IRS MANAGEMENT

Challenges Facing the

National Taxpayer

Advocate

Statement of Cornelia M. Ashby, Associate Director

Tax Policy and Administration Issues

General Government Division

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Oversight

Committee on Ways and Means

House of Representatives

For Release on Delivery

Expected at

2:30 p.m., EST

on Wednesday

February 10, 1999

GAO/T-GGD-99-28

Statement

Page 1 GAO/T-GGD-99-28

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to assist the Subcommittee in its oversight

of the Internal Revenue Service’s (IRS) Office of the Taxpayer Advocate.

Our testimony is based on our ongoing work for the Subcommittee. Our

work has included (1) interviewing IRS officials at the National Office, all 4

regional offices, and 17 of the 43 district offices and service centers; (2)

reviewing numerous documents relating to the work of the Advocate’s

Office; and (3) surveying IRS staff who were doing Advocate’s Office work

as of June 1, 1998. We are currently drafting our report, which we expect

to issue later this year.

As you are aware, IRS is changing its organizational structure in response

to the IRS Restructuring and Reform Act of 1998. My statement highlights

three key challenges facing IRS and the National Taxpayer Advocate as

decisions are made about restructuring the Office of the Taxpayer

Advocate. These challenges are to

• address complex staffing and operational issues within the Advocate’s

Office in a way that will ensure that it offers an independent means for

taxpayers to resolve their problems. Specifically, while maintaining

independence from IRS operations, the National Taxpayer Advocate must,

to some extent, depend on other IRS units in developing a caseworker

reporting structure, establishing a resource control and tracking system,

obtaining caseworkers and providing them with appropriate training, and

determining how best to use available resources.

• strengthen efforts within the Advocate’s Office to determine the causes of

taxpayer problems so that systemic causes can be identified and corrected.

In that regard, the Advocate’s Office needs to share information on these

efforts throughout IRS and conduct them in a systematic and coordinated

way to reduce duplication of efforts among its offices.

• develop the performance measures that the National Taxpayer Advocate

needs to manage operations and measure effectiveness.

IRS founded the Problem Resolution Program (PRP) in 1976 to provide an

independent means of ensuring that taxpayers’ unresolved problems were

promptly and properly handled. Initially, PRP units were established in

IRS district offices and, in 1979, PRP was expanded to include the service

centers. In late 1979, IRS created the position of Taxpayer Ombudsman to

head PRP. In 1996, Congress replaced the Ombudsman’s position with

what is now the National Taxpayer Advocate.

Background
Statement

Page 2 GAO/T-GGD-99-28

The goals of PRP are consistent with IRS’ mission of providing quality

service to taxpayers by helping them meet their tax responsibilities and by

applying the tax laws fairly. PRP’s first goal is to assist taxpayers who

cannot get their problems resolved through normal IRS channels or who

are suffering significant hardships. For example, local advocate offices

can expedite tax refunds or stop enforcement actions for taxpayers

experiencing significant hardships. During fiscal year 1998, PRP closed

more than 300,000 cases, of which about 10 percent involved potential

hardships. The second goal of PRP is to determine the causes of taxpayer

problems so that systemic causes can be identified and corrected and to

propose legislative changes that might help alleviate taxpayer problems.

IRS commonly refers to this process as advocacy. The third goal of PRP is

to represent the taxpayers’ interests in the formulation of IRS’ policies and

procedures.

IRS has a taxpayer advocate in each of its 4 regional offices and has local

advocates in its 33 district offices, 30 former district offices,1

 and 10

service centers. The National Taxpayer Advocate has responsibility for the

overall management of PRP, and regional and local advocates have

responsibility for managing PRP at their respective levels. The Office of

the Taxpayer Advocate funds the advocate positions; the staff in advocate

offices at all levels;2

 and other resources for advocate offices.

PRP assistance to taxpayers who cannot get their problems resolved

through normal IRS channels is done by employees called caseworkers,

who are not part of the Advocate’s Office. They are in IRS’ functional

units—mainly customer service, collection, and examination—in the

district offices and service centers. Most PRP resources, including

caseworkers, are funded by the functions, and about 80 percent of the

caseworkers report to functional managers--not local advocates. Some

offices, however, had a centralized structure in which PRP casework was

done by employees who were funded by the functions, but reported to the

local taxpayer advocate.

Formerly, regional and local advocates were selected by and reported to

the director of the regional, district, or service center office where they

worked. However, in response to a requirement in the IRS Restructuring

 

1

In 1996, IRS consolidated its regional and district offices and reduced the number of its district offices

from 63 to 33. The 30 former district offices continue to have staff and operations, including local

advocate staff.

