Department of the Treasury – Budget in Brief FY 2008



Executive Summary

Executive Summary

FY 2008 President’s Budget by Function

(Dollars in Thousands)

Appropriation

FY 2006 FY 2007 FY 2008

Enacted President’s 

Budget CR-rate President’s Budget

$ Change 

over CR-rate

% Change 

over CR-rate

Management & Financial $597,759 $601,946 $565,975 $635,770 $69,795 12.3%

Departmental Offices Salaries and Expenses 194,626 223,874 192,171 250,141 57,970 30.2%*

Treas Building & Annex Repair & Restoration 9,900 0 0 0 0 0.0%

Dept-wide Systems & Capital Invest. Program 24,168 34,032 24,046 18,710 (5,336) (22.2%)

Air Transportation Stabilization Program** 2,723 0 0 0 0 0.0%

Office of Inspector General 16,830 17,352 17,022 18,450 1,428 8.4%

Treasury IG for Tax Administration 131,953 136,469 131,953 140,553 8,600 6.5%

Community Development Financial Institutions Fund 54,450 7,821 40,000 28,557 (11,443) (28.6%)

Financial Crimes Enforcement Network 72,894 89,794 70,568 85,844 15,276 21.6%

Alcohol & Tobacco Tax and Trade Bureau 90,215 92,604 90,215 93,515 3,300 3.7%

Fiscal Service Operations $412,035 $414,443 $411,908 $418,062 $6,154 1.5%

Financial Management Service 233,881 233,654 233,292 235,191 1,899 0.8%

Bureau of the Public Debt*** 178,154 180,789 178,616 182,871 4,255 2.4%

Tax Administration $10,573,706 $10,591,837 $10,438,364 $11,095,499 $657,135 6.3%

IRS Taxpayer Services 2,142,042 2,079,151 2,059,151 2,103,089 43,938 2.1%

IRS Enforcement 4,708,441 4,797,126 4,708,405 4,925,498 217,093 4.6%

IRS Operations Support 3,461,205 3,488,404 3,459,152 3,769,587 310,435 9.0%

IRS Business Systems Modernization 242,010 212,310 196,810 282,090 85,280 43.3%

IRS Health Insurance Tax Credit Administration 20,008 14,846 14,846 15,235 389 2.6%

Total, Treasury Appropriations Committee $11,583,500 $11,608,226 $11,416,247 $12,149,331 $733,084 6.4%

Treasury International Programs $1,374,385 $1,535,467 $1,109,898 $1,731,050 $621,152 56.0%

International Financial Institutions 1,277,235 1,328,968 1,066,198 1,498,950 432,752 40.6%

Technical Assistance 32,800 23,700 23,700 24,800 1,100 4.6%

Debt Restructuring 64,350 182,799 20,000 207,300 187,300 936.5%

Total $12,957,885 $13,143,693 $12,526,145 $13,880,381 $1,354,236 10.8%

* FY 2008 request is a 11.7 percent increase over the FY 2007 President’s Budget.

** The FY 2008 budget proposes cancellation of the remaining balances from ATSB, currently estimated at $3.6M

*** Does not include estimated user fee offset

Overview

The U.S. Department of Treasury’s budget priorities 

reflect the Department’s dedication to promoting 

economic growth and opportunity, strengthening 

national security and exercising fiscal discipline while 

steadily improving the Department’s operations to 

ensure it remains a world-class organization.

The FY 2008 President’s Budget identifies the 

resources required to support Treasury’s role 

as the steward of U.S. economic and financial 

systems, and as an influential participant in the 

international economy. The FY 2008 Budget 

emphasizes initiatives that directly support its five 

strategic goals:

• Promote Prosperous U.S. and World Economies

• Promote Stable U.S. and World Economies

• Preserve the Integrity of Financial Systems

• Manage the U.S. Government’s Finances 

Effectively

• Ensure Professionalism, Excellence, Integrity, and 

Accountability in the Management and Conduct 

of the Department of the Treasury

While promoting financial and economic growth at 

home and abroad, Treasury performs a critical and farreaching role in national security. The Department 

battles national security threats by coordinating 

financial intelligence, targeting and sanctioning 

supporters of terrorism and proliferators of weapons of 

mass destruction (WMD), improving the safeguards 

of our financial systems, and promoting international 

relationships to combat the financial underpinnings 

of terrorist and other criminal networks. 

Managing these complex tasks requires expanded 

capabilities in Treasury’s Departmental Offices, 

which, in addition to providing policy direction, 

management oversight, and administrative support 

for Treasury’s 13 bureaus, makes direct and unique

contributions to national security through the Office 

of Terrorism and Financial Intelligence and the Office 

of International Affairs. Adequate funding for this 

leadership role is critical to Treasury’s ability to protect 
Department of the Treasury – Budget in Brief FY 2008

FY 2008 President’s Budget by Strategic Goal(Dollars in Thousands)

Treasury Goal/Objective

Promote Prosperous

US/World Economies

(E1)

Promote Stable

US/World Economies

(E2)

Preserve the Integrity of

Financial Systems

(F3)

Manage US Gov

Finances Effectively

(F4)

Management Excellence 

& Accountability

(M5)

Total

Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $

Management & Financial $91,235 $3,172 $79,020 $4,001 $178,344 $6,655 $70,674 $3,857 $216,497 $7,856 $635,770 $25,541 

Departmental Offices Salaries and Expenses 62,678 3,172 33,198 3,168 92,500 5,114 22,981 2,990 38,784 5,356 250,141 19,800 Dept-wide Systems & Capital Invest. Program 18,710 18,710 0 Office of Inspector General 18,450 1,300 18,450 1,300 Treasury IG for Tax Administration 140,553 1,200 140,553 1,200 Community Development Financial Institutions Fund 28,557 28,557 0 Financial Crimes Enforcement Network 85,844 1,541 85,844 1,541 Alcohol & Tobacco Tax and Trade Bureau 45,822 833 47,693 867 93,515 1,700 

Fiscal Service Operations $0 $0 $0 $0 $0 $0 $418,062 $230,911 $0 $0 $418,062 $230,911 

Financial Management Service 235,191 215,179 235,191 215,179 Bureau of the Public Debt 182,871 15,732 182,871 15,732 

Tax Administration $0 $0 $0 $0 $267,970 $13,012 $10,827,529 $120,486 $0 $0 $11,095,499 $133,498 

IRS Taxpayer Service 2,103,089 27,414 2,103,089 27,414 IRS Enforcement 205,126 13,012 4,720,372 36,341 4,925,498 49,353 IRS Operations Support 62,844 3,706,743 56,731 3,769,587 56,731 Business Systems Modernization 282,090 282,090 0 Health Insurance Tax Credit Administration 15,235 15,235 0 

Total, Treasury Appropriations Committee $91,235 $3,172 $79,020 $4,001 $446,314 $19,667 $11,316,265 $355,254 $216,497 $7,856 $12,149,331 $389,950 

Treasury International Programs 1,731,050 1,731,050 0 

Total, Appropriated Level $1,822,285 $3,172 $79,020 $4,001 $446,314 $19,667 $11,316,265 $355,254 $216,497 $7,856 $13,880,381 $389,950 Non Appropriated Bureaus $0 $132,031 $0 $0 $0 $3,313,117 $0 $0 $0 $797,312 $0 $4,242,460 

Treasury Franchise Fund 797,312 0 797,312 Bureau of Engraving and Printing 602,000 0 602,000 U.S. Mint 1,899,035 0 1,899,035 Office of the Comptroller of the Currency 108,200 597,600 0 705,800 Office of Thrift Supervision 23,831 214,482 0 238,313 

Subtotal, Direct $ $1,822,285 $79,020 $446,314 $11,316,265 $216,497 $13,880,381 Subtotal, Reimbursable $ $135,203 $4,001 $3,332,784 $355,254 $805,168 $4,632,410 Total, Treasury Level $1,957,488 $83,021 $3,779,098 $11,671,519 $1,021,665 $18,512,791 
Department of the Treasury – Budget in Brief FY 2008

Executive Summary

the American people. This Budget request reflects the 

adjustments and funding increases required to meet 

Treasury’s mission in this area. 

FY 2008 Budget Request

The President’s FY 2008 Budget request of $12

billion for the Department of the Treasury focuses 

resources on key programs necessary to promote 

economic growth and effectively fight the war on 

terror. The request is $736 million above the FY 

2007 Continuing Resolution rate (CR-rate), a 6.4 

percent increase. The FY 2008 Budget increase 

reflects Treasury’s ability to bring a demonstrable 

return on investment that no other federal agency can 

provide. By collecting the revenue due to the federal 

government and working to reduce illicit threats to 

the financial system, Treasury solidifies the financial 

integrity of the United States. While the majority 

of the Department’s Budget is funded through the 

Department of the Treasury Appropriations Act, $1.5

billion for the Department’s international programs 

is funded through the State, Foreign Operations, and 

Related Programs Appropriations Act.

Promoting Economic Growth, Security 

and Opportunity 

The Secretary of the Treasury is the President's 

leading policy advisor on a broad range of domestic 

and international economic issues. Treasury’s 

Departmental Offices, including the Offices of 

International Affairs, Tax Policy, Economic Policy, and 

Domestic Finance, support the Secretary in this role 

through the provision of technical analysis, economic 

forecasting, and policy guidance on issues ranging 

from federal financing to responding to international 

financial crises. The Department supports policies 

that stimulate U.S. economic growth, strengthen 

and modernize entitlement programs, and minimize 

regulatory burdens while ensuring the safety and 

soundness of financial institutions.

The FY 2008 Budget request funds Treasury’s efforts to 

promote domestic and international economic growth 

through financial diplomacy. Treasury stimulates 

economic growth and job creation by working to 

open trade and investment, encouraging growth in 

developing countries, and promoting responsible 

policies regarding international debt, finance, and 

economics. Treasury supports trade liberalization and 

budget discipline through its role in negotiating and 

implementing international agreements pertaining 

to export subsidies. These agreements open markets, 

level the playing field for U.S. exporters, and provide 

effective subsidy reductions that save the U.S. 

taxpayer millions annually. Since 1991, cumulativ

budget savings from these arrangements are estimated 

at over $10 billion. The growth of these activities

makes it necessary to enhance policy coordination and 

resources through the addition of regional experts. 

This initiative is for additional staff to support key 

policy dialogues across the globe.

Treasury also remains committed to protecting the 

homeland from international investments that may 

threaten our national security. The Committee on 

Foreign Investment in the United States (CFIUS) is 

responsible for investigating the merger or acquisition 

of U.S. companies by foreign persons for national 

security, and Treasury’s Office of International 

Affairs manages this function on the Secretary’s 

behalf. The growth and economic importance of 

foreign investment in the United States has increased 

exponentially the number of cases reviewed by 

CFIUS. The President’s FY 2008 Budget request 

provides additional resources to support Treasury in 

its role as Chair of CFIUS, including administering 

the interagency CFIUS process.

The FY 2008 request also includes $28.6 million for 

the Community Development Financial Institutions 

Fund (CDFI), $11.4 million below the FY 200

CR-rate. CDFI’s mission is to expand the capacity 

of financial institutions to provide credit, capital, and 

financial services to underserved populations and 

communities in the United States. The Budget does 

not request funding for the Bank Enterprise Award.

The FY 2008 President’s Budget request for Treasury’s 

International Assistance Programs supports key 

objectives of the President’s agenda, such as the G-8 

Multilateral Debt Relief Initiative, measuring results, 

improving debt sustainability, increasing grants, 

improving transparency and fighting corruption.
Department of the Treasury – Budget in Brief FY 2008

Strengthening National Security

The sponsorship of terrorism and potential acquisition 

of weapons of mass destruction (WMD) by rogue 

regimes and non-state entities represents a grave threat 

to U.S. national security and the security of all free 

and open societies. 

Terrorists, WMD proliferators and other non-state 

threats require vast support networks through which 

money and material flow. The Treasury Department 

draws on financial and other all-source intelligence 

and utilizes its unique regulatory and law enforcement 

authorities to combat national security threats and 

safeguard the financial system. 

The Office of Terrorism and Financial Intelligence 

(TFI) provides financial intelligence analysis; 

develops and implements systems to combat money 

laundering and terrorist financing; administers the 

Bank Secrecy Act; and administers and enforces the 

U.S. Government’s economic sanctions programs.

Treasury exercises a full range of intelligence, 

regulatory, policy, and enforcement tools in tracking 

and disrupting terrorists’ support networks, 

proliferators of weapons of mass destruction, rogue 

regimes, and international narco-traffickers, both 

as a vital source of intelligence and as a means of 

degrading the terrorists’ ability to function. Treasury’s 

actions include:

• Freezing the assets of terrorists, proliferators, 

drug kingpins, and other criminals; and shutting 

down the channels through which they raise and 

move money.

• Cutting off corrupt foreign jurisdictions 

and financial institutions from the U.S. 

financial system.

• Developing and enforcing regulations to reduce 

terrorist financing and money laundering.

• Tracing and repatriating assets looted by corrupt 

foreign officials.

• Promoting a meaningful exchange of information 

with the private financial sector to help detect and 

address threats to the financial system.

The FY 2008 President’s Budget will enable Treasury 

to enhance these capabilities. The President’s Budget 

requests funding for investments to further the 

Department’s national security mission in three 

critical areas: expanding the Department’s capacity 

to identify potential national security threats and 

to enforce U.S. policies to counter those threats; 

enhancing the information technology and physical 

infrastructure of TFI and its component bureaus 

and offices to improve data security, access, and 

quality; and further integrating TFI into the broader 

Intelligence Community. This request includes:

• $5.3 million to respond to emerging national 

security threats, provide strategic policy coordination 

in regions key to the fight against terrorist 

financing, and to enhance implementation of 

sanctions against state sponsors of terrorism and 

WMD proliferation. 

• $12.6 million for infrastructure and information

technology projects to enhance data access, security, 

and quality, including construction of a Sensitive, 

Compartmented Information Facility (SCIF) 

and investments to stabilize and enhance the 

Department’s classified information systems.

• $1 million for initiatives to fur ther

Treasury’s integration into the broader 

Intelligence Community.

The Financial Crimes Enforcement Network 

(FinCEN), a bureau within Treasury’s Office of 

Terrorism and Financial Intelligence, is responsible 

for administering the Bank Secrecy Act (BSA). The 

FY 2008 Budget request provides funding to upgrade 

BSA E-Filing; strengthen recovery capability for 

mission-critical information technology systems 

and emergency operation capabilities; and improve 

information technology planning and oversight.

Managing U.S. Government Finances 

The Treasury Department manages the nation’s 

finances by collecting money due the United States, 

making its payments, managing its borrowing, 

investing when appropriate, and performing central 

accounting functions. Key priorities in managing the 

government’s finances effectively include maximizing 

voluntary compliance with tax laws and regulations, 
Department of the Treasury – Budget in Brief FY 2008

Executive Summary

continually improving financial management 

processes, and financing the government at the lowest 

possible cost over time. The FY 2008 Budget request 

provides the funding necessary to properly administer 

these functions.

Collecting the Taxes

Collecting taxes in a fair and consistent manner 

is a core mission of the Treasury Department. 

Treasury’s priorities in tax administration are 

enforcing the nation’s tax laws fairly and efficiently 

while balancing service and education to promote 

voluntary compliance and reduce taxpayer burden. In 

September 2006, Treasury published a comprehensive 

plan to improve tax compliance. The FY 2008 

Budget funds implementation of this plan with new 

investments in enforcement, taxpayer service and 

technology. It includes $11,095 million for the IRS

which is an increase of $657 million (6.3 percent) 

above the FY 2007 CR-rate. As in FY 2006 and 

FY 2007, the Administration proposes to fund the 

portion of the IRS budget increase attributable to 

improved tax enforcement ($440 million above the 

CR-rate) through a program integrity cap adjustment 

to help increase revenue. Highlights include:

• $291 million for new enforcement initiatives

and $149 million for inflationary cost increases.

This is a $440 million increase above the FY 

2007 CR-rate. The IRS Enforcement Program 

is funded in the Enforcement and Operations 

Support appropriations. IRS will enhance 

coverage of high-risk compliance areas, as well as 

address the tax gap associated with small business 

and self-employed taxpayers. Enforcement will 

focus on critical reporting, filing, and payment 

compliance programs, and highlight abusive 

tax avoidance transactions and high income 

individual examinations involving pass-through 

entities (e.g. partnerships, trusts). The IRS will 

continue to reengineer its examination and 

collection procedures to reduce time, increase yield, 

and expand coverage. It will expand 

compliance research to help target its programs 

more effectively.

