TAX

ADMINISTRATION

Allegations of IRS

Employee Misconduct

United States General Accounting Office

GAO Report to the Chairman

Committee on Finance

U.S. Senate

May 1999

GAO/GGD-99-82

United States

General Accounting Office

Washington, D.C. 20548

General Government Division

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Page 1 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

GAO

May 24, 1999

The Honorable William V. Roth, Jr.

Chairman, Committee on Finance

United States Senate

Dear Mr. Chairman:

For years, the Congress has expressed concerns about the Internal

Revenue Service’s (IRS) management and treatment of taxpayers. We, and

others, have chronicled IRS’ struggle to modernize and have made scores

of recommendations to improve IRS’ operations and its service to

taxpayers. Congressional concerns led to a June 1997 report1

 by the

National Commission on Restructuring IRS and a series of hearings in 1997

and 1998 that focused on problems at IRS.

In April 1998, the Senate Committee on Finance held hearings on alleged

misconduct by IRS employees in their treatment of other IRS employees

and taxpayers. Witnesses testifying at the hearings alleged that (1) senior

IRS managers did not receive the same level of disciplinary action as line

staff; (2) the Deputy Commissioner of Internal Revenue delayed action on

substantiated cases of employee misconduct until senior managers were

eligible to retire; (3) IRS retaliated against whistleblowers and against

taxpayers and their representatives who were perceived to be

noncooperative; (4) IRS employees zeroed out or reduced proposed tax

assessments for reasons not related to the merits of the cases; and (5) IRS

discriminated against employees in the evaluation process on the basis of

race or national origin in its Midwest District Office, which is

headquartered in Milwaukee, WI.

You asked us to review these allegations and, in particular, to evaluate

both the specific allegations made at the hearings and any underlying

systemic or programmatic problems that needed to be resolved to protect

the rights of taxpayers and IRS employees in these areas. This report

provides information related to specific allegations regarding IRS senior

managers and the Midwest District Office. It also brings together

information bearing on the other allegations from our current and past

work on systemic problems at IRS. Because some of the specific

allegations involve taxpayer data that cannot be publicly disclosed, we are

issuing to you at the same time as this report a separate, restricted letter

 

1

A Vision for a New IRS, Report of the National Commission on Restructuring the Internal Revenue

Service, June 25, 1997.
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Page 2 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

that discusses alleged improper zeroing out and retaliation against

taxpayers.

We did our work in Washington, D.C., and Milwaukee between June 1998

and March 1999 in accordance with generally accepted government

auditing standards. A complete description of the objectives, scope, and

methodology for this report appears in appendix I. A summary of IRS’

written comments on a draft of the report appears at the end of this letter.

Available data showed significant differences between Senior Executive

Service (SES) and line staff disciplinary cases in terms of dispositions and

processing times. For example, a much higher percentage of SES cases

than of lower-level cases was cleared or closed without action, and SES

cases tended to take longer to complete. Also, IRS found that actions taken

against lower-level employees more closely conformed to its established

table of penalties than actions taken against higher-graded employees.

However, there was no basis for a more direct comparison of the discipline

imposed on senior managers and lower-level employees because SES and

line staff offenses, as well as their associated mitigating and aggravating

factors, were different. Our ability to make other comparisons between

SES and line staff disciplinary cases was hindered by the lack of detailed

and accurate data in connection with IRS’ disciplinary case database.

Regarding the allegation that the Deputy Commissioner delayed action on

senior manager misconduct cases until the managers were eligible to

retire, we focused on actual retirements and did not reach general

conclusions about eligibility to retire. We found no cases in which an

individual who was ineligible to retire when an allegation was filed, retired

while the case was pending with the Deputy Commissioner. However,

cases we studied in depth were pending for 2 months to 4 years at the

Deputy Commissioner’s level. In addition, we estimated, on the basis of a

random sample of IRS SES disciplinary files, that SES cases averaged

almost a year from the time executive support staff received them until

case closure, compared to a goal of 90 days. To address a variety of

problems, including poor case-tracking procedures, inaccurate and

incomplete records and files, and poor communication, IRS has started to

revamp its entire disciplinary system.

We could not determine the extent of reprisal against whistleblowers

because IRS did not track whistleblowing reprisal cases. The only

systematic data available related to formal complaints filed with two

independent review agencies—the U.S. Office of Special Counsel (OSC)

and the U.S. Merit Systems Protection Board (MSPB). In fiscal years 1995

Results in Brief
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through 1997, OSC received 63 IRS whistleblower reprisal matters and

obtained action from IRS favorable to employees in 4 cases. In the same

time period, MSPB decided 45 initial appeals of whistleblowing reprisal

allegations involving IRS, dismissing the majority of them but settling more

than half of the remainder.

Regarding allegations of IRS retaliation against taxpayers, we previously

reported that IRS information systems were not designed to identify,

address, and prevent such taxpayer abuse.2

 In reviewing IRS databases for

this report, we again found that IRS information systems provided limited

and incomplete data on alleged revenue agent retaliation against taxpayers

and their representatives.

With respect to allegations of improper zeroing out or reductions of

recommended taxes by IRS managers, we found no evidence to support

the allegations in the eight specific cases referred to us by the IRS

employees who testified at the hearings. On the other hand, IRS did not

systematically collect data on how much additional taxes recommended by

auditors were zeroed out or reduced by IRS employees without a basis in

law or IRS procedure. In particular, IRS had no data on supervisors’

improperly limiting auditors’ recommendations of additional tax before an

audit was closed. Although our results were not a measure of improper

reductions in recommended taxes, we recently reported that the majority

of additional taxes recommended during audits was not assessed. We

attributed this to many factors, including the complexity of the tax code

and the overreliance on additional taxes recommended to measure audit

results.

IRS has acknowledged equal employment opportunity (EEO)-related

problems, including problems in hiring and promotion, in its Midwest

District Office and has begun addressing them. After an Equal Employment

Opportunity Commission administrative judge’s finding that an IRS

employee was a victim of discrimination, the district produced a climate

assessment report. In addition, although a recent outside panel found no

discriminatory hiring or promotion practices, its August 1998 report

contained many recommendations related to several district problem

areas, including the hiring and promotion processes. Since the report was

 

2

Tax Administration: IRS Can Strengthen Its Efforts to See That Taxpayers Are Treated Properly

(GAO/GGD-95-14, Oct. 26, 1994); Tax Administration: IRS Is Improving Its Controls for Ensuring That

Taxpayers Are Treated Properly (GAO/GGD-96-176, Aug. 30, 1996); and Tax Administration: IRS

Inspection Service and Taxpayer Advocate Roles for Ensuring That Taxpayers Are Treated Properly

(GAO/T-GGD-98-63, Feb. 5, 1998).
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issued, a new District Director was named who has stated her commitment

to overcoming the district’s contentious and long-standing EEO problems.

In general, IRS’ lack of adequate information systems and documentation

in the areas of employee discipline, retaliation against whistleblowers and

taxpayers, and zeroing out of recommended taxes prevented us from doing

a more comprehensive analysis of these issues. This lack of information

hinders both congressional oversight and IRS management from

addressing any problems in these areas. IRS has acknowledged the need

for more complete and accurate program and management information on

these issues.

The IRS Restructuring and Reform Act of 1998 included several provisions

related to employee misconduct, abuse, and retaliation. As a consequence,

IRS has taken steps intended to begin reform of its processes and data

collection in the areas of employee discipline, retaliation, and the tax

assessment process, among other things. We believe that it is important

that IRS maintain adequate information systems and documentation so

that employee and taxpayer complaints, including those related to

retaliation, can be properly reviewed.

Available data showed that case dispositions and processing times in

disciplinary cases during the period of January 1, 1996, through June 30,

1998, differed for SES employees and lower-level, or general schedule

(GS), staff. In addition, a 1997 IRS internal study found that actions taken

against lower-level employees more closely conformed to the IRS table of

penalties than actions taken against higher-graded employees.3

 However,

because of dissimilarities in the types of offenses and incomplete case

files, these data do not necessarily prove disparate treatment. Agencies

must consider many factors, such as the nature and seriousness of the

offense; the employee’s job level and type of employment; whether the

offense was intentional, technical, or inadvertent; the employee’s past

disciplinary record; and the notoriety of the offense or its impact upon the

reputation of the agency, in deciding what penalty, if any, should be

imposed in any given case. IRS recognized that problems have hindered

the processing and resolution of employee misconduct cases and has

begun revamping its disciplinary systems.

For the period we studied, IRS tracked disciplinary cases for GS and SES

employees in different systems. The Office of Labor Relations (OLR),

which is the personnel office for non-SES staff, handled GS cases. It

 

3

Guide for Penalty Determinations Report, IRS, Sept. 1997.

Disciplinary Actions

for Senior Executive

Service and LowerLevel Staff

Background
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tracked these cases in the Automated Labor and Employee Relations

Tracking System (ALERTS), although IRS officials told us that ALERTS

data were often missing or incomplete. The Office of Executive Support

(OES), which is the personnel office for IRS executives, handled SES

cases. Although ALERTS was supposed to also track SES cases, OES

tracked SES cases by using a log and monthly briefing reports. The

monthly briefing reports were used to inform the Deputy Commissioner

about the status of cases.

We selected the cases for our study of disciplinary actions for SES and

lower-level staff as follows: For GS cases, we used ALERTS data for 22,025

cases received in, or closed by, OLR between January 1, 1996, and June 30,

1998. For SES cases, our information came from two sources: (1) a 70-case

random sample of SES nontax misconduct case files that were active

between January 1, 1996, and June 30, 1998;4

 and (2) for the same time

period, 43 other SES nontax cases reported either in the logs or as

“overaged”5

 SES cases in the monthly briefing reports. In total, we looked

at 113 cases involving 83 SESers. Unless otherwise noted, all SES statistics

presented in this section are based on the random sample. See appendix I

for more information on how we selected the cases for our study.

