GAO-02-711R IRS Budget Justification Options

United States General Accounting Office

Washington, DC 20548

July 8, 2002

The Honorable Ernest J. Istook, Jr.

Chairman, Subcommittee on Treasury, Postal Service,

 and General Government

Committee on Appropriations

House of Representatives

Subject: IRS’s Budget Justification: Options for Structure and Content

Dear Mr. Chairman:

Each year, as part of the Department of the Treasury’s (Treasury) budget request, the

Internal Revenue Service (IRS) submits to the Congress a congressional justification

(CJ), a document justifying the dollars and number of staff positions that it is

requesting. For fiscal year 2002, IRS asked for about $9.4 billion and about 101,000

full-time-equivalent (FTE) staff positions.

The House Committee on Appropriations’ July 23, 2001, report on Treasury’s fiscal

year 2002 budget request expressed concern about the information in IRS’s CJ and

asserted that other types of information and presentations would better help the

committee evaluate IRS’s budget.1

 In that light, you asked us to identify ways to

improve the usefulness of IRS’s CJ information. As agreed with your office, our

objectives were to (1) determine whether Treasury and Office of Management and

Budget (OMB) guidance allow flexibility in the structure and content of IRS’s CJ and

(2) identify a range of options to display IRS’s appropriation request and additional

data that can be included in the CJ, or in a supplement to it, that would help

congressional decision makers consider IRS’s request.

As described below, within the context of Treasury and OMB guidance, IRS has the

flexibility to present more information than it included in the fiscal year 2002 CJ and

to display it in different ways. This report describes various options for exercising

that flexibility. In commenting on a draft of the report, Treasury orally expressed a

preference for some types of options over others, and IRS wrote that it found no

problems with what we said about improving the CJ’s content and format.

 1

U.S. House of Representatives, Treasury, Postal Service, and General Government Appropriations Bill, 2002, Report 107-152

(Washington, D.C.: 2001).
Page 2 GAO-02-711R IRS Budget Justification Options

Background

According to a Congressional Research Service analysis, federal agencies’ CJs

typically vary in form and content, reflecting the on-going relationship between each

agency and appropriations subcommittee. 2 The main purpose of CJs is to give the

subcommittees more details about agency programs and their relationship to

appropriation requests than the President’s budget documents provide.

IRS’s fiscal year 2002 CJ had a summary section and a section on each of IRS’s five

appropriations.3

 The summary section explained the foundation of IRS’s budget

request and summarized the dollars and FTE staff positions being requested for

specific appropriations. Each appropriation section presented, among other things

and where applicable, the budget activities within the appropriation, a list of the

programs or projects within each budget activity, the requested dollar and staffing

levels for each budget activity and program, and related measures.4

IRS’s fiscal year 2002 CJ was its first CJ submitted after a recent major IRS

reorganization took effect and after the IRS Oversight Board began operating. Aimed

at meeting the unique needs of specific taxpayer groups, the reorganization resulted

in four operating divisions—Wage and Investment, Small Business and SelfEmployed, Large and Mid-Size Business, and Tax Exempt and Government Entities.

The new organizational structure officially “stood up” on October 1, 2000. At about

the same time, the IRS Oversight Board held its first meeting. According to the IRS

Restructuring and Reform Act of 1998, the board’s responsibilities include reviewing

and approving the IRS budget request prepared by the Commissioner of Internal

Revenue, submitting it to the Secretary of the Treasury, and ensuring that it supports

IRS’s strategic plans.5

As OMB Circular A-11 states, OMB intends that an agency’s budget request be

integrated with its annual performance plan6

 required by the Government

Performance and Results Act (GPRA) of 1993.7 OMB guidance builds upon both

GPRA and the Chief Financial Officers (CFO) Act of 1990,8

 as amended. Among their

complementary purposes, both acts seek to improve congressional decisionmaking

by providing information on the relative effectiveness and efficiency of federal

programs and spending, and to help federal managers improve service delivery by

providing them with information about program results, cost, and service quality.

 2

Congressional Research Service, Agency Justification of the President’s Budget (updated, Washington, D.C.: 2001). 3

The five appropriations—(1) processing, assistance, and management; (2) tax law enforcement; (3) information systems; (4)

business systems modernization; and (5) the earned income tax credit compliance initiative—remained the same in the fiscal

year 2003 CJ.

4

For example, prefiling taxpayer assistance and education was one of the budget activities in the processing, assistance, and

management appropriation. Within that budget activity, two of the programs were (1) tax law interpretation and public guidance

and (2) taxpayer communication and education.

5

P.L. 105-206.

6

OMB Circular A-11 also discusses the cascading relationship between an agency’s general goals in its strategic plan and

performance goals in its annual performance plan.

7

P.L. 103-62.

8

P.L. 101-576.
Page 3 GAO-02-711R IRS Budget Justification Options

Many agencies, including IRS, use the CJ as a vehicle to integrate their performance

plan and budget request, an approach that OMB supports.

IRS Has Flexibility in the Context of Treasury and OMB Guidance

IRS operates under both Treasury and OMB guidance in producing its CJ, but it

retains flexibility in what it may present. According to Treasury officials, after

periodically consulting with its congressional appropriations subcommittees on the

CJ’s general structure, Treasury prescribes the format for a specific year’s CJ to

ensure consistency among its many bureaus, including IRS. This format appears in

detailed instructions that Treasury provides its bureaus, and for fiscal year 2002, it

included detailed outlines to be followed and tables to be completed. OMB Circular

A-11 also supplies guidance binding on agencies, including direction on how an

agency budget should directly link to the agency’s annual performance plan

mandated by GPRA. IRS’s CJ is to be prepared in accordance with the guidance, and

Treasury and OMB must clear everything in the CJ before it can be sent to the

Congress.

When preparing its CJ, IRS has flexibility in the context of Treasury and OMB

guidance. Although the appropriation subcommittees decide the content they want in

the CJ, and Treasury prescribes the format, IRS develops the budget narrative. Also,

because OMB is more concerned with enforcing consistency between the CJ and the

policy and funding requests in the president’s budget than it is with format, IRS has

some leeway. This leeway could take the form of the CJ including displays or

information beyond what Treasury prescribes or OMB needs.

Options for Displaying IRS CJ Information and Providing Additional Data

The following are some general options for displaying IRS’s request that differ from

the presentation in IRS’s fiscal year 2002 CJ:

• focusing more on budget activities and programs and easy-to-follow linkages to

measures, both performance measures and workload indicators;

• relating the request to IRS’s organizational structure;

• relating the request to IRS’s organizational structure and to measures;

• highlighting IRS-wide goals; and

• analyzing more than net changes to the previous year’s appropriation (referred to

here as the budget base).

Enclosures I through V discuss these options, respectively, and any pros and cons for

adopting them. On the basis of our interviews of IRS, Treasury, and OMB officials

who prepare, review, and clear the CJ, as well as of staff members of various

congressional committees responsible for IRS who might be expected to use the CJ,

we believe that options involving displays of budget activities and programs, links to

measures, and selected measures themselves could make the CJ clearer and easier to

analyze, with fewer disadvantages, than would options highlighting organizational

units or IRS-wide goals. Options involving displays of budget activities and programs,
Page 4 GAO-02-711R IRS Budget Justification Options

links to measures, and selected measures are also in the spirit of recent federal

government initiatives involving GPRA and the CFO Act that seek better alignment of

budgeting, performance, and financial statement information. According to officials

whom we interviewed, the options highlighting organizational units or IRS-wide goals

could be less attractive than the others, because these options call for greater levels

of detail, emphasize stove-piped organizations, or face practical difficulties, such as

allocating extensive IRS activities among goals. The additional detail, however, could

provide specific information by organizational unit, including data on programs and

measures, and better linkages among IRS activities, performance goals, and IRS-wide

goals would be consistent with the requirements of GPRA and OMB. In its fiscal year

2003 CJ, IRS provided more information than previously on reductions within IRS’s

budget, but the information was not summarized in a way that showed at a glance the

trade-offs being made among different IRS programs.