• $56 million for new taxpayer service initiatives 

and $75 million for inflationary costs. This 

is a $131 million increase above the FY 200

CR-rate. The IRS Taxpayer Service Program is 

funded in the Service and Operations Support 

appropriations. The IRS will continue efforts to 

increase and improve services offered to taxpayers 

through efforts such as adding an estimated wait 

time message for taxpayers on hold for telephone 

service. The IRS will also increase self-service 

applications, continue to ensure web navigation is 

user-friendly, and improve the quality and accuracy 

of its telephone responses. The IRS will expand 

its research and evaluate information regarding 

taxpayer service needs, priorities, and preferences 

in order to improve delivery services. 

• $60 million for critical IT infrastructure upgrades 

(included in the enforcement and taxpayer 

service totals above). IRS will continue to 

invest in technology, process improvements, and 

training to achieve consistent quality service with 

reduced costs. 

• $282 million for the IRS’ Business Systems 

Modernization program to give IRS employees 

the tools they need to continue to administer and 

improve both service and enforcement programs.

Treasury also regulates the manufacture and sale of 

alcohol, tobacco, firearms, and ammunition, and 

collects excise taxes on the sale of these products. 

The Alcohol and Tobacco Tax and Trade Bureau 

collected $14.8 billion in excise taxes, interest, and

other revenues.

Ensuring Efficient Fiscal Service Operations

The FY 2008 Budget request provides the funds 

necessary for Treasury to meet its responsibilities as 

the federal government’s financial manager. 

Treasury’s management of the federal government’s 

finances includes making payments, collecting 

revenue, and preparing public financial statements 

through the Financial Management Service. Treasury 

oversees a daily cash flow in excess of $50 billion and 

disburses 85 percent of all federal payments. The 

Department is working to improve its payments 

and collections processes by moving toward an allelectronic Treasury. In FY 2006, Treasury issued 

742 million electronic payments including income 

tax refunds, Social Security benefits, and veterans’ 

benefits. Treasury is also encouraging Social Security 
Department of the Treasury – Budget in Brief FY 2008

and Supplemental Security Income recipients to 

switch to direct deposit through the Go Direct 

campaign. Direct Deposit represents a cost savings 

to the taxpayer of 75 cents per transaction. 

Treasury manages more than $7.9 trillion of public 

debt through its Bureau of Public Debt. Public 

debt includes marketable securities, savings bonds, 

and other instruments held by state and local 

governments, federal agencies, foreign governments, 

corporations, and individuals. To improve debt 

management and offer better customer service, 

Treasury offers Treasury Direct, an electronic, webbased system that electronically issues securities to 

retail customers and enables investors to manage their 

accounts on-line. 

Managing Treasury Effectively

Treasury is committed to using the resources provided 

by taxpayers in the most efficient manner possible. 

The Department will drive improved results through 

decision-making that considers performance and 

cost. The Treasury Department strives to serve its 

stakeholders in the most effective way while working 

to leverage resources across the Department and 

across the government.

Funding requested in Treasury’s Departmental 

Offices and Department-wide Systems and Capital 

Investments Program (DSCIP) seeks to build an 

efficient information technology infrastructure, 

ensuring that Treasury remains a world-class 

organization that meets the President’s standard of a 

citizen-centered, results-oriented government. 

The DSCIP account funds technology investments 

to modernize business processes throughout Treasury, 

helping the Department improve efficiency. The 

President’s 2008 Budget requests $18.71 millio

for ongoing modernization and critical information 

technology infrastructure projects, and to invest in 

other new technologies that will improve efficiency 

and service to the American people. The Budget 

request includes:

• $6 million implement a pilot Enterprise Content 

Management (ECM) system, which will address the 

critical and urgent business need of the Office of 

Foreign Asset Control (OFAC) and the Financial 

Crimes Enforcement Network. The pilot ECM 

system will align with government-wide initiatives, 

promote common standards across the Treasury 

Department, and position the Treasury for a 

Department-wide ECM system.

• $2 million for the continued operation 

and maintenance of the Treasury Secure 

Data Network. 

• $4 million to improve Treasury’s FISMA 

performance and strengthen the Department’s 

overall security posture; and completing required 

milestones as part of Treasury’s Presidential EGovernment Implementation Plan.

The Budget request also includes funding for 

Treasury’s Inspectors General. The Office of the 

Inspector General and the Treasury Inspector General 

for Tax Administration play an important oversight 

role in the overall management of the Department 

and the fair administration of the nation’s tax laws.

Strengthening Financial Institutions

One of the principal objectives of the Treasury 

Department is to enable commerce. The Department 

is responsible for the safety and soundness of national 

banks and federally-chartered savings associations. 

The Treasury Department also produces the coins and 

currency needed for commerce, and guards against 

counterfeiting and other misuse of our money. 

Treasury, through the Office of the Comptroller of the 

Currency (OCC) and the Office of Thrift Supervision 

(OTS), maintains the integrity of the financial system 

of the United States by chartering, regulating, and 

supervising national banks and savings associations. 

In FY 2006, OCC and OTS oversaw financial 

assets held by these financial institutions totaling 

$8.1 trillion

The U.S. Mint (Mint) and the Bureau of Engraving 

and Printing (BEP) are responsible for producing the 

nation’s coins and currency. In FY 2006, the Mint 

and BEP produced 16.1 billion coins and 8.2 billio

paper currency notes, respectively. The Mint issued 

five new quarters from the 50 State Quarters program 

and BEP introduced the new $10 currency note into

circulation. Also, due to recently improved operating 

results and profits, the Mint returned $750 million 

to the Treasury General Fund in FY 2006. 
Department of the Treasury – Budget in Brief FY 2008

Executive Summary

Funding for the OCC, OTS, Mint, and BEP is 

not included in the Department's annual budget 

requests, because they have non-appropriated funding 

sources. OCC's operations are funded primarily by 

semi-annual assessments levied on national banks. 

Revenue from licensing, other fees, and investments 

in U.S. Treasury securities provides the remaining 

revenue. OTS's operations are funded from 

assessments on thrifts and savings and loan holding 

companies; examination, application, and security 

filing fees; interest on investments in U.S. government 

obligations; and rent and other sources. The Mint's 

operations are financed by proceeds from the sales of 

circulating coins to the Federal Reserve Bank System 

and numismatic items to the public. BEP operations 

are financed primarily by the printing of currency 

for the Federal Reserve Bank System. Other BEP 

revenues are derived from the printing of securities 

for the Public Debt and commissions, certificates, 

invitations for various Government agencies; and 

space rental fees.

President’s Management Agenda (PMA)

The Department of the Treasury works to manage 

the Department effectively through the principles 

of the President’s Management Agenda (PMA). 

The Department of the Treasury is responsible 

for six initiatives identified by the PMA, five 

standard initiatives that are government-wide 

and one (Improper Payments) that is specific to 

the Department. 

The President holds each agency accountable for 

its performance in carrying out the PMA, and 

performance results are demonstrated through 

quarterly scorecards issued by OMB. 

Human Capital: In FY 2006, the Treasury 

Department’s Human Capital initiative was successful 

by continuing to align its workforce with its human 

capital goals and objectives. Consistent with its 

human capital vision, the Department used strategic 

workforce planning and flexible tools to recruit, 

retain, and reward employees, fostering a diverse and 

high-performing workforce.

In FY 2006, the Department’s human capital activities 

focused on results-oriented performance, leadership 

succession planning, and accountability. The Office 

of Personnel Management approved the Treasury 

Department’s program for succession planning and 

accountability, a condition for remaining successful 

in the PMA Human Capital initiative. This program 

ensures that future management acquires appropriate 

skills to enable them to lead the Department in an 

ever-changing environment. 

FY 2006 human capital successes included:

• Achieving a goal of 100 percent of supervisors’,

managers’, and executives’ performance plans 

that contain elements directly linked to the 

Department’s mission;

• Training over 1,300 current and future managers

in leadership competencies; and

• Strengthening the accountability system through 

Department-wide policy which emphasizes 

compliance with federal laws and regulations, and 

merit system principles.

Competitive Sourcing: Through Competitive Sourcing, 

the Treasury Department utilizes public-private 

competition to effectively deliver services at the lowest 

possible cost to the American taxpayer. Competitive 

Sourcing allows the Department to look internally 

and externally for the most efficient ways to achieve 

its mission.

President’s Management Agenda 

Initiative

Status Q1 FY 2007

FY 2005 FY 2006 Status Progress

Human Capital ● Y ● G ● G ● G

Competitive 

Sourcing ● G ● G ● G ● Y

Financial 

Performance ● R ● R ● R ● G

E-Government ● R ● Y ● Y ● R

BudgetPerformance 

Integration ● Y ● Y ● Y ● G

Improper 

Payments ● R ● R ● R ● Y

Green for 

Success

Yellow for 

Mixed Results

Red for 

Unsatisfactory
Department of the Treasury – Budget in Brief FY 2008

In FY 2006, the Department of the Treasury 

remained successful in the Competitive Sourcing 

initiative by: 

• Migrating and conducting the Federal Activities 

Inventory Reform (FAIR) Act in HR Connect, the 

Department’s on-line human capital system;

• Proposing a plan to include all Treasury efforts 

(Lines of Business, Strategic Sourcing, etc.) to close 

competitiveness gaps;

• Improving its demand analysis system for conducting 

potential studies; and

• Stressing coordination of competitive sourcing 

activities Department-wide. 

Improved Financial Performance: The Treasury 

Department continued to work toward full 

compliance with the Federal Managers Financial 

Improvement Act (FMFIA) and improved financial 

management processes to produce accurate and 

timely information that supports operating, budget, 

and policy decisions.

In FY 2006, the Department of the Treasury 

accounted for public funds accurately and in a 

timely manner through a successful three day 

closing process at the end of each month. The 

Department’s Financial Performance team met its 

reporting deadlines and was provided a clean annual 

audit. Treasury will continue to make progress in 

implementing Custodial Detail Database revenue 

accounting system enhancements.

In addition, the Treasury Department continued 

emphasis on reducing material weaknesses during 

the year resulting in a reduction from seven to six 

material weaknesses. 

Expanded E-government: Expanding electronic 

government products and services Departmentwide improves internal efficiency and effectiveness, 

and enhances service to the public. In FY 2006, 

the Treasury Department continued to improve 

its enterprise architecture, information technology 

(IT) capital planning processes, and cyber security 

practices Department-wide. The Department worked 

to manage projects to meet cost, schedule, and 

performance goals; to certify and accredit Treasury 

systems to protect information from unauthorized 

access and theft; and fully participated in Presidential 

E-Government Initiatives.

During FY 2006, accomplishments included:

• Improving Treasury-wide Capital Planning 

and Investment Control policies and processes, 

including executive certification of quarterly project 

performance reporting and

• Applying standard definitions for systems under 

the Federal Information Security Management Act 

(FISMA) and establishing a new system inventory 

to improve future management and reporting;

• Integrating Treasury Enterprise Architecture (EA) 

and IT Capital Planning processes.

Budget and Performance Integration: In FY 2006, 

the Treasury Department embarked on revising its 

Strategic Plan. This plan clearly defines the strategic 

priorities and articulates outcome-oriented goals 

and objectives. The Department’s senior leadership 

sponsored the effort and served as champions 

for the teams developing outcomes, strategies, 

and measures. Treasury will continue to develop 

the Budget Formulation and Execution Module 

(BFEM) to produce the Congressional Justification 

and Budget in Brief.

The Treasury Department tested its mission, goals, 

and strategies against a set of future possibilities to 

ensure their robustness. The Department identified 

ten value chains (groups of programs with a common 

purpose), recognizing that outcomes connect the 

Treasury Department’s programs across different 

programs and organizations. The new Treasury 

Strategic Plan will add a vision statement and a 

set of core values, both of which serve to integrate 

and draw the Department toward a compelling 

picture of its future. Finally, the Strategic Plan will 

establish an integrated management system that 

links budget and cost to outcomes, enabling the 

Department to measure the value it produces for the 

American people.

Eliminating Improper Payments: The Department 

continuously works with the Office of Management 

and Budget (OMB) to develop improved error 

measurement methodology for the Internal Revenue 
Department of the Treasury – Budget in Brief FY 2008

Executive Summary

Service (IRS) Earned Income Tax Credit (EITC) 

program. EITC, due to erroneous payments, is the 

only program in the Treasury Department considered 

a high risk for fraud, waste and abuse. Treasury has 

committed to providing a corrective action plan to 

OMB, which includes aggressive reduction targets 

for EITC’s erroneous payments that will produce 

effective results.

Program Rating and Assessment Tool (PART) 

Summary

Program evaluation is a core management tool used by 

Treasury to allocate resources and promote efficiency 

and effectiveness. In addition to regular independent 

program evaluations conducted by Treasury bureaus, 

Treasury also works with OMB to evaluate 20 percent 

of its programs each year through the PART process. 

All programs that undergo a PART evaluation receive 

weighted scores in four categories: program purpose 

and design, strategic planning, program management, 

and program results and accountability.

The PART process gives the Treasury Department 

a framework for assessing performance in its major 

programs. Through the use of in-depth performance 

questions, the PART allows leadership to evaluate how 

well a program is meeting its intended objectives, how 

effectively and efficiently it is managed, the extent 

to which the program supports the Department’s 

overarching strategic goals and how well the program 

achieves results.

PART Scoring History

Percentage Treasury Programs Passing PART 

Evaluations (adequate or better score)

Programs Evaluated for the FY 2007 Budget Cycle

Program Bureau Rating

FinCen BSA Collection & Dissemination FinCen Moderately Effective

FMS Payments FMS Effective

IRS Exam IRS Moderately Effective

IRS Criminal Investigations IRS Moderately Effective

Submission Processing - Re-do IRS Moderately Effective

Mint Protection Mint Effective

TTB Collect the Revenue TTB Effective

Programs Evaluated for the FY 2008 Budget Cycle

Program Bureau Rating

Protection BEP Effective

BSA Administration FinCen Results Not Demonstrated

BSA Analysis FinCen Adequate

Government Wide Accounting FMS Moderately Effective

HITCA IRS Results Not Demonstrated

IRS Retirement Savings Regulatory IRS Adequate
Department of the Treasury – Budget in Brief FY 2008

1

Fiscal Year Comparison of Full-Time Equivalent (FTE) Staffing

(Direct and Reimbursable)

Appropriation FY 2006 Actual FY 2007 Estimated FY 2008 President’s Budget

 Direct Reimb. Total Direct Reimb. Total Direct Reimb. Total

Departmental Offices Salaries and Expenses 900 97 997 1,058 90 1,148 1,136 90 1,226

98145.452 3 0 3 0 0 0 0 0 0

Air Transportation Stabilization Program 2 0 2 0 0 0 0 0 0

Office of Inspector General 116 4 120 115 2 117 115 0 115

Treasury IG for Tax Administration 835 3 838 817 3 820 835 3 838

Community Development Financial Institutions Fund 48 0 48 63 0 63 63 0 63

Financial Crimes Enforcement Network 296 1 297 334 1 335 356 1 357

Alcohol & Tobacco Tax and Trade Bureau 524 10 534 544 15 559 544 15 559

Financial Management Service 1,604 373 1,977 1,761 370 2,131 1,692 428 2,120

Bureau of the Public Debt 1,299 69 1,368 1,390 18 1,408 1,390 21 1,411

Internal Revenue Service 91,717 1,129 92,846 91,722 682 92,404 92,118 696 92,814

Subtotal, Treasury Appropriated Level 97,344 1,686 99,030 97,804 1,181 98,985 98,249 1,254 99,503

Working Capital Fund 0 200 200 0 233 233 0 233 233

Treasury Franchise Fund 0 645 645 0 827 827 0 909 909

Bureau of Engraving and Printing 0 2,190 2,190 0 2,300 2,300 0 2,250 2,250

U.S. Mint 0 1,927 1,927 0 1,975 1,975 0 1,975 1,975

Office of the Comptroller of the Currency 0 2,812 2,812 0 2,977 2,977 0 3,041 3,041

Office of Thrift Supervision 0 918 918 0 1,046 1,046 0 1,046 1,046

Terrorism Insurance Program 10 0 10 10 0 10 8 0 8

Sallie Mae Assessments 2 0 2 0 0 0 0 0 0

Total 97,356 10,378 107,734 97,814 10,539 108,353 98,257 10,708 108,965

Summary of FY 2008 Increases and Decreases 

(Dollars in Thousands)

Appropriations DO DSCIP OIG TIGTA CDFI FINCEN TTB FMS BPD IRS Total

FY 2007 President’s Budget $223,874 $34,032 $17,352 $136,469 $7,821 $89,794 $92,604 $233,654 $180,789 $10,591,837 $11,608,226 

CR-rate Adjustment (31,703) (9,986) (330) (4,516) 32,179 (19,226) (2,389) (362) (2,173) (153,473) (191,979)

FY 2007 CR-rate $192,171 $24,046 $17,022 $131,953 $40,000 $70,568 $90,215 $233,292 $178,616 $10,438,364 $11,416,247 

