IRS and CFTC Funding Fights Hamper Enforcement

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Accounting pages and a coffee mug, representing internal and external audits

Whistleblowers should continue to expect the government’s pursuit of some enforcement actions to be tempered by limited resources as both the IRS and CFTC have recently acknowledged insufficient funding is causing tough choices within their agencies.

The USA Today reported today that the IRS audit rates for large U.S. corporations fell to their lowest level in at least a decade. Corporations were considered large if they had at least $10 million in assets. The IRS Commissioner told USA Today that it is the lowest level of staffing for the tax regulator in twenty years. As a result, audit-related revenue fell to its lowest level in more than a decade. This collection decline is expected to continue as staffing of enforcement personnel remains low.

Earlier this month, the CFTC Chair Timothy Massad told a House budget hearing that the commodities regulator needed more money in order to be able to monitor high speed and algorithmic trading. Much of the proposed budget increase would be used on market surveillance and data collection, since the agency needs to build sophisticated analytical tools to keep up with electronic traders. Massad also said the CFTC’s budget doesn’t allow it to pursue every worth enforcement action, identifying cases of spoofing and precious-metals scams as some that may miss the cutoff because of insufficient funding.

These reports identifying inadequate funding have become an annual process as government agencies fight Congress to justify their proposed budget increases. The SEC and CFTC funding was part of a deal in the last budget battle related to the repeal of the swaps push out rule. Nevertheless, Congress continues to withhold funding from the IRS, which has been cut more than a billion dollars over the last five years.