Unless placed in the CJ’s opening section covering all of IRS as opposed to individual

IRS appropriations, any of the options in the enclosures might have to supplement

rather than replace the current CJ. A supplement could be a separate submission to

the Congress and could be in a format agreed to by the appropriation subcommittees,

Treasury, and IRS.

Concluding Observations

If the appropriation subcommittees want a certain kind of information in IRS’s CJ,

and if Treasury and OMB clear the information, IRS may include additional displays

or data in the CJ beyond what it included previously. There are many ways for IRS to

present current or other information either in the CJ or in supplements to it. Because

of disagreements among the people whom we interviewed over the advisability of the

different options discussed in this report, it is unlikely that all concerned parties will

agree on the “right” ways. Any ideas adopted would need to meet congressional

needs and minimize the burden to IRS in producing new presentations or

information. Only the parties themselves can engage in the dialogue needed to decide

what fulfills their respective needs.

Agency Comments

We provided a draft of this report to the Secretary of the Treasury and the

Commissioner of Internal Revenue for comment. Treasury’s Director of the Office of

Performance Budgeting provided oral comments on June 18, 2002. He said our

analysis was timely and necessary, and our report, presenting a thorough review of

options for structuring the IRS budget, would help focus discussions with IRS over a

future budget structure. Further, our report would add structure to Treasury’s

ongoing efforts to merge its budget formulation and oversight functions with its

performance evaluation and monitoring functions.

The Director strongly recommended that when drawing conclusions from our

analysis, we stress options focusing on performance, rather than on a detailed,

operational break-out. We believe that this position is consistent with our earlier
Page 5 GAO-02-711R IRS Budget Justification Options

statement that options involving displays of budget activities and programs, links to

measures, and selected measures themselves could make the CJ clearer and easier to

analyze, with fewer disadvantages, than would options highlighting organizational

units or IRS-wide goals. Still, the involved congressional and executive parties

themselves need to agree on what best suits their needs.

In providing written comments on our draft, the Commissioner of Internal Revenue

found no problems with what we said about improving the content and format of

IRS’s CJ. Given OMB’s and Treasury’s roles in the CJ process, he said IRS would

share our report with them for their consideration. The full text of the

Commissioner’s comments is reprinted in enclosure VI.

Scope and Methodology

To accomplish our objectives, we (1) analyzed IRS’s fiscal year 2002 CJ, which was

the most current CJ when we began our work; (2) reviewed OMB Circular A-11 and

Treasury’s fiscal year 2002 instructions governing budget submissions; (3) studied

IRS budget, planning, and performance management background materials;

(4) interviewed IRS, Treasury, and OMB officials knowledgeable about IRS’s CJ, as

well as staff members of congressional appropriation and authorization committees

responsible for IRS; (5) analyzed IRS presentations to the IRS Oversight Board on

IRS’s fiscal year 2002 budget request; (6) used the fiscal year 2002 CJ, background

materials, interviews, and Oversight Board presentations to develop ideas for other

ways to display IRS’s appropriation request and other data that might be useful in the

CJ or a supplement; and (7) analyzed IRS’s fiscal year 2003 CJ to see if there were any

changes to the CJ’s structure or content that affected our results. In developing our

ideas, we kept in mind the possibility of using material that IRS already had available

or might already be using for other purposes. We did not update the tables and

figures in this report to reflect the numbers in the fiscal year 2003 CJ, because our

purpose was to illustrate formats and ideas and not to dwell on numbers. We did our

review in Washington, D.C., from August 2001 through March 2002 in accordance

with generally accepted government auditing standards.

 - - - - -

As agreed with your office, unless you publicly announce its contents earlier, we plan

no further distribution of this report until 30 days from the date of this report. At that

time, we will send copies to the Ranking Minority Member, Subcommittee on

Treasury, Postal Service, and General Government, House Committee on

Appropriations; the Chairmen and Ranking Minority Members of the House and

Senate Committees on Appropriations and the Senate Subcommittee on Treasury and

General Government; the Chairmen and Ranking Minority Members of the House

Committee on Ways and Means and the Senate Committee on Finance; the

Commissioner of Internal Revenue; the Secretary of the Treasury; and other

interested parties. We also will make copies available to others upon request. In

addition, the report will be available at no charge on the GAO Web site at

http://www.gao.gov.
Page 6 GAO-02-711R IRS Budget Justification Options

If you or your staff have any questions about this report, please contact David

Attianese or me on (202) 512-9110. Lawrence Korb was a key contributor to the

report.

Sincerely yours,

James R. White

Director, Tax Issues
Enclosure I

Page 7 GAO-02-711R IRS Budget Justification Options

Focusing IRS’s Appropriation Request on Programs and Links to Measures

This enclosure presents ideas for displaying IRS’s appropriation request in ways that

better focus on budget activities and programs and easy-to-follow linkages to

measures. Many of the executive branch and congressional officials whom we

interviewed thought that the tables in this enclosure could be helpful. Table 1

summarizes the lead schedules of all IRS appropriations and includes all budget

activities in one place, not spread over many pages as in the fiscal years 2002 and

2003 congressional justifications (CJ). Although the table covers only dollar amounts

and 2 years, it could be reformatted to cover full-time-equivalent (FTE) staff positions

and more years.

Table 1: Total IRS Fiscal Year 2001 and 2002 Budget Authority by Budget Activity

Dollars in millions

Budget activity

FY 2001

amount

FY 2002

amount Change

Prefiling services $548 $591 $42

Filing and account services 1,452 1,532 80

Shared support services 1,010 1,018 8

General management and administration 683 643 (41)

Processing, assistance, and management appropriation 3,694 3,783 89

Compliance services 3,294 3,443 149

Research and Statistics of Income 88 90 3

Tax law enforcement appropriation 3,382 3,533 152

Information systems improvement programs 40 40 0

Information services 1,509 1,523 14

Information systems appropriation 1,549 1,563 14

Business systems modernization appropriation 72 397 325

Earned income tax credit appropriation 145 146 1

Total IRS appropriation $8,841 $9,422 $582

Legend: FY = fiscal year.

Note: Numbers in columns do not always add to the totals because of rounding. Fiscal year 2001 and 2002

numbers are proposed operating level amounts and requested amounts, respectively.

Source: IRS’s fiscal year 2002 congressional justification.