Non-Pay Inflation Adjustments 2,342 0 95 672 77 1,335 931 2,079 1,666 66,893 76,090 

Pay Annualization Adjustments 669 0 71 579 24 203 287 778 590 40,484 43,685 

Pay Inflation Adjustments 4,129 0 380 3,623 149 1,239 1,678 4,829 3,456 232,630 252,113 

Maintaining Current Levels $7,140 $0 $546 $4,874 $250 $2,777 $2,896 $7,686 $5,712 $340,007 $371,888 

Technical Adjustments Due to CR 29,319 0 882 3,726 0 9,266 404 (2,043) 336 27,573 69,463 

Non-Recurring Costs (2,360) (18,946) 0 0 0 0 0 (1,224) 0 0 (22,530)

Initiative Annualizations 7,877 0 0 0 0 740 0 0 0 0 8,617 

Transfers 5,100 (5,100) 0 0 0 0 0 0 0 0 0 

Productivity and Efficiency Savings 0 0 0 0 0 0 0 0 0 (119,981) (119,981)

Adjustments to FY 2007 CR-rate $39,936 ($24,046) $882 $3,726 $0 $10,006 $404 ($3,267) $336 ($92,408) ($64,431)

FY 2008 Base $239,247 $0 $18,450 $140,553 $40,250 $83,351 $93,515 $237,711 $184,664 $10,685,963 $11,723,704 

Program Decreases 0 0 0 0 (13,191) 0 (441) (12,013) (2,793) (6,479) (34,917)

Program Reinvestments 0 0 0 0 0 0 441 9,493 1,000 6,479 17,413 

Program Increases 10,894 18,710 0 0 1,498 2,493 0 0 0 409,536 443,131 

FY 2008 President’s Budget $250,141 $18,710 $18,450 $140,553 $28,557 $85,844 $93,515 $235,191 $182,871 $11,095,499 $12,149,331 

Offsetting Fees 0 0 0 0 0 0 0 0 (10,000) 0 (10,000)

FY 2008 President’s Budget less 

Offsetting Fees $250,141 $18,710 $18,450 $140,553 $28,557 $85,844 $93,515 $235,191 $172,871 $11,095,499 $12,139,331 
Departmental Offices - S & E 

Mission Statement 

To promote the conditions for prosperity and stability in the United States and to 

encourage prosperity and stability in the rest of the world. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate

% from

CR-rate

Executive Direction $16,329 $17,501 $16,325 $19,815 $3,490 21.38%

Economic Policies and 

Programs 31,691 41,947 31,581 45,450 13,869 43.91%

Financial Policies and 

Programs 26,308 25,336 26,254 28,869 2,615 9.96%

Terrorism and Financial 

Intelligence 39,540 45,401 39,263 56,224 16,961 43.20%

Treasury-wide Management 

and Programs 16,674 20,372 16,556 20,810 4,254 25.70%

Administration Programs 63,094 73,316 62,191 78,972 16,781 26.98%

Currency Manipulation 990 0 0 0 0 0.00%

Total Appropriated Resources $194,626 $223,874 $192,171 $250,141 $57,970 30.17%

FY 2008 Priorities 

The Fiscal Year (FY) 2008 President’s Budget request supports the Departmental Offices 

leading role in accomplishing key Administration goals: 

• Promoting Economic Growth and Security - Increasing economic growth and 

stability at home and internationally are key priorities for the U.S. government 

and the Treasury Department. 

• Strengthening National Security - Fighting and winning the global war on terror 

continues to be the Administration’s top priority. 

• Maintaining a World-class Treasury - Using the President’s Management 

Agenda to continually improve the management of Treasury and its program 

delivery to the American taxpayer. 
Table of Contents 

Section 1 – Purpose....................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 2 

Section 2 – Budget Adjustments and Appropriation Language .............. 7

2.1 – Budget Adjustments Table..................................................................................... 7 

2A – Budget Increases and Decreases Description......................................................... 7 

2.2 – Operating Levels Table........................................................................................ 14 

2B – Appropriation Language ...................................................................................... 15 

2C – Legislative Proposals............................................................................................ 16 

Section 3 – Budget and Performance Plan............................................... 17

3.1 – Appropriation Detail Table.................................................................................. 17 

3A – Executive Direction............................................................................................. 17 

3.2.1 – Executive Direction Budget and Performance Plan.......................................... 17 

3B – Economic Policies and Programs......................................................................... 17 

3.2.2 – Economic Policies and Programs Budget and Performance Plan..................... 19 

3C – Financial Policies and Programs......................................................................... 20 

3.2.3 – Financial Policies and Programs Budget and Performance Plan...................... 21 

3D – Terrorism and Financial Intelligence .................................................................. 22 

3.2.4 – Terrorism and Financial Intelligence Budget and Performance Plan ............... 23 

3E – Treasury-wide Management and Programs......................................................... 25 

3.2.5 – Treasury-wide Management and Programs Budget and Performance Plan ..... 26 

3F – Administration Programs..................................................................................... 27 

3.2.6 – Administration Programs Budget and Performance Plan ................................. 28 

Section 4 – Supporting Materials.............................................................. 29

4.1 – Human Resources Table ...................................................................................... 29 

4A – Human Capital Strategy Description ................................................................... 29 

4.2 – Summary of IT Resources Table ......................................................................... 34 

4B – Information Technology Strategy ........................................................................ 35 

4.3 – PART Evaluation Table....................................................................................... 36 

4C - FY 2007 Supplemental Request............................................................................ 39 

DO - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The mission of the Departmental Offices (DO) mirrors the mission of the Department of 

the Treasury: To promote the conditions for prosperity and stability in the United States 

and to encourage prosperity and stability in the rest of the world. 

Departmental Offices, as the headquarters bureau for the Department of the Treasury, 

provides leadership in such critical areas as economic and financial policy, financial 

crimes, and general management. DO is responsible for Treasury policy direction and 

formulation and supports Treasury’s role in leading the country and the world to more 

prosperous and stable economies through improving financial and economic systems, 

promoting a safe and secure America, and collecting the revenue due to the government. 

The FY 2008 Budget request supports DO’s leading role in accomplishing key 

Administration goals: 

• Promoting Economic Growth and Security - Increasing economic growth and 

stability at home and abroad are key priorities for the U.S. Government and this 

Department. Treasury will continue to work with international financial 

institutions and through high-level multilateral forums, such as the G7 and G8, to 

develop and implement policies that increase productivity, reduce poverty, and 

prevent financial crises around the world. 

• Strengthening National Security - Fighting and winning the global war on terror 

continues to be the Administration’s top priority. To further this mission in FY 

2008, the Treasury Department will expand its capacity to identify potential 

national security threats; enforce U.S. policies to counter those threats; and will 

invest in enhancements to its information technology and physical infrastructure 

to improve data security, access and quality. 

• Maintaining a World-class Treasury – In FY 2008, DO will work to modernize 

business processes and improve overall efficiency and effectiveness throughout 

the Treasury Department. Oversight and strengthening of management programs 

including human resources, acquisition/procurement, training, as well as 

environmental health and safety, ensure that the Treasury Department remains a 

world-class organization. 

1B – Program History and Future Outlook 

Treasury's Departmental Offices has transformed to accomplish missions far beyond the 

scope of traditional headquarters responsibilities. Departmental Offices now plays a 

direct role in fighting the war on terror and in promoting the President's economic policy 

agenda domestically and abroad. 

DO - 2 
Promoting Economic Growth and Security. 

The Department of the Treasury is a lead federal agency for providing economic 

guidance and support. Treasury’s Departmental Offices, including the Offices of 

International Affairs, Tax Policy, Economic Policy, and Domestic Finance, support the 

Secretary in this role through the provision of technical analysis, economic forecasting, 

and policy guidance on issues ranging from changes in tax policy to responding to 

international financial crises. The Treasury Department also manages the nation’s 

finances by collecting tax revenues due the United States, making its payments, 

managing its borrowing, investing when appropriate, and performing central accounting 

functions; all essential for ensuring the integrity of the American financial system. 

The Department works with foreign governments, financial institutions and international 

organizations to promote free and fair trade practices, target development assistance, 

identify global financial trends, and expand prosperity in the United States and around the 

world. The Treasury Department plays an important role in the global economy, 

monitoring over 160 economies to ensure stability and transparency in the global 

marketplace. 

During FY 2006, the Department of the Treasury continued to promote greater exchange 

rate flexibility, a more balanced economy, and the modernization of China’s financial 

system. In addition to holding bilateral and multilateral discussions with the Chinese 

leadership, the Department established a permanent, full-time Financial Attaché office in 

Beijing to significantly bolster its engagement with China. The Department also 

established a financial regulator working group with the Chinese to discuss key 

regulatory issues and held the first two meetings of this group. 

The Department has also been able to secure agreements in the Organization for 

Economic Cooperation and Development (OECD) that have reduced subsidies in export 

credits and tied aid flows valued at over $70 billion annually. These agreements open 

markets, level the playing field for U.S. exporters, and save the U.S. taxpayer about $800 

million annually. Cumulative budget savings from these agreements are estimated at 

over $11 billion since 1991.

The Department of the Treasury develops and implements economic policies to stimulate 

economic growth and job creation here in the United States. Treasury will continue to 

serve the President's economic priorities, including leading efforts to ensure that taxes are 

collected when due in a fair and efficient manner through oversight of IRS efforts to

address the tax gap. DO offices directly support Presidential efforts to reform the tax 

code, pension and Social Security programs, and entitlement programs. 

In FY 2006, the Office of Tax Policy successfully assisted in efforts to elevate awareness 

of the Administration's position on further expansion of reduced tax rates on capital gains 

and dividends. Tactics included public dissemination of factual information regarding 

tax relief, development of a report on “The Economic Impacts of Cutting Dividend and 

Capital Gains Taxes in 2003,” and facilitating a Treasury-sponsored roundtable 

discussion on the benefits of capital gains and dividends tax cuts. 

DO - 3 
The Department also provided significant and timely analysis of many health and 

Medicare reform proposals, agendas, and commissions. A primary focus of the health 

care work was to study the causes and consequences of high health care spending, which 

is critical to stimulating economic growth and job creation over the long-term. 

Fully funding the President’s FY 2008 Budget request will allow the Treasury 

Department to continue to study, recommend, and support Administration policy 

initiatives to strengthen the U.S. economy, create more jobs for Americans, and enhance 

citizens’ economic security. The Department will actively work to improve the U.S. 

pension system, reform Social Security, and improve the federal income tax system by 

providing timely, usable, and comprehensive analyses that advance the policy process. 

The Department of the Treasury is committed to the critical task of fortifying economic 

relations with foreign countries and financial institutions, working towards creating a 

platform for global growth and security. The FY 2008 Budget will allow Treasury to 

continue to devote resources to expand its financial attaché program, begun in 2006. 

Treasury attachés serve as the U.S. Treasury's representative in key overseas locations 

and engage in economic diplomacy on behalf of the U.S. Government. This budget 

request also will allow Treasury to add regional experts to enhance policy coordination 

on international matters and to support key policy dialogues with priority countries like 

China. 

Treasury is also dedicated to protecting the homeland from international investments that 

may lead to national security concerns. The Committee on Foreign Investment in the 

United States (CFIUS) was delegated the Presidential function of investigating the 

merger or acquisition of U.S. companies by foreign persons for national security 

implications. The Secretary of Treasury is the chair of CFIUS, and Treasury’s Office of 

International Affairs manages this function on the Secretary’s behalf. The growth and 

economic importance of foreign investment in the United States has increased 

exponentially the number of cases reviewed by CFIUS. The FY 2008 Budget request 

provides additional resources to support Treasury in its role as Chair of CFIUS, including 

administering the interagency CFIUS process. 

Strengthening National Security. 

The Treasury Department’s Office of Terrorism and Financial Intelligence (TFI) leads 

the U.S. Government’s multi-faceted effort to keep the world’s financial systems free and 

open to legitimate users, while excluding those who wish to use these systems for illegal 

purposes. TFI’s activities in this arena focus on stopping the flow of funds and support to 

terrorist groups, drug traffickers and other criminals; identifying, disrupting and 

dismantling their support networks; and leveraging the power of the U.S. financial market 

to isolate state sponsors of terrorism and weapons of mass destruction (WMD) 

proliferation. 

Since it was established in 2004, TFI has achieved significant success in identifying and 

disrupting the financial support networks of terrorists and other national security threats, 

and, in recognition of these successes, is increasingly tasked by the National Security 

DO - 4 
Council and other intelligence and national security bodies with helping to address the 

most pressing national security issues. 

 

In FY 2006, TFI pursued designations of entities engaged in the proliferation of WMD, 

continued its efforts to expose terrorist networks, and built on its success of dismantling 

networks associated with drug cartels. Notable targets have included Iranian and Chinese 

companies that supplied Iran’s military and Iranian proliferators with missile-related and 

dual-use components; multiple entities, including a Swiss company, that acted as a 

technology broker for North Korean military goods with weapons-related applications; 

two overseas branches of the International Islamic Relief Organization, who were 

bankrolling the al Qaida network in Southeast Asia; individuals and entities providing 

financial support to the Libyan Islamic Fighting Group, an al Qaida affiliate; and four top 

leaders of the al Qaida linked to the Southeast Asian Terrorist Organization, “Jemmah 

Islaiyah.” In countering narcotics trafficking, TFI successfully targeted the North Valle 

drug cartel in four separate actions, which resulted in the designation of 22 individuals 

and 29 companies, ultimately leading to the exposure and incarceration of two notorious 

Cali cartel leaders. 

 

The Treasury Department leads the U.S. delegation to the Financial Action Task Force 

(FATF), the international standard setting body charged with safeguarding the global 

financial system against money-laundering and terrorist financing. The results of TFI’s 

leadership through that body include impeding access to funds and the financial system

by terrorist groups and limiting the ability of organized criminals and other illicit groups 

to abuse the international financial system. 

 

TFI has also collaborated on a number of reports, including the U.S. Government’s firstever Money Laundering Threat Assessment report and a revision of its Anti-Terrorist 

Financing Guidelines: Best Practices for U.S.-Based Charities. TFI also worked closely 

with law enforcement, bank regulators, and other appropriate parties to identify evolving 

trends in drug proceeds money-laundering, and then communicate these to the U.S. 

financial industry. 

 

Fully funding the President’s FY 2008 Budget request for TFI activities will allow it to 

continue to improve its capabilities in performing Treasury’s National Security mission. 

Department-wide investments in physical and information technology infrastructure, 

including construction of a Sensitive, Compartmented Information Facility (SCIF) and 

investments to enhance and improve the Department’s classified information systems, 

will improve data access, security and quality. The FY 2008 Budget request will also 

allow TFI to make further investments in personnel to enhance its capacity to respond to 

emerging national security threats, provide strategic policy coordination in regions key to 

the fight against terrorist financing, enhance implementation of sanctions against state 

sponsors of terrorism and WMD proliferation, and to increase TFI’s integration into the 

broader intelligence community. 

DO - 5 
Maintaining a World-class Treasury. 

The Departmental Offices continue to improve the management and operations of the 

Treasury Department, meeting the President’s standard of a results-oriented, citizencentered government. 

Treasury has implemented workforce management initiatives such as Senior Executive 

Service pay-for-performance, as well as the training and mentoring of over 1,300 current 

and future managers. Treasury has also been able to expand electronic government 

products and services, improve internal efficiency and effectiveness, and enhance 

services to other governmental agencies and the public. 

Treasury will continue to work towards identifying and improving its management 

challenges. Policy guidance is being strengthened to reflect the Department’s evolving 

mission, and stronger oversight and accountability mechanisms are being instituted for 

the management of information technology investments. 

