Internal Revenue Service:

Strategic Human Capital Management is Needed to Address Serious Risks to IRS's Mission

GAO-19-176: Published: Mar 26, 2019. Publicly Released: Mar 26, 2019.

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James R. McTigue, Jr
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McTigueJ@gao.gov

 

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Fewer individual and corporate tax returns have been audited in recent years, largely because IRS doesn't have the people it needs to enforce existing tax laws while implementing new laws. As a result, billions of dollars in taxes go unpaid every year. Enforcing tax laws, a High Risk area, is critical to promoting voluntary compliance and collecting unpaid taxes.

IRS's workforce is the key to addressing its challenges. Cultivating a well-equipped and engaged workforce requires strategic human capital management that will help IRS focus its current and future hiring needs.

We made 6 recommendations to improve IRS's human capital management.

Hiring freezes, retirements, and low morale have shrunk IRS's workforce, largely in enforcement

Chart showing steadily declining staffing levels for enforcement and operations support staff fiscal years 2011 through 2017

Chart showing steadily declining staffing levels for enforcement and operations support staff fiscal years 2011 through 2017

Multimedia:

Additional Materials:

Contact:

James R. McTigue, Jr
(202) 512-9110
McTigueJ@gao.gov

 

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

What GAO Found

The Internal Revenue Service (IRS) has scaled back strategic workforce planning activities in recent years. IRS officials told GAO that resource constraints and fewer staff with strategic workforce planning skills due to attrition required IRS to largely abandon strategic workforce planning activities.

However, a number of indicators, such as increasing rates of retirement eligible employees and declining employee satisfaction, led IRS to determine that continuing to make short-term, largely nonstrategic human capital decisions was unsustainable. One way IRS sought to address these issues was to develop a strategic workforce plan and associated workforce planning initiative. Initiative implementation, however, is behind schedule and on hold. IRS attributed the delay to a combination of: 1) personnel resources redirected to implement Public Law 115-97—commonly referred to as the Tax Cuts and Jobs Act, 2) lack of workforce planning skills within its Human Capital Office, and 3) delayed deployment at the Department of the Treasury (Treasury) related to a new workforce planning system. As a result, IRS lacks information about what mission critical skills it has on board, where skills gaps exist, and what skills will be needed in the future.

IRS staffing has declined each year since 2011, and declines have been uneven across different mission areas. GAO found the reductions have been most significant among those who performed enforcement activities, where staffing declined by around 27 percent (fiscal years 2011 through 2017). IRS attributed staffing declines primarily to a policy decision to strictly limit hiring. Agency officials told GAO that declining staffing was a key contributor in decisions to scale back activities in a number of program and operational areas, particularly in enforcement, where the number of individual returns audited from fiscal years 2011 through 2017 declined by nearly 40 percent.

IRS has skills gaps in mission critical occupations, and the agency's efforts to address these skills gaps do not target the occupations in greatest need, such as tax examiners and revenue officers. However, the results of an interagency working group effort that began in 2011, and was intended to address skill gaps among IRS revenue agents and other occupations with skills gaps across the government, may hold important lessons for addressing skills gaps in other mission critical occupations at IRS.

IRS's Human Capital Office has limited staffing capacity to hire employees in hard to fill positions, which holds risks for the agency's ability to implement the Tax Cuts and Jobs Act. IRS is undertaking a variety of activities to improve its hiring capacity, but has not determined how each activity will be evaluated and will contribute to increased hiring capacity or associated outcomes. In addition, changes in the agency's hiring processes have been confusing to managers and contributed to hiring delays. Clear guidance on hiring request requirements would better position IRS to avoid the risk of hiring delays for mission critical occupations.

Why GAO Did This Study

IRS faces a number of challenges that pose risks to meeting its mission if not managed effectively. Key to addressing IRS's challenges is its workforce. Cultivating a well-equipped, diverse, flexible, and engaged workforce requires strategic human capital management.

GAO was asked to review IRS's enterprise-wide strategic workforce planning efforts. GAO assessed (1) how IRS defines its workforce needs and develops strategies for shaping its workforce; (2) the extent to which IRS identified the critical skills and competencies it will require to meet its goals, and its strategy to address skills gaps in its workforce; and (3) the extent to which IRS's Human Capital Office has the capacity to hire employees in hard to fill positions.