Figure 1 shows how IRS presented its budget at a similar level of aggregation in a July

2001 presentation to the IRS Oversight Board, after the CJ numbers had been refined

somewhat as fiscal year 2002 drew closer. Figure 1’s main structural difference from

table 1 is that there is a separate line item for submission processing and information

reporting, differentiating between tax administration programs that involve contact

with taxpayers and those that do not. Another difference is the absence of the earned

income tax credit appropriation, which was outside certain spending caps.9

 Still, the

figure allows the reader to see the percentage of the operations budget accounted for

by postfiling compliance services—38.8 percent—a feature similar to one that IRS

highlighted in its budget in brief but not in its CJ. The figure also better highlights the

 9

The Information Technology Investment Account in figure 1 is the equivalent of the Business Systems Modernization (BSM)

appropriation in table 1. Neither presentation has enough information to show full BSM costs, since some of the costs are

funded by the information systems and other appropriations. According to IRS officials, IRS does not isolate these costs, which

are tracked after the fact, for budget purposes. Also, the officials told us, because these costs are already scrutinized before

congressional approval of BSM expenditures, isolating them for budget purposes is not needed. The business line investment in

figure 1 is equivalent to information systems improvement programs in table 1.
Enclosure I

Page 8 GAO-02-711R IRS Budget Justification Options

prefiling, filing, and postfiling service categories that IRS’s fiscal year 2003 CJ says

form a central theme for organizing IRS’s strategy and program plans, budgets,

financial plans and reports, and accounting systems.

Figure 1: IRS Fiscal Year 2002 Budget Authority, by Budget Activity, as Presented to the IRS Oversight Board

(Dollars in thousands)

Legend: FY = fiscal year; FTE = full-time equivalent.

Note: An IRS footnote pointed out that the FTEs reflected the financial plan as of July 2001, but the dollar

amounts reflected the President’s budget.

Source: IRS.

Table 2 expands on table 1 to include in one place all programs and their

corresponding measures instead of having them scattered throughout the CJ. In this

way, for instance, the program dollars for taxpayer communication and education

can be shown together with their relevant measures. To the extent that the linkage

between a program and a measure is not perfect or that a dollar change merely

reflected inflation—both of which are concerns that we heard—the table could say

so. Or the table could replace dollar amounts with FTEs, a change that an IRS budget

official said would be a better way of comparing resource changes with changes in

performance and workload. Either way, the table would allow amounts used for

different activities—for instance, for education and various types of compliance—to

be seen together, but at the cost of adding length to the CJ. Versions of table 2 could

display programs, budget amounts or FTEs, and measures, by IRS organizational unit,

making the CJ somewhat longer still. Rather than show all program categories, IRS

could highlight some. For instance, IRS could focus on program categories with the

FTE FTE % of 

Total Budget $ % of Total Budget

% of Tax 

Administration

Tax Administration Programs 80,761 82.8% 5,595,566 62.8% 100.0%

Taxpayer Contact Programs 66,498 68.2% 4,918,587 55.2% 87.9%

 Pre-filing Services 3,712 3.8% 590,872 6.6% 10.6%

 Filing and Account Services 17,018 17.4% 871,924 9.8% 15.6%

 Post-filing - Compliance Services 45,768 46.9% 3,455,791 38.8% 61.8%

Submission Processing/Information Reporting 14,263 14.6% 676,979 7.6% 12.1%

Shared Services Programs 4,775 4.9% 1,072,037 12.0%

Information Systems Programs 7,477 7.7% 1,549,596 17.4%

Operations (includes all operations tiers) 5,637 5.8% 1,192,734 13.4%

Applications Support 1,840 1.9% 356,862 4.0%

Research and Statistics of Income 918 0.9% 97,167 1.1%

General Management and Administration 3,631 3.7% 595,563 6.7%

TOTAL OPERATIONS BUDGET 97,562 100% 8,909,929 100.0%

 Tier B -- Business Line Investment 39,865

 Tier A -- Information Technology Investment Account 396,593

TOTAL BUDGET 97,562 9,346,387

Less: User Fees (70,000)

CURRENT FINANCIAL PLAN 97,562 9,276,387

Budget by Program

FY 2002
Enclosure I

Page 9 GAO-02-711R IRS Budget Justification Options

largest absolute or percentage increases from the previous year, excluding cost-ofliving or inflation adjustments. In any case, placing measures closer to related dollar

amounts is in the spirit of recent federal government initiatives to better align budget,

performance, and financial statement information and to achieve a closer link

between requested resources and expected results.

Table 2: Budget Authority and Measures for All IRS Programs, Fiscal Years 2001 and 2002

Dollars in millions

Program and

budget activity

FY

2001

FY

2002 Change Corresponding measure

FY

2001

FY

2002

Management $11 $12 $0

Tax law interpretation

and guidance

16 16 1

Taxpayer

communication and

education

363 399 36 Workshops

Volunteer locations

Volunteer hours reported (millions)

Education and outreach staff years

371

17,472

2.3

829

408

18,693

3.0

1,555

Rulings and agreements 118 123 5 Education and outreach staff years

Employee plans/exempt organizations

determination letters

Private letter rulings completed

Advance pricing and prefiling agreements

Small business agreements

245

121,000

1,920

202

3,000

216

257,600

1,930

338

3,300

Electronic tax

administration

35 36 0 Form 1040 series electronic primary returns filed

(millions)

Business electronic primary returns filed

(millions)

Percent of individual returns filed electronically

Electronic tax payment transactions (millions)

Debit/credit card transactions (millions)

Hits to IRS Web site (billions)

42.3

3.7

32.6%

67.5

1.0

2.0

50.1

4.3

38.0%

72.1

1.8

2.5

Taxpayer advocacy 5 5 0 Taxpayer advocacy projects 88 88

Prefiling services

budget activity

548 591 42

Management 34 33 (1)

Submission processing 593 615 22 Form 1040 series paper primary returns processed

(millions)

Business paper primary returns processed

(millions)

87.9

81.5

82.1

82.4

Electronic/

correspondence account

management and

assistance

695 725 30 Electronic tax questions received

Customer account correspondence (millions)

Teletax and toll-free automated calls (millions)

Assistor calls answered (millions)

Toll-free customer satisfaction (4-point scale)

Toll-free level of service

Toll-free tax law quality score

Toll-free account quality score

310,050

17.1

67.8

32.7

3.58

63.4%

74.0%

63.0%

434,070

17.4

67.8

33.4

3.69

71.1%

76.0%

65.0%

Field account

management and

assistance

99 125 27 Walk-in customer satisfaction (7-point scale)

Walk-in returns prepared (millions)

Geographic coverage (projection)

6.50

1.1

72%

6.55

1.1

75%

Information reporting 32 34 1

Filing and account

services budget

activity

1,452 1,532 80

Facilities services 126 127 1

Personnel 134 139 5

Procurement 46 47 2

Equal employment

opportunity field

operations

16 16 1

Rent 574 574 0

Space and housing for

nonautomated data

processing equipment

109 109 0

Learning delivery 1 0 (1)
Enclosure I

Page 10 GAO-02-711R IRS Budget Justification Options

Dollars in millions

Program and

budget activity

FY

2001

FY

2002 Change Corresponding measure

FY

2001

FY

2002

Administrative services 5 5 0

Treasury complaint

centers

110

Shared support 0 0 0

Shared support

services budget

activity

1,010 1,018 8

Unit management and

administration (M&A)

199 205 6

Headquarters M&A 352 299 (53)

Communication and

liaison

57 59 2

General legal services 10 10 0

Benefit payments 66 69 3

General M&A budget

activity

683 643 (41)

Management 92 95 3

Payment compliance—

electronic/

correspondence

collection

252 274 23 Automated collection system customer

satisfaction (4-point scale)

Automated collection system closures—taxpayer

delinquent accounts (millions)

Automated collection system closures—taxpayer

delinquency investigations (millions)

Automated collection system level of service

3.50

1.7

0.8

80.0%

3.60

1.9

0.7

81.0%

Payment compliance—

field collection

572 593 21 Field collection customer satisfaction (7-point

scale)