We were unable to make many meaningful statistical comparisons

between SES and GS employee misconduct cases for three reasons. First,

we were able to collect more detailed data through our SES file review

than from the ALERTS database used for GS cases. This was particularly

true regarding dates on which important events occurred. As a result, we

could not compare average processing time at each phase of the

disciplinary process, although we were able to compare processing times

from case receipt through case closure.

Second, the level of detail and accuracy of ALERTS data varied widely.

Some IRS regions historically took ALERTS data entry more seriously than

others did, according to an IRS memorandum, and cases contained varying

levels of detail about case histories, issues, facts, and analyses. ALERTS

had few built-in system controls to ensure data integrity. Instead, IRS

relied on managers to ensure the accuracy of their subordinates’ work.

Third, some data were missing for the majority of the cases tracked in

ALERTS. For example, we could not analyze the frequency with which

 4

We excluded employee tax cases because they were inherently different from the cases and issues

raised during the April 1998 Senate Finance Committee hearings.

5

IRS defined overaged cases as those cases pending in OES for more than 90 days.
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final dispositions were less severe than proposed dispositions because

both pieces of information were available for only about 13 percent of the

ALERTS cases. Because officials said that ALERTS was OLR’s means of

recording information on lower-level disciplinary cases, we used it to the

extent that it had information comparable to what we collected on SES

cases.

Available data showed that processing time and frequency and type of case

dispositions differed for SES and lower-level staff. On average, from OES’

or OLR’s receipt of a case until case closure, SES cases, on the basis of our

70-case random sample, lasted almost a year (352 days) and lower-level

cases lasted less than 3 months (80 days).

We estimated that the largest difference between SES and GS case

dispositions occurred in the closed without action (CWA) and clearance

categories. As shown in table 1, the dispositions in 73 percent of SES cases

were CWA or clearance, versus 26 percent for GS cases. CWA is to be used

to close a case when the evidence neither proves nor disproves the

allegation(s). A disposition of clearance is to be used when the evidence

clearly establishes that the allegations are false. In practice, neither

disposition results in a penalty. The actual breakdown between the two

dispositions is as follows: for SES cases, 61 percent were CWA and 12

percent were clearance; for GS cases, 24 percent were CWA and 2 percent

were clearance.

Disposition

Percentage of

sampled

SES cases

Confidence

interval for SES

casesa

Percentage

of GS casesb

Clearance or closed without

action

73 63.4 - 83.4 26

Caution letter 0 0 - 5 3

Oral or written counseling 9 4.5 - 17.0 13

Reprimand 2 0.4 - 7.9 9

Suspension 0 0 - 5 9

Removal 0 0 - 5 5

Retired/Resigned 9 4.5 - 17.0 11

Otherc 7 3.2 -14.8 25 a

The confidence level for these intervals was 95 percent.

b

Does not add to 100 percent due to rounding.

c

For GS cases, “other” includes admonishments, leave restriction, reassignment, alternative discipline,

cases forwarded to Inspection, missing and miscoded cases, and other dispositions. For SES cases,

“other” includes missing and miscoded cases.

Sources: GAO analysis based on sample of SES cases and information from IRS’ ALERTS.

Table 1 outlines in order of severity the frequency with which available

data indicate that various dispositions were imposed for SES and lowerComparisons Between SES

and Lower-Level

Misconduct Cases

Table 1: Percentages of Closed SES and

Lower-Level Misconduct Cases

Receiving Various Dispositions
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level staff. SES data are based on the 56 closed cases in our 70-case

sample. GS data are based on 15,656 closed cases in ALERTS.6

 Ninety-fivepercent confidence intervals for the SES data are presented to more

accurately portray our findings. Using these confidence intervals, the rates

of occurrence differed between SES and GS cases for dispositions of

clearance and CWA, reprimand, suspension, and other. However, using 95-

percent confidence intervals and eliminating the CWA or clearance

category from the analysis, the rates of occurrence between SES and GS

cases were similar for all dispositions, except oral or written counseling

and retired/resigned. In any case, we will discuss later in this report that

differences in dispositions of SES and GS cases do not necessarily mean

that the dispositions were inappropriate or that disparate treatment

occurred.

We also analyzed disciplinary actions for an additional 43 SES cases.

Because these cases were not randomly selected, the results may not be

representative. Of the 43 cases, we found 9 in the more serious

categories—6 instances of counseling, 1 reprimand, 1 suspension, and 1

removal.

As further detailed in the upcoming section of this report on alleged caseprocessing delays by the Deputy Commissioner, SES cases took a long

time to close for many reasons. These reasons included poor case-tracking

procedures, inadequate file management, and poor communication among

agency officials involved in the disciplinary process. We do not know to

what extent, if any, these difficulties contributed to differences in

processing times between SES and GS cases.

Many factors can affect the discipline imposed in a particular case. These

factors include the nature and seriousness of the offense; the employee’s

job level and type of employment; whether the offense was intentional,

technical, or inadvertent; the employee’s past disciplinary record; and the

notoriety of the offense or its impact upon the reputation of the agency.

Collectively, these factors are components of what is known as the

Douglas Factors, and they must be considered in determining the

appropriate penalty in a case.7

 See appendix II for a listing of the Douglas

Factors.

 

6

Excludes duplicate cases and nondisciplinary dispositions.

7

Douglas v. Veterans Administration, 5 M.S.P.R. 280 (1981).

Factors Affecting CaseProcessing Time and

Dispositions
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Not all of the Douglas Factors will be pertinent in every case, and, while

some factors will weigh in the employee’s favor (mitigating factors), others

may weigh against the employee (aggravating factors). IRS officials told us

that lower-level actions tend to be more straightforward than SES actions,

with fewer mitigating factors. Since mitigating factors tend to reduce the

level of discipline imposed, this could partially explain why penalties might

be imposed differently in lower-level cases than in SES cases.

We found that allegations against SES employees were usually reported to

a hotline, the Department of the Treasury’s Office of Inspector General

(OIG), or the IRS Inspection Service. Because complaints against SES

employees can be anonymous, this anonymity can affect IRS’ ability to

follow up on a complaint or investigate it thoroughly. In contrast, IRS

officials told us that GS cases were generally filed by managers about their

subordinates. In these cases, the complainant was known and generally

provided concrete evidence to support the allegation.

Further, typical issues surrounding lower-level cases may be less

complicated or easier to successfully investigate than those involving SES

employees. Table 2 outlines in more detail the most common issues in SES

and lower-level staff cases. SES data are based on our 70-case sample. GS

data are based on 22,025 cases in ALERTS. We subjectively classified the

issues in SES cases, and our classifications may not be precise. Overall, we

found that the most common issue in SES cases was prohibited personnel

practices,8

 while time and attendance was the most common issue in GS

cases.

Cases

Most common

issue

Second most

common issue

Third most

common issuea

SES sample Prohibited personnel

practices

Misuse of

funds/property; fraud,

waste, and abuse

Procurement issues;

lying/falsifying

documents; abuse of

position/authority;

preferential treatment

GS Time and attendance Unauthorized

access to taxpayer

information

Unacceptable job

performance

a

There was a four-way tie among SES cases.

Sources: GAO analysis based on SES case file review and issue data from IRS’ ALERTS.

 8

Defined as actions that, by law, may not be taken by any employee who can take, direct others to take,

recommend, or approve any personnel actions. Examples include discrimination, coercion of political

activity, and nepotism. 5 U.S.C. 2302(b).

Table 2: Most Frequently Cited Issues

in SES and GS Disciplinary Cases
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In 1994, in response to an internal IRS study reporting a perception that

managers received preferential treatment in disciplinary matters, IRS

created a table of penalties, the Guide for Penalty Determinations.9

 The

purpose of the guide was to ensure that decisions on substantiated cases

of misconduct were appropriate and consistent throughout IRS. In 1997

and 1998, IRS studied the effect of the guide on GS and SES employees and

found that

• actions taken against lower-graded employees more closely conformed to

the guide than those taken against higher-graded employees (see table 3);

• for GS employees overall, 91 percent of disciplinary actions conformed to

the guide, versus 74 percent for SES employees;

• when disciplinary actions did not conform to the guide, the actions were

below the guide’s prescribed range 93 percent of the time for GS

employees overall, versus 100 percent of the time for GS-13 through GS-15

and SES employees; and

• if admonishments were included as part of reprimands, conformance with

the guide approached 100 percent for GS-13 through GS-15 employees.

Employee level

Degree of conformance

with the penalty guide

GS-2 through GS-7 92% - 93%

GS-8 through GS-12 88 - 91

GS-13 through GS-15 77 - 87

All SESa 74

Note: Nonconformance with the penalty guide does not necessarily mean that a particular penalty

was inappropriate.

a

IRS reviewed 164 executive cases. Of these, 43 cases had dispositions that were subject to the

provisions of the guide.

Source: Report of the Employee Complaints Analysis Group, IRS, 1998.

The IRS study and IRS officials agreed that the guide had limitations and

no longer met IRS needs. Specifically, the guide covered all employees but

did not address statutory and regulatory limitations that restricted

management’s ability to impose disciplinary suspensions on SES

employees. IRS officials said that governmentwide, there was no level of

discipline available for SES employees that was more severe than a

reprimand but less severe than a suspension of at least 15 days.10 In

contrast, GS employees could have received suspensions of 14 days or

less. While the guide prescribed a penalty range of “reprimand to

suspension,” the only option for SES employees, because of the statutory

 

9

Report of the Double Standard Study Group, IRS, May 1992.

105 U.S.C. 7542 and 5 C.F.R. 752.601(b).

IRS Study of Penalty Guide

Effects

Table 3: Degree With Which

Disciplinary Action Conformed to Guide

for Penalty Determinations, 1994-97
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limitations against suspensions of less than 15 days, was a reprimand if

management wished to impose a penalty, but not the harshest available

penalty. IRS officials also told us that in certain cases, they might have

imposed discipline in between a reprimand and a 15-day suspension had

they had the option to do so. According to IRS officials, IRS’ 1995 attempt

to have the Office of Personnel Management deal with this issue was

unsuccessful. Statutory and regulatory requirements could partially

explain why reprimands might have been imposed when a harsher

disciplinary action might have seemed more appropriate.