GAO analyzed trends in staffing across IRS and in selected mission critical occupations; compared IRS strategic workforce management processes, practices, and activities with federal regulations and leading practices; analyzed IRS documents and interviewed agency officials.

What GAO Recommends

GAO is making six recommendations to IRS that include implementing its delayed workforce planning initiative, evaluate actions to improve the agency's hiring capacity, and address changes in its processes that have contributed to hiring delays. IRS agreed with GAO's recommendations. GAO also recommends Treasury clarify guidance to IRS on a forthcoming workforce planning system. Treasury agreed with the recommendation.

For more information, contact James R. McTigue, Jr. at (202) 512-9110 or McTigueJ@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: IRS agrees with this recommendation. In its recommendation status letter to us, IRS provided implementation dates for addressing this recommendation. By October 2019, IRS wrote they will have on-boarded or made final offers to the new members of the new workforce planning branch. By December 2019, IRS will update its Workforce Planning policy. By December 2020, IRS will establish a workforce plan including an enterprise strategy and will initiate workforce analysis. By December 2021, IRS will implement the workforce plan and implement a process to monitor and evaluate the results of the workforce plan. IRS's Human Capital Officer is the responsible agency official for addressing this recommendation. In our 2019 Duplication, Overlap, and Fragmentation report, we determined implementing this recommendation is needed to address IRS's fragmented human capital activities to improve its strategic workforce planning so it can better meet challenges to achieving its mission. We will continue to monitor IRS's progress in implementing this recommendation.

    Recommendation: The Commissioner of the IRS should fully implement the workforce planning initiative, including taking the following actions: (1) conducting enterprise strategy and planning, (2) conducting workforce analysis, (3) creating a workforce plan, (4) implementing the workforce plan, and (5) monitoring and evaluating the results. (Recommendation 1)

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Open

    Comments: Treasury agreed with the recommendation. Treasury stated that it has taken actions to ensure that IRS and all Treasury bureaus have a clear understanding of when the ITM workforce planning module will be available and how it will be used. Treasury stated that they conducted a Workforce Planning offsite in May 2019 to (1) ensure a common understanding of the workforce planning process as it relates to ITM; 2) document the process in preparation of utilizing ITM; and 3) agree on how the agency will accomplish workforce planning in ITM. According to Treasury, goals 1 and 2 were achieved during the offsite and the workforce planning community continues to work on the third goal. Treasury expects to complete the discussion on how to accomplish workforce planning in ITM by the end of calendar year 2019. Treasury's Offices of the Chief Human Capital Officer and the Chief Information Officer are responsible for ensuring effective communication and training are completed as each ITM module is implemented. We will continue to monitor Treasury's progress in implementing this recommendation.

    Recommendation: The Secretary of the Treasury should issue clarifying guidance to IRS about the Integrated Talent Management system, including when the workforce planning and talent management modules will be deployed and available for IRS's use, the functions it will include, and how IRS's existing systems and processes within business divisions and program offices will be affected. (Recommendation 2)

    Agency Affected: Department of the Treasury

  3. Status: Open

    Comments: IRS agrees with this recommendation. In its recommendation status letter to us, IRS wrote that they will include workforce planning in their bi-monthly HRstat information submissions to Treasury, and will have an approved implementation schedule for the workforce planning initiative by December 2019. IRS identified the Human Capital Officer as the responsible official for addressing this recommendation. We will continue to monitor IRS's progress in implementing this recommendation.

    Recommendation: The Commissioner of IRS should ensure the Human Capital Officer improves reporting for its workforce planning initiative in its bi-monthly HRstat information submissions to Treasury. The submissions should include the original implementation schedule, changes to the original schedule, delays in implementation and each of their causes, and IRS's strategy to address the causes of those delays. (Recommendation 3)

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Open

    Comments: IRS agrees with this recommendation. In its recommendation status letter to us, IRS provided a timetable for implementation. By January 2021, IRS will initiate use of Integrated Talent Management's (ITM) capability to enable workforce planning and analytics. They are still working through requirements and the implementation plan for using this system. By December 2021, IRS will report the results of efforts to close skills gaps among revenue agents, including lessons learned on an annual basis over the next three fiscal years. IRS identified the Human Capital Officer and Deputy Commissioner for Services and Enforcement as the officials responsible for addressing this recommendation. In our 2019 Duplication, Overlap, and Fragmentation report, we determined implementing this recommendation is needed to address IRS's fragmented human capital activities to improve its strategic workforce planning so it can better meet challenges to achieving its mission. We will continue to monitor IRS's progress in implementing this recommendation.