Closures—taxpayer delinquent accounts (millions)

Closures—taxpayer delinquency investigations

(millions)

Field collection quality score

Offers in compromise processed

Offers in compromise processed within 6 months

4.94

0.8

0.1

86.4%

73,068

37.7%

5.04

0.9

0.2

89.0%

77,470

39.6%

Tax reporting

compliance—document

matching

61 69 9 Automated underreporter closures (millions)

Automated underreporter quality score

2.9

94%

3.3

94%

Tax reporting

compliance—electronic/

correspondence

examination

125 130 5 Service center examination customer satisfaction

(7-point scale)

Correspondence returns examined

Service center examination quality score

Innocent spouse modules closed

4.30

558,655

72.0%

57,659

4.45

519,664

78.0%

62,133

Tax reporting

compliance—field

examination

1,408 1,466 58 Field examination customer satisfaction (7-point

scale)

Individual returns examinations greater than

$100,000

Individual returns examinations less than $100,000

Individual returns examined

Field examination case quality score

Business and general industry returns examined

Large cases examined

Large case returns closed

Employee plans/exempt organizations

examination customer satisfaction (7-pont scale)

Employee plans/exempt organizations

examination cases closed

Employee plans/exempt organizations

examination quality score

4.6

113,699

152,964

266,663

60%

142,441

475

3,831

5.7

19,300

83%

4.9

167,282

173,855

341,137

62%

168,712

475

3,356

5.8

11,000

85%

Criminal investigations 351 365 14 Subject criminal investigations initiated 3,320 3,368

Currency transaction

reporting

18 19 1

Appeals 149 156 7 Appeals cases closed 73,013 72,842

Litigation 144 149 5 Tax Court cases 12,000 11,000

Taxpayer advocate case

processing

122 127 4 Taxpayer advocate cases closed

Taxpayer advocate quality index

244,941

68.3%

252,289

69.7%

Compliance services

budget activity

3,294 3,443 149 Enforcement revenue (billions) $34.0 $34.9
Enclosure I

Page 11 GAO-02-711R IRS Budget Justification Options

Dollars in millions

Program and

budget activity

FY

2001

FY

2002 Change Corresponding measure

FY

2001

FY

2002

Research 58 60 2

Statistics of Income 29 30 1

Research and

Statistics of Income

budget activity

88 90 3

Information systems

improvement

programs budget

activity

40 40 0

Unit management 105 107 2

Applications support 392 367 (26)

Operations and

maintenance (O&M)

infrastructure

management

21 21 0

O&M enterprise systems

and assets management

13 13 0

O&M

telecommunications

303 304 1

O&M enterprise

operations

286 291 5

O&M field desktop

support

234 243 8

O&M desktop

management

93 93 0

Rulings and agreements 0 0 0

Electronic tax

administration

110

Submission processing 3 3 0

Account management

and assistance

000

Facilities services 3 4 0

Personnel 32 32 0

Procurement 0 0 0

Unit general M&A 8 8 0

Headquarters M&A 10 32 23

Communications and

liaison

000

Payment compliance—

electronic

correspondence

110

Payment compliance—

field collection

110

Tax reporting

compliance—field

examination

110

Research 1 2 0

Statistics of Income 0 0 0

Information services

budget activity

1,509 1,523 14

Business systems

modernization

business activity

72 397 325

Taxpayer

communication and

education

341

Rulings and agreements 0 0 0

Electronic tax

administration

000

Submission processing 19 19 0

Account management

and assistance—

electronic

330

Account management

and assistance—field

550
Enclosure I

Page 12 GAO-02-711R IRS Budget Justification Options

Dollars in millions

Program and

budget activity

FY

2001

FY

2002 Change Corresponding measure

FY

2001

FY

2002

Communications and

liaison

110

Tax reporting

compliance—electronic

40 40 0

Tax reporting

compliance—field

31 31 0

Criminal investigations 23 23 0

Appeals 2 2 0

Litigation 1 1 0

Taxpayer advocate case

processing

220

Research 4 4 0

Applications support—

9B

10 10 0

Applications support—

9E

220

Earned income tax

credit budget activity

145 146 1 Earned income tax credit coverage 0.16% 0.15%

Total IRS $8,841 $9,422 $582 Primary returns processed (millions)

Agencywide employee satisfaction

Other education and outreach staff years

Full-time equivalents (including earned

income tax credit) (thousands)

Full-time equivalents in taxpayer contact

programs (including earned income tax

credit)

Full-time equivalents per billion dollars of

real gross domestic product

215.4

60%

694

100

67,852

10.42

219.0

62%

1,338

101

69,965

10.12

Legend: FY = fiscal year.

Notes: (1) The shared support services, general M&A, research and Statistics of Income, information systems improvement

programs, information services, business systems modernization, and earned income tax credit activities did not have specific

measures. According to IRS, the resources for these activities contributed to meeting the targets for measures reported in the

prefiling services, filing and account services, and compliance services budget activities. (2) A table like this could be created for

each IRS organizational unit. (3) Shading denotes a measure that is not found in the budget justification but that exemplifies

what was included in IRS’s draft Summary of Balanced Measures and Workload Indicators from Program Plans, which we

obtained in October 2000, before the CJ was prepared. (4) The numbers for the measures are not necessarily the entire numbers

for the measures; they are only the numbers relating to the individual program. (5) To shorten the table, some of the measures

could be combined. (6) The numbers do not always add to the totals because of rounding. (7) According to an IRS budget

official, replacing the dollar amounts in the table with FTEs would provide a more meaningful comparison of resource changes

with changes in performance and workload.

Sources: Except for note 3, IRS’s fiscal year 2002 CJ; the Commissioner’s May 7, 2001, fiscal year 2003 strategic planning

guidance memo, attachment 4 within attachment c; and a knowledgeable IRS official.

As indicated by the shading in table 2, we included in the table two IRS measures that

were not among the 65 measures that IRS chose to put in its fiscal year 2002 CJ. One

of the shaded measures was for the $146 million earned income tax credit

appropriation, for which the CJ provided no measures. The other was for the offer in

compromise program that IRS uses to collect part of the delinquent taxes it is owed.

For this program, the CJ mentioned improving the timeliness of offer in compromise

processing without clearly showing how the improvement would be measured.

Other topics similarly lacked measures in the CJ. Although the CJ noted that audit

coverage was expected to increase by 0.05 percentage points, and although the

President’s budget called coverage a critical performance measure, the CJ included

no measures for it. Likewise, the CJ had no measure for the 350-FTE initiative it
Enclosure I

Page 13 GAO-02-711R IRS Budget Justification Options

described as matching information returns against trust and partnership return filings

with $500 billion in pass-through income.

Trade-offs would be involved in revising the CJ to include measures in all these areas.

The Congress would have more information at its disposal to flesh out information

that it had been given, such as the 0.05 percentage point increase in audit coverage,

but the level of detail might become too great.

As figure 2 shows, IRS featured programs in a November 2000 presentation to the IRS

Oversight Board.
Enclosure I

Page 14 GAO-02-711R IRS Budget Justification Options

Figure 2: Excerpts from an IRS November 2000 Presentation to the IRS Oversight Board, Showing FTE

Information by Program

Legend: FY = fiscal year; FTE = full-time equivalent; Mgmt = Management; Elec. = Electronic; Coll. = Collection;

Doc. = Document; Corr. Exam = Correspondence Examination; Proc. = Processing; Rept. = Reporting

Source: IRS.