DO - 6 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

Appropriation: Salaries and Expenses FTE Amount

FY 2006 Appropriation (P.L. 109-115) 1,004 $196,592

Rescission (P.L. 109-148) 0 $1,966

FY 2006 Enacted 1,004 $194,626

FY 2007 President's Budget 1,058 $223,874

CR-rate Adjustment (31,703)

FY 2007 CR-rate 1,058 $192,171

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

FY 2007 Annualizations 2,511

FY 2007 Initiatives 19,477

FY 2007 MCLs 2,131

FY 2007 Transfers In 5,200

Base Realignment:

OIA - Security Personnel 5

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 2,342

Pay Annualization 669

Pay Inflation Adjustment 4,129

Initiative Annualization:

IA - Annualization of FY 2007 Initiative 8 2,580

OFAC - Annualization of FY 2007 Initiatives 12 2,429

OGC - Annualization of FY 2007 Initiatives 6 1,034

OIA - Annualization of FY 2007 Initiative 6 1,261

TP - Annualization of FY 2007 Initiative 3 573

Non-Recurring Costs:

Non-recur SCIF (1,000)

Non-recur of Declassification Project (676)

Non-recur of IA (684)

Transfers In:

DF - Critical Infrastructure Protection Transfer from DSCIP 10 2,100

OIA - TFIN Transfer from DSCIP 3,000

Total FY 2008 Base 1,108 $239,247

Program Increases:

ED - Enhanced International Economic Policy Coordination 3 618

IA - CFIUS 4 940

OFAC - Economic Sanctions against State Terrorism 2 1,392

OFAC - Sanctions against WMD Proliferation 2 889

OIA - Emerging National Security Threats 10 1,973

OIA - Intelligence Community Integration 1 219

OIA - Intelligence Support 1 215

OIA - Overseas Travel 148

OIA - SCIF 3,000

OIA - Special Security Program 1 477

TFFC - Disrupt and Dismantle Financial Networks 2 638

TFFC - Disrupt and Dismantle Rogue Regimes 2 385

Subtotal FY 2008 Program Changes 28 10,894

Total FY 2008 Request 1,136 $250,141

2A – Budget Increases and Decreases Description 

Adjustments ...................................................................................-$31,703,000 / +0 FTE 

CR-rate Adjustment -$31,703,000 / +0 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

DO - 7 
Technical Adjustment to FY 2007 Base due to CR ...................+$29,319,000 / +0 FTE 

FY 2007 Annualizations +$2,511,000 / +0 FTE Funding is requested for completing the 

full-year cost and FTE realization from initiatives enacted for FY 2006, which support 

the Office of Terrorism and Financial Intelligence (TFI). 

FY 2007 Initiatives +$19,477,000 / +0 FTE This request provides resources to expand 

Treasury's overseas presence to provide relevant intelligence and expert analysis to 

support the formulation of policy on international economics, trade, finance, and 

combating terrorist financing; and to administer and enforce economic sanctions against 

terrorist networks. This request also provides resources to: develop policies and 

implement strategies to safeguard the United States and international financial systems 

from national security threats; manage the public debt; represent the United States on 

international monetary, trade, and investment issues; recommend and implement United 

States domestic and international economic and tax policy. 

FY 2007 MCLs +$2,131,000 / +0 FTE Funds are requested for: the FY 2007 cost of the 

January 2006 pay increase; the January 2007 pay raise and benefits; non-labor related 

items such as contracts, travel, supplies, equipment, and General Services Administration 

(GSA) rent adjustments; and Department of State overseas Capital Security Cost Sharing. 

FY 2007 Transfers In +$5,200,000 / +0 FTE Transfer in of $1,000,000 from Treasury 

Building and Annex Repair and Restoration to re-establish a Repair and Improvements 

(R&I) account. A recurring baseline for major repairs and improvements is needed for the 

Main Treasury (Historic Landmark) and Annex (Historic Register) infrastructure. Prior to 

the existence of the TBARR account, DO had a no-year account for this purpose. 

Additionally, a transfer in of $4,200,000 and 0 FTE to cover the cost of the U.S. Secret 

Service security detail provided to the Secretary of the Treasury. 

Base Realignment .........................................................................................+$0 / +5 FTE 

OIA - Security Personnel +$0 / +5 FTE Transfer of security personnel from WCF Secure 

Communications to Office of Intelligence and Analysis (OIA). 

Maintaining Current Levels (MCLs) ...........................................+$7,140,000 / +0 FTE 

Non-Pay Inflation Adjustment +$2,342,000 / +0 FTE Funds are requested for non-labor 

related items such as contracts, travel, supplies, equipment and GSA rent adjustments. 

Pay Annualization +$669,000 / +0 FTE Funds are requested for the FY 2008 cost of the 

January 2007 pay increase. 

Pay Inflation Adjustment +$4,129,000 / +0 FTE Funds are requested for the proposed 

January 2008 pay raise. 

Initiative Annualization ...............................................................+$7,877,000 / +35 FTE 

IA - Annualization of FY 2007 Initiative +$2,580,000 / +8 FTE In FY 2007, additional 

resources were requested to expand the Treasury attaché program in countries such as 

Iraq, China and Afghanistan. Treasury attachés work in tandem with the Office of 

DO - 8 
International Affairs (IA) and the Office of Terrorism and Financial Intelligence (TFI) to 

build relationships with foreign officials and work with local U.S. industry and agency 

representatives to advance U.S. interests. They also provide much-needed intelligence 

and expertise to U.S. officials in Washington formulating policy on international 

economics, trade, finance and terrorist finance. Funding is requested for the full FY 2008 

cost and FTE realization from this FY 2007 initiative. 

OFAC - Annualization of FY 2007 Initiatives +$2,429,000 / +12 FTE Designated Global 

Terrorists and their support networks continuously seek new ways of evading U.S. and 

international sanctions by changing the names and locations of support organizations and 

financing methods. This creates an additional challenge for the Office of Foreign Assets 

Control (OFAC) in its responsibility to administer and enforce economic sanctions. 

Additional positions were requested in FY 2007 for OFAC to monitor and update 

existing designations to capture these evasions and track the development of new support 

structures and funding sources. Additionally, in FY 2007 positions were requested to 

implement and administer the new 2006 WMD Executive Order. These resources would 

be deployed to identify, target, designate and implement sanctions against the financiers 

and facilitators of WMD proliferation. Funding is requested for the full FY 2008 cost 

and FTE realization from these FY 2007 initiatives. 

OGC - Annualization of FY 2007 Initiatives +$1,034,000 / +6 FTE The FY 2007 

President’s Budget provides funding for three FTEs to finalize the staffing needs of the 

recently created Office of the Assistant General Counsel for Enforcement and 

Intelligence (AGC E&I) and three FTEs for OFAC Chief Counsel’s Office to meet 

Treasury’s need for essential legal services in support of the Department’s most critical 

anti-terrorism missions. The AGC E& I attorneys provide legal counsel for the 

Department’s essential and growing terrorist financing, money laundering, WMD 

proliferation, narco-trafficking and economic sanctions programs, and a wide range of 

intelligence and information-sharing initiatives that are critical to the success of those 

programs. OFAC’s Chief Counsel’s Office supports an “operational” client, and its 

responsibilities include drafting Executive Orders and regulations, and working closely 

with OFAC and the Justice Department on litigation matters. Funding is requested for 

the full FY 2008 cost and FTE realization ($1,034 / +6 FTE) from the FY 2007 

initiatives. 

OIA - Annualization of FY 2007 Initiative +$1,261,000 / +6 FTE Additional analyst 

positions were requested in FY 2007 to effectively address transnational terrorist and 

illicit finance issues; such as terrorist finance, decentralization and proliferation of 

terrorist groups, counter-proliferation and critical infrastructure protection. These 

resources will provide the ability to engage in analyst exchanges with other national 

security and intelligence community agencies in accordance with the Intelligence Reform

and Terrorism Prevention Act of 2005. Funding is requested for the full FY 2008 cost 

and FTE realization from this FY 2007 initiative. 

TP - Annualization of FY 2007 Initiative +$573,000 / +3 FTE Dynamic analysis of tax 

policy proposals (analysis incorporating changes in taxpayer behavior), including their 

DO - 9 
macroeconomic effects, enhance the information provided to decision-makers regarding 

the effects of their tax policy determinations. The FY 2007 proposed addition of a 

Dynamic Analysis Division (including a division director and economists) to the Office 

of Tax Policy facilitates the production of such dynamic analyses relating to proposed 

Federal tax legislation. Funding is requested for the full FY 2008 cost and FTE 

realization from this FY 2007 initiative. 

Non-Recurring Costs ......................................................................-$2,360,000 / +0 FTE 

Non-recur SCIF -$1,000,000 / +0 FTE FY 2008 savings achieved from non-recurring 

costs: -$1,000,000 associated with the establishment of a Sensitive Compartmented 

Information Facility (SCIF) in FY 2007. 

Non-recur of Declassification Project -$676,000 / +0 FTE FY 2008 savings achieved 

from non-recurring costs: $-676,000 for project expenses for declassification of records. 

Non-recur of IA -$684,000 / +0 FTE FY 2008 savings achieved from non-recurring 

costs: -$684,000 for one-time expense related to transfer of new staff to overseas posts in 

FY 2007. 

Transfers In ..................................................................................+$5,100,000 / +10 FTE 

DF - Critical Infrastructure Protection Transfer from DSCIP +$2,100,000 / +10 FTE 

Homeland Security Presidential Directive 7 (HSPD-7) designates Treasury as the lead 

agency for the Banking and Finance sector. The Office of Critical Infrastructure 

Protection discharges this obligation for the Department, and works to identify, prioritize, 

and determine the interdependencies of critical assets in order to provide an appropriate 

level of protection. This initiative, which is also one of the Department’s President’s 

Management Agenda milestones, will assist in Treasury’s efforts to ensure the resilience 

of the financial services sector in the event of threats to its physical integrity or viability. 

This request represents the transfer of Critical Infrastructure Protection salaries from the 

Department-wide Systems and Capital Investment Program to Domestic Finance, and 

recognizes that important milestones have been achieved and that permanent staffing will 

be required to continuously implement these resilience efforts. 

OIA - TFIN Transfer from DSCIP +$3,000,000 / +0 FTE The Treasury Foreign 

Intelligence Network (TFIN) system supports the Department of the Treasury’s 

capabilities in providing and analyzing meaningful intelligence for senior Treasury 

Department staff, as well as for other agencies within the Intelligence Community. The 

data from the TFIN system is utilized by the Secretary of the Treasury, the Deputy 

Secretary of the Treasury, the Under Secretary for TFI, the Under Secretary for 

International Affairs, OIA, OFAC, the Financial Crimes Enforcement Network (FinCEN) 

and other components. The development phase of the TFIN stabilization and 

modernization project will be completed by the end of FY 2007, requiring funds for user 

support and ongoing operations and maintenance of the system. 

DO - 10 
Program Increases .....................................................................+$10,894,000 / +28 FTE 

ED - Enhanced International Economic Policy Coordination +$618,000 / +3 FTE The 

Department of the Treasury is committed to the critical task of fortifying economic 

relations with foreign countries and financial institutions, working towards creating a 

platform for global growth and security. To this end, it is necessary to enhance policy 

coordination and resources through the addition of regional experts. This initiative is for 

additional staff to support key policy dialogues with countries like China. 

IA - CFIUS +$940,000 / +4 FTE The Committee on Foreign Investment in the United 

States (CFIUS) is responsible for investigating the merger or acquisition of U.S. 

companies by foreign persons for national security implications. This function is 

mandated under the Exxon-Florio Legislation amendment to the Defense Production Act, 

and is managed by Treasury’s Office of International Affairs on the Secretary’s behalf. 

The significance of this work has grown exponentially with the growth of foreign 

investment into the United States and the sharp increase in transactions filed with CFIUS. 

Requested resources will be used to recruit investment flow analysts and other specialists. 

This function is necessary to provide adequate support for, and measure progress toward, 

achieving the International Affairs objective of ensuring national security and increasing 

economic growth. 

OFAC - Economic Sanctions against State Terrorism +$1,392,000 / +2 FTE The Office 

of Foreign Assets Control (OFAC) is committed to combating terrorist networks and state 

sponsors of terrorism. New Executive Orders with respect to Sudan and Syria were 

issued in 2006 and the Administration is extensively engaged with respect to Iran. Each 

new Executive Order and/or OFAC designation of terrorists and their financial networks 

brings with it increasing demands on OFAC’s enforcement, licensing, compliance and 

administrative support components. Additional resources in these areas are requested to 

match the increased tempo of new Executive Orders and Treasury designations. 

OFAC - Sanctions against WMD Proliferation +$889,000 / +3 FTE Building on 

resources requested in FY 2007 to fund the start-up of the sanctions program against 

WMD proliferation, the FY 2008 President’s Budget requests additional resources to 

effectively implement and administer Executive Order 13382. The WMD sanctions 

program is a Presidential national security priority, and these resources will be used to 

strengthen OFAC’s ability to track, identify, and designate financiers and other 

supporters of WMD proliferation. Publicizing the designations, and assigning resources 

to work with the U.S. public and with government agencies will greatly assist the 

Treasury Department in effectively isolating financiers and facilitators of WMD 

proliferation from the U.S. and international commercial communities. The request will 

also provide OFAC with additional resources to expand its enforcement capacity in 

support of investigation and blocking activities, which are critical to the enforcement of 

sanctions. 

OIA - Emerging National Security Threats +$1,973,000 / +10 FTE Eleven intelligence 

analysts (including three open-source analysts) and five production officers are requested 

to support the efforts of the Office of Intelligence Analysis (OIA) in addressing the most 

DO - 11 
pressing and emerging national security issues; including transnational terrorist and illicit 

finance issues, as well as engage in analyst exchanges with other national security and 

intelligence community agencies. This request will also allow OIA to establish a 

permanent intelligence production structure, an essential component to the timely and 

accurate production of intelligence information. 

OIA - Intelligence Community Integration +$219,000 / +1 FTE Integrating Treasury 

further into the Intelligence Community (IC) remains one of OIA’s top priorities. This is 

consistent with the information sharing and coordination requirements outlined in the 

Intelligence Reform and Terrorism Prevention Act of 2004, as well as in Executive 

Orders 13356 and 13388. Improvements in this arena will increase Treasury’s access to 

critical intelligence, and expand its ability to coordinate on terrorist-financing and WMD 

proliferation matters with the IC, law enforcement communities, and foreign partners. 

OIA’s participation as a full fledged IC member is closely aligned with the Director of 

National Intelligence's (DNI) mission objective to improve the integration of the IC. This 

initiative will allow OIA to hire two additional personnel to engage in analytic 

exchanges/detail assignments with the National Counterterrorism Center and the Central 

Intelligence Agency (CIA) – two of Treasury’s key intelligence partners. 

OIA - Intelligence Support +$215,000 / +1 FTE The Office of Intelligence Support (OIS) 

is tasked with providing intelligence on a full range of political, economic, and security 

matters to the Secretary, Deputy Secretary and other senior Treasury leadership. The 

information provided by OIS is critical for the Treasury Department’s senior leaders’ 

participation in the National Security Council policymaking process. For OIS to succeed 

in these efforts, it is essential that the office be fully integrated into the intelligence 

community. The funding requested will enable OIS integration consistent with the 

information sharing and coordination requirements of the Intelligence Reform and 

Terrorism Prevention Act and Executive Orders 13356 and 13388. The additional 

personnel will provide briefing support and facilitate OIA’s increased role in the review 

process for transactions filed with the Committee on Foreign Investment in the United 

States (CFIUS). Finally, the request provides additional watch officers to fully staff the 

Department’s 24/7 intelligence operations center. 

OIA - Overseas Travel +$148,000 / +0 FTE This initiative would enable OIA 

intelligence analysts to engage in intelligence/analytic exchanges in key countries, 

improving Treasury’s access to information on priority terrorist financing targets. The 

OIA analysts would travel to countries where terrorist financing remains a serious 

problem; where the host governments have not taken sufficiently aggressive action in 

response to this threat. Intelligence analysts need to build lasting institutional 

relationships with key counterterrorism intelligence/analytic authorities in these 

governments, which could result in greater cooperation and more aggressive action by the 

host countries. Improving the host countries’ understanding of Treasury’s unique 

authorities to combat terrorism, including Executive Order 13224 and Section 311 of the 

USA PATRIOT Act, would greatly benefit the U.S. Government’s terrorist financing 

efforts. This type of travel is valuable both for employee skill development, and in 

improving their understanding of the regions and countries that they cover. 

DO - 12 
OIA - SCIF +$3,000,000 / +0 FTE This initiative is a request for additional secure space 

to accommodate the new hires in OIA and OFAC’s terrorism and WMD proliferation 

programs. The highly classified work of these expanding units can only be accomplished 

in specially constructed secure areas, known as Sensitive Compartmented Information 

Facilities (SCIF). Adequate security infrastructure is critical to protecting the intelligence 

and national security functions of the Department. OIA’s increasing reliance on highly 

classified intelligence information necessitates additional space requirements, as there is 

currently a lack of SCIF space in the Treasury building. 

OIA - Special Security Program +$477,000 / +1 FTE Safeguarding the sensitive 

information provided to the Treasury Department by the National Security Counsel 

(NSC) and the IC, as outlined in Director of Central Intelligence Directives 6/1 – 6/10, 

Executive Orders 12333, 12958, and 32CFR2004, is a critical responsibility of OIA. 

Accidental or unauthorized disclosure of this information could do exceptionally grave 

damage to national security. The expansion of TFI and its components has placed 

increased demands on the small staff of the office responsible for special security 

programs. In addition, with OIA’s increased integration into the IC, OIA is now a 

participant in the IC reciprocity programs, which are required by the DNI of IC members. 

The expansion of OIA has also resulted in the need for more Sensitive Compartmented 

Information Facilities to do this highly classified work, which has also significantly 

increased the responsibilities of the Office of Special Security Programs. This initiative 

will allow OIA to hire two security specialists to cover these various issues. 

