Download Audit of the Bureau of Alcohol, Tobacco, Firearms and Explosives' Use of Income-generating Undercover Operations Book in PDF, Epub and Kindle
The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is responsible for the investigation and prevention of federal offenses involving the unlawful use, manufacture, and possession of firearms and explosives, acts of arson and bombings, and illegal trafficking of alcohol, and tobacco products. In conducting its undercover operations, ATF may participate in transactions that are normally prohibited by federal law. In most of these illicit transactions, ATF uses appropriated funds to make any purchases and deposits any proceeds into the Department of the Treasury's General Fund. However, in 2004, ATF was granted the same authority previously provided to the Federal Bureau of Investigation (FBI) and the Drug Enforcement Administration (DEA) to use proceeds generated from these undercover operations to offset necessary and reasonable operational expenses related to the same operations. ATF refers to this authority as "churning authority," and to cases that use such authority as "churning investigations." To date, the ATF has used this authority only to investigate tobacco diversion, which involves efforts to evade state, local, or federal tobacco taxes. The Office of the Inspector General (OIG) conducted this audit to determine whether ATF: (1) properly authorized income-generating undercover operations (churning investigations); and (2) provided adequate management and oversight of its churning investigations. Our audit included a review of 20 of the 36 churning investigations conducted by ATF between February 2006 and June 2011 that generated total reported revenues of nearly $162 million. We found a serious lack of oversight by ATF at both the headquarters and field office levels during the period of time covered by the audit. ATF's guidance regarding churning investigations lacked breadth and specificity, and managers at ATF headquarters as well as managers and Special Agents at ATF field offices often disregarded it. We found that ATF proceeded with churning investigations without proper approval, misused the proceeds from churning investigations, and failed to account properly for cigarettes and assets purchased during churning investigations.