The excerpts in figure 3 show how IRS used measures in an easy-to-read format in

that same November 2000 presentation to the Oversight Board. The format facilitates

FY 2000 FY 2001 FY 2002

Actuals Financial Plan Financial Plan

FTE FTE FTE

Tax Administration Programs 80,120 82,960 85,766 

Taxpayer Contact Programs 65,415 68,267 72,256 10%

Pre-Filing Services 2,826 3,692 4,731 67%

1A Pre-Filing Management 171.09 224.28 223.15 

1B Tax Law Interpretation 169.32 172.80 221.79 

1C Taxpayer Education & Communication 1,081.84 1,767.99 2,751.90 

1E Rulings & Agreements 1,222.76 1,308.70 1,312.94 

1H Electronic Tax Administration 145.89 165.00 167.97 

1J Taxpayer Advocacy 34.68 53.59 53.26 

Filing and Account Services 15,973 16,619 18,204 14%

2A Filing Management 378.74 375.82 374.77 

2C Accounts Mgmt - Elec. Assistance 14,094.42 14,207.43 15,158.87 

2D Account Mgmt - Field Assistance 1,499.98 2,035.63 2,670.49 

 728.40

 31,855.77

Post-Filing - Compliance Services 46,617 47,956 49,321 6%

7A Post-Filing Management 1,079.89 1,018.75 1,013.13 

7C Payment Compliance - Remote Coll. 4,890.34 5,063.01 5,736.46 

7D Field Collection 

Revenue Officer 5,607.53 5,993.01 6,089.40 

Field Clerical/Other 2,712.50 3,022.22 2,975.99 

7E Tax Reporting Compliance - Doc Matching 1,214.87 1,510.06 1,687.16 

7F Tax Reporting Compliance - Corr. Exam 3,219.32 3,266.35 3,358.57 

7G Field Examination 

Revenue Agent 12,773.18 12,654.12 12,827.37 

Tax Auditor / Tax Compliance Officer 1,688.44 1,760.20 1,923.14 

Clerical/Other 4,832.06 4,384.48 4,347.77 

7H Criminal Investigations 

Special Agents 2,408.67 2,467.40 2,569.39 

Other Staff 1,152.68 1,133.70 1,169.20 

7J Currency Transaction Reporting 314.00 314.00 312.07 

7K Appeals 1,974.07 1,895.93 1,884.50 

Appeals Officer 1,075.89 1,046.89 1,040.60 

Other 898.18 849.04 843.90 

7L Counsel 1,459.41 1,478.11 1,444.15 

Attorneys 857.25 870.79 865.67 

Other 602.16 607.32 578.48 

7M Taxpayer Advocate Case Processing 1,289.72 1,994.51 1,982.43 

Submission Proc. & Information Rept. 14,705 14,693 13,510 -8%

2B Returns Processing 14,281.72 13,964.52 12,605.80 

2E Information Reporting 422.93 728.40 904.14 

Budget by Program

% Change, 

2000 to 2002
Enclosure I

Page 15 GAO-02-711R IRS Budget Justification Options

analysis of the changes occurring from year to year. However, it does not show the

corresponding changes in budget dollars that we showed in table 2.10

Figure 3: Excerpts Showing Measures, from an IRS November 2000 Presentation to the IRS Oversight

Board

Legend: FY = fiscal year; EP/EO = employee plans/exempt organizations; APA = advance pricing agreement.

Source: IRS.

Table 3 aligns a few IRS measures with various factors throughout the CJ that

contribute to the measures’ changing between years. As opposed to table 2, which

starts with specific changes in budget dollars and relates them to changes in

measures, table 3 starts with changes in a few measures and relates them to budget

dollars and statements in various parts of the CJ. The Congress and IRS could agree

on who would select the measures to be displayed and on what basis they would be

selected.

 10Because our aim is only to show different ways of displaying IRS’s appropriation request, we did not explore why some of the

numbers in figure 3 differed from those in table 2.

Summary of Expected Results - Peformance Measures for FY2001 and FY2002

Pre-Filing Programs -- Assisting Taxpayers in Understanding their Tax Responsibilities and Preparing Accurate Returns

Change Change Change

FY2000 FY2001 FY00-FY01 FY2002 FY01-FY02 FY00-FY02

Education and Outreach Staff-Years 1,081.84 1,767.99 63% 2,751.90 56% 154%

Volunteers Helping Taxpayers

Volunteer Hours Reported 2,274,732 2,297,700 1% 3,005,400 31% 32%

Number Volunteer Locations 18,207 17,472 -4% 18,693 7% 3%

Small Business Products Disseminated (Workshops) 334 371 11% 408 10% 22%

Rulings and Agreements

EP/EO Determination Letters 109,461 134,500 23% 257,600 92% 135%

Private Letter Rulings Issued 1,913 1,920 0% 1,930 1% 1%

APA's and Pre-Filing Agreements 67 202 201% 338 67% 404%

Small Business Agreements 2,700 3,000 11% 3,300 10% 22%

Electronic Tax Law Questions Received 303,758 310,050 2% 434,070 40% 43%

Taxpayer Advocacy Projects 76 80 5% 80 0% 5%
Enclosure I

Page 16 GAO-02-711R IRS Budget Justification Options

Table 3: Examples of IRS Measures That Are Affected by Many Factors

Measure changing from fiscal year 2001 to fiscal year

2002 Factors contributing to the change

Percentage of returns filed electronically increased from

32.6 percent to 38 percent (p. PAM-15 of CJ)

• Increase of about $400,000 in electronic tax administration

budget (PAM-10)

• Implementation of the e-Services project, included in the BSM

budget for $26 million and designed to induce tax preparers to file

electronically on behalf of their clients (SD-8, BSM-11)

Toll-free level of service (rate at which taxpayers who

called IRS toll-free actually got through and received

service) increased from 63.4 percent to 71.1 percent (PAM16)

• Increase of $30 million in electronic/correspondence account

management and assistance budget (PAM-14)

• Implementation of the Customer Communications 2001 business

systems modernization project to improve the level of service

without commensurate increases in the number of FTEs handling

calls (SD-8)

• Possible negative effect on productivity owing to attrition

among senior front-line staff (SD-6)

• Improvement in level of access as a result of telephone assistors

being helped to do more (PAM-6)

Number of offers in compromise processed increased from

73,068 to 77,470 (TLE-12)

• Increase of $21 million in payment compliance (field collection)

budget (TLE-9)

• Expected improvement in timeliness due to centralization of

offer case processing (SD-6)

Number of individual returns examined increased from

266,663 to 341,137 (TLE-12)

• Increase of $58 million in tax reporting compliance (field

examination) budget (TLE-10)

• Expected increase of audit coverage by 0.05 percentage points,

owing to reduced diversion of revenue agents, tax auditors, and

revenue officers to customer service activities (SD-6)

Source: Table 2 and various pages of the CJ, as noted.
Enclosure II

Page 17 GAO-02-711R IRS Budget Justification Options

Relating IRS’s Appropriation Request to IRS’s Organizational Structure

This enclosure presents a way to relate IRS’s appropriation request to IRS’s

organizational units. Table 4 expands on table 1 by adding information on individual

IRS organizational units that was taken from an internal fiscal year 2002 IRS

spreadsheet that had information on many more units than are included here. The

fiscal year 2002 congressional justification (CJ) did not include unit information.

