December 10, 2022

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Justice Department Sues to Shut Down Multistate Tax ‘Elimination’ Scheme Involving Charitable Remainder Annuity Trusts

15 min read
On Feb. 23, the United States filed a complaint seeking an order prohibiting John Hugo Eickhoff Jr., Rhonda Kaye Eickhoff, Hoffmann Associates LLC, Aric Elliot Schreiner, Columbia CPA Group LLC, John Williams Gray II and Damon Thomas Eisma from organizing, promoting or selling an allegedly unlawful tax scheme involving the use of charitable remainder annuity trusts (CRATs). The government allegations detail the defendants’ involvement with at least 70 CRATs, in a scheme that has resulted in an estimated $40 million of taxable income going unreported and at least $8 million in tax revenue losses.

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    In U.S GAO News
    The United States uses arms transfers through government-to-government Foreign Military Sales (FMS) and direct commercial sales (DCS) to support its foreign policy and national security goals. The Departments of Defense (DOD) and State (State) have authorized arms worth billions of dollars to six Persian Gulf countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). The United States established the Gulf Security Dialogue (GSD) to discuss security issues with these countries. GAO was asked to determine (1) the dollar value and nature of U.S. arms transfers authorized for the Gulf countries’ governments, (2) the extent to which U.S. agencies documented how arms transfers to Gulf countries advanced U.S. foreign policy and national security goals, and (3) the role of the GSD. To conduct this work, GAO analyzed U.S. government regional plans, arms transfer data from fiscal years 2005 to 2009, case-specific documentation for fiscal years 2008 and 2009, and program guidance; and interviewed officials in Bahrain, Saudi Arabia, and the UAE. GAO cannot determine the total value of authorized arms transfers to the governments of Gulf countries in part because State’s DCS database also includes arms transfers authorized for U.S. military units stationed in those countries. GAO’s review of State’s database determined that at least $6 billion of the $21 billion of authorized transfers between fiscal years 2005 and 2009 were for U.S. military units in Gulf countries. In addition, some license values were counted twice. State’s database system does not have the capability to separate authorizations by end-user or separate multiple authorizations that cover the same equipment. Consistent with statutory requirements, State included this data in reporting all license authorizations to Congress. In contrast, GAO could determine that the DOD-administered FMS program authorized about $22 billion in arms transfers to the six Gulf countries. Authorized transfers included air and missile defense systems, with the UAE and Saudi Arabia accounting for over 88 percent of total FMS authorizations. State and DOD did not consistently document how arms transfers to Gulf countries advanced U.S. foreign policy and national security goals for GAO selected cases. State assesses arms transfer requests against criteria in the Conventional Arms Transfer policy, including interoperability with the host nation and the impact on the U.S. defense industrial base. Additionally, DOD assesses FMS requests for significant military equipment against criteria in DOD policy, such as the impact on the recipient’s force structure and the ability to monitor sensitive technology. GAO’s analysis of 28 arms transfer authorizations–15 DCS and 13 FMS–found that State did not document how it applied its criteria to arms transfers, while DOD could not provide documentation on its review of release of technology for 7 of 13 FMS authorizations. Due to a lack of complete documentation, we cannot verify if U.S. agencies consistently reviewed authorizations. When established in 2006, GSD was intended to enable multilateral cooperation on six security-related topics between the United States and six Gulf countries, but it instead operates as a bilateral forum between the United States and five Gulf countries due to the preference of these countries. Saudi Arabia does not participate in GSD, but discusses security concerns at other forums. According to U.S. officials, GSD’s agenda has evolved to focus on regional security and other concerns specific to the country participants. GAO recommends that (1) State take steps to improve the clarity and usefulness of DCS license data, and (2) State and DOD document their reviews of arms transfer requests. State and DOD agreed with the recommendations, but State noted that it would need additional resources to improve DCS reporting.

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    In U.S GAO News
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  • Humanitarian Assistance: USAID Should Improve Information Collection and Communication to Help Mitigate Implementers’ Banking Challenges
    In U.S GAO News
    What GAO Found Implementing partners (partners) for 7 of 18 Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance projects that GAO selected noted encountering banking access challenges, such as delays or denials in transferring funds overseas. Of those 7 projects, 1 partner told us that banking access challenges adversely affected its project and 2 additional partners told us that the challenges had the potential for adverse effects. Moreover, the majority of partners (15 out of 18) for the 18 projects noted experiencing banking access challenges on their global portfolio of projects over the previous 5 years. Number of Selected U.S. Government Humanitarian Assistance Projects That Experienced Banking Access Challenges USAID’s partners’ written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that encountered challenges were USAID-funded. Of those 6 USAID projects, 5 partners told us that these challenges did not rise to the threshold of affecting project implementation that would necessitate reporting, and 1 did not report challenges although its project was adversely affected. Additionally, GAO’s review of about 1,300 USAID partner reports found that the few instances where challenges were mentioned lacked sufficient detail for GAO to determine their type, severity, or origin. Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives. The Department of the Treasury (Treasury) and State have taken various actions to help address banking access challenges encountered by nonprofit organizations (NPO), but USAID’s efforts have been limited. Treasury’s efforts have focused on engagement between NPOs and U.S. agencies, while State has issued guidance on the topic to its embassies and designated an office to focus on these issues. In contrast, USAID lacks a comparable office, and NPOs stated that it is difficult to find USAID staff to engage with on this topic. Further, GAO found that awareness of specific challenges was generally limited to USAID staff directly overseeing the project. Without communicating these challenges to relevant parties, USAID may not be aware of all risks to agency objectives and may not be able to effectively engage with external entities on efforts to address these challenges. Why GAO Did This Study Since 2012, the United States has provided approximately $36 billion in humanitarian assistance to save lives and alleviate human suffering. Much of this assistance is provided in areas plagued by conflict or other issues that increase the risk of financial crimes. The World Bank and others have reported that humanitarian assistance organizations face challenges in accessing banking services that could affect project implementation. GAO was asked to review the possible effects of decreased banking access for nonprofit organizations on the delivery of U.S. humanitarian assistance. In this report, GAO examines (1) the extent to which State and USAID partners experienced banking access challenges, (2) USAID partners’ reporting on such challenges, and (3) actions U.S. agencies have taken to help address such challenges. GAO selected four high-risk countries—Syria, Somalia, Haiti, and Kenya—based on factors such as their inclusion in multiple financial risk-related indices, and selected a non-generalizable sample of 18 projects in those countries. GAO reviewed documentation and interviewed U.S. officials and the 18 partners for the selected projects.

