IRS reform plan includes pay changes, buyouts

Under the Senate-passed IRS reform bill, the agency would be able to offer employee buyouts, adjust pay scales and import up to several dozen new executives from the private sector.

The bill gives the IRS buyout authority until the end of 2002. It also modifies rules reserving many positions at the IRS for career employees, allowing more senior-level IRS positions to go to outside appointees. Executives could be granted bonuses for strong performance, though their annual compensation could not exceed the Vice President's salary ($175,400). In addition, the IRS could create a personnel demonstration project that could include broad-banding pay scales and new performance measurement systems.

The IRS will also undergo a major restructuring under the bill, shifting from a geographically focused organization centered around 33 regional offices to a customer-focused structure, organized around four business lines--individual taxpayers, small businesses and the self-employed, medium and large businesses, and tax-exempt organizations. As part of the reorganization, IRS Commissioner Charles Rossotti says he plans to "flatten" the agency, which has as many as eight layers of management between headquarters brass and front-line employees.

At a Council for Excellence in Government briefing Monday, Rossotti said middle managers at the tax agency have little power to deal effectively with problems.

"Being a middle manager at the IRS is not an easy job," Rossotti said, because the stovepipe structure of the agency leaves them with little authority. In surveys, IRS employees frequently blame middle managers for the agency's problems, but Rossotti said the real problem is that managers are stuck in the middle of complex organizational structures with too much administrative work and not enough control over their programs. "It's gotten to be so stacked," he lamented.

The commissioner also pledged more training for IRS employees. Rossotti said employees' biggest complaint is not about pay or benefits, but about their inability to help customers because training materials are out of date. On top of downsizing at the agency, Congress has continued to make tax laws more complex. This year, for example, between 700 and 800 tax law changes were made, Rossotti said.

"It's really almost a miracle what the people in the IRS do with the tax code they have to work with and the technology they have to work with," Rossotti said.

Rossotti described information technology at the IRS as "chaotic," explaining that for the next two years, the agency will be consumed by a $1 billion year 2000 computer conversion project. Simultaneously, the agency will be gearing up for a massive computer upgrade effort, to be headed by a prime contractor with project management responsibilities to make sure the IRS does not repeat its Tax System Modernization failures.

Meanwhile, debate continues about a proposed new IRS oversight board, which would include six private-sector members with management experience, along with the Treasury Secretary, the IRS commissioner and a representative of the IRS employees' union. The board would have oversight authority over IRS operations.

During debate in the Senate about the IRS bill, some Republicans tried to remove the Treasury Secretary and the union representative from the board, saying they would have conflicts of interest. But those efforts failed in Senate votes, and Democrats have vowed to oppose changing the board's membership in conference committee. The conference is expected to begin soon.

Rossotti said he was optimistic that the oversight board will not take an adversarial stance, suggesting that the board "could be very constructive."

"If we get a good board, it will be helpful," Rossotti said.

Many of the management proposals included in the IRS reform bill are being considered for governmentwide reforms. The Office of Personnel Management has proposed an overhaul of the Senior Executive Service this year, while the Defense Department is crafting changes to the department's entire civilian personnel system.

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