Table 4: IRS Fiscal Year 2002 Budget Authority, by Organizational Unit

Dollars in millions

Unit

Budget

activity Total

Wage and

Investment

Small Business

and SelfEmployed

Large and

Mid-Size

Business

Tax Exempt and

Government

Entities Subtotal Other

Prefiling

services

$591 $378 $50 $31 $60 $519 $71

Filing and

account

services

1,532 997 516 7 10 1,530 2

Shared support

services

1,018 0 0 0 0 0 1,018

General

management

and

administration

643 16 57 15 20 108 534

Processing,

assistance,

and

management

3,783 1,391 623 53 89 2,158 1,626

Compliance

services

3,443 246 1,672 586 105 2,608 834

Research and

Statistics of

Income

90 6 14 6 0 26 64

Tax law

enforcement

3,533 251 1,686 592 105 2,634 899

Information

systems

improvement

programs

40 0 0 0 0 0 40

Information

services

1,523 5 2 2 0 10 1,514

Information

systems

1,563 5 2 2 0 10 1,554

Business

systems

modernization

397 0 0 0 0 0 397

Earned

income tax

credit

146 74 31 0 0 105 41

Total IRS $9,422 $1,721 $2,343 $647 $195 $4,906 $4,516

Note: The numbers do not always add to the totals because of rounding.

Source: U.S. General Accounting Office, Fiscal Year 2002 Budget Request for the Internal Revenue Service,

GAO-01-698R (Washington, D.C.: May 1, 2001).

Some executive branch and congressional officials whom we interviewed favored

displaying IRS’s appropriation by organizational unit. According to them, an

organizational break-out allows individuals to be held accountable for large pieces of

the budget and is useful as background.
Enclosure II

Page 18 GAO-02-711R IRS Budget Justification Options

However, an organizational break-out also creates concerns for some agency and

congressional officials. The following concerns were cited:

• At the time a CJ is prepared, IRS has not allocated all amounts, such as training, to

specific organizational units, making the units’ dollar totals incomplete.

• IRS has not considered evolving operational factors such as how a filing season will

go or how hiring efforts will work out, and, consequently, IRS organizational heads

might be locked into untenable published budget numbers for their units.11

• If an organizational break-out were presented, inappropriate comparisons might be

made among organizations serving different segments of taxpayers.12

• The budget focus might be on stove-piped units, not on IRS as an integrated

organization. This could lead to particular interest groups focusing on the budgets for

particular units, undermining the trade-offs that need to be made within the entire

organization and among all types of taxpayers.

Figure 4 shows excerpts of the formatted grids that IRS already uses to collect 3

years of program information for each organizational unit on table 4. If they desired,

congressional parties could collect these grids from IRS for selected units. In a

further refinement, they could receive them or the CJ spreadsheet electronically,

allowing for staff analysis and presentation at different levels of detail. Presenting

program information in the CJ would provide a greater level of detail than currently

exists but would also allow for more analysis than is currently possible.

 11It seems that this argument could also be applied to any organization as a whole, because any allocation is subject to

adjustment as uncertainty diminishes.

12Of course, proper comparisons might be made as well.
Enclosure II

Page 19 GAO-02-711R IRS Budget Justification Options

Figure 4: Excerpt from IRS Grid for Collecting Program Information, by Organizational Unit

Legend: Org = Organizational; FY = fiscal year; FTE = full-time equivalent; BAC = budget activity code; Comm. =

Communication; Mgmnt = Management; Assist. = Assistance; Elec/Corr Collect. = Electronic/Correspondence Collection; Doc.

Match. = Document Matching; Elec/Corr Exam = Electronic/Correspondence Examination; EITC = earned income tax credit;

OM = Operations and Maintenance; HQ = Headquarters; SOI = Statistics of Income

Source: IRS.

Business Unit:

FTE Dollars FTE Dollars FTE 

BAC 21 - Pre-filing Services 0 0 0 0 0

 1A - Pre-filing Services Management ,.

 1B - Published Guidance Preparation

 1C - Taxpayer Comm. & Education

 1E - Rulings and Agreements

 1H - Electronic Tax Administration

 1J - Taxpayer Advocacy

BAC 22 - Filing and Account Services 0 0 0 0 0

 2A - Filing and Account Services Mgmnt

 2B - Submissions Processing

 2C - Account Mgmt and Assist. (Elec/Corr) 

 2D - Account Mgmt and Assist. (Field) 

 2E - Information Reporting

BAC 37 - Compliance Services 0 0 0 0 0

 7A - Compliance Services Management

 7C - Payment Compliance (Elec/Corr Collect.)

 7D - Payment Compliance (Field Collect.)

 7E - Tax Reporting Compliance - Doc. Match.

 7F - Tax Reporting Compliance - Elec/Corr Exam

 7G - Tax Reporting Compliance - Field Exam

 7H - Criminal Investigation

 7J - Currency Transaction Reporting

 7K - Appeals

 7L - Litigation

 7M - Taxpayer Advocate Case Processing

BAC 80 - EITC 00000

 1C - Taxpayer Comm. & Education

 1E - Rulings and Agreements

 1H - Electronic Tax Administration

 2B - Submissions Processing

 2C - Account Mgmt and Assist. (Elec/Corr)

 2D - Account Mgmt and Assist. (Field)

 5C - Communications & Liaison

 7F - Tax Reporting Compliance - Elec/Corr Exam

 7G - Tax Reporting Compliance - Field Exam

 7H - Criminal Investigation

 7K - Appeals

 7L - Litigation

 7M - Taxpayer Advocate Case Processing

 8A - Research 

 9B - Applications Support

 9E - OM - Telecommunications

BAC 25 - General Management and Administration 0 0 0 0 0

 5A - Unit General Mgmnt & Admin.

 5B - National HQ Mgmnt & Admin

 5C - Communications & Liaison

 5D - General Legal Services

 5E - Benefit Payments

BAC 38 - Research and SOI 0 0 0 0 0

 8A - Research 

 8B - SOI

BAC 24 - Shared Support Services 0 0 0 0 0

Org Unit Resource Matrix

(dollars in thousands)

Program Activities FY 2001 FY 2002 FY2
Enclosure III

Page 20 GAO-02-711R IRS Budget Justification Options

Relating IRS’s Appropriation Request to IRS’s Organizational Structure and

Measures

This enclosure presents ideas on how to relate IRS’s appropriation request to IRS’s

organizational structure and measures. Within organizational units, table 5 shows

examples of large or important programs and selected related measures. The

information comes from the internal fiscal year 2002 IRS spreadsheet mentioned in

enclosure II and from other internal IRS sources. The level of detail in this enclosure

is greater than that in enclosure II; the potential for analysis is also greater.
Enclosure III

Page 21 GAO-02-711R IRS Budget Justification Options

Table 5: Budget Authority for Selected Programs and Examples of Corresponding Measures

Dollars in millions

Budget activity

and

program IRS unit

FY 2001

dollar

amounta

FY 2002

requested

dollar

amount Measure

Measure

in FY

2001

Measure in

FY 2002

Longterm

measurec

Prefiling services—

taxpayer

communication and

education

Wage and

Investment

$340 Education and

outreach staff

years

392 712

Prefiling services—

electronic tax

administration

Wage and

Investment

35 Percentage of

individual

returns filed

electronically

32.6% 38.0%

Filing and account

services—

submission

processing

Wage and

Investment

486 Timeliness of

refunds to

individuals

filing paper

returns

Baseline To be

determined

Filing and account

services—account

management and

assistance

(electronic,

correspondence)