Applying to employees at different levels, the IRS penalty guide was

constructed with very broad recommended discipline ranges to provide for

management discretion. However, one IRS study pointed out that, in some

instances, this rendered the guide useless (e.g., when the penalty range

was “reprimand to removal”).11

IRS created a disciplinary review team in September 1998. Among other

things, the team was to

• develop an action plan that addressed case handling, complaint systems,

and employee awareness;

• review and revise IRS’ Guide for Penalty Determinations; and

• develop a process to review and monitor complaints.

As of March 1999, the team was proposing a new integrated IRS complaint

process. Its intent was to overcome problems with complaint processing

systems’ not (1) communicating or coordinating with each other, (2)

capturing the universe of complaints, (3) specifically tracking or

accurately measuring complaints, and (4) following up on complaints to

ensure that appropriate corrective action had been taken. The team was

proposing a 26-person Commissioner’s Review Group to, among other

things, manage and analyze complaints sent to the Commissioner of

Internal Revenue, monitor other IRS complaint systems, and coordinate

with the systems’ representatives. The team was also redesigning the

penalty guide.

 

11For the 51 offenses listed in the penalty guide, 15 offenses (or 29 percent) had a range of “reprimand

to removal” or “admonishment to removal.”

IRS Is Making Changes to

Its Complaint System
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On the basis of our review of SES cases, we did not find a case in which an

individual who was ineligible to retire at the time an allegation was filed,

retired while the case was pending with the Deputy Commissioner.

However, we found cases that spent up to 4 years at this stage in the

disciplinary process and cases that stalled at various points throughout the

process. Although OES’ goal for closing an SES case was 90 days, on the

basis of our random sample, cases averaged almost 1 year for OES to

close. Further, IRS had poor case-tracking procedures, inadequate file

management, missing and incomplete files, and poor communication

among officials involved in the disciplinary process.

Because IRS’ 1990 and 1994 written SES case-handling procedures were

out of date, IRS officials described the operable procedures to us.12 During

the period covered by our review, OES handled SES misconduct cases. Its

goal for closing a case was 90 days from its receipt of a case. Once OES

received a case, it was to enter it into ALERTS, although it did not always

do this, and prepare a case analysis. The case analysis and supporting

documents were then to be forwarded to the appropriate Regional

Commissioner, Chief, or Executive Officer for Service Center Operations,

who was to act as the “recommending official.” Within 30 days, the

recommending official was to review the case with the help of local labor

relations experts, develop any additional facts deemed appropriate, and

return a case report to OES, including a recommendation for disposition.

If OES disagreed with the report for any reason, it was to include a

“statement of differences” in its case analysis. OES was to forward the

field report and the OES analysis to the Deputy Commissioner’s office for

concurrence or disapproval. If the Deputy Commissioner concurred with

the proposed disposition, the recommending official could take action. If

the Deputy Commissioner did not approve, he could impose a lesser

disposition or return the case to OES for further development.13 IRS

executive case-handling procedures did not define a time period within

which the Deputy Commissioner was to act on case dispositions.

We collected information on SES cases from two sources: (1) the five

specific cases mentioned during the April 1998 Senate Finance hearings,

and (2) a 70-case random sample of the SES misconduct case files as

previously described, plus 43 more cases from OES tracking logs and

 

12Offices and positions in existence when the procedures were written had changed or disappeared but

were still official links in the processing chain.

13IRS officials told us that, procedurally, it would be difficult for the deciding official to impose a more

severe penalty than what was proposed.

Alleged Delays by IRS

Deputy Commissioner

on Senior Executive

Service Misconduct

Cases

Background
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monthly briefing reports, for a total of 113 cases. These 113 cases involved

83 individuals. Again, see appendix I for more details on how we selected

the cases to study.

Of the 113 SES cases we reviewed, we did not find a single instance in

which an individual who was ineligible to retire at the time the allegation

was filed, retired while the case was pending with the Deputy

Commissioner. Overall, of the 83 individuals involved in the 113 cases, 25

people, or 30 percent, had retired from IRS by December 31, 1998.14 Of

these 25 people, 13 retired before their cases were closed or the cases

were closed because the individuals retired. At the time of retirement,

cases for 2 of the 13 people were pending in the Deputy Commissioner’s

office, but both of these individuals had been eligible to retire at the time

the complaints against them were originally filed. Cases for the remaining

11 of the 13 people either were still being investigated or were pending in

OES, that is, they had not yet reached the Deputy Commissioner’s office.

In doing our analyses, we focused on actual retirements and did not reach

general conclusions about eligibility to retire.

As table 4 shows, of the five executive cases mentioned during the April

1998 hearings, two of the executives were already eligible to retire when

the allegations against them were filed. We refer to the executives in the

five cases as Executives A through E. One of the two eligible executives—

Executive B—was still an IRS employee as of September 30, 1998. The

other—Executive D—retired while, in OES’ view, his case was pending in

the Deputy Commissioner’s office.15 Of the three individuals who were not

eligible to retire when the allegations against them were filed, one retired

16 months after his case was closed. The other two executives, one of

whom was not found culpable, were still employed by IRS as of September

30, 1998.

 

14The 25 individuals do not include people for whom specific retirement dates were unavailable or

individuals whose cases were received in OES after they had retired.

15Executive D was transferred about 7 months after the Inspection investigation was completed. The

Deputy Commissioner considered the case closed with the individual’s transfer, but OES was unaware

of the Deputy Commissioner’s view and did not formally close the case until 3 months after Executive

D retired, or 35 months after the transfer.

No Cases Showing

Retirement Linked to

Deputy Commissioner

Delays in Case Processing
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Page 13 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

SESer

Employment

status

at our

September 30,

1998, cutoff date

Retirement

status at time

of allegation

Case pending

with Deputy

Commissioner

(months) Case outcome

A IRS employee Not eligible to

retire

a Not found to be

culpable for

violation

B IRS employee Eligible to

retire

2 Counseled,

confirmed in writing

C Retired Not eligible to

retire

18 Counseled

D Retired Eligible to

retire

a Transferred

E IRS employee Not eligible to

retire

48 Counseled,

confirmed in writing a

Disciplinary file did not document the duration of the Deputy Commissioner’s review.

Sources: GAO analysis based on IRS misconduct case files and retirement eligibility information.

IRS records showed that the misconduct cases spent from 2 months to 4

years at the Deputy Commissioner level. See appendix III for more details

about the five cases.

As shown in table 5, on the basis of our random sample, the total

processing time for SES misconduct cases averaged 471 days (almost 16

months) from the date the complaint was filed until the case was closed.

Most of this time involved OES case analysis and referral to the

recommending official for inquiry (214 days, or about 7 months) and

investigation by the recommending official (124 days, or more than 4

months). These averages exceeded IRS’ most recent, written caseprocessing time guidelines, which were 14 and 30 days, respectively. The

average total time from OES’ receipt of a case to the case’s closure was

352 days, compared to a goal of 90 days. As previously mentioned, there

was no targeted time frame for the Deputy Commissioner’s review.

However, on average, cases spent 42 days at this level.

Table 4: Information on the Five

Misconduct Cases Cited at the April

1998 Senate Finance Committee

Hearings

Case Processing Not Timely
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Stages of process

Percentage of

sample cases

with

informationa

Median

number

of days

Mean

number

of days

Required

number

of days

Range

 of days

Complaint filed to

OIG/Inspection

beginning

investigation

21 41 60 10-15 0 - 280

Complaint filed to

OIG/Inspection

declining to

investigate

66 40 57 10-15 0 - 306

OIG/Inspection

starting investigation

to referral to IRS

21 123 130 No standard 7 - 355

OES receipt to

transmittal to

recommending official

(RO)

60 161 214 14 43 - 690

RO’s receipt of case

to RO’s completion of

inquiry

56 99 124 30 13 - 514

OES transmittal to

deciding official (DO)

to DO’s decision

57 30 42 No standard 2 - 143

DO’s decision to case

closure

57 0 12 No standard 0 - 202

OES receipt to case

closure

79 252 352 90 13 - 1,275

Overall time:

complaint filed to

case closure

79 390 471 No standard 104 - 1,467

Note: Ninety-five-percent confidence intervals surrounding the mean number of days for all

processing stages were less than plus or minus 10 percent.

a

Some percentages were relatively low because not all cases went through every phase, case files

did not always include all dates, and open cases still had processing phases to go through.

Sources: GAO analysis based on IRS misconduct case data and executive case-handling

procedures.

In addition, we found that some cases took a particularly long time to be

resolved. For example, in our sample cases, from the date the complaint

was filed to the date the case was closed, 8 cases took at least 2 years, an

additional case took more than 3 years, and still another case took longer

than 4 years.

In 1992, IRS acknowledged that the best way to prevent employees from

retiring before their cases closed was to improve timeliness.16 Although we

found no cases in which individuals ineligible to retire when allegations

 

16IRS’ Program to Combat Senior-Level Misconduct: Getting Stronger but Still a Long Way to Go, FortyFirst Report by the Committee on Government Operations, Nov. 23, 1992.

Table 5: Processing Time at Selected

Stages in the Disciplinary Process for

SES Misconduct Cases
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Page 15 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

were made retired with the case pending before the Deputy Commissioner,

the longer it takes to close cases, the more likely that individuals would

retire or resign while their cases were open.

Our review and a recent IRS task force report identified numerous

problems with the executive misconduct case-handling process.17 These

problems included inadequate staffing, poor communication, inaccurate

and incomplete records and files, outdated procedures, conflicts over

proposed case dispositions, and internal disagreement about case

investigations. These problems contributed to the lengthy case-processing

times in the available data and case files.

According to IRS officials, IRS’ downsizing a few years ago significantly

affected OES and field staff resources. From late 1996 through early 1998,

OES devoted only one staff year to executive misconduct cases. The staff

year was divided between the Director and one employee. In mid-1998, the

Director moved to Labor Relations, and the employee retired, leaving OES

with no resident expertise. Previously, four or five case experts handled

executive cases. In total, according to an IRS official, the office was

understaffed for about 18 months, which caused a case backlog. However,

the new Chief of OES was able to bring the staffing level up to eight,

including two individuals with employee relations backgrounds to act as

team leaders. She also used detailees and a technical contractor to reduce

the case backlog.

