IRS boosts pay, promotions, but results lag behind

The IRS is using personnel flexibilities to reshape its workforce, but some reforms are having an unexpected consequence on bottom-line results, according to a new General Accounting Office report.

Congress passed the IRS Restructuring and Reform Act in July 1998 in response to calls for better customer service from the IRS. To aid in making tax collectors more accountable to the public, the IRS was granted authority to offer top executives bigger salaries, lay off poor-performing employees and train its staff to be more customer-focused.

So far, the agency has put these flexibilities to good use, GAO concluded in its report, "Tax Administration: IRS' Implementation of the Restructuring Act's Personnel Flexibility Provisions" (GGD-00-81).

Rep. Bill Archer, R-Texas, chairman of the House Ways and Means Committee, and Rep. Amo Houghton, R-N.Y., chairman of the Subcommittee on Oversight, requested the report to find out if the IRS was taking advantage of its new personnel authority.

More than 50,000 employees have received new customer service training and a revised training course has been well-received by employees, GAO found. At least 12 senior executives have been hired under an authority allowing the agency to offer salaries commensurate with the Vice President's, up to $181,400. Plans to put other senior managers in a broad-banded pay system have been approved, and two demonstration projects dealing with employee performance and rewards are under consideration.

Other provisions, however, aren't being used much, such as a streamlined hiring process and authority to exceed performance bonus caps for certain senior executives.

In the report, GAO raised concerns about the effect the IRS's restructuring efforts on agency performance. Many employees are confused about new rules of behavior the agency has adopted, especially a list of 10 types of actions for which employees can be fired.

That could be part of the reason why the IRS audited about one-third fewer tax returns in 1999 than it did in fiscal 1997, and why other collection activities dropped significantly too. In 1999, collections from delinquent taxpayers were down about $2 billion from 1996 levels, the report said.

"Front-line employees we spoke to believed that the decline was due to a lack of agency guidance on how to interpret the provision concerning employee misconduct," GAO said.

GAO also expressed concern about whether the IRS had sent a clear enough message agencywide about the Restructuring Act's requirement that enforcement statistics not be used to evaluate employees. The agency has taken steps to clarify the proper use of enforcement statistics, but so far no surveys have been performed to determine whether the rules have sunk in.

IRS Commissioner Charles Rossotti viewed the report as good news. "Upon review, we were pleased that the report recognizes the IRS as having complied" with the Restructuring Act, he said. Rossotti also said to expect more improvements in the future, when the IRS begins to use its demonstration project authority.