Wage and

Investment

374 Toll-free level

of service,b

telephone

timeliness, and

account quality

63.4%,

95%,

and 63%

71.1%,

96%,

and 65%

Filing and account

services—account

management and

assistance

(electronic,

correspondence)

Small

Business and

Self-Employed

345 Toll-free level

of serviceb

63.4% 71.1%

Compliance

services—payment

compliance (field

collection)

Small

Business and

Self-Employed

593 Percentage of

offers in

compromise

processed

within 6 months

37.7% 39.6%

Compliance

services—tax

reporting

compliance (field

examination)

Small

Business and

Self-Employed

783 Percentage of

field

examination

cases overage

40% 37%

Compliance

services—tax

reporting

compliance (field

examination)

Large and MidSize Business578 Industry cycle

time in months

31.42 31.00

Compliance

services—criminal

investigation

Criminal

Investigations

365 Subject

criminal

investigations

initiated

3,320 3,368

Shared support—

rent

Agencywide

Shared

Services

574 None given

Information

services—

applications

support

Chief

Information

Officer

367 None given

Total $4,840

All IRS $9,422

Note: Measures selected are limited to those IRS had. Shading indicates that the measure was not included in the 2002 CJ and

that the values associated with it predated the CJ and could have changed by the time the CJ was issued.

a

Dollar amounts for fiscal year 2001 did not appear in the materials we reviewed.

b

Toll-free level of service is the rate at which taxpayers who call IRS toll-free actually get through and receive service.
Enclosure III

Page 22 GAO-02-711R IRS Budget Justification Options

c

Long-term measures would be included only to the extent that they exist. The fiscal year 2003 CJ mentioned long-term IRS-wide

goals of 90 percent telephone level of service on taxpayer accounts and 85 percent on tax law inquiries. It also noted the

congressional goal of IRS’s receiving 80 percent of all tax and information returns electronically by 2007.

Sources: IRS spreadsheet on fiscal year 2002 CJ; the Commissioner’s May 7, 2001, fiscal year 2003 strategic planning guidance

memo, attachment 4 within attachment c; format for the fiscal year 2001 Monthly Business Performance Summary; and draft

Summary of Balanced Measures and Workload Indicators from Program Plans.

Figure 5 shows the formatted grid that IRS uses to collect information on programs

and measures for each IRS organizational unit. If they desired, congressional parties

could collect these grids from IRS for selected organizational units and programs. To

supplement either table 5 or figure 5, IRS could submit narrative program summaries

already prepared as part of IRS’s strategic planning process.
Enclosure III

Page 23 GAO-02-711R IRS Budget Justification Options

Figure 5: IRS Grid for Collecting Information, by Program, Measure, and Organizational Unit

Legend: FY = fiscal year; BAC = budget activity code; PAC = program activity code; FTE = full-time equivalent; ADP = automated

data processing.

Business Unit: BAC:

Appropriation: PAC:

Labor:

Employment Category FTE $ FTE $ FTE $

Total FTE & Labor Costs

Staff Disposition (only for Applicable employment categories)

Category FTE $ FTE $ FTE $

Direct

Indirect

Details Out/In (-/+)

Total FTE & Labor Costs

Non-Labor:

Budget Line Item

ADP Operations

Communications

Enforement Expenses

Equipment, Non-ADP

Land and Buildings

Postage

Printing

Space and Housing

Rent

Services and Supplies

Training

Travel

Total Labor and Non-Labor Costs

Operational Support Contracts Summary:

Name of Contract

Total Funded Contracts

Critical Measures:

Measure

Key Workload/Performance Indicators (other than Critical Measures):

Indicator

Program Resources Summary

FY 2001-2003

Resources Required

FY 2001 FY 2002 FY 2003

Performance and/or Program Goals

FY 2001 FY 2002 FY 2003

FY 2001 FY 2003 FY 2002

FY 2003

$

FY 2002

$

FY 2001

$

FY 2001 FY 2002 FY 2003

FY 2001 FY 2002 FY 2003
Enclosure III

Page 24 GAO-02-711R IRS Budget Justification Options

Note: “Employment category” includes such classifications as seasonal, tax technician, and “other full-time permanent”

employees.

Source: IRS.
Enclosure IV

Page 25 GAO-02-711R IRS Budget Justification Options

Highlighting IRS-Wide Goals

This enclosure presents still another way to display IRS’s appropriation request—by

relating it to IRS-wide goals. Table 6 shows how the IRS Oversight Board roughly

allocated IRS’s operations budget among IRS’s three strategic goals.13 However,

allocating particular IRS activities, such as general management and administration,

to only one goal, such as productivity, might make budgeting by goal problematic.

Table 6: IRS’s Fiscal Year 2002 Operations Budget as Proposed by the IRS Oversight Board, by IRS

Strategic Goal

Dollars in millions

Service category and strategic goal Fiscal year 2002 budget requirement

Prefiling services $359

Filing and account services 910

Tax return processing and information reporting 866

Other 23

Total service to each taxpayer 2,158

Payment, filing, and reporting compliance 3,597

Total service to all taxpayers 3,597

Tax administration training 64

Shared services programs 1,121

Information systems programs 1,593

General management and administration 358

Research and Statistics of Income 101

Total productivity through a high-quality work environment 3,237

Total proposed IRS operations budget $8,992

Note: We did not completely reconcile the numbers in this table with other information that we saw.

Source: IRS Oversight Board, The IRS Budget Fiscal Year 2002: Analysis and Recommendations (Interim

Report) (Washington, D.C.: 2001).

Table 7 shows IRS’s strategic measures, tied to its three strategic goals, at the

beginning of fiscal year 2002 that were in various stages of development and should

one day provide usable information in the form of IRS-wide and division-specific

measures of IRS performance. In using these measures, IRS could show interim

progress toward long-term goals and also show staff and technology resources

needed for continued progress toward those goals’ achievement. However, some of

the evolving strategic measures might have more severe limitations than others. Also,

because IRS did not link budget dollars to the strategic goals or measures, how it

would relate funds received or requested to strategic goals or measures was unclear.

The measures shown in table 2 and elsewhere for fiscal year 2002 did not link to the

strategic goals, either. In its fiscal year 2003 annual performance plan, however, IRS

noted that the strategic measures it was developing would be supported by

operational measures.

 13The goals are (1) top-quality service to each taxpayer in every interaction, (2) top-quality service to all taxpayers through fair

and uniform application of the law, and (3) productivity through a high-quality work environment.
Enclosure IV

Page 26 GAO-02-711R IRS Budget Justification Options

Table 7: IRS Strategic Measures at the Beginning of Fiscal Year 2002

IRS strategic

goal

Strategic

measure Brief description

Level of

reporting Limitations

Service to each

taxpayer

Customer

satisfaction

An index showing

customers’

satisfaction with such

things as the clarity

and usefulness of

IRS’s information, the

accessibility of

information, and the

courtesy and

professionalism of IRS

representatives

IRS-wide,

operating

division

Only 3 IRS-related activities and 250

interviewees are reflected, limiting

analysis, providing only high-level

guidance, and requiring more study to gain

actionable results. Some taxpayer

segments will only be added in future

years.

Customer

satisfaction/

public

approval

The percentage of the

public that has a

favorable opinion of

IRS

IRS-wide Survey respondents may or may not have

had dealings with IRS personnel. The

responses cannot be used to measure the

impact of specific IRS programs or

services.