2

Unless specifically noted, a reference to “advocate’s staff” or “Advocate’s Office staff” refers to staff in

the Advocate’s Office at all levels.
Statement

Page 3 GAO/T-GGD-99-28

and Reform Act of 1998, regional advocates are now selected by and report

to the National Taxpayer Advocate or his or her designee; and local

advocates are now selected by and report to regional advocates.

Additionally, last October, IRS began moving to a more centralized

reporting structure for the caseworkers—in which they would report to

local advocates instead of functional management. IRS officially assigned

those caseworkers who were already reporting to local advocates—about

20 percent of the caseworkers—to local advocate offices. In addition, IRS

is developing an implementation plan to have the remaining 80 percent of

the caseworker positions assigned to local advocate offices this year. IRS

plans to submit budget requests that reflect these staffing changes by

transferring funds for caseworkers to the Advocate’s Office.

During fiscal year 1998, the staffing level of the Advocate’s Office

increased from 428 to 584 authorized positions. Our survey showed that,

as of June 1, 1998, the Advocate’s Office had 508 on-board staff. At the

same time, there were about 1,500 functional employees doing PRP

casework in IRS’ field offices. Advocate staff worked on, among other

things, sensitive cases; cases involving taxpayer hardship; and advocacy

work, such as identifying IRS procedures that cause recurring taxpayer

problems. Caseworkers worked on resolving individual taxpayer problems

as well as participating in some advocacy efforts. During times of high

casework levels, many Advocate’s Office staff are required to do casework

in addition to their other duties.

The first challenge facing IRS and the National Taxpayer Advocate is the

need to address staffing and operational issues while ensuring the

independence of the Advocate’s Office. Staffing and operational issues,

such as resource allocation, training, and staff selection, are commonplace

in most organizations. However, dealing with these issues could prove

more challenging for the Advocate’s Office because of the need for PRP to

be independent from the IRS operations that have been unsuccessful in

resolving taxpayers’ problems. Independence—actual and apparent—is

important because, among other things, it helps promote taxpayer

confidence in PRP.

A key staffing and operational issue is developing an implementation plan

for bringing all caseworkers into the Advocate’s Office that includes

operational mechanisms that will give PRP the potential benefits of both a

reliance on the functions and a separate operation. According to IRS

officials, having the caseworkers in the functions may have facilitated

caseworker training and the handling of workload fluctuations; however,

this arrangement may also have led to the perception that PRP was not an

Resolving Staffing and

Operational Issues

While Maintaining

Independence
Statement

Page 4 GAO/T-GGD-99-28

independent program. In addition, as we will discuss later, this

organizational arrangement may have contributed to some of the other

PRP staffing and operational issues.

Another, but related, staffing and operational issue is capturing

information about resource usage that advocates need to manage PRP.

Some local advocates told us that the lack of control over PRP resources,

including staff, made it difficult to manage PRP operations. Advocates do

not know the full staffing levels or the total cost of resources devoted to

PRP, because IRS does not have a standard system to track PRP resources.

Instead, each function tracks its resources differently. The absence of this

type of management information yields an incomplete picture of program

operations, places limitations on decision-making, and hinders the

identification of matters requiring management attention. In addition,

having this basic program information would improve the National

Taxpayer Advocate’s ability to estimate the resources needed in the

restructured Advocate’s Office.

Providing appropriate training is also an issue. It is important that

caseworkers and other staff receive adequate training if they are going to

be able to help taxpayers resolve their problems and effectively work on

advocacy efforts. Our survey of IRS staff who were doing advocate office

work showed that training has been inconsistent throughout the

Advocate’s Office and among PRP caseworkers. For example, as of June

1, 1998, more than half of the PRP caseworkers had not completed a

formal PRP training course for their current position.

Caseworkers should be trained in both functional responsibilities and PRP

operations. Functional training, such as training in tax law changes, is

important because resolving taxpayer problems requires that caseworkers

understand the tax law affecting a particular case. Historically, because

caseworkers were usually functional employees, they routinely received

training in functional matters. The National Taxpayer Advocate is faced

with ensuring that caseworkers continue to receive needed functional

training even if they are no longer functional employees. In this regard, the

National Taxpayer Advocate is considering whether to implement a crossfunctional training program for caseworkers that would provide training in

multiple IRS functions. IRS officials told us that this would broaden

caseworker skills and might provide faster and more accurate service to

taxpayers.