    Recommendation: The Commissioner of IRS should ensure the Human Capital Officer and Deputy Commissioner for Services and Enforcement report the results of efforts to close skills gaps among revenue agents, including lessons learned, that may help inform strategies for conducting skills gap assessment efforts for other mission critical occupations. (Recommendation 4)

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Open

    Comments: IRS agrees with the recommendation. In its recommendation status letter to us, IRS provided implementation dates for addressing this recommendation. By December 2019, the IRS will have an approved implementation schedule for the IRS program. By June 2020, the IRS Human Capital Officer will coordinate with the Chief Financial Officer and the Deputy Commissioner for Services and Enforcement in developing a work plan or other mechanism that prioritizes and schedules skills assessments for mission critical occupations. IRS will validate its list of 22 positions established in coordination with Treasury. IRS wrote that its Human Capital Officer and Deputy Commissioner for Services and Enforcement are responsible for addressing this recommendation. In our 2019 Duplication, Overlap, and Fragmentation report, we determined implementing this recommendation is needed to address IRS's fragmented human capital activities to improve its strategic workforce planning so it can better meet challenges to achieving its mission. We will continue to monitor IRS's progress in implementing this recommendation.

    Recommendation: The Commissioner of IRS should ensure the Human Capital Officer and Deputy Commissioner for Services and Enforcement collaborate to develop a work plan or other mechanism that prioritizes and schedules skills assessments for mission critical occupations at highest risk of skills gaps, such as those identified by Treasury or where key activities have been scaled back, for the purposes of developing a strategy to close the gaps. (Recommendation 5)

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Implemented

    Comments: According to IRS, its Human Capital Office agrees with the recommendation and evaluated the effectiveness of its hiring activities and strategies (e.g., contracts, Administrative Resource Center (ARC) services, Federal Executive Board, and Business-based HR teams) on its enterprise hiring capacity. IRS found that a number of its activities and strategies were not effective in helping the agency meet its hiring needs. In response, IRS developed a "Get-Well" strategy to address current and future IRS hiring requirements. The strategy was effective April 1, 2019. Aspects of this strategy included establishing deadlines for HCO to post all vacancies and issue certificates of eligible candidates to the selecting officials and providing weekly reports to notify Business Units of completed announcements and certificates. This proactive communication approach was designed to provide the HCO staff the opportunity for uninterrupted focus on production of hiring actions. According to IRS, the "Get-Well" strategy is the first step of many that HCO will implement to ensure the agency sustains a responsive program for the IRS's hiring needs. As IRS has measured the extent to which its hiring activities met its needs, identified problem areas, and has taken corrective action, we are closing this recommendation as implemented. Going forward, it will be important for IRS to identify and address problems with its hiring capacity that may emerge as the agency works to close skills gaps in mission critical occupations.

    Recommendation: The Commissioner of IRS should direct the Human Capital Officer to measure the extent to which each of its activities for improving hiring capacity are effective in producing desired hiring capacity outcomes, including strategies used to mitigate hiring risks associated with Tax Cuts and Jobs Act implementation hiring. (Recommendation 6)

    Agency Affected: Department of the Treasury: Internal Revenue Service

  7. Status: Closed - Implemented

    Comments: The Chief Financial Officer and the IRS Human Capital Officer agree with this recommendation. According to IRS, on March 8, 2019, they issued new guidance to the business units' Senior Executive Team streamlining the hiring approval process and discontinuing the FY 2011 Exception Hiring Process guidance. On July 10, 2019, the Chief Financial Officer, in partnership with IRS Human Capital Officer, issued Frequently Asked Questions to the business units to further clarify hiring and staffing levels and posted documents on our Corporate Budget website. With the discontinuation of the exception hiring process and the issuance of guidance on the new hiring process, we have closed this recommendation as implemented.

    Recommendation: The Commissioner of IRS should direct the Human Capital Officer and Chief Financial Officer to issue clarifying guidance on the current Exception Hiring Process, including clarifying areas where hiring limitations that were used in previous years are no longer applicable. (Recommendation 7)

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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