TFFC - Disrupt and Dismantle Financial Networks +$638,000 / +3 FTE This request 

would provide the Office of Terrorist Financing and Financial Crimes (TFFC) with 

increased resources to devote specific policy advisors to critical regions in the Western 

Hemisphere, Africa and the Middle East-South Asia nexus. These regions present 

specific terrorist financing and financial crimes problems, including money laundering 

tied to narcotics and arms trafficking, and financial flows to terrorist organizations. The 

Middle East is of particular concern, as a number countries continue to provide a base for 

terrorist fundraisers and financial supporters, particularly to South Asia-based terrorist 

groups. Additional policy advisors dedicated to these areas will allow the Treasury 

Department to bring together the U.S. Government tools available to law enforcement 

and national security agencies in the fight against terrorist financing and financial crime. 

The requested policy advisors would allow TFFC to meet multiple strategic objectives, 

including disrupting terrorist financial and support networks and building the capacity of 

foreign governments to combat terrorist financing. 

TFFC - Disrupt and Dismantle Rogue Regimes +$385,000 / +2 FTE This initiative 

would fund additional policy advisors to cover North Korea, Afghanistan, Pakistan, 

India, and Central Asia on pressing financial issues. This funding will allow the Treasury 

Department to fully leverage tactical successes to develop ongoing strategic approaches 

to bring additional financial pressures. This initiative is consistent and in support of 

Executive Orders 13338 and 13382 and Section 311 of the U.S. PATRIOT Act. 

DO - 13 
2.2 – Operating Levels Table 

Dollars in Thousands 

 

Appropriation Title: DO Salaries & Expenses FY 2006

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007

CR-rate

FY 2007

Proposed

Operating 

Level

FY 2008 

Requested

Level

FTE 1,004 1,058 - 1,004 1,058 1,136

Object Classification:

11.1 Full-Time Permanent Positions..................... $91,905 $100,850 ($13,293) $87,557 $100,850 $112,378

11.1 Other than Full-Time Permanent Positions.... 2,781 2,781 (538) 2,243 2,781 2,781

11.5 Other Personnel Compensation.................... 197 197 76 273 197 197

11.8 Special Personal Services Payments............ 0 0 0 0 0 0

11.9 Personnel Compensation (Total)............... $94,883 $103,828 ($13,755) $90,073 $103,828 $115,356

12.0 Personnel Benefits........................................ 19,117 21,548 1,132 22,680 21,548 23,843

13.0 Benefits to Former Personnel........................ 0 0 0 0 0

21.0 Travel............................................................ 3,000 6,296 (2,723) 3,573 6,296 6,789

22.0 Transportation of Things............................... 0 0 0 0 0 0

23.1 Rental Payments to GSA.............................. 4,000 4,602 (649) 3,953 4,602 5,239

23.2 Rent Pa

0

yments to Others.............................. 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc................. 7,967 7,967 5,189 13,156 7,967 7,967

24.0 Printing and Reproduction............................. 2,715 2,715 (121) 2,594 2,715 2,715

25.1 Advisory & Assistance Services.................... 28,014 41,852 (11,175) 30,677 41,859 52,837

25.2 Other Services.............................................. 9,724 9,724 (386) 9,338 9,724 9,724

25.3 Purchase of Goods/Serv. from Govt. Accts... 18,847 18,847 (8,357) 10,490 18,840 18,840

25.4 Operation & Maintenance of Facilities........... 900 900 76 976 900 900

25.5 Research & Development Contracts............. 0 0 0 0 0 0

25.6 Medical Care................................................. 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment........ 1,000 1,000 405 1,405 1,000 1,000

25.8 Subsistence & Support of Persons................ 0 0 0 0 0

26.0 Supplies and Materials.................................. 3,711 3,801 (894) 2,907 3,801 3,857

31.0 Equipment..................................................... 748 794 (445) 349 794 1,073

32.0 Lands and Structures.................................... 0 0 0 0 0 0

33.0 Investments & Loans....................................

0

. 0 0 0 0 0

41.0 Grants, Subsidies.........................................

0

. 0 0 0 0 0

42.0 Insurance Claims & Indemn.......................... 0 0 0 0 0 0

43.0 Interest and Dividends...........................

0

... 0 0 0 0 0

44.0 Refunds........................................................

0

. 0 0 0 0 0

Total Budget Authority....................................

0

... $194,626 $223,874 ($31,703) $192,171 $223,874 $250,141

Budget Activities:

Executive Direction Programs.............................. $16,329 $17,501 ($1,176) $16,325 $17,501 $19,815

Economic Policies and Programs........................ 31,691 41,947 (10,366) 31,581 41,947 45,450

Financial Policies and Programs........................... 26,308 25,336 918 26,255 25,336 28,869

Terrorism and Financial Intelligence..................... 39,540 45,401 (6,138) 39,264 45,401 56,224

Treasury-Wide Mgmt. Policies and Programs......... 16,674 20,372 (3,816) 16,556 20,372 20,810

Administration Programs................................... 63,094 73,316 (11,125) 62,191 73,316 78,972

Currency Manipulation................................... 990 0 0 0 0 0

Total Budget Authority....................................... $194,626 $223,874 ($31,703) $192,171 $223,874 $250,141

DO - 14 
2B – Appropriation Language 

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY 

DEPARTMENTAL OFFICES 

Federal Funds 

SALARIES AND EXPENSES: 

For necessary expenses of the Departmental Offices 

including operation and maintenance of the Treasury 

Building and Annex; hire of passenger motor vehicles; 

maintenance, repairs, and improvements of, and purchase 

of commercial insurance policies for, real 

properties leased or owned overseas, when necessary for 

the performance of official business, $250,141,000: 

Provided, That of the amount appropriated under this 

heading, not to exceed $3,000,000, to remain available 

until September 30, 2009, for information technology 

modernization requirements; not to exceed $200,000 for 

official reception and representation expenses; and not to 

exceed $258,000 for unforeseen emergencies of a 

confidential nature, to be allocated and expended under the 

direction of the Secretary of the Treasury and to be 

accounted for solely on his certificate: Provided further, 

That of the amount appropriated under this heading, 

$5,114,000 to remain available until September 30, 2009, 

is for the Treasury-wide Financial Statement Audit and 

Internal Control Program, of which such amounts as may 

be necessary may be transferred between accounts of the 

Department’s offices and bureaus to conduct audits: 

Provided further, That this transfer authority shall be in 

addition to any other provided in this Act: Provided 

further, That of the amount appropriated under this 

heading, $3,000,000 to remain available until September 

30, 2009 is for secure space requirements: Provided 

further, That of the amount appropriated under this 

heading, $2,300,000, to remain available until September 

30, 2009, is for salary and benefits for hiring of personnel 

whose work will require completion of a security clearance 

investigation in order to perform highly classified work to 

further the activities of the Office of Terrorism and 

Financial Intelligence: Provided further, That of the 

amount appropriated under this heading, $2,100,000, to 

The language has been 

amended to remove the 

allocation of appropriated 

funds by budget activity. 

The amended language 

provides flexibility to the 

Secretary of the Treasury 

to meet critical 

requirements in a timely 

manner. This 

methodology is in line 

with submissions from

prior years, and will 

make DO’s 

reprogramming 

requirements the same as 

all other Treasury 

bureaus. 

The language requests 

that representation funds 

be increased by $50,000 

to reflect Treasury’s 

greater overseas presence 

and increased 

international 

responsibilities. 

This language requests 

that $3M of the DO S&E 

request for construction 

of a SCIF be identified as 

multi-year. Given the 

scope of the project and 

project plans for similar 

DO - 15 
remain available until September 30, 2010, is to develop 

and implement programs within the Office of Critical 

Infrastructure Protection and Compliance Policy, including 

entering into cooperative agreements. (Department of the 

Treasury Appropriations Act, 2008.)

construction projects, 

multi-year funding will 

be necessary. 

This requests includes a 

set aside of $2.3M for the 

hiring of personnel who 

require a security 

clearance. Given the 

highly specialized 

background and expertise 

required to fill these 

positions, as well as the 

extended time required to 

perform background 

investigations, multi-year 

funds are necessary. 

2C – Legislative Proposals 

Expand the Secretary of the Treasury’s authority to invest excess cash on behalf of the 

government. The FY 2008 Budget proposes legislation to give the Secretary of the 

Treasury the ability to manage the government’s short-term excess operating cash more 

efficiently. Under the current authority, which is codified at 31 U.S.C. 323, the 

Government is authorized to invest its short-term excess cash in obligations of the United 

States Government and depositary institutions, principally, banks, savings and loan 

associations and credit unions. This initiative would enable the Secretary of the 

Treasury to broaden investment options and improve earnings on investments while not 

increasing the risk of those investments. This initiative is expected to increase interest 

earnings on the Treasury’s investment of short-term excess cash by approximately $10 

million annually. Such earnings would be deposited in the general fund of the Treasury. 

Additional Assistant Secretary for International Affairs. In FY 2007, the Administration 

will seek legislation to establish a second assistant secretary for International Affairs, 

funded with existing budgetary resources. One assistant secretary would focus on the 

Treasury Department's development and regional policy responsibilities while the other 

would be focused on matters of international capital and trade flows. 

DO - 16 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Executive Direction Programs 113 $16,329 90 $16,309 119 $17,501 $113 $16,325 129 $19,815 14.16% 21.38%

Economic Policies and Programs 222 31,691 169 31,570 232 41,947 222 31,581 244 45,450 9.68% 43.92%

Financial Policies and Programs 182 26,308 130 26,258 184 25,336 182 26,255 197 28,869 8.24% 9.96%

Terrorism and Financial Intelligence 233 39,540 180 39,340 264 45,401 233 39,264 308 56,224 31.97% 43.20%

Treasury-wide Mgmt. Policies and Programs 94 16,674 69 16,664 99 20,372 94 16,556 99 20,810 5.32% 25.70%

Administration Programs 160 63,094 126 62,924 160 73,316 160 62,191 160 78,972 0.00% 26.98%

Currency Manipulation 0 990 0 990 0 0 0 0 0 0 0.00% 0.00%

Subtotal New Appropriated Resources 1,004 194,626 764 194,055 1,058 223,874 1,004 192,171 1,136 250,141 13.15% 30.17%

Other Resources:

Offsetting Collections - Reimbursable 86 $19,800 83 $17,845 90 $19,800 $86 $17,845 90 $19,800 4.65% 10.96%

Subtotal Other Resources 86 $19,800 83 $17,845 90 $19,800 86 $17,845 90 $19,800 4.65% 10.96%

Total Resources Available for Obligation 1,090 $214,426 847 $211,900 1,148 $243,674 1,090 $210,016 1,226 $269,941 12.48% 28.53%

Resources Available for Obligation Enacted Obligations President's Budget CR-rate Request to FY 2008

% Change

FY 2006 FY 2006 FY 2007 FY 2007 FY 2008 FY 2007

3A – Executive Direction ($19,815,440 from direct appropriations and $590,000 from 

reimbursable programs): The Executive Direction program area provides direction and 

policy formulation to the Department and DO, and interacts with Congress and the public 

on Departmental policy matters. Components of Executive Direction include: the Office 

of the Secretary, Deputy Secretary, Chief of Staff, Executive Secretary, Office of General 

Counsel, Legislative Affairs, Public Affairs, and Treasurer. No specific performance 

goals/measures are presented for this budget activity as the work of the offices within this 

budget activity is captured within the other budget activities. 

3.2.1 – Executive Direction Budget and Performance Plan 

Dollars in Thousands

Executive Direction Budget Activity Includes Strategic Objectives E1A, E1B, E1C, E2A, E2B, F3A, F3B, 

F3C, F4A, F4B, F4D, and M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $17,067 $14,430 $16,329 $17,501 $19,815

 Other Resources 414 469 590 590 590

Total Operating Level $17,481 $14,899 $16,919 $18,091 $20,405

Human Resources

 Appropriated FTE 106 112 113 119 129

 Other FTE 5 3 3 3 3

Total FTE (direct and reimbursable) 111 115 116 122 132

3B – Economic Policies and Programs ($45,450,170 from direct appropriations and 

$3,839,000 from reimbursable programs): The Treasury Department plays both a policy 

and an operational role in promoting prosperous U.S. and world economies, raising 

standards of living, and protecting global economic and financial systems through the 

formulation and execution of United States economic and financial policies that promote 

growth. The Treasury Department supports U.S. economic growth by developing and 

implementing policies for domestic economic development, tax programs, banking and 

financial institutions, and other fiscal matters. 

DO - 17 
The Office of International Affairs and the Office of Economic Policy monitor domestic 

and international economic conditions, and collect and analyze financial data, including 

foreign credits and credit guarantees. The Treasury Department works to establish open 

trade and investment policies that benefit American workers and encourage growth in 

developing countries, while also promoting responsible policies regarding international 

debt and finance. The Treasury Department monitors the economies of more than 160 

countries worldwide to ensure stability and transparency in the global marketplace, and 

works with more than twenty international financial institutions and organizations to 

target development assistance. 

The Secretary of Treasury is the chair of CFIUS –an interagency committee that 

investigates the merger or acquisition of U.S. companies by foreign persons for national 

security implications. Treasury’s Office of International Affairs manages this function on 

the Secretary’s behalf. Recent high-profile investments, and the sharp increase in 

transactions filed with CFIUS, have demonstrated the importance of dedicating adequate 

resources to this critical function. 

Office of International Affairs. The mission of this office is to:

• Raise economic growth in developed and developing countries; 

• Improve financial stability and security in emerging and world markets; 

• Increase the effectiveness of U.S. assistance to the world’s poorest 

countries; 

• Enhance the functioning of international financial institutions; and 

• Promote an open and transparent international trade and investment 

market.

Office of Economic Policy. The mission of this office is to:

• Analyze and report on current and prospective economic developments in 

the U.S. and world economies, and assist in the determination of 

appropriate economic policies; 

• Produce and publish a corporate bond yield curve as required by the 

Pension Protection Act of 2006; 

• Support the Secretary of the Treasury in his roles as Chairman and 

Managing Trustee of the Social Security and Medicare Boards of Trustees; 

and 

• Conduct research to assist in the formulation and articulation of public 

policies and positions of the Treasury Department on a wide range of 

microeconomic issues. Recent examples include terror risk insurance, 

health care, pension reform and retirement income security, policy 

responses to a potential flu pandemic, and policy responses to natural 

disasters such as Hurricanes Katrina and Rita. 

Other Resources: Reimbursements totaling $3.8 million are collected from the U.S. 

Agency for International Development for Treasury economic and financial technical 

assistance to foreign governments; and from the Mansfield Center for Pacific Affairs for 

personnel services rendered on a rotational basis to the Government of Japan’s Ministry 

DO - 18 
of Finance. (Note: A portion of these funds are allocated to the Executive Direction and 

Administrative Programs budget activities to support management and legal services 

provided to reimbursable programs). 

3.2.2 – Economic Policies and Programs Budget and Performance Plan 

Dollars in Thousands

Economic Policies and Programs 

Budget Activity

Includes Strategic Objectives E1A, E1C, E2A, E2B, F3A, F3B, F3C, 

F4A, F4B, and F4D

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $31,837 $31,203 $31,691 $41,947 $45,450

 Other Resources 2,690 3,050 3,839 3,839 3,839

Total Operating Level $34,527 $34,253 $35,530 $45,786 $49,289

Human Resources

 Appropriated FTE 199 218 222 232 244

 Other FTE 18 17 17 17 17

Total FTE (direct and reimbursable) 217 235 239 249 260

Economic Policies and Programs Budget 

Activity

Includes Strategic Objectives E1A, E1C, E2A, E2B, F3A, F3B, 

F3C, F4A, F4B, and F4D

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 90% 90% 90% 90%

Actual 78% 100%

Improve International Monetary Fund (IMF) 

effectiveness and quality through periodic review

of IMF programs (%)(Oe) Met No Yes

Target 294 216 870 870 870

Actual 65 46 700

Level of MDB grant financing and satisfactory

results measurements (African Development 

Bank/AFDF Grants) (in millions) (Oe) Met No No No

Target 21% 19.5% 35% 28.5% 35%

Actual 39.2% 21.8% 30.5%

Level of MDB grant financing and satisfactory

results measurements (Grants as a % of AFDF 

FY Commitment) (Oe) Met Yes Yes No

Target 22% 19.6% 30.4% 30% 19.6%

Actual 18.8% 21.4% 25%

Level of MDB grant financing and satisfactory

results measurements (Grants as a % of IDA FY

Commitment) (Oe) Met No Yes No

Target 1,602 1,728 3,555 2,025 2,025

Actual 1,681 1,925 2,025

Level of MDB grant financing and satisfactory

results measurements (World Bank/IDA Grants) 

[in millions] (Oe) Met Yes Yes No

Target 5 9 7 7

Actual 7 12

Number of new Free Trade Agreement (FTA) 

negotiations and Bilateral Investment Treaty

(BIT) negotiations underway or completed (Oe) Met Yes Yes

Target Baseline 90% 90% 90%

Actual 78% 88%

Percentage of grant and loan proposals 

containing satisfactory frameworks for results 

measurement (%) (Oe) Met Yes No

Target 5.6% 5.3% 5.2% 5.1% 4.8%

Actual 5.4% 5.1% 4.6%

U.S. unemployment rate (%) (Oe) 

Met Yes Yes Yes

Target 3.5% 3.6% 3.4% 3.3% 3.2%

Actual 4.5% 3.6% 3%

US Real Gross Domestic Product (GDP) growth 

rate (%) (Oe) 

Met Yes Yes No

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: One of Treasury’s important economic performance goals 

is to address global imbalances and assure sustainable global growth. One way Treasury 

accomplishes this goal is by encouraging large economies with fixed or rigid exchange 

rate regimes to adopt flexible exchange rates. Treasury engaged in and supported 

economic dialogue with countries, including China, and provided technical advice and 

assistance so these countries will be able to transition from fixed to flexible regimes. In 

DO - 19 
FY 2004, Treasury met its target of three regimes becoming more flexible. In FY 2007 

and FY 2008 Treasury will continue to work with China and other governments. China is 

now taking concrete steps to establish the financial infrastructure to implement flexible 

exchange rates. Treasury is actively assisting China in its efforts to achieve the desired 

outcome of a flexible China currency. 

