In the News: GAO & TIGTA Issue Worrying Reports While Lerner May Face Contempt Charges

FEDS Professional Liability Insurance gives you the freedom to manage. For more articles like this one, read "Yesterday's Headlines, Today's Coverage" in the bottom left corner on the FEDS homepage.

Here at FEDS we are consistently asked how federal employee professional liability insurance actually works and in what scenarios it is applicable and would provide coverage. In our column here at FEDmanager we will aim to give you concrete examples of instances in which a PLI policy would be of great benefit. Given the nature of today’s federal government finding these scenarios is no more difficult than looking at the front page of your newspaper. Today’s column focuses on the Internal Revenue Service (IRS), an agency still dealing with the fallout of the tax-exemption “scandal” from last year, and currently facing new difficulties.

  • On April 10, the House Oversight and Government Reform Committee voted to approve a resolution holding Lois Lerner, ex-head of an IRS division that reviews applications for tax exemptions, in contempt of Congress due to her refusal to testify at two of the committee’s hearings. The party-line 21-12 vote, with Republicans voting for and Democrats against, sends the bill to the House floor, where the full body of representatives will decide whether or not to ask the Justice Department to pursue criminal prosecution of Lerner. The Oversight and Government Reform Committee’s vote comes on the heels of an earlier vote by the House Ways and Means Committee requesting that the Justice Department consider prosecuting Lerner for crimes including exposing confidential taxpayer information and misleading investigators.
  • The Government Accountability Office (GAO) recently released a report that reflects how a large decrease in the budget of the Internal Revenue Service (IRS) has led to a substantial decline in the agency’s ability to effectively collect owed tax revenue as well as the agency’s customer service capabilities. The IRS’ budget has declined approximately $900 million since fiscal 2010 in the shape of personnel reductions, some efficiency improvements, and a sharp decline in employee training. The GAO reported that IRS per-employee spending has dropped from $1,450 in 2009 to $250 in 2013. Consequently, the IRS’ abilities have been compromised. In an interview, IRS Commissioner John A. Koskinen stated that the $500 million budget cut that the IRS absorbed as part of the sequester last year led to a drop in tax revenue of more than $2 billion, with more than $4 in revenue being lost for every $1 that was “saved” due to the sequester. IRS collections from enforcement actions are also down about $4.3 billion from 2010.
  • A late-April report by the Treasury Inspector General for Tax Administration revealed that between October 2010 and December 2012 the Internal Revenue Service (IRS) paid out approximately $2.8 million in bonuses to employees with serious conduct issues, including more than $1 million in cash awards to about 1,100 employees with federal tax-compliance issues. IRS officials revealed that, due to their interpretation of the agency’s contract with the National Treasury Employees Union (NTEU), they generally do not consider conduct issues when issuing employees’ performance awards. TIGTA Inspector General Russell George acknowledged in the report that the government does not prohibit bonuses for those employees who are tax-delinquent, but added that these awards create “a conflict with the IRS’ charge of ensuring the integrity of the system of tax administration.”
  • As the GAO report suggests, this is already an agency dealing with the harmful effects of severe budget cuts. The large presence of the IRS in the public’s eye means that more and more scrutiny, both by the media and by Congress, is being heaped upon the agency. This in turn can lead to an increased chance of disciplinary, criminal, and civil actions being taken against managers in the IRS. In the three news stories mentioned above, we see one manager hauled in front of Congress and now potentially facing criminal charges, while the TIGTA report may lead to discipline for managers who gave bonuses to employees behind on their taxes.

It is apparent from these scenarios that outside scrutiny could affect ANY manager. Adverse actions can and do get brought against quality government workers. If you have a disciplinary matter being brought against you the FEDS policy will provide you with up to $200,000 in legal defense costs to protect your career and your reputation. Being the subject of an investigation, whether by OIG, OSC, or another organization within the government, is also covered under this part of the policy. The administrative portion of the FEDS policy also would provide legal counsel if you are forced to testify before Congress, as IRS officials did after the Cincinnati office scandal. The policy also allows for up to $100,000 in legal defense in the unfortunate event that you face a criminal charge brought against you as a result of doing your job in the federal government. Having a FEDS professional liability insurance policy assures that you will have top-notch legal representation and coverage in the event of any job-related adverse action being taken against you. You will also have the peace of mind, knowing that the FEDS policy will defend and indemnify you up to $1 or $2 million in the event of a civil lawsuit. Given the prevalence of all types of these instances in today’s government, you can’t afford not to have FEDS PLI.

For more information on your specific exposures now, how professional liability insurance protects, or how the FEDS program differs from other insurance programs, please visit the FEDS website and choose the Executive and Managers tab. For more articles like this one, read "Yesterday's Headlines, Today's Coverage" in the bottom left corner on the FEDS homepage.

Posted in Manager Matters

Tags: IRS, Internal Revenue Service, PLI policy, professional liability insurance

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