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    In Crime News
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  • Contractor Oversight: Information on the National Nuclear Security Administration’s Report on Burdensome Regulatory Requirements
    In U.S GAO News
    What GAO Found In 2019, the Department of Energy’s (DOE)’s National Nuclear Security Administration (NNSA) provided a report to Congress on its findings from its survey of the seven contractors that manage and operate its nuclear security enterprise sites to identify requirements the contractors viewed as burdensome. This survey was congressionally mandated after reports by external groups found that the environment in which NNSA carried out its oversight of such management and operating (M&O) contractors was strained. GAO reviewed information on the following three areas related to NNSA’s report: Comparison of NNSA’s findings with related reports. GAO found that during the past 10 years, three external groups carried out studies and assessments of the nuclear security enterprise and issued reports citing ways NNSA’s oversight has contributed to burden for M&O contractors. These groups were all directed by Congress to complete their studies, which were published between 2014 and 2020. Their reports also cite ways in which NNSA’s oversight may have contributed to increased costs or reduced mission capabilities. NNSA’s Burdensome Regulatory Requirements report explicitly identifies 91 requirements that M&O contractors found burdensome; these include requirements found in sources such as DOE and NNSA directives, federal regulations, and statutes. NNSA’s approach to collecting and reporting information on requirements that M&O contractors identified as burdensome. NNSA first collected information on the requirements the contractors viewed as burdensome, and second, asked the contractors to rate these requirements based on the likelihood that the requirement could be changed and the effects such a change would have on cost savings, morale, recruitment and retention, and mission capability. While NNSA did not provide a definition to its contractors of what constituted a “burdensome” requirement, some contractors created their own definitions, while others told us the definition was understood based on the previously published related reports. GAO interviewed M&O contractor representatives and found that their definitions of what constituted a “burdensome requirement” varied. Also, the seven M&O contractors used different approaches to identify and rate requirements they considered burdensome. However, multiple M&O contractors identified the same requirements, or sources of those requirements, as burdensome. For example, one contractor identified the entire DOE Order for Program and Project Management of the Acquisition of Capital Assets (DOE Order 413.3B) as burdensome, while another contractor identified specific requirements within the same order as burdensome. NNSA actions to address matters that M&O contractors identified as burdensome. In its report, NNSA included a list of 16 matters that it committed to reviewing based on the rating data it collected from M&O contractors and input from members of the Operations and Efficiencies Board, an internal body established to improve coordination and collaboration across NNSA’s sites. According to NNSA officials, 10 matters are under revision or have been changed; two matters were reviewed, but no changes were made; and four matters were reviewed, and M&O contractor input will be considered should the regulation undergo a revision in the future. NNSA’s list of matters included DOE directives, federal requirements, and an M&O contract change. According to agency officials, NNSA chose to prioritize its review of certain matters because the agency did not have the resources to review all 91 requirements that M&O contractors identified as burdensome. NNSA provided technical comments on a draft of this report, which were incorporated as appropriate. Why GAO Did This Study NNSA is responsible for maintaining a safe, secure, and reliable nuclear stockpile and relies on and oversees contractors who manage and operate its laboratory and production sites. NNSA’s M&O contracts include requirements for contractors to adhere to laws, regulations, and DOE and NNSA directives. NNSA also has processes to hold contractors accountable for meeting these requirements. Senate Report 115-262, accompanying the John S. McCain National Defense Authorization Act for Fiscal Year 2019, directed NNSA to collect information from its M&O contractors on specific requirements they deemed particularly burdensome and to publish this information in a report. Senate Report 115-262 also included a provision for GAO to review NNSA’s report. GAO’s report provides information on (1) a comparison of NNSA’s findings with findings reported by external groups, (2) NNSA’s approach to collecting and reporting information on requirements the M&O contractors identified as burdensome, and (3) NNSA’s actions to address the requirements that the M&O contractors identified. GAO reviewed NNSA’s 2019 report and supplemental documents and interviewed NNSA officials and M&O contractor representatives. For more information, contact Allison Bawden at (202) 512-3841 or bawdena@gao.gov.

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  • Financial Audit: Consumer Financial Protection Bureau’s FY 2021 and FY 2020 Financial Statements
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