Another important economic goal for Treasury is to work with foreign governments to 

open financial services markets to U.S. providers. This goal is accomplished by 

increasing the number of new Free Trade Agreement (FTA) negotiations and Bilateral 

Investment Treaty (BIT) negotiations. Treasury seeks strong commitments from U.S. 

trading partners in these negotiations to ensure those markets are available to the U.S. on 

a fair and open basis. Once implemented, these agreements serve as a core element of 

U.S. trading partner’s economic infrastructure and help enhance international economic 

and financial stability. In FY 2006, Treasury negotiated 12 such agreements, which 

surpassed its target of nine. For FY 2008, Treasury plans to negotiate seven more 

agreements. 

 

3C – Financial Policies and Programs ($28,868,940 from direct appropriations and 

$4,665,000 from reimbursable programs): The Treasury Department has both a policy 

and an operational role in promoting prosperous U.S. and world economies, raising 

standards of living, and protecting domestic and international economic and financial 

systems. As the principal economic advisor to the Secretary on domestic issues, the 

offices within the Financial Policies and Programs area provide the economic and 

financial policy expertise of the Department. 

One of the principal objectives of the Financial Policies and Programs area is to enable 

commerce. The Office of Domestic Finance is responsible for advising and assisting in 

areas of domestic finance, banking, fiscal policy and operations, and the development of 

policies and guidance in areas of financial institutions, Federal debt finance, financial 

regulation and capital markets. The Treasury Department supports U.S. economic 

growth by developing and implementing policies for domestic economic development, 

tax programs, banking and financial institutions, and other fiscal matters. The Office of

Tax Policy, in addition to providing the Secretary with expert tax analysis, serves as the 

official representative to a number of international organizations, which contribute to the 

search for common approaches to addressing current and important tax problems for 

which international consensus can be very valuable. 

Office of Tax Policy. Responsibilities of the Office of Tax Policy include: 

• Advising the Secretary, Assistant Secretary of Tax Policy and other 

Treasury officials on the formulation of the Administration's domestic and 

international taxation policy, including preparing the Administration’s 

testimony on such legislation; 

• Coordinating with Congressional staffs and other agencies on matters 

related to U.S. domestic and international tax policy, including the 

documentation of the legislative history of tax legislation and drafting of 

new legislation; 

DO - 20 
• Establishing policy criteria derived from rulings and regulations, and 

guiding preparation of these requirements with the Internal Revenue 

Service to implement and administer the Internal Revenue Code; and 

• Representing the United States in various international organizations, such 

as the Organization for Economic Cooperation and Development and the 

G-7. 

Office of Domestic Finance. Responsibilities of the Office of Domestic Finance 

include: 

• Assisting in the formulation of policy related to financial institutions, 

government-sponsored enterprises, critical infrastructure protection, 

Federal debt management, state and local finance, financial market 

oversight as well as compliance policy and financial education; 

• Establishing policy aimed at deterring U.S. currency counterfeiters; 

• Developing systems for the collection, disbursement, management and 

security of public monies in the United States and abroad, and related 

government-wide accounting and reporting for those funds; and 

• Creating the conditions necessary for the financial sector to be resilient in 

the event of unforeseeable future events. 

Other Resources: Reimbursements totaling $4.7 million are collected from the Council 

of Economic Advisors and the Board of Governors of the Federal Reserve for personnel 

services rendered. (Note: A portion of these funds are allocated to the Executive 

Direction and Administrative Programs budget activities to support management and 

legal services provided to reimbursable programs). 

3.2.3 – Financial Policies and Programs Budget and Performance Plan 

Dollars in Thousands

Financial Policies and Programs Budget 

Activity

Includes Strategic Objectives E1A, E1C, E2A, E2B, F3A, F3B, F3C, 

F4A, F4B, and F4D

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $23,265 $25,231 $26,308 $25,336 $28,869

 Other Resources 3,269 3,706 4,665 4,665 4,665

Total Operating Level $26,534 $28,937 $30,973 $30,001 $33,534

Human Resources

 Appropriated FTE 163 177 182 184 197

 Other FTE 25 26 22 27 27

Total FTE (direct and reimbursable) 188 203 204 211 224

DO - 21 
Financial Policies and Programs Budget 

Activity

Includes Strategic Objectives E1A, E1C, E2A, E2B, F3A, F3B, 

F3C, F4A, F4B, and F4D

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Met Met Met Met Met

Actual Met Met Met

Audit opinion received on government-wide 

financial statements (Oe) 

Met Yes Yes Yes

Target Met Met Met Met Met

Actual Met Met Met

Release Federal Government-wide financial 

statements on time (Oe) 

Met Yes Yes Yes

Target 5% 5% 5% 5% 5%

Actual 3.8% 5% 3.9%

Variance between estimated and actual receipts 

(annual forecast) (%) (Oe) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: In FY 2006, the Treasury Department’s Office of 

Domestic Finance released the federal government-wide financial statements on time. 

The Treasury Department has met this performance target since FY 2004, and expects to 

continue to meet its targets in FY 2008. The prompt release of this statement is important 

because it represents the culmination of the recent government-wide campaign to 

accelerate the issuance of financial reporting. Treasury also manages the government’s 

cash position to ensure that funds are available on a daily basis to cover federal payments 

and to maximize investment earnings and minimize borrowing costs. 

To optimize cash management, the Treasury Department measures the difference 

between actual and projected receipts. In FY 2006, Treasury continued to improve in 

forecasting receipts, outlays, debt and overall cash, and met its targeted variance level of 

five percent. In FY 2007 and FY 2008, the Treasury Department plans to continue 

efforts to improve its forecasting abilities in order to provide government savings. 

3D – Terrorism and Financial Intelligence ($56,224,450 from direct appropriations 

and $3,242,000 from reimbursable programs): The Department of the Treasury’s 

regulatory, law enforcement and intelligence authorities provide powerful tools for the 

United States to apply pressure against threats to national security when diplomatic 

outreach may be unproductive and traditional military action may be ineffective or 

inappropriate. Terrorism and Financial Intelligence (TFI) leverages these authorities to 

neutralize threats and to safeguard the security of the U.S. and international financial 

system by excluding those who would use these systems for illegal purposes or to harm

U.S. national security interests. The Treasury Department does this while keeping 

financial systems free and open to legitimate users. 

Office of Foreign Assets Control (OFAC). The mission of this office is to 

administer and enforce economic and trade sanctions based on U.S. foreign policy 

and national security goals against targeted foreign countries and/or foreign 

regimes, terrorists, international narcotics traffickers, war criminals and their 

support structures, and those engaged in activities related to the proliferation of 

weapons of mass destruction. 

DO - 22 
Office of Intelligence and Analysis (OIA). OIA’s mission is to support the 

formulation of policy and execution of Treasury authorities by: 1) producing 

expert intelligence analysis on financial and other support networks for terrorist 

groups, proliferators, and other key national security threats and; 2) providing 

timely, accurate, and focused intelligence on the full range of economic, political, 

and security issues. 

Office of Terrorist Financing and Financial Crimes (TFFC). TFFC is the policy 

and outreach apparatus for the Department on terrorist financing, money 

laundering, financial crime, and sanctions issues. The mission of TFFC is to 

develop and implement strategies, policies and initiatives to identify and address 

vulnerabilities in the U.S. and international financial system and to disrupt and 

dismantle terrorist and WMD proliferation financial networks. TFFC also 

formulates and promotes policies domestically and internationally to combat 

terrorist financing and financial crime. 

Other Resources: Reimbursements totaling $3.2 million are collected from the Executive 

Office of Asset Forfeiture and the U.S. Department of Defense. (Note: A portion of 

these funds are allocated to the Executive Direction and Administrative Programs budget 

activities to support management and legal services provided to reimbursable programs). 

3.2.4 – Terrorism and Financial Intelligence Budget and Performance Plan 

Dollars in Thousands

Terrorism and Financial Intelligence 

Budget Activity

Includes Strategic Objectives F3A, F3B, F3C, and F4B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $23,997 $34,796 $39,540 $45,401 $56,224

 Other Resources 2,271 2,575 3,242 3,242 3,242

Total Operating Level $26,268 $37,371 $42,782 $48,643 $59,466

Human Resources

 Appropriated FTE 159 205 233 264 308

 Other FTE 17 15 17 14 14

Total FTE (direct and reimbursable) 176 220 250 278 322

Terrorism and Financial Intelligence Budget 

Activity

Includes Strategic Objectives F3A, F3B, F3C, and F4B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline

Actual 0

Customer satisfaction with Office of Intelligence 

Analysis (OIA) analysis in terms of its accuracy, 

timeliness, and relevance (Oe) Met Yes

Target Baseline 105 70 120

Actual 95 45

Increase the number of outreach engagements 

with the charitable and international financial 

communities (Ot) Met Yes No

Target Baseline 45 12 12

Actual 49 5

Number of countries that are assessed for 

compliance with the Financial Action Task Force 

(FATF) 40+9 recommendations (Ot) Met Yes No

Target Baseline 85 85 85

Actual 85 85

Number of open civil penalty cases that are 

resolved within the Statute of Limitations period 

(Ot) Met Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

DO - 23 
Description of Performance: When the Office of Terrorism and Financial Intelligence 

(TFI) was established in 2004, the Treasury Department reallocated resources from other 

programs to support its start-up. While each program that made up TFI had its own 

performance management system, TFI did not have a system which supported the 

Department’s entire National Security mission. In FY 2005, TFI worked to align its 

performance goals, objectives and measures with Treasury’s Strategic Plan. TFI’s focus 

on performance management led to significant changes in its suite of performance 

measures - several established performance measures were discontinued and several new 

measures were developed or are under development. 

Although the Treasury Department is making progress in combating the financing of 

terrorists and other national security threats, quantifying these results is challenging. 

Given the clandestine nature of the activities of terrorists and proliferators of weapons of 

mass destruction, it is impossible to estimate what portion of the money intended for their 

support was blocked, and the Department has relied on proxy indicators to estimate the 

effectiveness of its actions; more refined measures to assess performance will be 

implemented in the future. 

Combating money laundering and denying terrorists access to the global financial system

is an integral element in the U.S. strategy for winning the war on terror. Through 

diplomatic efforts and the provision of technical assistance to foreign governments and 

the international financial community, the Treasury Department encourages 

implementation of anti-money laundering/counter terrorist financing standards designed 

to deny terrorists access to a country’s financial systems. Without implementation of 

these standards worldwide, terrorists will enter the international financial system at the 

point of least resistance, and preventative national efforts will be rendered less effective. 

These standards are an important element in the financial war on terror. One way the 

Department tracks its effort in this important area is through the measure “Number of 

Countries” that are “assessed for compliance with the Financial Action Task Force 

(FATF) 40+9 Recommendations.” In FY 2006, 5 countries were assessed for compliance 

with these international standards. This is much below the target. However, classified 

assessments are no longer being included, resulting in the reduction of reported 

recommendations. As a result, the baseline for this performance measure has been 

changed. 

The Treasury Department tracks its engagements with U.S. and international 

governments and private institutions through the measure “Increase the number of 

outreach engagements with charitable and financial communities.” In FY 2006, the 

Department worked with 45 entities to ensure their financial systems are safeguarded 

from money laundering. In FY 2008, the Treasury Department plans to work with 120 

entities. 

In addition to its efforts to prevent money laundering and terrorist financing through 

diplomatic means, the Department administers and enforces economic sanctions against 

individuals, organizations and regimes which pose a threat to U.S. national security. In 

FY 2006, the Department established baselines for a new efficiency measure relating to 

DO - 24 
the processing of license and interpretive guidance requests, and a workload measure 

relating to the resolution of civil penalty cases. 

The Treasury Department also plays an important role in collecting, analyzing and, when 

appropriate, disseminating intelligence about how terrorists and other criminal networks 

operate. A composite measure of the impact of the Department’s intelligence and 

analytical activities is under development. 

3E – Treasury-wide Management and Programs ($20,809,970 from direct 

appropriations and $4,681,000 from reimbursable programs): Treasury-wide

Management’s (TWM) primary responsibility within the Department of Treasury is to 

create the conditions which allow for Administration priorities and goals to be achieved 

in the most efficient and effective manner. Treasury-wide Management provides 

strategic plans and policy direction in the fields of: human resources; emergency 

management, including Treasury employee evacuation and Continuity of Operations; 

information technology security; and financial administration, including the formulation 

and management of the Treasury budget. The development of these integrated plans help 

to align policy and operations in order to produce maximum value for the American 

people. 

TWM is also responsible for the development, implementation and oversight of the 

Federal Information Security Management Act of 2002 (FISMA). FISMA was created to 

provide a broad framework for ensuring the effectiveness of controls around information 

security in support of Federal operations. FISMA aims to effectively reduce information 

security risks, including coordination of information security efforts throughout the 

civilian, national security, and law enforcement communities. Given the critical mission 

supported by the Department, this issue is especially essential to Treasury and DO. 

TWM will act on behalf of Treasury in developing and coordinating the Department’s 

response to this mandate. Resources will be devoted to this task in FY 2008. 

Other Resources: Reimbursements totaling $4.9 million are collected from the Internal 

Revenue Service Oversight Board, Department of Homeland Security, D.C. Pensions, 

and other Treasury bureaus for services rendered. (Note: A portion of these funds are 

allocated to the Executive Direction and Administrative Programs budget activities to 

support management and legal services provided to reimbursable programs). 

DO - 25 
3.2.5 – Treasury-wide Management and Programs Budget and Performance Plan 

Dollars in Thousands

Treasury-wide Management and 

Programs Budget Activity

Includes Strategic Objective M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $17,564 $16,245 $16,675 $20,372 $20,810

 Other Resources 3,283 3,722 4,681 4,681 4,681

Total Operating Level $20,847 $19,967 $21,356 $25,053 $25,491

Human Resources

 Appropriated FTE 84 96 94 99 99

 Other FTE 6 12 7 14 14

Total FTE (direct and reimbursable) 90 108 101 113 113

Treasury-wide Management and Programs 

Budget Activity

Includes Strategic Objective M5B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 40% 50% 50% 50% 50%

Actual 31% 36% 20%

Complete investigations of EEO complaints 

within 180 days (%) (Oe) 

Met No No No

Target 3.12 3 2.8 2.6 2.4

Actual 3.94 2.8 1

Injury and illness rate Treasurywide-including 

DO (Oe) 

Met No Yes Yes

Target Baseline $40.27 $38.21 $40.96

Actual $39.33 $40.59

Management cost per Treasury employee ($) (E)

Met Yes No

Target 6 4 2 1 1

Actual 8 7 1

Number of open material weaknesses (Oe) 

Met No No Yes

Target 25% 25% 30% 30%

Actual 25% 25%

Percent of complainants informally contacting 

EEO (for the purposes of seeking counseling or 

filing a complaint) who participate in the ADR 

process (%) (Oe) 

Met Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: DO, through TWM, is committed to building a world-class 

organization through accountability, with a clear and understood strategic direction. The 

focus of the past year has been on measurable ways to monitor progress toward key goals 

related to building a world class organization both in Departmental Offices and Treasurywide. 

