts to collect the loss. Documents include:

Relief is requested upon determination that the loss amount is not collectible. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Relief is granted to a present or former accountable officer for the physical loss or deficiency of public money (or securities) when the head of the agency (or his/her designee) determines: the accountable officer was carrying out official duties when the loss or deficiency occurred, or the loss or deficiency occurred because of an act or failure to act by a subordinate of the accountable officer; the loss or deficiency was not the result of fault or negligence by the accountable officer; and the loss or deficiency was not the result an illegal or incorrect payment.

Within the scope of jurisdiction, the Director, Submission Processing W&I is authorized by Delegation Order 115 IRM 1.2.40.37 and Treasury Directive 32–04 http://www.treas.gov/regs/td32-04.htm to administratively resolve irregularities (including embezzlements) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

The 7610 Account is monitored to ensure timeliness of relief requests.

Review relief requests to ensure that appropriate documents support the type of loss incurred and are attached. Incomplete case files will be returned for further development. The Accountable Director is determined by when the loss occurred. Determine if negligence is involved, proper collection action taken, and include the TIGTA ROI or the Secret Service Report for counterfeit bill cases. Include a copy of internal controls that were in place when the loss occurred and identify any deficiencies or changes made.

The memorandum to the Director, Submission Processing Wage and Investment (W&I) contains a complete explanation of how the loss occurred, the circumstances surrounding it, when it was discovered, internal controls in place, changes to internal controls, court information, efforts taken to collect and why the loss is uncollectible. Complete the Embezzlement Documentation Check Sheet (See IRM Exhibit 3.0.167–7) to insure the case file is complete. The memorandum for cases administratively resolved will contain the statement authorizing the resolution and a signature block for the Director, Submission Processing W&I. See IRM Exhibit 3.0.167-6.

A taxpayer complains that a remittance, sent or given to the IRS has been altered. The matter is referred to TIGTA when a photocopy of both sides of the original negotiating instrument was endorsed and/or made payable to someone other than the IRS. In the case of money orders, cashier's checks, etc. the taxpayer provides a photocopy of the customer's receipt and a written statement that the original instrument was payable to the Treasury and/or sent to the IRS. The taxpayer is encouraged to provide sufficient identifying data, including a telephone number where they may be contacted at home and work.

In these cases the employee/unit handling the complaint should input Transaction Code (TC) 470 with no closing code, and forward the taxpayer's correspondence to the nearest TIGTA Special Agent.

If the remittance was mailed to the IRS but is taken by a Postal or other government employee, the Service is not legally obligated to credit a taxpayer's account under such circumstances. Therefore, the 7610 account is not used. The taxpayer's recourse is against the payor bank as it is held strictly liable to the true owner if it pays on a forged instrument.

Do not use the 7610 account if the remittance was processed through a lockbox bank. Contact the Lockbox Field Coordinator.

A Form 843 claim for repaid loss or embezzlement is coordinated with TIGTA on a case by case basis for processing. These claims are not processed without authorization from Counsel.

When a claim is received for a repaid loss or embezzlement, prepare a memorandum to counsel requesting an opinion be rendered concerning the individual claim.

Preliminary reports and relief requests require documentation that all injured taxpayers accounts were corrected. A managerial review is required 120 days after the credit is transferred from the 7610 account to insure that injured taxpayer's accounts are properly corrected. The results of this review is part of the relief request.

Treasury Directive 34–02 http://www.treas.gov/regs/td34-02.htm authorizes the Commissioner to compromise, suspend or terminate collection action against federal depositaries for deposit discrepancies of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . In Delegation Order 1-25 IRM 1.2.40.11, the Commissioner has delegated this authority to the Director, Submission Processing W&I.

The Director, Submission Processing W&I authorizes termination, compromise, or suspension of collection on claims for deposits when records indicate that credit is due from the depositary but can't be proven because of the unavailability of bank records and the amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Counsel's recommendation is needed for amounts ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .