Managing IRS:

Actions Needed to Assure Quality Service in the Future

GGD-89-1: Published: Oct 14, 1988. Publicly Released: Oct 14, 1988.

Additional Materials:

Contact:

James R. White
(202) 512-5594
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO evaluated the Internal Revenue Service's (IRS) management systems and administrative support functions to determine its effectiveness in: (1) preparing for the future; (2) providing quality service in an effective manner; (3) maintaining workforce quality during a period of rapid change; and (4) ensuring a strong system of clear management accountability for its actions.

GAO found that: (1) the most critical long-term challenge IRS had was to effectively modernize its computer-based tax processing system, since the system was outdated and not capable of meeting the growing IRS workload; (2) IRS modernization efforts were slow due to ineffective management and changes in leadership; (3) although IRS had pursued four different proposed modernization plans, none had progressed beyond the planning stage because of a lack of leadership in information resources management; (4) although IRS designated a senior executive as the information resources focal point, he had other responsibilities that precluded him from devoting his full attention to this area; and (5) although IRS initiated a strategic management process to help set agencywide goals, establish mission priorities, and create a benchmark, it lacked effective methods to measure and monitor its progress toward achieving plan objectives, obtaining congressional concurrence, and ensuring consistency with its budget requests. GAO also found that: (1) IRS was concerned about its capacity to effectively deal with the public and attract and retain quality employees; (2) IRS could not offer salaries sufficiently competitive with the private sector to attract quality employees; (3) over half of the surveyed IRS senior executives would be eligible to retire before 1993, and 60 percent indicated that they would leave within a year of eligibility; (4) IRS spent considerable time and effort correcting tax return errors instead of preventing problems from reaching the public; and (5) although IRS initiated processes to improve its quality, it lacked the sustained management commitment to maintain quality at a daily operating level. In addition, GAO found that: (1) IRS revenue and administrative accounting operations had internal control weaknesses that produced inaccurate and untimely information; and (2) although IRS has reinstituted the National Office Review Program (NORP), the program's lack of independence and performance measures could hinder its effectiveness.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Although IRS considers this recommendation implemented, GAO assessments of the IRS budget request for fiscal years 1991 and 1992 provided little evidence of a substantial link between SBP and the budget. Budget proposals are justified in terms of their relationship to SBP, but GAO fails to see the kind of SBP-booked priority setting that was intended by the recommendation.

    Recommendation: To enhance IRS efforts to effectively prepare for the future, the Commissioner of Internal Revenue should institutionalize the link between the Strategic Business Plan (SBP) and budget development. IRS needs to clearly establish priorities and make a concerted effort during the budget process to make decisions consistent with SBP strategies and priorities. Also, because IRS has not yet used SBP to formulate a budget, it should formalize its procedures connecting the two.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: GAO and IRS conducted a joint assessment of the reorganization. A GAO report was issued March 1990.

    Recommendation: To enhance IRS efforts to effectively prepare for the future, the Commissioner of Internal Revenue should assess the 1987 reorganization. This reassessment should be initiated in the fall of 1988, allowing the reorganization to be in place about a year.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS has been and will be reexamining its traditional compliance roles as it proceeds with tax system modernization. Although it will be several years before the results of this reexamination are known, GAO believes there is sufficient evidence of IRS seriousness in this matter to warrant closing the recommendation.

    Recommendation: To enhance IRS efforts to effectively prepare for the future, the Commissioner of Internal Revenue should examine service center and district office compliance roles.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: IRS has, in recent months, made a concerted effort not only to familiarize its external shareholders, OMB, Treasury, practitioner groups, states, etc., with SBP, but also to get their input in revising it.

    Recommendation: To enhance SBP, the Commissioner of Internal Revenue should familiarize other key organizations with IRS plans. To facilitate the development and implementation of IRS action plans, IRS should explain and seek acceptance of its plans from the Department of the Treasury, the Office of Management and Budget (OMB), and its congressional oversight committees.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: IRS has a process for annually assessing field office performance in support of SBP. IRS has begun developing measures to use in those assessments and has begun steps to hold managers accountable.