TWM has placed heavy emphasis on creating an environment that is fair and equitable, 

and monitors Treasury-wide progress through a number of performance metrics. In FY 

2006, the average number of EEO complaint closures completed within 180 days was 20 

percent. This is well below the target goal of 50%. A management review was 

conducted to identify problem areas at the Treasury Complaint Center (which processes 

all complaints for all bureaus), and a need for different leadership in this area was 

identified. A new Director for the Complaint Center position began in November of 

2006, and will assist the Department in meeting its goal in FY 2007 and FY 2008. 

 

The Department of Treasury measures bureau performance plans for supervisors, 

management and SES members that contain elements linking to the bureau mission. This 

measure ensures that the policies and priorities set for DO by TWM and the 

DO - 26 
Administration are evident in the actions and tasks executed by management throughout 

the organization. For FY 2006, Treasury reached 100 percent of this goal. 

In FY 2004, the Department of Labor recognized Treasury for reducing the total injury 

and lost time injury rates by more than 10 percent each, well below the recommended 

three percent for all federal agencies. In 2006, Treasury continued its aggressive 

occupational safety and health program and had a 1.8 percent reduction. 

The Department works to attract and retain the best talent while rewarding employees for 

their individual performance. Building a stronger management infrastructure through 

Department-wide management training and by linking organization accomplishments to 

individual performance is a key step. The Department’s leadership strives to create an 

environment that offers purposeful, challenging work in a constructive performance 

culture. TWM has laid a foundation that is focused on results-oriented performance, 

leadership succession planning and accountability to not only maintain the present skills 

base and diversity in the Department’s workforce, but to also meet future human resource 

needs. The Department-wide succession plan ensures that future management acquires 

appropriate skills to enable them to lead the Department in an ever-changing 

environment. 

3F – Administration Programs ($78,972,030 from direct appropriations and 

$2,783,000 from reimbursable programs): Administration Programs provides operational 

support and shared services to all offices within DO. Activities include accounting, 

budget, human resources, information technology, procurement, facilities support, and 

travel services. Approximately one-third of the budget activity relates to information 

technology support (desktop computers, printers, faxes, copiers, helpdesk support, etc.). 

Another one-third consists of shared services: GSA rent, utilities, telecommunications, 

printing and graphics, public transit subsidy, workers compensation, and financial system

support. By centralizing shared services, economies of scale and workload efficiencies 

are achieved. The final third consists of employee salaries, routine building maintenance, 

custodial services, library services, etc. No specific performance goals/measures are 

presented for this budget activity, as the work of the offices within this budget activity is 

captured within the other budget activities. 

DO - 27 
3.2.6 – Administration Programs Budget and Performance Plan 

Dollars in Thousands 

Administration Programs Budget 

Activity

Includes Strategic Objectives E1A, E1C, E2A, E2B, F3A, F3B, F3C, 

F4A, F4B, F4D, M5A, and M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $61,340 $56,506 $63,094 $73,316 $78,972

 Other Resources 1,948 2,209 2,783 2,783 2,783

Total Operating Level $63,288 $58,715 $65,877 $76,099 $81,755

Human Resources

 Appropriated FTE 163 152 160 160 160

 Other FTE 16 15 18 15 15

Total FTE (direct and reimbursable) 179 167 178 175 175

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

DO - 28 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 858 1,004 1,058

Increases:

Reason #1:

Initiatives to promote national

security 146 54 68

Reason #2:

Initiatives to promote global

economic growth and financial

security 10

Subtotal, Increases 146 54 78

Decreases:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 1,004 1,058 1,136

Net Change from prior year SOY to budget year EOY 132

4A – Human Capital Strategy Description 

By providing sound advice and guidance regarding hiring, retention, rewarding, 

employee/labor relations, performance evaluation, training and employee development, 

the DO’s Office of Human Resources (OHR) helps to ensure that management has the 

HR tools it needs to manage its human capital effectively and in support of the 

organization’s overall and human capital strategic goals. 

Specific accomplishments for fiscal year 2006 include the following: 

HC Strategic Goal 1: Organizational Effectiveness – Align human capital plans, 

strategies, and systems to achieve organizational effectiveness and mission 

accomplishment.

• In 2005, DO undertook a major initiative to move transactional HR processing 

to the Bureau of the Public Debt (BPD), consolidate recruitment and staffing 

functions at BPD, and revamp on-site HR services to focus on areas aligned 

with Treasury’s Human Capital Strategic Plan. To ensure the quality and 

DO - 29 
delivery of HR services, the on-site Office of Human Resources (OHR) 

focused on evaluating the effectiveness of services provided. Prior to entering 

into a continued agreement with BPD for fiscal year 2006, OHR worked with 

BPD to memorialize and implement service level standards (SLS) for key HR 

functions. These SLS are now a part of the continuing memorandum of 

understanding between the two entities. At the end of each quarter, OHR 

conducts a review of how well BPD met those SLS during the preceding 

quarter. During the third quarter of this fiscal year, managers/supervisors 

were surveyed to find out how well they perceived BPD was doing in 

supporting their HR management needs. In looking at the accuracy of 

services provided, the OHR conducted an audit of a sample of staffing/hiring 

actions done by BPD to determine compliance with Federal hiring rules and 

regulations. 

 

• DO’s OHR staff conducted an exhaustive review of the organization’s current 

performance management system. A “get-well plan” was derived from this 

review that focuses on communication and education and includes briefings 

for senior leaders and training for managers/supervisors, senior advisors and 

administrative support staff involved in performance management. The 

objectives of the briefings/training are: alignment of performance 

expectations with organizational goals; accountability for results; credible 

measures; and meaningful distinctions in performance. Moving forward, HR 

staff will continually evaluate the effectiveness of DO’s performance 

management system. 

• The OHR also added another tier to its leadership/executive training program. 

The New Supervisory Readiness Training Program was implemented this 

fiscal year and is targeted to DO supervisors with three years or less of 

Federal supervisory experience. The goal of the program is to equip new 

supervisors for the myriad of personnel, ethical, and budgetary challenges 

they will face, thus providing them essential management tools early in their 

supervisory careers. Components of this 40-hour training include Merit 

Principles and Prohibited Personnel Practices, Talent and Position 

Management, EEO, Ethics, Performance Management, Adverse Actions, the 

Budget and Acquisition Process, Emergency Preparedness, Personnel 

Security, Records Management and Workplace Safety. 

• In 2006, DO continued its efforts to build leadership bench strength through 

the Leadership Training Program (LTP – targeted to high-performing GS-15s 

and newly appointed senior executives). The LTP is 12-18 months in duration 

and encompasses residential stays, formal classroom training, 

presentations/briefings, rotational/stretch assignments, coaching/mentoring, 

and book discussions. The organization also competitively selected five 

employees to participate in the Internal Revenue Service’s Executive 

Readiness Program. 

DO - 30 
HC Strategic Goal 2: Recruitment and Diversity – Recruit and hire a highly skilled 

and diverse workforce aligned with business goals. 

• In support of the Office of Intelligence and Analysis (OIA), OHR worked 

with OIA leadership, in partnership with the DNI Chief Human Capital 

Officer, to pursue and obtain Office of Personnel Management approval for 

direct-hire authority for certain intelligence and intelligence-related positions. 

A unique and relatively new organization directly involved with the war on 

terror, the OIA had encountered significant challenges in quickly filling 

analyst positions with the best-qualified individuals. Use of the direct-hire 

authority provides the organization a competitive edge in that it substantially 

streamlines the Federal hiring process. 

• As always, DO advocates the use of a variety of excepted appointments to 

ensure that new talent is hired as quickly as possible, e.g., Presidential 

Management Fellows; Student Career Experience Program; Departmental 

Office-specific fellowship programs; and other authorities. DO actively 

supports initiatives aimed at increasing the diversity of its workforce, 

including providing internships to students under the Hispanic National 

Internship Program and the Washington Internships for Native American 

students (WINS). 

• DO also continues to advocate the use of a variety of pay and workplace 

scheduling flexibilities, where appropriate, e.g., recruitment bonuses, superior 

qualifications appointments and alternative work schedules. 

HC Strategic Goal 3: Employee Retention and Satisfaction – Retain a high 

performing workforce while maintaining an environment conducive to a high level of 

employee satisfaction. 

• With an increased emphasis on retirement and other benefits on the part of 

DO employees, the OHR staff began conducting “Benefits Brown Bag” 

sessions during the third quarter. These one-hour sessions are scheduled each 

month to discuss benefits topics of interest to employees. The goal of each 

session is to provide basic facts about benefits programs that help employees 

make better choices/decisions regarding their benefits. Sessions fill quickly 

and the response has been overwhelmingly positive. 

• Based on the number of DO employees eligible to retire within the next five 

years, OHR contracted with an outside vendor to provide three retirement 

seminars during this fiscal year – two for CSRS employees and one for FERS. 

DO - 31 
HC Strategic Goal 4: Information Technology – Enhance workforce capabilities to 

support the use of current, new and evolving technologies. 

• There are a number of automated tools available to DO managers, supervisors 

and employees that provide a wealth of personnel/payroll data. To market the 

effectiveness of these tools, OHR has added a component on HR-related 

technology to the New Employee Orientation Program. Making employees 

aware of these valuable tools early in their DO careers will empower them to 

keep abreast of the HR matters that impact them or their organizations (in the 

case of managers/supervisors) directly, and is expected to decrease the 

number of personnel/payroll inquiries received by the on-site staff and BPD. 

• Recognizing the importance human resources data can play in managing an 

organization, the aforementioned New Supervisory Readiness Training 

Program includes a detailed segment on the Manager Self Service component 

of HR Connect, the agency’s enterprise human resources management system. 

As in the previous fiscal year, DO faces a number of human capital challenges in FY 

2007: 

• Increasing competition from private sector and other government agencies for 

mission-critical positions such as intelligence analysts, economists and 

information technology specialists. 

Strategies for Addressing Challenge: 

— Increased education about and support of a variety of 

hiring/retention flexibilities and incentives, such as direct 

hire (where request to OPM is appropriate), superior 

qualifications appointments, recruitment bonuses, student 

loan repayment, retention allowances and alternative work 

arrangements/schedules. 

• Loss of institutional knowledge through retirement waves, particularly for 

the managers and senior executives. 

Strategies for Addressing Challenge: 

— Increased emphasis on determining leadership bench 

strength and supporting leadership/executive development 

programs that help to identify and prepare cadres of future 

leaders, and gaining approval to hire at a level needed to 

continue to meet mission objectives. 

— Work with DO policy offices to identify succession issues 

and develop appropriate strategies, emphasizing an overall 

need to conduct workforce planning to transition and 

maintain technical knowledge. 

DO - 32 
• Instilling and developing a performance management culture that is 

results-oriented. 

Strategy for Addressing Challenge: 

— Increased education around aligning commitments to 

organizational goals and developing measurable, resultsbased standards/commitments. 

DO - 33 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 Major IT Investments

Budget

Activity/Funding

Source

Operating 

Plan Obligations

Operating 

Plan Enacted 

Financial Analysis & Reporting System(FARS) Applications -Major

Treasury-wide

Management $0.000 0.000 0.000 N/A 3.099 N/A 

DC Pension System to AdministerRetirement (STAR)

DC Federal Pension/JudicialRetirement Funds 12.800 12.800 4.998 -61.0% 9.732 94.7% 

Treasury Foreign Intelligence Network(TFIN) Terrorism and Financial Intelligence 2.325 2.325 13.306 N/A 21.200 59.3% 

Subtotal, Major IT Investments $15.1 $15.1 18.304 21.0% 34.031 85.9% Non-Major IT Investments $2.0 $2.0 4.937 145.7% 8.057 63.2% Infrastructure Investments $134.2 $134.2 167.328 24.7% 168.030 0.4% Enterprise Architecture $1.2 $1.2 1.397 14.8% 2.160 54.6% 

Total IT Investments $152.5 $152.5 191.966 25.8% 212.278 10.6% 

FY 2005 % Change

from FY05

Actuals to

FY06

% Change

from FY06 to

FY07

DO - 34 
4B – Information Technology Strategy 

The Office of the Chief Information Officer (OCIO) Telecommunications Management 

organization supports the IT infrastructure and operations of critical offices including the 

Office of the Secretary, the Assistant Secretary for Management, DO policy offices, and 

the newly formed Office of Terrorism and Financial Intelligence. This includes the 

management of technical staff, program and project managers, and budgetary and 

administrative staff, as well as overseeing the development, implementation, and 

operation of DO IT systems. In order to effectively support and plan for current and 

future DO customer requirements, OCIO is focused on the following areas: 

Modernize the DO IT Infrastructure: Modernization of the DO IT infrastructure 

will provide enhanced functionality, performance, and security, which will allow 

offices to achieve their missions more effectively. Specific projects will include 

enhanced disaster recovery capabilities, consolidation of remote access solutions, and 

software and hardware upgrades, and overall optimization of the DO IT network, 

which will be developed in accordance with the Infrastructure Line of Business. 

Improve IT Governance and Project Management: OCIO is committed to 

ensuring that information and IT resources are managed efficiently and effectively. 

In support of DO IT governance and project management, the OCIO 

Telecommunications Management team has reestablished a Customer Service Board 

(CSB) to address DO customer issues with service delivery, determine requirements 

and detailed planning for new projects, and provide overall senior management 

engagement and oversight. 

DO - 35 
4.3 – PART Evaluation Table 

PART Name: African Development Fund

Year PARTed: FY 2005

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. The African Development Fund is starting to improve its performance measurement and use of

performance-based funding allocations. In the latest donor negotiation, the Fund and donors agreed to 

implement better results measurement for key development goals, such as education, and reconfirmed the

allocation of funding towards better-performing countries, but more remains to be done. 

1. Working with Congress to secure $136 million annually for the period 2006 to 2008 to fund the US 

commitment to the latest African Development Fund replenishment. 

2. Monitoring the Fund's effectiveness in achieving its development objectives, including its progress in 

measuring and meeting development objectives across-the-board.

3. Working with Fund and other donors to improve the ability of developing countries to handle their debt, 

including providing grants to the most debt-vulnerable countries using the Fund.

2. In the negotiations, the Fund and donors agreed to reforms to improve the ability of the poorest countries 

to handle their debts. In particular, they agreed that grants to assist the poorest countries will be expanded

based on countries' debt vulnerability. Grants are expected to rise to more than one-third of the Fund's

assistance. 

3. Accountability and transparency require additional improvements. The Bank Group has established a new

anti-corruption and fraud unit and improved internal financial controls. The Bank Group is also expanding 

public access to its documents but more remains to be done.

PART Name: Tropical Forest Conservation Act

Year PARTed: FY 2004

Rating: RND

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. The program has been unable to measure its impact on increasing tropical forest conservation. It does 

not have performance measures that would enable a meaningful evaluation of program effectiveness.

2. The Administration has developed a tool to help manage and measure the success of existing and

pending agreements. This evaluation sheet will measure the success of country boards and oversight 

committees in developing a strategic plan that specifies key objectives, conservation and funding priorities, 

target dates in meeting those objectives, and key efficiency measures. 

3. The Administration is now collecting evaluation sheet data, and actual performance data will be reported 

in 2006. A re-evaluation may be performed as early as 2007. 

1. Using information presented in evaluation sheets for existing programs to develop recommendations for 

improved program management, and to justify future funding requests. .

2. Working with the boards, oversight committees, and program partners to include the evaluation sheet tool 

or other appropriate evaluations in all new agreements. 

DO - 36 
PART Name: Asian Development Fund

Year PARTed: FY 2005

Rating: RND

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. The Fund recently agreed to improve its performance measurement and performance-based allocations. 

In the latest donor negotiations, the AsDF-9 replenishment, the Fund and donors adopted several important 

reforms to improve performance and to implement results measurement, including launching the Managing

for Results action plan. These reforms remain to be implemented and expanded in the future. 

2. AsDF-9 agreed to reforms to improve the ability of the poorest countries to handle their debts. In

particular, it established a new program to give 30 percent of funding in the form of grants to these countries. 

These reforms remain to be implemented.

3. Transparency and accountability in the Bank Group are improving. AsDF-9 requires more transparency 

through improved information disclosure and communication policies. The Bank Group's anti-corruption and

auditing procedures require improvements. 

1. Working with Congress to secure $115 million annually for the period 2006 to 2009 to fund the U.S. 

commitment to the latest Asian Development Fund replenishment (AsDF-9).

2. Monitoring the Fund's improvements and implementation of measures to show its effectiveness in 

achieving development goals, including its progress in meeting development objectives across-the-board. 

3. Working with the Fund and other donors to improve the ability of developing countries to handle their 

debt, including increasing the amount of grants for the most debt-vulnerable Asian countries. 

PART Name: Bank Enterprise Award

Year PARTed: FY 2002

Rating: RND

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. This program is unable to measure results because it can not determine how awardees would behave in

the absence of the program. 

1. Working with Congress to consolidate this program into a more efficient and effective federal program 

within the Department of Commerce and the Department of Housing and Urban Development.