The understaffing issue also extended to the labor relations functions in

the regions. These functions supplied the staff that recommending officials

used to investigate misconduct cases. When the regional offices were

consolidated several years ago, they lost their labor relations functions as

well as a central repository for program administration and expertise.

IRS did not enter executive misconduct cases into ALERTS from late 1996

through early 1998. IRS officials told us they did not have enough labor

relations experts to properly track cases on ALERTS because the system

required significant detail about each case. Instead, it tracked these cases

using logs and monthly briefing reports. OES also used the briefing reports

to inform the Deputy Commissioner of case status. IRS officials

acknowledged that these independent systems often disagreed with each

other about the details and status of the cases.

 

17Task Force to Review Handling of Executive, Grade 15 and Inspector General Referrals and

Investigations, IRS, July 28, 1998.

Problems With the SES

Misconduct Case-Handling

Process

Lack of IRS Staff Resources
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Our review found that poor communication among IRS support staff, the

Deputy Commissioner’s office, IRS Inspection, and OIG contributed to

case-processing delays. As previously mentioned, the Deputy

Commissioner considered one case to be closed with the transfer of the

individual, but OES was not told to formally close the case. In another

instance, the Deputy Commissioner told us that he inadvertently allowed a

case to be lost in the system. Case information in the ALERTS, OES, and

IRS Inspection tracking systems was also found to be inconsistent and

inaccurate in many instances. For example, according to IRS officials,

cases recorded as “overaged” in the IRS Inspection system were recorded

as “closed” by the field offices, leading to confusion among officials as to

whether a case was open or closed and where a particular case was

pending at a given time.

An internal IRS study found that many cases had timeliness problems,

especially cases that had been referred to IRS from OIG. In certain

instances, cases stayed at a particular phase in the process for months

before an OES employee inquired about their status. In one instance, for

nearly 2 years, OES did not follow up on the status of an OIG investigation.

IRS officials told us that these problems occurred primarily because IRS

had no contact person for OIG cases before early 1997, and because OES

lacked staff resources to properly monitor cases.

Our review identified several concerns surrounding IRS’ files, records, and

miscellaneous procedures for executive misconduct cases. Examples

included the following:

• Poor filing. Executive misconduct cases were to be filed alphabetically.

Several times, we happened upon misfiled cases only because we went

through all of the files to draw our sample. Also, in one instance, a closing

letter addressed to the executive involved in a case was filed instead of

being mailed to the individual. It took nearly 5 months for the error to be

discovered and rectified.

• Missing files and records. We requested eight case files for our review that

IRS could not provide, even after more than 4 months.

• Incomplete files. In some cases, the case files did not document important

information, such as dates, transmittal memorandums, and final case

dispositions. In one instance, the case file consisted of a single E-mail

message. The case was serious enough to warrant suspending the

individual.

Poor Communication

Administrative Practices That

Raised Concerns
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• Noncompliance with procedures. In several instances, field staff imposed

discipline before the Deputy Commissioner had concurred with the

proposed action. Several files contained memorandums to the field staff,

reminding them not to impose discipline or close a case until the Deputy

Commissioner had indicated his approval. Further, as mentioned in

appendix III, a premature disposition occurred in one of our case studies.

According to two 1998 IRS internal studies, outdated procedures led to

inefficient case handling and confusion as to who was responsible for

what. Because of regional and district consolidations and a national office

restructuring, the written, 1994 case-handling procedures no longer

accurately depicted the proper flow of cases. Although procedures were

informally adjusted and work kept moving, it was not efficient. As a result,

ad hoc procedures were developed in each region, leading to

communication problems between the regions and the national office. IRS

recognized this problem in March 1998 and completed a draft of new case

procedures in July 1998. During that time, the Internal Revenue Service

Reform and Restructuring Act of 199818 established the Treasury Inspector

General for Tax Administration (TIGTA), and procedures were again

revised to accurately depict TIGTA’s role. According to IRS officials, draft

procedures were sent to IRS field offices for comment in mid-March 1999.

Another factor contributing to case-processing delays was internal

disagreement surrounding the proper level of discipline to impose in

particular cases. In our case studies, we noted instances in which internal

disputes significantly lengthened case-processing times.19 OES officials

told us that this situation occurred much more frequently in the past.

However, over the past few years, IRS has made a concerted effort to

resolve disputes below the Deputy Commissioner level.

As shown in table 6, in the cases involving Executives C and D,

disagreements were serious. In fact, they warranted formal statements of

differences. In each of these two cases, OES endorsed a stronger level of

discipline than that suggested by the recommending official. In the case of

 

18P.L. 105-206.

19See appendix III for information on these disagreements.

Outdated Procedures

Internal Disagreements
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Executive E, IRS officials disagreed among themselves over the facts of

the case. Although an IRS Internal Security investigation confirmed the

allegations, the Deputy Commissioner was not comfortable with the

allegations’ correctness. However, he eventually agreed that the

allegations had some merit. The Deputy Commissioner issued a letter of

counseling 5-1⁄2 years after the complaint was filed, which was more than 4

years after he received the case.

SESer

Recommending

official’s proposed

disposition

OES’ original

proposed

disposition Final disposition

C Close without action Letter of reprimand a Closed without action,

but employee was

counseled

D Counseling 15-day suspension

and consideration of

transferring the

employee

Transferred, according

to Deputy

Commissioner;

according to OES,

closed without action

“administratively” due

to retirementb

E Letter of reprimand Letter of reprimandc Letter of counseling a

OES subsequently changed its position and recommended a disposition of “close without action.”

b

See footnote 15 of this report.

c

The proposed disposition was later changed to “letter of reprimand or letter of counseling.”

Source: GAO analysis based on IRS misconduct case files.

As of March 1999, an IRS disciplinary review team was proposing changes

to overcome problems with complaints processing. One of the units of its

proposed Commissioner’s Review Group was to provide labor relations

support for SES and other cases. This unit would have 11 employees. In

addition, the Commissioner’s Review Group would have a contractor

available to supplement it and support field investigations when

management believed help was needed. As previously mentioned, the

group would also be responsible for overcoming communication and

coordination problems among complaint-processing systems.

Table 6: Disputes Surrounding Case

Dispositions in Three Executive

Misconduct Cases

Recent IRS Actions
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IRS did not comprehensively collect and analyze information on reprisals

against IRS employee whistleblowers or on IRS retaliation against

taxpayers. Some information was available on the number of IRS-related

whistleblowing reprisal cases resolved by the two agencies responsible for

considering such cases. For example, one of the agencies, OSC, received

63 IRS whistleblower reprisal matters over the fiscal years 1995 through

1997 and obtained action from IRS favorable to employees in 4 cases.

Concerning allegations of IRS retaliation against taxpayers, we reported in

1996 and 1998 that IRS did not systematically capture information needed

to identify, address, and prevent such taxpayer abuse. During this review,

we also found limited and incomplete IRS information of past revenue

agent retaliation against taxpayers.

The IRS Restructuring and Reform Act of 1998 included several provisions

related to abuse or retaliation against taxpayers, their representatives, or

IRS employees. As of March 1999, the IRS disciplinary review team was

proposing how data needed to fulfill the act’s requirements would be

assembled.

It is against the law to take a personnel action as a reprisal against a

whistleblower.20 More specifically, an employee with personnel authority is

not allowed to take, fail to take, or threaten a personnel action against an

employee because the employee made a protected disclosure of

information. Protected disclosures include disclosures that an employee

reasonably believes show a violation of law, rule, or regulation; gross

mismanagement; gross waste of funds; or an abuse of authority.

If federal employees believe they have been subject to reprisal, they may

pursue their complaint through the agency where they work. Alternatively,

they may direct their complaint to OSC or MSPB.

We could not determine the extent of reprisal against whistleblowers

because IRS did not track information on whistleblower claims of reprisal.

According to a knowledgeable IRS official, until recently, the ALERTS

database did not have a code to capture information on retaliation

associated with individuals, including reprisal against whistleblowers.

However, OSC and MSPB provided the number of complaints filed with

them.

Under the Whistleblower Protection Act of 1989, OSC’s main role is to

protect federal employees, especially whistleblowers, from prohibited

 

205 U.S.C. 2302(b)(8).

Number of

Whistleblowing

Reprisal Cases and

Extent of Information

on Alleged IRS

Retaliation Against

Taxpayers

Reprisals Against

Whistleblowers

Office of Special Counsel Cases
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Page 20 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

personnel practices. In this role, OSC is to act in the interests of the

employees by investigating their complaints of whistleblower reprisal and

initiating appropriate actions. Whistleblowing employees may file a

complaint with OSC for most personnel actions that are allegedly based on

whistleblowing.

As shown in table 7, between fiscal years 1995 and 1997, OSC received 63

whistleblowing reprisal matters related to IRS, compared to 2,092 for the

federal government as a whole. However, OSC concluded that a much

smaller number of IRS and governmentwide reprisal matters involved

potentially valid statutory claims and therefore warranted more extensive

investigation. OSC closed cases without further action for many reasons,

including lack of jurisdiction over an agency or employee, absence of an

element needed to establish a violation, and insufficient evidence.

Category IRS Governmentwide

Matters received 63 2,092

Matters referred for field

investigation

13 621

Actions favorable to employees 4 237

Source: OSC.

Since IRS had about 100,000 employees during this period, the ratio of

matters received to the number of employees was less than a tenth of 1

percent. Similarly, although OSC received whistleblowing reprisal matters

from throughout the federal government, the number of matters received

was an extremely small percentage of the civilian employee federal

workforce that numbered almost 2 million people.