    Recommendation: To enhance SBP, the Commissioner of Internal Revenue should establish measures of accomplishment within the planning process. All SBP strategies should be supported by a set of clearly defined measures of accomplishment written in their supporting work plans. In addition, IRS also should use such measures to hold its executives and managers accountable for program performance.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Implemented

    Comments: IRS has implemented a business review process that provides the kind of feedback mechanism called for in the recommendation.

    Recommendation: To enhance SBP, the Commissioner of Internal Revenue should implement an effective feedback mechanism to provide top executives with nationwide evaluative feedback implementation of SBP strategies, action plans, and accomplishments.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  7. Status: Closed - Implemented

    Comments: In October 1989, Treasury approved the IRS proposal to establish a new Chief Information Officer position. A person was selected to fill that position in March 1990. He reports directly to the Commissioner/Senior Deputy Commissioner and thus is at an organizational level consistent with the recommendation.

    Recommendation: The Commissioner of Internal Revenue should assess the new organizational structure for technology management and consider establishing a third Deputy Commissioner whose sole responsibility is managing information technology before major modernization investments are undertaken.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  8. Status: Closed - Implemented

    Comments: Telecommunications functions (voice/data) in the national office were consolidated under the Assistant Commissioner for Information Systems Development. In the regions, they were consolidated under the Assistant Regional Commissioner for Data Processing.

    Recommendation: The Commissioner of Internal Revenue should consolidate below the Deputy Commissioner the responsibility and accountability for managing the IRS telecommunications program.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  9. Status: Closed - Implemented

    Comments: IRS has developed an executive and management technical expertise strategy which, according to IRS, includes an assessment of the technical skills of executives and managers. IRS also established a new Training Branch to assist Information Systems functions in designing and developing training programs and addressing technical training issues.

    Recommendation: The Commissioner of Internal Revenue should develop and implement, as a high-priority initiative, a strategy for providing additional technical training and expertise to the Deputy Commissioners and their senior management teams. In addition, the succession planning system should establish a career path to create a pool of technically qualified executives to meet future needs in critical senior-level technical positions.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  10. Status: Closed - Implemented

    Comments: The Information Systems Plan is a subset of SBP, is concurrent with SBP, and shares its same strategies, thereby achieving consistency. Senior IRS officials are satisfied that this assessment has been made and IRS has developed the Information Systems Plan as part of the SBP.

    Recommendation: The Commissioner of Internal Revenue should assess the current technology vision and information system strategy and initiatives for redesigning the tax processing system to ensure that they adequately support the objectives specified in SBP and accomplish the expected results.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  11. Status: Closed - Implemented

    Comments: IRS has established a separate cost/price analysis branch and, in July 1992, issued new policies and procedures for cost/price analyses.

    Recommendation: The Commissioner of Internal Revenue should monitor implementation of actions to build and maintain the competence of contract administration staff in price evaluation and to develop new management information software.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  12. Status: Closed - Implemented

    Comments: In October 1989, Treasury approved the IRS proposal to designate the Deputy Commissioner (Planning and Resources) as the Chief Financial Officer. In addition, a new Assistant Commissioner (Finance/Comptroller), who is responsible for developing and promulgating servicewide financial standards, systems, and controls, and for managing appropriated funds, was selected in April 1990.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should designate and support a Chief Financial Officer.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  13. Status: Closed - Implemented

    Comments: The most recent IRS SBP, which runs through 1996, includes objectives and strategies directed at improving the use of financial resources. One strategy calls for developing a restructured financial management system by the end of fiscal year (FY) 1993. This meets the intent of the recommendation.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should develop an overall financial management improvement plan as part of SBP, to assist in setting priorities, fixing accountability and responsibility, monitoring financial systems operations and improvements, and providing a strategy for attracting and retaining accounting staff.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  14. Status: Closed - Implemented