Acquiring qualified PRP caseworkers has been an issue. In the past, the

quality of caseworkers depended on the office and the function that
Statement

Page 5 GAO/T-GGD-99-28

assigned the caseworkers to PRP. Local advocates told us that they had

no assurance that the functions would provide PRP with qualified staff. It

is important for the Advocate’s Office to develop mechanisms to ensure

that qualified caseworkers are selected so that program goals are met.

Once the Advocate’s Office is no longer dependent upon the functions for

its staff, it can implement a competitive selection process for PRP

caseworkers that should help ensure that it gets the staff it needs.

As IRS restructures the Advocate’s Office, it must consider how best to

handle workload fluctuations. Over the past 18 months, the Advocate’s

Office and PRP’s workloads have increased. Factors that have affected

and could continue to affect workload include increased media attention,

the introduction of a toll-free telephone number for taxpayers to call PRP,

and Problem Solving Days.3

 Historically, PRP has relied on the functions

to provide additional staff to cover workload increases. However, as the

office is moving toward a structure that would place all caseworkers in the

Advocate’s Office, this source of additional caseworkers may no longer be

available. Many local advocates told us that it would be difficult to handle

workload fluctuations without the traditional ability to obtain additional

caseworkers from functional units.

Workload increases may also make it necessary for the Advocate’s Office

to decide which cases to address with PRP resources. That is, some

taxpayers who seek help from PRP may have to be referred to other IRS

offices. Local advocates told us that workload increases could

compromise PRP’s ability to help taxpayers. For example, an increase in

the number of PRP cases could negatively affect the timeliness and quality

of PRP casework.

IRS has three criteria for deciding what qualifies as a PRP case. The first

two criteria are specific—(1) any contact by a taxpayer on the same issue

at least 30 days after the initial contact and (2) no response to the taxpayer

by a promised date. However, the third criterion—any contact that

indicates established systems have failed to resolve the taxpayer problem,

or when it is in the best interest of the taxpayer or IRS to resolve the

problem in PRP—is broad enough to encompass virtually any taxpayer

contact. We understand why the Advocate’s Office would not want to turn

away any taxpayer. However, if PRP accepts cases that could be handled

elsewhere in IRS, the program could be overburdened, potentially reducing

 3

Beginning in November 1997, IRS began holding a series of monthly Problem Solving Days in each of

its 33 districts. The purpose is to give taxpayers with unresolved tax problems the opportunity to meet

face-to-face with IRS staff in an effort to resolve those problems.
Statement

Page 6 GAO/T-GGD-99-28

PRP’s ability to help taxpayers who have nowhere else to go to resolve

their problems.

The second challenge facing IRS and the National Taxpayer Advocate is to

strengthen advocacy efforts within the Advocate’s Office. Advocacy

efforts are key to the success of the Advocate’s Office because the

improvements they generate can reduce the number of taxpayers who

ultimately require help from PRP. Ideas for advocacy efforts are generated

at the national, regional, and local levels. These efforts are aimed at

eliminating deficiencies in IRS’ processes and procedures that cause

recurring problems. Through advocacy efforts, the National Taxpayer

Advocate can recommend changes to the Commissioner, IRS functions,

and Congress to improve IRS operations and address provisions in law that

may be causing undue burden to taxpayers.

The Advocate’s Office has taken steps to promote advocacy, such as

implementing regional advocacy councils and identifying strategies to

increase awareness of advocacy within IRS. The Advocate’s Office has

encouraged the functions to play a greater role in assisting taxpayers and

improving procedures to reduce taxpayer compliance burden. For

example, the Advocate’s Office is working with functional management

through an executive level group—called the Taxpayer Equity Task Force--

to develop ways to strengthen equity and fairness in tax administration.

The Task Force consists of a cross section of executives from IRS’

functions and staff from the Advocate’s Office. It was established to “fasttrack” potential administrative changes and legislative proposals

recommended to the National Taxpayer Advocate.

However, the Advocate’s Office staff and PRP caseworkers told us that

they were spending only a minimal amount of time on advocacy. In that

regard, our survey showed that as of June 1, 1998, advocates and their

staffs were spending about 10 percent of their time on advocacy, and PRP

caseworkers were spending less than 1 percent of their time on advocacy.

Advocate office staff and PRP caseworkers told us that increased

casework limited the time they could spend on advocacy.

We understand the need to give priority to casework over advocacy when

there is not enough time to do both. The National Taxpayer Advocate’s

ability to deal with these competing priorities is hampered, however, by

the absence of (1) a systematic and coordinated approach for conducting

advocacy efforts and (2) data with which to prioritize potential advocacy

work.