As table 7 further shows, at times both IRS and the federal government

took “favorable actions” as a result of OSC investigations. In general,

favorable actions are those that may directly benefit the complaining

employee, punish the supervisor involved, or systematically prevent future

questionable personnel actions. Agencies take these actions after receiving

a request from OSC or with knowledge of a pending OSC investigation. The

four favorable actions taken by IRS between fiscal years 1995 and 1997

entailed removing disciplinary letters from a personnel file, correcting an

employee’s pay level, presenting a performance award, and promoting an

employee retroactively and providing back pay.

Employee complaints of whistleblowing reprisal may reach MSPB in two

ways. First, if employees do not obtain relief through OSC, they may

appeal to MSPB. Second, employees may appeal directly to MSPB without

Table 7: OSC Whistleblower Reprisal

Matters for Fiscal Years 1995-97

Merit Systems Protection Board

Cases
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first going through OSC. They may do this for actions including adverse

actions, performance-based removals or reductions in grade, denials of

within-grade salary increases, reduction-in-force actions, and denials of

restoration or reemployment rights. MSPB categorizes both types of

appeals as “initial appeals.”

MSPB administrative judges throughout the country decide initial appeals.

The judges either dismiss the cases or decide them on their merits.

Common reasons for dismissing cases are that they do not raise appealable

matters within MSPB’s jurisdiction or that they are not filed within the

required time limit. The parties to the dispute also may enter into a

voluntary settlement, sometimes with assistance from the judge. Cases not

dismissed or settled are adjudicated on their merits. Possible outcomes are

that the agency action may be affirmed or reversed or the agency penalty

may be mitigated or otherwise modified.

A party dissatisfied with a case decision may file a “petition for review” by

MSPB’s three-member board. The board may grant a petition if it

determines that the initial decision was based on an erroneous

interpretation of law or regulation or if new and material evidence became

available. It may dismiss a petition that is untimely, withdrawn by the

parties, or moot. Petitions may also be denied or settled.

As with OSC, the number of whistleblowing reprisal decisions issued by

MSPB was very small compared to the size of the IRS and federal

workforces. As shown in table 8, for fiscal years 1995 through 1997, MSPB

decided 45 initial appeals of whistleblowing reprisal allegations involving

IRS. Similar to MSPB’s rulings involving the rest of the federal government,

MSPB dismissed the majority of initial appeals involving IRS and denied

the majority of petitions for review. However, settlements occurred in

more than half of the initial appeals that were not dismissed, which could

mean that employees were getting some relief. MSPB also occasionally

remanded petitions for review, that is, sent them back for further

consideration. MSPB ordered IRS corrective action (canceling an

employee’s removal and mandating back pay) in one initial appeal case

when due process measures unrelated to reprisal were not followed. To

our knowledge, except for this case, MSPB did not reverse any IRS actions

regarding alleged whistleblower reprisal matters over the 3-year period.

For government initial appeals as a whole, MSPB ordered agency
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Page 22 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

corrective action 11 times and otherwise reversed agency actions in 24

instances.21

Decision IRS Treasury Governmentwide

Initial appeals

 Dismissed 27 63 882

 Corrective action not ordered 1 6 70

 Corrective action ordered 1 3 11

 Settled 11 22 324

 Affirmed 4 11 127

 Reversed 0 0 24

 Modified/Mitigated 1 4 21

Total 45 109 1,459

Petitions for review

 Dismissed 1 1 23

 Settled 0 2 14

 Denied 13 23 229

 Denied then reopened 0 3 26

 Granted - affirmed 0 2 10

 Granted - reversed 0 0 7

 Granted - remanded 3 5 32

 Granted - mitigated 0 1 1

 Granted - other 1 1 4

 Other 0 0 3

Total 18 38 349

Sources: Information compiled by GAO from MSPB, IRS, and the Internet.

Before the IRS Reform and Restructuring Act of 1998, IRS did not

systematically collect information on retaliation against taxpayers. As we

have previously reported,22 IRS information systems were designed for

tracking disciplinary and investigative cases or correspondence and not for

identifying, addressing, or preventing retaliation against taxpayers. The

systems contained data elements that encompassed broad categories of

employee misconduct, taxpayer problems, and legal action. Information in

the systems related to allegations of taxpayer abuse was not easily

distinguishable from information on allegations not involving taxpayers.

 

21Although we did not have any governmentwide statistics for 1998, we did have 1998 information for

IRS. The only decisions in these cases that could have been construed to be favorable to the original

complainants were 6 settlements out of the 25-case total.

22GAO/GGD-95-14, GAO/GGD-96-176, and GAO/T-GGD-98-63.

Table 8: Number of MSPB Decisions

Covering Whistleblower Disclosures for

Fiscal Years 1995-97

Extent of Information on

IRS Retaliation Against

Taxpayers
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Page 23 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

Consequently, we found limited information on potential taxpayer abuse in

IRS information systems, as shown in table 9.23

Database Results of GAO queries

Internal Security Management

Information System

IRS found information on two cases of confirmed

retaliation in 4 years but said coding in database

could not ensure comprehensiveness.

Automated Labor and Employee

Relations Tracking System

Until recently, database did not include a code for

retaliation for cases associated with individuals.

Problem Resolution Office

Management Information System

Database did not include a code for retaliation.

Executive Control Management

System

IRS case summaries described four cases as

taxpayer retaliation during 1 year for this system, in

existence since mid-1997. According to IRS, the

system’s coding was becoming more specific.

Source: GAO analysis of various IRS databases.

Recent changes in the law and IRS’ progress on information systems are

intended to improve IRS’ ability to determine the extent to which its

employees might have retaliated against taxpayers or employees for

whistleblowing. Enacted in July 1998, the IRS Restructuring and Reform

Act of 1998 included several provisions related to abuse or retaliation

against taxpayers, their representatives, or IRS employees.

Section 1203 of the act provided for firing IRS employees who commit any

1 of 10 acts. For example, the act required the Commissioner of Internal

Revenue to fire any IRS employee for

“violations of the Internal Revenue Code of 1986, Department of Treasury regulations, or

policies of the Internal Revenue Service (including the Internal Revenue Manual) for the

purpose of retaliating against, or harassing, a taxpayer, taxpayer representative, or other

employee of the Internal Revenue Service” ...or ... “threatening to audit a taxpayer for the

purpose of extracting personal gain or benefit.”

The act also required the Treasury Inspector General for Tax

Administration to include in its annual report summary information about

any termination under section 1203 or about any termination that would

have occurred had the Commissioner not determined there were

mitigating factors. In March 1999, the disciplinary review team previously

described was proposing that the Commissioner’s Review Group report

these data to the Inspector General as well as broader data on the number

of taxpayer complaints and the number of taxpayer abuse and employee

 23For information on specific allegations of retaliation against taxpayers, see Tax Administration:

Investigation of Allegations of Taxpayer Abuse and Employee Misconduct Raised at Senate Finance

Committee’s IRS Oversight Hearings (GAO/OSI-99-9R, May 24, 1999).

Table 9: IRS Information on Retaliation

Against Taxpayers

Restructuring Act Reporting

Requirements
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Page 24 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

misconduct allegations. The group would collect, consolidate, and validate

data from existing systems and obtain supplemental information to fill

gaps. However, according to the team, the group would have to qualify the

initial reports to the Inspector General, waiting for data reliability to be

established.

With respect to allegations of improper zeroing out or reductions of

recommended tax by IRS managers, we found no evidence to support the

allegations in the eight specific cases referred to us by the IRS employees

who testified at the hearings. On the other hand, IRS does not

systematically collect data on the extent to which additional taxes

recommended by IRS auditors are zeroed out or reduced without a basis in

law or IRS procedure. While there are no data on improper reductions,

there are data on IRS recommendations of additional tax that were not

ultimately assessed. On the basis of such data, we recently reported that

the majority of recommended additional taxes was not assessed. We

attributed this result to a variety of factors, including the complexity of the

tax code and the overreliance on taxes recommended as a measure of

audit results.

IRS’ process for doing audits of taxpayers’ returns and closing related

disputes over additional recommended taxes has several steps. In an audit,

an IRS auditor usually reviews the taxpayer’s books and records to

determine compliance with tax laws and identify whether the proper

amount of tax has been reported. To close an audit, the auditor may

recommend increasing, decreasing, or not changing the tax reported. If a

taxpayer disagrees with the recommendation at the close of the

examination, the taxpayer may request an immediate review by the

auditor’s supervisor.

If the taxpayer agrees with the recommended additional tax or does not

respond to IRS’ notices of examination results, IRS assesses the tax. With

an assessment notice, IRS formally notifies the taxpayer that the specified

amount of tax is owed and that interest and penalties may accrue if the tax

is not paid by a certain date. The assessed amount, not the amount an

auditor recommends at the end of the audit, establishes the taxpayer’s

liability.

If the taxpayer disagrees with an examination’s recommendation, the

recommendation may be protested to IRS’ Office of Appeals or the dispute

can be taken to court.24 The Office of Appeals settles most of these 24Taxpayers may appeal to Tax Court without paying the tax or pay the tax and claim a refund in the

U.S. Court of Federal Claims or a federal district court.

Alleged Improper

Zeroing Out or

Reduction of

Recommended Tax

Background
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Page 25 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

disputes, and the remainder are docketed for trial. Agreements made in

settlements and court decisions determine the assessed part of the

disputed tax.

The issue of reductions in recommended tax was raised in the Committee’s

hearing by IRS auditors who alleged that some supervisors “zeroed out” or

reduced the results of audits—that is, the audits were closed with no or

reduced recommended additional tax, without a basis in law or IRS

procedure. The witnesses further alleged that the reasons for zeroing out

included retaliating against auditors to diminish their chances for

promotion, favoring former IRS employees in private practice, and

exchanging zeroing out for bribes and gratuities from taxpayers.25

IRS has not systematically collected data on the extent to which additional

taxes recommended by auditors have been zeroed out or reduced without

a basis in law or IRS procedure. In particular, IRS had no data on

supervisors’ improperly limiting auditors’ recommendations of additional

tax before an audit was closed. However, IRS collects data on the amounts

of recommended taxes that were not assessed and the number of

examinations closed with no change in tax liability.