    Comments: Internal Audit filled a position to coordinate financial audit responsibilities. GAO provided technical support and staff training to Internal Audit to assist in its effort to certify IRS FY 1991 financial statements. The Chief Financial Officers Act of 1990 calls for an audit of IRS financial statements for FY 1992. Since this audit is now a legislative mandate, the recommendation is closed.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should arrange for IRS financial statements, prepared in accordance with Title 2 requirements, to be independently audited.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  15. Status: Closed - Implemented

    Comments: Operating accounting stations are alerted to any unusual conditions in monthly statements, while senior management is advised of any serious recurring operating problems. The Standard General Ledger was implemented in the AABES at the beginning of FY 1990. A self-study course for accounting technicians was developed.

    Recommendation: In order to help correct IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should monitor the Automated Accounting and Budget Execution System (AABES) to determine that its internal controls and accounting processes protect the government's interests.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  16. Status: Closed - Implemented

    Comments: A project office with a GM-15 project manager was established and will report directly to the Assistant Commissioner. Project office staffing has been significantly enhanced since the report.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should designate a project director to manage day-to-day efforts to develop the Automated Financial System and ensure that sufficient staff resources are devoted to the project.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  17. Status: Closed - Implemented

    Comments: In a March 1990 report, an IRS task force identified staffing needs within the Controller's organization and specified various actions IRS would have to take to fill those positions.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should identify present and future staffing needs for accounting operations and look into alternatives for filling staffing requirements in this area, such as seeking increased salary levels for accountants, complementing their ranks with contractor staff, and expanding a career path for employees doing accounting work.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  18. Status: Closed - Implemented

    Comments: IRS has begun developing activity-based costs.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should require, in the long term, that a comprehensive cost accounting system be developed to account for all IRS costs and identify them with the organizational components and functions to which they relate.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  19. Status: Closed - Implemented

    Comments: IRS problems in accounting for and controlling accounts receivable were included in FMFIA reports since FY 1988.

    Recommendation: In order to help correct the IRS accounting and financial systems problems and provide a sound basis for guiding its systems development efforts, the Commissioner of Internal Revenue should include in the IRS Federal Managers' Financial Integrity Act (FMFIA) report its serious problems in accounting for and controlling accounts receivable.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  20. Status: Closed - Implemented

    Comments: Improved quality is one of three IRS business objectives and one of its long-term strategies for achieving that goal is to fundamentally change the way it does business. This is a neverending process. GAO sees enough movement in the right direction to warrant closing this recommendation.

    Recommendation: To ensure that the quality improvement process is maintained and adopted as a means of doing business, the Commissioner of Internal Revenue should build quality into IRS services using preventive and quality assurance approaches.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  21. Status: Closed - Implemented

    Comments: IRS has made much progress in developing performance measures. One significant new development is the IRS attempt to break away from a functional orientation. IRS has developed agencywide measures that can be used to assess its performance in increasing compliance, reducing taxpayer burden, increasing customer satisfaction, and improving quality-driven productivity. Although there is still much work to be done, enough progress has been made to warrant closing this recommendation.

    Recommendation: To ensure that the quality improvement process is maintained and adopted as a means of doing business, the Commissioner of Internal Revenue should develop an agencywide performance measurement system containing measures of quality, timeliness, and efficiency that are consistently used throughout the organization.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  22. Status: Closed - Implemented

    Comments: The intent of this recommendation was to involve all employees in the IRS quality improvement process. IRS has done a good job of involving its employees and recognizing their contributions through awards, local newsletters, pamphlets, etc.

    Recommendation: To ensure that the quality improvement process is maintained and adopted as a means of doing business, the Commissioner of Internal Revenue should develop reward and recognition systems for quality management.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  23. Status: Closed - Implemented

    Comments: The service strengthened the program through increased publicity for FY 1988 award winners. As a result, both award nominations and savings ratios have increased during the past year.