Taxpayer

burden

Time and out-ofpocket dollars spent,

by types of taxpayers

and types of activity

IRS-wide,

operating

division

Work to be finished in 2002 will be for

wage and investment and self-employed

taxpayers only, with business and

employment tax burdens to come later.

Separating IRS and tax code burdens may

not be possible.

Service to all

taxpayers

Payment

compliance

The percentage of tax

liability reported on

timely-filed returns

that is paid by the

return due date or to

date

IRS-wide,

operating

division, type

of tax

Factors outside IRS’s control will have to

be considered in assessments of the effect

of IRS activities. Complete data will not be

ready until more than a year after a tax

year ends. The data source was expected

to be operational in fiscal year 2002.

Filing

compliance

The percentage of

required individual

returns that are filed

on time for a given

year

IRS-wide Factors outside IRS’s control will have to

be considered in assessments of the effect

of IRS activities. Complete data will not be

ready until more than a year after a tax

year ends. Data are now available for

individuals only.

Reporting

compliance

The percentage of

individual income tax

liability that is

voluntarily reported

on timely-filed returns

for a given tax year

IRS-wide;

W&I, SB/SE

individuals

Factors outside IRS’s control will have to

be considered when assessing the effect of

IRS activities. Data are available for

individuals only; the data are based on

1988 information and do not reflect 1988

underreporting, which is thought to have

been significant. A more accurate measure

will have to await the more current

compliance data that will be available in

the future.

Productivity

through a quality

work

environment

Employee

satisfaction

Survey questions of

employees

IRS-wide,

operating

division,

functional

division,

work group

No limitations listed by IRS.

Workload

resource

index

Percentage change in

IRS workload and

productivity over time

IRS-wide,

operating

division,

lower

This measure involves some questionable

assumptions and places greater weight on

some of its component 62 measures than

on others.

Source: IRS, Data Dictionary for Strategic Measures.
Enclosure V

Page 27 GAO-02-711R IRS Budget Justification Options

Analyzing More Than Net Changes to the Budget Base

This enclosure presents a final way to display IRS appropriation information, one that

would facilitate analysis of more than net changes to the budget base. For the first

time, IRS’s fiscal year 2003 congressional justification (CJ) showed resource

reductions within the base budget that were reallocated to high-priority areas.

However, the fiscal year 2003 CJ did not summarize the specifics of this information

in one place to show at a glance the trade-offs being made among different IRS

programs.

From IRS’s strategic planning process, figures 6 and 7 show excerpts from IRS

formats for displaying what drives increases and decreases in IRS resource needs.

The formats differ from traditional incremental CJ presentations by showing pluses

and minuses before they are netted out. In addition, they show break-outs by budget

activity and could show break-outs by organizational unit. The formats used in the

planning process allow IRS to show, for instance, how savings in the cost of

processing returns brought on by electronic filing can be reapplied to such efforts as

stabilizing audit rates and pursuing high-priority tax collections. The formats could

include, or be restricted to, columns with totals for all of IRS. These columns would

show how trade-offs are made within IRS as a whole. Although figure 6 displays only

dollar amounts, it could include full-time-equivalent staff positions as well.
Enclosure V

Page 28 GAO-02-711R IRS Budget Justification Options

Figure 6: Excerpts from IRS Grid Showing Expected Increases and Decreases in IRS Labor Costs, by

Program

Legend: FTE = full-time equivalent; Sub Proc = Submission Processing; Tel/Corr = Telephone/Correspondence; Elec/Corr =

Electronic/Correspondence; CI = Criminal Investigations; TAS = Taxpayer Advocate Service.

Note: The Servicewide codes refer to the relevant budget activity (BAC 21) or program (2B, for instance) code.

Source: IRS.

Dollar Cost of FTE Drivers

BAC 21 2B & 2E 2D 2C 7C 7D 7F 7G 7H 7K 7M

TAS

All PreFiling 

Programs Appeals

Filing Post-Filing Compliance

Field 

Payment

Elec/Corr 

Reporting

Field 

Reporting Sub Proc CI Field Asistance

Tel/Corr 

Assistance

Elec/Corr 

Payment

Servicewide

LA

B

O

R 

IN

CR

EA

SE

S

 Drivers of Increased Resources

 All PreFiling 

Programs 

Filing Post-filing Compliance

 Sub Proc Field 

Asistance 

 Tel/Corr 

Assistance 

 Elec/Corr 

Payment 

 Field 

Payment 

 Elec/Corr 

Reporting 

 Field 

Reporting CI Appeals TAS 

Workload Increases

Compliance Strategies

Other

TOTAL

LA

B

O

R 

SA

VI

N

GS

Drivers of Resource Savings 

 All PreFiling 

Programs 

Filing Post-filing Compliance

 Sub Proc Field 

Assistance 

 Tel/Corr 

Assistance 

 Elec/Corr 

Payment 

 Field 

Payment 

 Elec/Corr 

Reporting 

 Field 

Reporting CI Appeals TAS 

Workload Decreases

Improvement Projects

Selected Tier B Projects

TOTAL

Other

TOTAL COST of FTE DRIVERS
Enclosure V

Page 29 GAO-02-711R IRS Budget Justification Options

Figure 7: Excerpts from IRS Grid Showing Expected Increases and Decreases in IRS Nonlabor Costs, by

Program Category

Legend: Sub Proc = Submission Processing; Tel/Corr = Telephone/Correspondence; Elec/Corr = Electronic/Correspondence; CI

= Criminal Investigations; TAS = Taxpayer Advocate Service.

Note: The Servicewide codes refer to the relevant budget activity (BAC 21) or program (2B, for instance) code.

Source: IRS.

Non-Labor Drivers & Contracts

 BAC 21 2B & 2E 2D 2C 7C 7D 7F 7G 7H 7K 7M 

 - - - - - - - - - - - 

Appeals TAS 

 All PreFiling 

Programs 

Filing Post-Filing Compliance

Servicewide

 Sub Proc Field 

Asistance 

Tel/Corr 

Assistance 

Elec/Corr 

Payment 

Field 

Payment 

Elec/Corr 

Reporting 

 Field 

Reporting CI 

Post-Filing Compliance

 CI Appeals TAS 

Non-Labor Increases

 Drivers of Increased Resources

 All PreFiling 

Programs 

Filing

Increased Support Dollars

Contracts

 Sub Proc Field 

Assistance 

Tel/Corr 

Assistance 

Elec/Corr 

Payment 

Field 

Payment 

Elec/Corr 

Reporting 

 Field 

Reporting 

Improvement Project Costs

Other

Non-Labor Savings

Drivers of Resource Savings 

 All PreFiling 

Programs 

Filing

Selected Tier B Projects

 Sub Proc Field 

Assistance 

Tel/Corr 

Assistance 

Elec/Corr 

Payment 

Field 

Payment 

Elec/Corr 

Reporting 

 Field 

Reporting 

Workload Decreases

Improvement Projects

 CI Appeals TAS 

Post-Filing Compliance

NON-LABOR DRIVERS & CONTRACTS

Other

TOTAL

TOTAL
Enclosure VI

Page 30 GAO-02-711R IRS Budget Justification Options

Comments from the Internal Revenue Service
Enclosure VI

Page 31 GAO-02-711R IRS Budget Justification Options

The following are GAO’s comments on the Internal Revenue Service’s letter dated

June 18, 2002.

GAO Comments

Although the letter said that IRS found no problems with our recommendations, our

draft report contained no recommendations and neither does the final report.

According to an official with IRS’s Office of Legislative Affairs, IRS was saying that it

agreed with the content of our report.

(440069)