One of our recent reports illustrates the lack of data on the extent to which

supervisors improperly limit auditors’ recommendations of additional tax.26

We found that an estimated 94 percent of IRS workpapers lacked

documentation that the group manager reviewed either the support for

adjustments or the report communicating the adjustments to the taxpayer.

IRS managers acknowledged that because of competing priorities, they

could not thoroughly review workpapers for all audits. IRS officials

commented that supervisory reviews were usually completed through

other processes, such as reviewing time spent on an audit, conducting onthe-job visits, and discussing cases with auditors. We recommended that

the IRS Commissioner require all audit supervisors to document their

review of all workpapers to help ensure the quality of all examinations.

In another recent report, we found that most additional taxes

recommended by IRS auditors were not assessed. Table 10 shows taxes

recommended by IRS auditors and the percentage of these amounts

assessed for audits closed in fiscal years 1992 through 1997. During these

 

25Further information on these issues is in GAO/OSI-99-9R.

26IRS Audits: Workpapers Lack Documentation of Supervisory Review (GAO/GGD-98-98, Apr. 15, 1998).

Data Collected by IRS
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Page 26 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

years, at most, 41 percent of the additional taxes recommended during

audits were assessed.

Dollars in billions

Fiscal year

Recommended

amount

Percentage

 assessed

1992 $24.8 34

1993 22.0 40

1994 22.6 41

1995 27.2 40

1996 30.8 36

1997 31.7 38

Note: Dollars are in current dollars.

Source: Tax Administration: IRS Measures Could Provide a More Balanced Picture of Audit Results

and Costs (GAO/GGD-98-128, June 23, 1998).

Other IRS data showed that many examinations were concluded with no

recommended additional tax. For example, according to IRS’ Fiscal Year

1997 Data Book, 24 percent of the corporate examinations completed

during fiscal year 1997 were closed with no proposed tax change.

Our previous work identified several factors that, in part, explained why

recommended additional taxes were not assessed after audits were

closed.27 Factors like these could also explain some actions by supervisors

to zero out or reduce recommended tax amounts prior to audits being

closed. However, IRS does not collect data on the extent to which these

factors, or others, contribute to supervisors’ decisions prior to audits being

closed.

We reported that the complexity and vagueness of the tax code was one

explanation for recommended taxes not being assessed after a corporate

audit was closed. Because of the complexity and vagueness of the tax

code, IRS revenue agents had to spend many audit hours to find the

necessary evidence to clearly support any additional recommended taxes.

In addition, differing interpretations in applying the tax code to underlying

transactions increased the likelihood of tax disputes. Because corporate

representatives usually prevailed in Appeals or the courts, additional taxes

recommended were often not actually assessed.

We also reported that aspects of the corporate audit process for large

corporations also made it difficult for revenue agents to develop enough

support to recommend tax changes that could survive a taxpayer appeal.

 

27Tax Administration: Factors Affecting Results From Audits of Large Corporations (GAO/GGD-97-62,

Apr. 17, 1997).

Table 10: Status of Additional Amounts

Recommended for Individual, Corporate,

and Other Audits Closed in Fiscal Years

1992-97, as of September 27, 1997

Reasons for Reducing

Recommended Tax
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For example, revenue agents worked alone on complex, large corporation

audits with little direct assistance from district counsel or their group

managers. In addition, when selecting returns for audit, the agents had

little information on previously audited corporations or industry issues to

serve as guideposts. Finally, the agents had difficulty obtaining relevant

information from large corporations in a timely manner.

IRS Internal Audit28 recently cited several factors that contributed to low

productivity, as partially manifested by high no-change rates, in the

Manhattan District Office. IRS acknowledged that in 1995, it took

aggressive action to close old examinations. Also, audit group managers in

Manhattan and two other districts did not have enough time to perform

workload reviews to ensure quality examinations. Manhattan was below

the IRS regional average in complying with IRS audit standards for such

things as depth of examinations and workpaper support for conclusions.

We also reported that relying too heavily on additional taxes

recommended as a measure of audit results might create undesirable

incentives for auditors. We found that audits of large corporations raised

concerns that relying on recommended taxes as a performance indicator

might encourage auditors to recommend taxes that would be unlikely to

withstand taxpayer challenges and thus not be assessed.29 Supervisors on

guard against this incentive, which might have also influenced them, might

have been accused of improper zeroing out. In this connection, we recently

reported that IRS examination and collection employees perceived that

managers considered enforcement results when preparing annual

performance evaluations.30

IRS is increasing its efforts to ensure that enforcement statistics are not

used to evaluate its employees. In commenting on our report on

enforcement statistics, the Commissioner stated that IRS was taking

several actions to ensure that all employees comply with its policies on the

proper use of enforcement statistics. These actions included redrafting

applicable sections of the Internal Revenue Manual, establishing a panel

responsible for answering all questions IRS received on enforcement

statistics, and establishing an independent review panel to monitor

compliance with restrictions on using enforcement statistics. In addition,

 

28Productivity of the General Examination Program in the Manhattan District, IRS Internal Audit

Report, Reference No. 680904, Jan. 30, 1998.

29GAO/GGD-98-128.

30IRS Personnel Administration: Use of Enforcement Statistics in Employee Evaluations (GAO/GGD-99-

11, Nov. 30, 1998).
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Page 28 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

in January 1999, IRS proposed establishing a balanced system of

organizational measures focusing on quality and production measures, but

not including tax enforcement results.

Several of the individual allegations made by IRS employees that we

reviewed involved the issue of improper zeroing out of additional taxes by

IRS managers. The eight specific cases in question involved large

organizations, and the issues generally related to complex financial

transactions.

We found no evidence to support the allegations that IRS managers’

decisions to zero out or reduce proposed additional taxes were improper.

Instead, we found that the managers acted within their discretion and

openly discussed relevant issues with involved IRS agents, technical

advisors, and senior management. Ultimately, the decisions were approved

by appropriate individuals and were documented in the files.

Several of the cases demonstrated some of the concerns and issues we

have raised in our prior work concerning audits of large corporations. For

example, the complexity and vagueness of the tax code create legitimate

differences in interpretation and administering the tax system creates a

tension in seeking a proper balance between the tax administrator’s need

for supporting documentation and the taxpayer’s burden in providing such

information.

IRS has acknowledged problems related to the EEO climate in its

Milwaukee, WI, area offices and over the last few years has moved to

address them. After a finding of discrimination in 1995 in the case of one

employee, a new district director initiated an internal review, and,

afterwards, IRS appointed an outside review team to study the EEO

situation. The internal study made 53 recommendations in broad

categories related to creating a supportive work culture, understanding

issues, preparing employees for promotion, and examining the promotion

process. The outside study found no discriminatory hiring or promotion

practices, but it did make recommendations related to hiring and

promotions, among other things.

Problems with the EEO climate in IRS’ Midwest District Office, which is

headquartered in Milwaukee, date back several years. In 1995, Treasury

agreed with an Equal Employment Opportunity Commission

administrative judge who found that a district employee was the victim of

discrimination and retaliation. Also, Wisconsin congressional offices

received EEO-related complaints from IRS employees, and internal and

Witness Allegations of

Improper Zeroing Out

Equal Employment

Opportunity Issues in

IRS’ Midwest District

Office

Background
B-280651

Page 29 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

external groups were critical of district EEO matters. According to the

District Director who arrived in early 1996, the district was perceived to

run on “good-old-boy” connections. Also, the district, which was created in

1996 through the merger of three smaller districts, was facing possible

layoffs, further contributing to tense labor-management relations.

To try to better identify some of the underlying causes of the problems in

IRS Milwaukee area offices, the District Director commissioned an IRS

team in April 1996 to assess the EEO climate and make recommendations

for corrective action. As part of its review, the team distributed a survey to

all Milwaukee area district employees to gather EEO-related perceptions.

On the basis of its review of the survey results and other data, in December

1997, the team reported that a lack of trust and goodwill pervaded the

work environment. The survey revealed that people in all groups (e.g.,

males, females, nonminority whites, African Americans, and Hispanics)

believed they were less likely than people in other groups to receive

promotions, significant work assignments, training opportunities, and

formal recognition or rewards. Specific problems cited in the report

included little recent diversity training, a belief by certain minority

employees that stereotypes negatively affected their treatment, difficulties

in widely disseminating information, gaps in EEO communication, no

formal mentoring program, and much dissatisfaction with how employees

were selected for promotion.

On the basis of its findings, the assessment team made 53

recommendations in 4 categories. The categories covered creating a

supportive culture, creating a greater understanding of issues, preparing

employees for promotion, and examining ways that employees were

selected for promotion. In a 5th category—examining the representation of

minorities in the district—the team made 21 more recommendations that

were expected to be suspended pending an IRS analysis of the

ramifications of certain court cases.

The District Director who commissioned the climate assessment report

praised it and the process that produced it. During his tenure, many

actions were taken to address the district’s EEO problems. For example,

(1) policy statements were issued tolerating no discriminatory behavior,

(2) minority representation in the Director’s and EEO offices was

increased, (3) the EEO office was given more privacy, (4) baselines were

set to measure the impact of any improved hiring or promotion policies,

(5) minorities were promoted to positions of authority, and (6) training

was provided. Goals were also set to open communications with

Two Studies of the EEO

Climate Made Numerous

Recommendations
B-280651

Page 30 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

employees, employee and community groups, and the media; treat

individual performance cases fairly; and not debate emotionally charged

personnel issues in the press.

In spite of the climate assessment team’s efforts and the various changes

made or planned, the district’s EEO problems persisted. Consequently, IRS

and certain members of the Wisconsin congressional delegation agreed

that another team should independently review the situation.31

To try to preserve its independence, the team purposefully had no

representation from IRS. Also for this reason, it solicited no IRS comments

on its draft report.

The team interviewed more than 100 people and examined over 130

records and files, although it did not scientifically select interviewees or

broadly survey all district employees. Team members told us they tried to

ensure broad coverage by talking to many people and to all sides of

general issues. Moreover, they relied on the climate assessment survey to

summarize perceptions. They also, however, relied extensively on

anecdotal information without determining its objectivity or accuracy.