Using Advocacy to

Prevent Problems

From Recurring
Statement

Page 7 GAO/T-GGD-99-28

To provide information on advocacy to field offices, the Advocate’s Office

has developed a list of ongoing advocacy projects. However, the list

includes only national-level projects; there is no corresponding list of local

efforts, even though those efforts could be addressing issues with

agencywide implications. Advocacy staff told us that because there is no

system for sharing information on local advocacy efforts, there is some

duplication of effort among field offices. Additionally, field staff told us

that there is no system that provides feedback on the status of advocacy

recommendations. For example, in one district, staff told us that they

forwarded the same recommendations to the Advocate’s Office over the

course of several years but never received feedback on what actions, if

any, were taken on those recommendations.

The Advocate’s Office also has not identified its top advocacy priorities,

and it has no way to determine the actual impact of its advocacy efforts.

Without such information, the National Taxpayer Advocate does not know

which advocacy efforts have the greatest potential to reduce taxpayers’

compliance burden.

The third challenge facing IRS and the National Taxpayer Advocate is to

develop performance measures to be used in managing operations and

assessing the effectiveness of the Office of the Taxpayer Advocate and

PRP. Developing measures of effectiveness is a difficult undertaking for

any organization because it requires that management shift its focus away

from descriptive information on staffing, activity levels, and tasks

completed. Instead, management must focus on the impact its programs

have on its customers.

Currently, the Advocate’s Office uses four program measures, but they do

not produce all of the information needed to assess program effectiveness.

The first two measures--the average length of time it takes to process a

PRP case and the currency of PRP inventory—describe program activity.

While these two measures are useful for some program management

decisions, such as the number of staff needed at a specific office, they do

not provide information on how effectively PRP is operating.

The third measure, PRP case identification and tracking, attempts to

determine if potential PRP cases are properly identified from incoming

service center correspondence and subsequently worked by PRP. This

measure is an important tool to help the National Taxpayer Advocate

know whether PRP actually serves those taxpayers who need and qualify

for help from the program. However, a recent review of this measure by

IRS’ Office of Internal Audit found, among other things, that inconsistent

Developing Measures

of Effectiveness
Statement

Page 8 GAO/T-GGD-99-28

data collection for the measure could affect the integrity and reliability of

the measure’s results. Also, the measure is designed for use only at service

centers; there is no similar measure for use at district offices, resulting in

an incomplete picture of whether taxpayers are being properly identified

and subsequently referred to PRP.

PRP’s fourth measure—designed to determine the quality of PRP

casework—provides some data on program effectiveness. This measure is

based on a statistically valid sample of PRP cases and provides the

National Taxpayer Advocate with data on timeliness and the technical

accuracy of PRP cases. Among other things, selected PRP cases are

checked to determine whether the caseworker contacted the taxpayer by a

promised date, whether copies of any correspondence with the taxpayer

appeared to communicate issues clearly, and whether the taxpayer’s

problem appeared to be completely resolved. Caseworkers and advocate

staff in the field told us that the quality measure was helpful because the

elements that are reviewed provide a checklist for working PRP cases.

According to staff, this helps ensure that most cases are worked in a

similar manner in accordance with standard elements.

The quality measure, however, does not have a customer satisfaction

component. The Advocate’s Office is piloting a method for collecting

customer satisfaction data, but the results of this effort are unknown.

Because IRS does not collect customer satisfaction data from taxpayers

who contacted PRP, the National Taxpayer Advocate does not know if

taxpayers are satisfied with PRP services or whether taxpayers considered

their problems solved.

The National Taxpayer Advocate has the formidable task of developing

measures that will provide useful data for improving program

performance, increasing accountability, and supporting decisionmaking.

To be comprehensive, these measures should cover the full range of

Advocate Office operations, including taxpayer satisfaction with PRP

services and the effectiveness of advocacy efforts in reducing taxpayer

compliance burden.

In summary, the responsibilities of the Office of the Taxpayer Advocate—

helping taxpayers who have not been able to resolve their tax problems

through normal IRS channels, helping taxpayers experiencing financial

hardship, and promoting advocacy—require the office to become involved

in most, if not all, of IRS’ varied operations. These broad responsibilities

must be fulfilled if IRS is to provide the level of customer service

envisioned in its mission statement. As the Office of the Taxpayer

Summary
Statement

Page 9 GAO/T-GGD-99-28

Advocate restructures, it will be faced with many challenges. Addressing

these challenges is pivotal to the National Taxpayer Advocate’s success.

Mr. Chairman, this concludes my prepared statement. I would be happy to

answer any questions that you or the Members of the Subcommittee may

have.

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