    Recommendation: To ensure that the quality improvement process is maintained and adopted as a means of doing business, the Commissioner of Internal Revenue should strengthen productivity through quality by sustaining recent initiatives to increase the overall awareness of the effort and by improving the documentation of individual projects as well as improving the dissemination process.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  24. Status: Closed - Implemented

    Comments: According to IRS, coordination between the two efforts includes: (1) awards to quality improvement teams; (2) productivity enhancement funding for unique ideas of quality improvement teams; and (3) tracking efficiency and timeliness measures under the President Productivity Improvement Program and sharing this information with the quality improvement staff.

    Recommendation: To ensure that the quality improvement process is maintained and adopted as a means of doing business, the Commissioner of Internal Revenue should coordinate the productivity management program with the quality improvement process.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  25. Status: Closed - Implemented

    Comments: IRS has developed a draft "Plan for Human Resources Issues". Its SBP for FY 1993 and beyond calls for finalizing and implementation of the plan by October 30, 1992. Sufficient progress has been made to warrant closing this recommendation.

    Recommendation: The Commissioner of Internal Revenue should coordinate human resource planning efforts through establishing an agencywide human resources plan. This plan should be an integral part of SBP.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  26. Status: Closed - Implemented

    Comments: The IRS draft plan for human resources issues includes a recommendation directed at gathering periodic data on, among other things, employee training and performance outcomes to be used as a basis for better targeting recruiting resources.

    Recommendation: The Commissioner of Internal Revenue should establish an agencywide strategy to develop, accumulate, and use information on employee quality throughout the IRS human resource management processes.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  27. Status: Closed - Implemented

    Comments: This responsibility has been assigned to the Assistant Commissioner for Human Resources.

    Recommendation: The Commissioner of Internal Revenue should establish clear accountability for the development and maintenance of an agencywide human resources plan.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  28. Status: Closed - Implemented

    Comments: According to IRS, this will be included in the development of the human resource management plan. This plan is effectively linked to SBP. Actions and critical success factors are developed and evaluated as part of the service's business review process.

    Recommendation: The Commissioner of Internal Revenue should reformulate the current human resource management evaluation strategy to explicitly link it to the new agencywide human resources plan. The evaluation strategy should provide effective feedback to management on the status of planned actions.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  29. Status: Closed - Implemented

    Comments: IRS is now conducting organizational impact analyses, which are studies of the human and organizational dimensions of planned automation projects. According to IRS, the studies are done early in the life of a project.

    Recommendation: The Commissioner of Internal Revenue should strengthen the information systems project approval process by requiring the identification of human resource requirements and issues when the project receives conceptual approval. These requirements should be specified in the prospectus for all projects.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  30. Status: Closed - Implemented

    Comments: The Assistant Commissioner, HRMS, review of information systems project prospecti is an integral part of the system development methodology and is included in the project manager's guide.

    Recommendation: The Commissioner of Internal Revenue should require the Assistant Commissioner for Human Resource Management and Support to comment on the human resource systems project prospecti and make any recommendations believed to be appropriate regarding the human resource issues involved, including the need for an HRMS liaison.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  31. Status: Closed - Implemented

    Comments: According to IRS, the individual progression planning process has been revised to include the executive output/competency profile. IRS plans to use this revised process in developing its 1991 succession plan.

    Recommendation: The Commissioner of Internal Revenue should integrate results of the executive attribute study into executive succession planning system design. Because succession planning will be initiated before executive attributes have been fully defined, IRS must ensure that the results of this research, which could have an impact on the entire system, are subsequently integrated into the new planning system.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  32. Status: Closed - Implemented

    Comments: A new business review process has been developed. Procedures were issued in October 1989, and the first reviews of all regional offices were completed in 1990.