In August 1998, the team reported, among other things, that (1) many

employees had no confidence in the EEO process and feared retaliation if

they filed complaints or participated in a way considered adversarial to

management, (2) separating EEO functions into outreach and traditional

EEO/counseling components was not working effectively, (3) the

counseling program was in disarray, and (4) confusion existed over the

role of Treasury’s Regional Complaint Center in the formal EEO complaint

process. Also, although anecdotes collected by the team did not support a

sweeping indictment of Milwaukee IRS management practices, the report

concluded that, intentionally or not, some practices perpetuated a work

environment that was historically insensitive to the concerns of female and

minority employees.

On the basis of its review, the team made recommendations in different

areas. For instance, many recommendations dealt with the team’s findings

related to the district’s EEO process for resolving issues in a precomplaint

stage and its relationship to Treasury’s formal complaint process. The

team also made recommendations relating to hiring and promotions in

spite of finding no discriminatory pattern or practice in promoting or

 

31Members of the congressional delegation were Senators Russell Feingold and Herb Kohl and

Representatives Tom Barrett and Gerald Kleczka.
B-280651

Page 31 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

hiring minorities or women. The report noted that African Americans in

IRS’ Milwaukee and Waukesha, WI, offices appeared underrepresented

when compared to the Milwaukee civilian labor force.32

Although district managers and representatives of employee groups

disagreed with many of the issues and assertions in the report, there was

general agreement with many of the recommendations. For instance, the

head of the diversity office at the time of the study informed us that he

agreed with the substance of, had actually taken action related to, or

would favor forwarding to Treasury many of the report’s

recommendations.

After the report was released, IRS initiated several significant actions to

address problems identified. Chief among these was appointing a new

District Director who arrived in the district in mid-November 1998 with a

stated commitment to overcome past problems. In that regard, she

described to us her intent to open communication channels and deal with

disrespect, nastiness, and mean-spiritedness at all levels. She emphasized

her themes of communication, responsibility, and accountability and told

us that on her second day in the district she discussed these themes at an

off-site meeting with top managers and union, EEO, and diversity officials.

The new District Director also expressed to us her commitment to work

with various interest groups. In addition, she combined the district’s EEO

and diversity functions, made EEO positions permanent as opposed to

rotational, and invited a union representative to be present for interviews

for a new EEO officer.

The new District Director stated that these actions were on the right track,

but because of the long and contentious history of EEO problems in the

district, improvements and success will take time. She also noted that

better communication and cooperation among IRS and the various internal

and external stakeholders will be extremely important in dealing with the

district’s long-standing problems.

In commenting on a draft of this report, the Commissioner of Internal

Revenue described IRS actions on the issues we noted. For instance, he

shared our concern that IRS needed to improve how it managed executive

misconduct cases. He noted that the recently created Commissioner’s

 32The head of the study team acknowledged that the proper statistical comparison was with the local

qualified labor force, not the civilian labor force. However, according to another study team member,

the relevant qualified labor force statistics were not available.

Agency Comments
B-280651

Page 32 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

Complaint Processing and Analysis Group, proposed as the

Commissioner’s Review Group, will coordinate IRS’ efforts to improve

complaint information, especially relating to alleged reprisal against

whistleblowers, so that complaints will be promptly and fairly resolved.

IRS will also share more information with employees and the public on

responses to reprisals and other complaints to highlight a message that all

employees will be held accountable for their actions. The full text of the

Commissioner’s comments is reprinted in appendix IV.

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 letter. At that time, we will send copies to Senator Daniel

Patrick Moynihan, the Ranking Minority Member of the Senate Committee

on Finance; the Honorable Charles O. Rossotti, Commissioner of Internal

Revenue; other interested congressional committees; and other interested

parties.

This work was done under the direction of Joseph E. Jozefczyk, Assistant

Director for Tax Policy and Administration Issues. Other major

contributors are listed in appendix V. If you have questions, you may

contact me on (202) 512-9110.

Sincerely yours,

James R. White

Director, Tax Policy

and Administration Issues
Page 33 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Page 34 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

Contents

1 Letter

36

Disciplinary Actions for Senior Executive Service and

Lower-Level Staff

36

Alleged Delays by IRS Deputy Commissioner on SES

Misconduct Cases

37

Number of Whistleblowing Reprisal Cases and Extent of

Information on IRS Retaliation Against Taxpayers

38

Alleged Improper Zeroing Out or Reduction of

Recommended Tax

38

EEO Issues in IRS’ Midwest District Office 38

Appendix I

Objectives, Scope, and

Methodology

Appendix II 40

The Douglas Factors

41

Executive A Allegations 41

Executive B Allegations 41

Executive C Allegations 41

Executive D Allegations 42

Executive E Allegations 43

Appendix III

Summaries of Alleged

Senior-Level

Misconduct Cases

Appendix IV 44

Comments From the

Internal Revenue

Service

Appendix V 46

Major Contributors to

This Report
Contents

Page 35 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

Abbreviations

ALERTS Automated Labor and Employee Relations Tracking System

CWA closed without action

DO deciding official

EEO equal employment opportunity

GS general schedule

IRS Internal Revenue Service

MSPB Merit Systems Protection Board

OES Office of Executive Support

OIG Office of Inspector General

OLR Office of Labor Relations

OSC Office of Special Counsel

RO recommending official

SES Senior Executive Service

TIGTA Treasury Inspector General for Tax Administration
Appendix I

Objectives, Scope, and Methodology

Page 36 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

We organized our work to bring together information bearing on the five

issues contained in your May 21, 1998, request letter. Accordingly, our

objectives were to

(1) determine if senior Internal Revenue Service (IRS) managers received

the same level of disciplinary action as line staff;

(2) determine to what extent, if any, the IRS Deputy Commissioner might

have delayed action on substantiated cases of employee misconduct until

senior managers were eligible to retire;

(3) ascertain the extent to which IRS employees might have retaliated

against whistleblowers and against taxpayers or their representatives who

were perceived as uncooperative;

(4) determine the extent to which IRS employees might have zeroed out or

reduced the additional tax recommended from examinations for reasons

not related to the merits of the examinations; and

(5) describe equal employment opportunity (EEO) issues in IRS offices in

the Milwaukee metropolitan area.

Our scope and methodology related to each of these objectives follow.

To compare disciplinary experiences of Senior Executive Service (SES)

and lower-level employees, we matched data accumulated by sampling

senior executives’ misconduct cases against data for lower-level

employees extracted from IRS’ broader disciplinary database, the

Automated Labor and Employee Relations Tracking System (ALERTS). We

compiled general statistics on how long senior executive cases took by

collecting information from every second nontax SES case file in IRS’

Office of Executive Support (OES) that was active sometime between

January 1, 1996, and June 30, 1998.1

 Our sample included 70 cases.

For each case in our sample, we extracted and recorded data from the

relevant case file. These data included issues involved, processing dates,

information on whether allegations were substantiated by investigators,

disciplinary actions proposed and adopted, and information related to

retirement.

 

1

We excluded cases related to employees’ tax compliance because they were different in nature from

the cases raised at the April 1998 Senate Finance Committee hearings.

Disciplinary Actions

for Senior Executive

Service and LowerLevel Staff
Appendix I

Objectives, Scope, and Methodology

Page 37 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

For lower-level employees, that is, general schedule (GS) employees, we

obtained selected parts of the ALERTS database from IRS. We ran our

statistical analyses on ALERTS cases that IRS’ Office of Labor Relations

received between January 1, 1996, and June 30, 1998, and on cases that

were closed within that period. More specifically, we focused on

administrative and IRS Inspection Service cases within ALERTS because

they were the categories in which conduct matters were found. Although

we did not audit ALERTS, IRS officials told us that this data system had

over the years had flaws, but they also told us it was better than it used to

be. Because ALERTS was the only source of information available on

lower-level disciplinary actions, we used it to the extent that it had

information comparable to what we collected on senior-level cases.

We also reviewed recent internal IRS and independent studies of IRS’

disciplinary systems and interviewed IRS officials about their plans for

revamping the systems. One IRS study we reviewed used the lower-level

disciplinary database to assess the effect of IRS’ using a guide to determine

appropriate disciplinary action. We also became familiar with the Douglas

Factors, shown in appendix II, governing disciplinary actions imposed and

asked IRS officials about the differences, if any, they perceived between

SES and lower-level cases.

We examined the question of alleged delays in dealing with cases of

alleged misconduct by senior executives by taking several steps. First, we

studied in depth the five specific cases mentioned in the April 1998

hearings. This involved examining investigative and personnel files as well

as files maintained by OES. In addition, we interviewed various IRS

officials, including the Deputy Commissioner, about these cases.

In addition, we used the 70-case sample of senior executive cases

previously described to obtain more broad-based information about any

possible delays. Although most of our analyses were based on this sample,

to learn more about the cases that took the most time, we also examined

every case file IRS could find that appeared on lists of cases awaiting

action at OES for at least 90 days during the January 1, 1996, through June

30, 1998, period we were studying. We also examined cases that appeared

on logs that IRS kept so we could better ensure we were not overlooking

cases we did not otherwise encounter for the period. In all, we examined

the 70 cases in our sample plus 43 more cases on lists and logs for a total

of 113 cases. Because some individuals were involved in more than 1 case,

the 113 cases we analyzed covered 83 senior executives. We extracted the

same type of information from each of the case files that we extracted

Alleged Delays by IRS

Deputy Commissioner

on SES Misconduct

Cases
Appendix I

Objectives, Scope, and Methodology

Page 38 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

from the sampled case files. Examining lists, logs, and files allowed us to

see if recordkeeping practices might have contributed to any delays.

To examine the relationship between case-processing and retirement

dates, we analyzed where in the case-processing sequence the retirement

dates provided us by OES fell. In instances in which OES was also able to

readily provide retirement eligibility dates, we considered them in

examining processing timeliness as well.

