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Tax Debt Collection: IRS Could Improve Future Studies by Establishing Appropriate Guidance

GAO-10-963 Published: Sep 24, 2010. Publicly Released: Oct 25, 2010.
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In September 2006, the Internal Revenue Service (IRS) started the private debt collection (PDC) program for using private collection agencies (PCA) to help collect some unpaid tax debts. Aware of concerns that PCAs might cost more than using IRS staff, IRS began studying the collection costs and performance of PCAs and IRS. In March 2009, IRS announced that it would not renew its PCA contracts based on the study and announced plans for increasing collection staffing. As requested, GAO is reporting on whether (1) the study was sound as primary support for IRS's PDC decision and (2) IRS has planned or made changes to its collection approach based on its PCA experience and PDC study. GAO compared IRS's study to federal and other guidance on what should be included in analyses to support program decisions and analyzed IRS's changes given expectations that IRS would consider PCAs' best practices.


Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should establish guidance on the types of analyses that should be done to support decisions to initiate, renew, or expand programs. The guidance might refer to OMB Circular A-94 and, if needed, provide any supplementation specific to IRS.
Closed – Implemented
In May 2012, IRS's Office of Research, Analysis, and Statistics (RAS) published "Guidelines for Conducting Program Evaluations," which is guidance for conducting studies to support decisions to initiate, renew, or expand a program, among other purposes. The guidelines include a section on the potential types of evaluations and evaluation methods that can be employed and an appendix that offers guidance for considering different design approaches and strategies. Furthermore, the guidelines refer to Office of Management Budget Circular A-94 (specifically in reference to cost-effectiveness analysis to identify the least costly alternative to meet a program goal) and several other sources on how to conduct program evaluations.
Internal Revenue Service The Commissioner of Internal Revenue should establish a policy requiring documentation for the design, analyses, and conclusions of studies supporting program changes.
Closed – Implemented
IRS's "Guidelines for Conducting Program Evaluations," (published in May 2012 to guide studies to support program changes) includes a section titled, "Documenting the Evaluation." The section notes the importance of documenting studies and states the minimum requirement of archiving the study design, the data files and databases created, and the final report containing the findings and conclusions. The guidance also states that the study documentation is to specifically how long documentation is to be retained after study completion and how and where key evidence is to be archived. In addition, the guideline includes the appendixes "Documentation Template" (that lays out the documentation to developed at each phase of a study), and "Documenting Sampling Plans" (that includes guidance on documenting key information such as the type of sample used, sample plans, and sampling error calculations).
Internal Revenue Service The Commissioner of Internal Revenue should ensure that PCA-type case results are considered and incorporated as appropriate into the Consolidated Decision Analytics (CDA) model.
Closed – Implemented
IRS implemented Consolidated Decision Analytics (CDA), which includes case modeling to better identify and prioritize tax debt cases with the best potential for collection, including PCA-type cases in the inactive queue. With implementation of CDA in December 2011, inventory in the Automated Collection System (ACS) function and the queue are scored and prioritized. IRS also established an annual assessment to monitor CDA model performance based on case outcome data from the ACS and Field Collection functions, to include PCA-type cases.
Internal Revenue Service If IRS determines completing the pilot study is the best means to ensure that PCA-type case results are considered for the CDA models, the Commissioner should ensure that the pilot study has a documented methodology and criteria to guide IRS's analysis and decision.
Closed – Not Implemented
This was a conditional recommendation. In commenting on the report, IRS said events (specifically, the planned implementation of Consolidated Decision Analytics) had overtaken the need to complete the study.

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Best practicesCost analysisDebt collectionDocumentationEvaluation criteriaFinancial analysisProgram evaluationTax administrationTax administration systemsTaxesTaxpayersProgram goals or objectives