    Recommendation: To strengthen the effectiveness of the major IRS evaluation processes, the Commissioner of Internal Revenue should improve IRS annual, nationwide assessments of its field operations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  33. Status: Closed - Implemented

    Comments: IRS began making annual assessments of each regional office in 1990.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should implement an annual IRS-wide NORP assessment schedule as soon as possible. This schedule should provide top executives with IRS-wide assessments to be used in annual budget proceedings.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  34. Status: Closed - Implemented

    Comments: Business review guidelines were published on October 1, 1989.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should develop detailed, standard NORP guidelines outlining minimum evaluation scope and methodology and addressing functional as well as cross-functional issues.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  35. Status: Closed - Implemented

    Comments: Critical success factors which incorporate performance measures are being developed and will be applied uniformly to all regions. IRS, as part of its SBP, has developed critical success factors which became the basis for assessing regional office performance. It is also in the process of developing various measures of quality, accuracy, timeliness, etc.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should use performance measures agreed upon throughout the organization for NORP.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  36. Status: Closed - Implemented

    Comments: The Deputy Assistant Commissioner (Planning, Finance, and Research) has been designated Business Review Executive. The business review executive reports directly to the Commissioner on the results of the process.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should provide a full-time management function to ensure consistent evaluation, appropriate independence, and sustained leadership. This evaluation function should also synthesize NORP and Regional Office Review Program (RORP) results to identify programmatic and cross-functional issues of nationwide importance.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  37. Status: Closed - Implemented

    Comments: By designating a Business Review Executive in the Office of the Assistant Commissioner for Planning, IRS has separated responsibility for the review process from the programs/functions being reviewed.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should ensure relative independence to enhance the credibility of NORP results to outside groups and to avoid duplication with other management analyses functions.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  38. Status: Closed - Implemented

    Comments: The business review process includes procedures for following up on prior recommendations.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should employ rigorous follow-up procedures to ensure prompt and sufficient implementation of NORP recommendations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  39. Status: Closed - Implemented

    Comments: IRS issued regional business review procedures in November 1990 that appear to meet the criteria set out in the recommendation.

    Recommendation: To ensure that both the Regional Commissioners, the primary RORP customers, and IRS senior management receive sufficient information on field performance, the RORP process should employ NORP measures and consistent IRS-wide methodology. This will require: (1) using the same performance measures and evaluation standards applied in NORP; (2) maintaining RORP with an appropriate level of independence; and (3) developing a coordinated NORP/RORP evaluation plan nationwide.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  40. Status: Closed - Implemented

    Comments: According to IRS, this will be included when a district/service center methodology based on the business review process is developed. IRS issued regional business review procedures in November 1990 that appear to satisfy this recommendation.

    Recommendation: To make the NORP process more useful to IRS top management, the Commissioner of Internal Revenue should balance IRS-wide/local needs with the need for a more structured RORP process to feed into NORP evaluations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  41. Status: Closed - Implemented

    Comments: Internal Audit has incorporated SBP into the universe of activities, functions, and programs subject to audit coverage.

    Recommendation: To improve the usefulness of the IRS internal audit activities, the Commissioner of Internal Revenue should independently evaluate strategic management and NORP efforts. This should include reviewing the effectiveness of business plan strategies and their supporting action plans, the implementation of strategic initiatives, and the extent to which SBP is driving IRS budget decisions.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  42. Status: Closed - Implemented

    Comments: IRS increased its internal audit staffing by about 37 percent, from about 520 staff years in 1988 to an expected level of about 710 in 1991, and requested another increase of 36 positions in its FY 1992 budget.

    Recommendation: To improve the usefulness of the IRS internal audit activities, the Commissioner of Internal Revenue should provide staff and funds for broader internal audit coverage.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

Explore the full database of GAO's Open Recommendations »

Sep 13, 2016

Sep 6, 2016

Jul 29, 2016

Jul 7, 2016

Jun 27, 2016

Jun 23, 2016

Apr 19, 2016

Apr 13, 2016

Apr 7, 2016

Mar 28, 2016

Looking for more? Browse all our products here