To tabulate the number of whistleblowing reprisal cases, we obtained

information from the Office of Special Counsel (OSC) and the Merit

Systems Protection Board (MSPB). We did this for the number of cases

involving IRS employees, and for contextual purposes, for cases from

throughout the federal government.

For governmentwide data, we used either information already published or

data generated specifically for us. For IRS data, the agencies did special

searches of their databases. We did not audit the OSC or MSPB data

systems. Because in the MSPB data system not all IRS cases could be

isolated, we examined actual case rulings that MSPB gathered for us or

that we located on the Internet, looking for Department of the Treasury

cases that were really IRS cases. For Treasury cases for which MSPB was

not able to give us timely information and information was not on the

Internet, we asked IRS to identify whether they involved IRS employees.

In looking for information on IRS employees who might have retaliated

against taxpayers or their representatives who were perceived to be

uncooperative, we studied our reports on taxpayer abuse. In addition, we

interviewed IRS officials and investigated entries under specific codes in

various databases to see if relevant issues appeared. Finally, we discussed

with IRS officials changes to the information systems that might be coming

in the future.

Concerning information on the improper zeroing out or reduction of

additional tax recommended, we studied our and Inspection Service

reports dealing with examination issues related to audit results. We

specifically considered our and IRS information on the extent to which IRS

audit recommendations were actually assessed and the factors that could

explain the results.

To describe EEO issues in the Milwaukee area, we examined the report of

an outside team studying the program and the documents that the team

accumulated in doing its work, including an IRS internal EEO climate

Number of

Whistleblowing

Reprisal Cases and

Extent of Information

on IRS Retaliation

Against Taxpayers

Alleged Improper

Zeroing Out or

Reduction of

Recommended Tax

EEO Issues in IRS’

Midwest District Office
Appendix I

Objectives, Scope, and Methodology

Page 39 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

assessment study. We also interviewed key study participants and affected

parties in Washington, D.C., and Milwaukee to better understand what the

EEO climate in the area was, how the study report was done, and what had

happened since the report was finished.

In addition to addressing the concerns of the Senate Committee on

Finance, we planned our work to respond to a mandate in the Conference

Report on the IRS Restructuring and Reform Act of 1998. The conferees

intended for us to review the study team report.

We did our work in Washington, D.C., and Milwaukee between June 1998

and March 1999 in accordance with generally accepted government

auditing standards.
Appendix II

The Douglas Factors

Page 40 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

The Douglas Factors are as follows:1

• The nature and seriousness of the offense, and its relation to the

employee’s duties, position, and responsibilities, including whether the

offense was intentional or technical or inadvertent, or was committed

maliciously or for gain, or was frequently repeated;

• the employee’s job level and type of employment, including supervisory or

fiduciary role, contacts with the public, and prominence of the position;

• the employee’s past disciplinary record;

• the employee’s past work record, including length of service, performance

on the job, ability to get along with fellow workers, and dependability;

• the effect of the offense upon the employee’s ability to perform at a

satisfactory level and its effect upon supervisors’ confidence in the

employee’s ability to perform assigned duties;

• consistency of penalty with those imposed upon other employees for the

same or similar offenses;

• consistency of the penalty with the applicable agency table of penalties;

• the notoriety of the offense or its impact on the reputation of the agency;

• the clarity with which the employee was on notice of any rules that were

violated in committing the offense, or had been warned about the conduct

in question;

• potential for employee’s rehabilitation;

• mitigating circumstances surrounding the offense such as unusual job

tensions, personality problems, mental impairment, harassment, or bad

faith, malice or provocation on the part of others involved in the matter;

and

• the adequacy and effectiveness of alternative sanctions to deter such

conduct in the future by the employee or others.

 

1

Douglas v. Veterans Administration, 5 M.S.P.R. 280 (1981).
Appendix III

Summaries of Alleged Senior-Level

Misconduct Cases

Page 41 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

This appendix summarizes information about the five senior-level

misconduct allegations cited in the April 1998 Senate Finance Committee

hearings. The summaries include information about when the executives

were eligible to retire and about whether their eligibility dates might have

related to how their cases were processed. We refer to the executives in

these five cases as Executives A through E.

An IRS employee filed a complaint that Executive A and two other IRS

employees violated IRS ethics rules. The IRS employee also alleged that

Executive A and the two other employees retaliated against her for

reporting the ethics violations. The alleged violations included

manipulating a rating system, giving an improper award, falsifying records,

and not reporting time card fraud, although Executive A was only alleged

to be involved in the last violation. Treasury’s Office of Inspector General

(OIG) did not find that Executive A was culpable for ethics violations but

found that the other two employees were culpable. IRS attorneys

reviewing the case concluded that the information in the OIG report did

not demonstrate misconduct on Executive A’s part.

Executive A was not eligible for retirement when the allegation was made

or when the OIG investigation was closed.

This case started when the OIG received an anonymous allegation that

Executive B abused travel authority.1

 IRS officials reviewed the allegation

and found that Executive B had authorized unjustified travel expenditures.

Local management then counseled Executive B that all expenditures

needed to be authorized according to IRS procedures. This counseling was

confirmed in writing. However, contrary to IRS policy, the counseling took

place before the Deputy Commissioner concurred with the proposed case

resolution.

Executive B was already eligible for retirement at the time the allegation

was made.

The OIG received an anonymous complaint that Executive C was abusing

official travel. The OIG report concluded that Executive C made personal

use of some travel benefits earned on government travel.

The offices considering the case disagreed among themselves over the

facts, the adequacy of the investigation, and the steps to be taken next. The

 

1

The allegation included two other issues that were immediately closed because they had been

previously reviewed.

Executive A

Allegations

Executive B

Allegations

Executive C

Allegations
Appendix III

Summaries of Alleged Senior-Level Misconduct Cases

Page 42 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

Director of IRS’ Human Resources Division, which was involved in

executive misconduct cases earlier in the 1990s, advocated a reprimand,

but the recommending official thought that significant circumstances

mitigated any disciplinary action. OES prepared a statement of differences

and recommended a reprimand.2

 A few months later, the recommending

official, finding no abuse and unclear IRS guidance in the area,

recommended closing the case without action but cautioning the

executive. The next month, the OES official who previously recommended

a reprimand sent the case to the Deputy Commissioner, this time agreeing

with the recommending official’s position. A few months after that, the

OIG reminded the Deputy Commissioner of the previous year’s report and

requested appropriate action. Later, OIG officials told OES that they

disagreed with OES’ recommendation to close the case without action.

Finally, OES wrote the Deputy Commissioner reaffirming the

recommendation for closure without action but with cautioning.

The Deputy Commissioner counseled the executive 5-1⁄2 years after the

case began and 18 months after receiving the case. When we asked the

Deputy Commissioner why the final stage of case processing took so long,

he had no explanation.

Executive C was not eligible for retirement at the time the allegation was

made or at the time he was counseled.

The IRS sexual harassment hotline received an anonymous allegation that

Executive D might have harassed a staff member. During the Inspection

Service investigation, Executive D refused to answer a question he

believed was irrelevant. In its report, the Inspection Service summarized

the facts of the investigation and did not conclude whether there was a

violation of IRS ethical standards.

OES and the recommending official disagreed in their analyses of the

report and their resulting recommendations. OES concluded that a 15-day

suspension was warranted for the refusal to answer a question even

though IRS counsel was not sure a violation really occurred. OES also

raised the possibility of reassigning Executive D. The recommending

official believed that, in this case, refusal to answer a question did not

violate ethics rules, but that counseling was warranted.

 

2

OES was previously known as the Office of Ethics and Business Conduct, but in this section only the

designation OES will be used.

Executive D

Allegations
Appendix III

Summaries of Alleged Senior-Level Misconduct Cases

Page 43 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

About 39 months after OES prepared a statement of differences, an

Inspection Service case-tracking entry indicated that IRS management

planned no action on the case. The next year, OES closed the case

“administratively” due to the employee’s retirement.

The Deputy Commissioner told us that, several years before its

administrative close, the case was “de facto closed” with Executive D’s

transfer. He stated that the transfer was the appropriate disciplinary action

because Executive D was too familiar with local employees.

OES did not close the case until the individual retired several years after

the transfer. It did not realize that the Deputy Commissioner considered it

closed earlier. Also, IRS officials we asked could not find the case file for

at least a few months.

Executive D was eligible for retirement at the time the allegation was

made.

The Inspection Service began an investigation after an anonymous caller

reported to Internal Security that Executive E abused her authority. More

than a year later, the investigation confirmed the allegation, and the

Director of the Human Resources Division recommended that a letter of

reprimand be issued. More than 4 years after that, OES recommended

sending a letter of reprimand or a letter confirming counseling. The Deputy

Commissioner sent Executive E a letter of counseling 5-1⁄2 years after the

original complaint and more than 4 years after receiving the case.

The Deputy Commissioner explained to us that he had not been

comfortable with the allegations’ correctness, but that he eventually

agreed that the allegations had some merit. He added that the delay in

closing the case occurred because he allowed the case to be lost in the

system. He did not, he said, cover up for Executive E. Specifically, he

stated that reduced OES staffing and a poor information system were

contributing factors to the case being delayed without a disposition.

Executive E was not eligible for retirement at the time the allegation was

made or at the time the counseling letter was sent.

Executive E

Allegations
Appendix IV

Comments From the Internal Revenue Service

Page 44
Appendix IV

Comments From the Internal Revenue Service

Page 45
Appendix V

Major Contributors to This Report

Page 46 GAO/GGD-99-82 Allegations of IRS Employee Misconduct

Lawrence M. Korb, Evaluator-in-Charge, Tax Policy and Administration

Issues

Leon H. Green, Senior Evaluator

Deborah A. Knorr, Senior Evaluator

Anthony P. Lofaro, Senior Evaluator

Jacqueline M. Nowicki, Evaluator

Patricia H. McGuire, Assistant Director

MacDonald R. Phillips, Senior Computer Specialist

James J. Ungvarsky, Senior Computer Specialist

Eric B. Hall, Computer Technician

General Government

Division, Washington,

D.C.
Page 47 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Page 48 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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