DO - 37 
PART Name: Economic and Trade Sanctions Program - OFAC

Year PARTed: FY 2008

Rating: RND

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Long Term 

 The percentage of civil penalty cases that are resolved within the Statute of Limitations Period. 

Target: (Baseline)

Short Term

The percentage of license and interpretive submissions turned around in 60 days.

Target: (Baseline)

The number of outreach engagements with government and the private sector promoting

compliance with OFAC regulations. 

Target: 60/year

1. Developed long-term and short-term performance goals with specific timeframes and measures,

including:

1. OFAC needs to develop long-term performance goals with specific timeframes and measures.

2. OFAC needs to develop annual performance goals and align them with the long-term performance goals.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

DO - 38 
4C - FY 2007 Supplemental Request 

FY 2007 Supplemental Request

Appropriation Language

For an additional amount for Salaries and Expenses, $2,538,000. 

Supplemental Request Description

The FY 2008 President’s Budget includes a FY 2007 supplemental Budget request of 

$2,538,000, to be used for funding the Iraq Threat Finance Cell and Treasury's Deputy 

Attaché in Baghdad. Treasury and the Department of Defense (DOD) are co-chairing the 

Iraq Threat Finance Cell in support of the Global War on Terrorism. The unit will work 

to enhance the collection, analysis and dissemination of financial intelligence to combat 

financiers, facilitators, and financial networks supporting the Iraqi insurgency. This 

funding is critical in supporting and strengthening U.S., Iraqi and Coalition efforts to 

disrupt and eliminate financial and other material support to the insurgency. 

The Deputy Attaché for Baghdad will perform a variety of activities, including: engaging 

regularly with senior officials in the Iraqi Ministry of Finance and Central Bank; advising 

and assisting the U.S. Ambassador on economic and financial matters; briefing U.S. 

Government agencies on the developments on the ground; tracking down data and 

economic updates requested by the U.S. Government; and coordinating and monitoring 

Treasury Technical Assistance policy in fiscal and financial areas. Treasury has only one 

Attaché in Iraq, and funding for the Deputy Attaché is essential to providing critical 

support to the Administration's fiscal, monetary, and financial sector reform efforts. 

DO - 39 
Department-wide Systems and Capital 

Investments Program 

Mission Statement 

The Department-wide Systems and Capital Investments Program (DSCIP) is authorized 

to be used by or on behalf of Treasury bureaus, at the Secretary’s discretion, to 

modernize business processes and increase efficiency through technology investments. 

Program Summary by Appropriations Account Dollars in Thousands

Appropriation FY 2006 FY 2007 FY 2007

DSCIP Enacted

President's

Budget CR-rate Request

$ from

CR-rate

% from

CR-rate

Department-wide Systems and 

Capital Investments Program $24,168 $34,032 $24,046 $18,710 ($5,336) -22.19%

Total Appropriated Resources $24,168 $34,032 $24,046 $18,710 ($5,336) -22.19%

FY 2008

FY 2008 Priorities 

• Developing a pilot Enterprise Content Management (ECM) system for multiple 

Treasury bureaus that will align with related government-wide initiatives and 

leverage commonalities in requirements among Treasury Department 

components. 

• Upgrading and stabilizing the Treasury Secure Data Network (TSDN), a 

classified system that is critical to Treasury’s expanding financial intelligence 

mission. 

• Continuing to modernize the Departmental Offices (DO) information technology 

infrastructure to enhance functionality, performance, and security for DO 

customers. 

• Improving Treasury’s Federal Information Security Management Act (FISMA) 

performance and strengthening the Department’s overall security posture. 

• Leveraging the President’s Management Agenda including the E-Government 

initiatives, across the Department. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 2 

Section 2 – Budget Adjustments and Appropriation Language................................... 3

2.1 – Budget Adjustments Table..................................................................................... 3 

2A – Budget Increases and Decreases Description......................................................... 3 

2.2 – Operating Levels Table.......................................................................................... 7 

2B – Appropriation Language ........................................................................................ 8 

2C – Legislative Proposals.............................................................................................. 8 

Section 3 – Budget and Performance Plan ..................................................................... 9

3.1 – Appropriation Detail Table.................................................................................... 9 

3A – Department-wide Systems and Capital Investments Program.............................. 9 

3.2.1 – Department-wide Systems and Capital Investments Program Budget and 

Performance Plan.......................................................................................................... 10 

Section 4 – Supporting Materials.................................................................................. 12

4B – Information Technology Strategy ........................................................................ 12 

DSCIP - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The President’s 2008 Budget request for the DSCIP account is $18,710,000 in direct 

appropriations. This account is authorized to be used by or on behalf of Treasury 

Department bureaus, at the Secretary’s discretion, to modernize business processes and 

increase efficiency through technology investments. Continuing investments include 

ECM, TSDN, Disaster Recovery (DR) capacity, Cyber Security, and E-Government 

initiatives. First time funding was requested in 2007 to plan for the development of an 

Enterprise Content Management system, while funding is requested in 2008 for the 

development of a pilot ECM system. 

1B – Program History and Future Outlook 

The Treasury Department has made significant progress in key initiatives for the DSCIP 

program. Highlights of these accomplishments include: 

Treasury Foreign Intelligence Network (TFIN): The TFIN was stabilized in FY 2006 

and the development of the enhanced analytical capability has begun. A major milestone 

was reached on Dec 22, 2006 with the Initial Operating Capability of the Analytic 

Support System Environment for Treasury (ASSET) analytical toolset. In addition, 

significant upgrades to infrastructure and communications in preparation for additional 

development work are on schedule and on budget. 

Critical Infrastructure Protection (CIP): Homeland Security Presidential Directive 7 

(HSPD-7) requires that federal agencies identify, prioritize, and determine the 

interdependencies of critical assets in order to provide an appropriate level of cyber and 

physical asset protection. The Department of the Treasury completed the Project Matrix 

Refresh effort, an assessment and evaluation of the Treasury Department’s critical cyber 

and physical assets and key resources. 

E-Government Initiatives: The Department of the Treasury funds 12 of the 25 EGovernment initiatives and six of the nine E-Government Lines of Business. The 

Treasury Department worked diligently with the Managing Partners of the Presidential EGovernment initiatives and completed all required Memoranda of Understanding with 

other federal agencies by March 30, 2006. By facilitating discussions between 

Departmental E-Government representatives and the federal Managing Partners, 

Treasury-wide coordination has improved and transition activities have begun to identify 

and eliminate duplicative systems. The Treasury Department has also taken a significant 

leadership role within the Budget Formulation and Execution Line of Business by making 

the Budget Formulation and Execution Manager toolset available on a multi-agency 

basis. 

DSCIP - 2 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands

Appropriation: Department-wide Systems & Capital Investment Program FTE Amount

FY 2006 Appropriation (P.L. 109-115) 0 $24,412

Rescission (P.L. 109-148) 0 ($244)

FY 2006 Enacted 0 $24,168

FY 2007 President's Budget 0 $34,032

CR-rate Adjustment (9,986)

FY 2007 CR-rate 0 $24,046

Changes to Base: 

Non-Recurring Costs:

DSCIP Base (18,946)

Transfers Out:

CIP Transfer to Departmental Offices S&E (2,100)

TFIN - Operations and Maintenance (3,000)

Total FY 2008 Base 0 $0

Program Increases:

Cyber Security - CIP 400

Cyber Security - Information Security 1,844

E-Government Enterprise Architecture 300

E-Government Initiatives 2,166

Enterprise Content Management 6,000

Integrated Wireless Network 2,000

Treasury Back-up Disaster Recovery 4,000

Treasury Secure Data Network 2,000

Subtotal FY 2008 Program Changes 0 18,710

Total FY 2008 Request 0 $18,710

2A – Budget Increases and Decreases Description 

Adjustments .....................................................................................-$9,986,000 / +0 FTE 

CR-rate Adjustment -$9,986,000 / +0 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Non-Recurring Costs ....................................................................-$18,946,000 / +0 FTE 

DSCIP Base -$18,946,000 / +0 FTE DSCIP is a non-recurring, zero-based budget. 

Transfers Out ..................................................................................-$5,100,000 / +0 FTE 

CIP Transfer to Departmental Offices S&E -$2,100,000 / +0 FTE Homeland Security 

Presidential Directive 7 (HSPD-7) requires that federal agencies identify, prioritize and 

determine the interdependencies of critical assets in order to provide an appropriate level 

of protection. Project Matrix Refresh is an assessment and evaluation of the Treasury 

Department's critical cyber and physical assets and key resources. This initiative, which 

is also one of the Department of the Treasury’s milestones under the President’s 

Management Agenda, will assist in the Treasury Department’s emergency preparedness

efforts and disaster recovery planning. Since the project has been fully developed and is 

in steady state, this request represents the transfer of CIP from DSCIP to Economic 

Policy. 

DSCIP - 3 
TFIN - Operations and Maintenance -$3,000,000 / +0 FTE Treasury Foreign Intelligence 

Network (TFIN) system supports the Department of the Treasury’s capabilities in 

providing and analyzing meaningful intelligence to senior Treasury Department staff, as 

well as to other agencies within the intelligence community. TFIN is the sole source of 

Top Secret intelligence for the Treasury Department, and the data from the system is 

utilized by the Secretary of the Treasury, the Deputy Secretary of the Treasury, and the 

Office of Terrorism and Financial Intelligence (TFI). 

Program Increases .......................................................................+$18,710,000 / +0 FTE 

Enterprise Content Management +$6,000,000 / +0 FTE This funding will enable the 

Department of the Treasury to implement a pilot enterprise-wide Enterprise Content 

Management (ECM) solution for the Department, initially meeting the business 

requirements of the Office of Foreign Assets Control (OFAC) and the Financial Crimes 

Enforcement Network (FinCEN). The Department of Treasury processes a massive 

volume of files and data, much of which is subject to statutory/regulatory handling 

requirements, and subsequently has an urgent need for an enterprise-wide approach to an 

ECM system to minimize duplication of effort and infrastructure investments to address 

workflow, document and case management, and reporting issues. The enterprise-wide 

approach, under the oversight of the Treasury Department's Chief Information Officer, 

will ensure that all Department-wide ECM efforts map to consistent standards, are 

aligned with related government-wide initiatives, such as the Case Management Line of 

Business, and leverage commonalities in requirements among Treasury Department 

components, thereby achieving economies of scale and efficiencies in information 

sharing. 

Treasury Secure Data Network +$2,000,000 / +0 FTE The Treasury Secure Data 

Network (TSDN) is the computer and network infrastructure that enables the 

communication and distribution of classified (Secret level) information to over 400 

Departmental offices and bureau users. TSDN also provides Treasury Department users 

with access to the Secret Internet Protocol Router Network (SIPRNET) and the 

Department of Defense classified communications network. This access is vital to 

ensuring that International Affairs, Senior Policy Officials such as Executive Secretary,

the Secretary and the Deputy Secretary, Terrorism and Financial Intelligence (TFI) and 

its components (Office of Foreign Assets Control and Office of Intelligence and 

Analysis), as well as the Financial Crimes Enforcement Network, can communicate 

effectively with colleagues in the law enforcement, Defense, and State Department 

communities. Treasury’s expanding role in financial intelligence has significantly 

increased the demand for TSDN seats and services; however, TSDN remains an out-ofdate and unstable system. This funding will allow for the stabilization and enhancement 

of the system to meet the growing user demand. 

Treasury Back-up Disaster Recovery +$4,000,000 / +0 FTE The disaster recovery site 

for Departmental Offices (DO) does not provide the capability to run many missioncritical applications. Continuity of Operations Plan (COOP) exercises have demonstrated 

that the current capability of the disaster recovery site does not meet the disaster scenario 

requirements of offices such as the Office of the Secretary, Office of Terrorism and 

DSCIP - 4 
Financial Intelligence (TFI), and the Office of Domestic Finance. Funding is required to 

provide server infrastructure and storage area network (SAN) upgrades and services to 

facilitate disaster recovery business solutions for DO. These upgrades will enable DO to 

meet critical requirements in the event of a disaster. 

Cyber Security - CIP +$400,000 / +0 FTE In accordance with HSPD-7, this initiative

supports the direct protection of designated Treasury Critical Infrastructure/ Key 

Resources (CI/KR) against terrorist activity. The official Treasury list of designated 

CI/KR was signed by the Assistant Secretary for Management in January 2006. 

Increased risks to these systems and networks are attributable to the enormous growth in 

interoperability and connectivity, and have been designated by the Office of Management 

and Budget (OMB) to be protected in accordance with National Institute of Standards and 

Technology (NIST) guidance (FIPS-199 High). These assets require the highest level of 

protection in order to provide for meeting the most critical functions of the U.S. Treasury 

Department and in providing the highest level of confidence to the general public and 

Congress for the U.S. Government’s commitment to the banking and finance sector. This 

initiative is essential if the Treasury Department and its bureaus are to respond effectively 

to the potentially debilitating impact of an attack on its critical infrastructures from both 

cyber and physical threats. The Department of the Treasury’s technology portfolio of 

approximately $3 billion in Information Technology investments must be adequately 

protected and risks must be managed. 

Cyber Security - Information Security +$1,844,000 / +0 FTE The Cyber Security 

Program performs a critical function in protecting the integrity and adequacy of the 

defense of Treasury Department systems and information. FY 2008 funding is requested 

to improve the Department of the Treasury’s information security programs, thereby 

improving the security of Treasury systems as well as increase compliance with the 

FISMA and related federal information security policies and guidance. These efforts will 

also address the information security challenge identified by the Inspector General (IG). 

In last year’s FISMA report, the IG stated, “[t]he Department faces serious challenges in 

bringing its systems into compliance with information technology security policies, 

procedures, standards and guidelines.” The IG continued, “the Department has 

significant deficiencies in information security that constitutes substantial noncompliance with the FISMA requirements.” The initiatives that will be supported for this 

proposal include identifying, tracking, and addressing cyber security weaknesses; 

operating the Treasury Computer Security Incident Response Capability to meet 

Department of Homeland Security, OMB, and FISMA requirements; tracking and 

validating program and system level cyber security plans of action and milestones; 

developing enhanced security policy for Departmental systems; and conducting the 

Treasury Department’s annual FISMA review. 

E-Government Enterprise Architecture +$300,000 / +0 FTE This funding is for the 

continued development of the Treasury Enterprise Repository (ER), a critical component 

of Enterprise Architecture (EA) information used for modeling the influx of new Capital 

Information Technology (IT) investments and the retirement of legacy IT investments. 

The EA repository will provide Treasury Department users the capability to store, 

DSCIP - 5 
retrieve, and display relevant business and information technology (IT) related data in a 

myriad of views to address IT Technology investment needs of the Treasury Department 

and its supporting bureaus. These views allow users to dynamically assess the planned 

introduction of new IT investments, and to ascertain how to restructure business 

processes and systems to increase organizational efficiency and effectiveness. The ER 

allows Treasury-wide EA information for each of the sub-architecture levels to be

captured and analyzed centrally. Each Treasury Department bureau is configured to 

interface with the EA tool, which allows immediate access to current information across 

the Department of the Treasury. 

E-Government Initiatives +$2,166,000 / +0 FTE This funding provides for the 

development and implementation of needs assessments, functional requirements, and 

implementation of applicable E-Government initiatives. The Office of the Chief

Information Officer (OCIO) provides program management oversight and departmental 

coordination for each of the initiatives assuring compliance by all bureaus. If not funded, 

the Treasury Department will be at risk of not meeting the goals of the E-Government 

component of the PMA. This funding will enable the Treasury Department to continue to 

meet the implementation milestones in the OMB-approved E-Government 

Implementation Plan, positively impacting the Department of the Treasury’s ability to

achieve a “Green” rating for the expanding E-Government initiatives of the PMA. 

Integrated Wireless Network +$2,000,000 / +0 FTE This investment will enable the

Treasury Department to participate in the Integrated Wireless Network (IWN) as well as 

continue to upgrade existing land-mobile-radio equipment. The new equipment acquired 

would be based on the Project-25 suite of standards for public safety communications, 

which supports law enforcement, first responders, and homeland security requirements 

with integrated communication services (voice, data, and multimedia) in a wireless 

environment. The Department of the Treasury relies on these systems to accomplish its 

mission, which includes agent safety, investigations, surveillance, and facility protection 

and security. Funding will make it possible for the Treasury Department to meet the 

National Telecommunications and Information Administration (NTIA) narrow banding 

mandate, NIST security standards for Advanced Encryption Standards, and the 

Association of Public Safety Communications Officials Project 25 standards for public 

safety digital radio. 

DSCIP - 6 
2.2 – Operating Levels Table 

Dollars in Thousands

Appropriation Title: DSCIP FY 2006

Enacted

FY 2007

President's

Budget

CR-rate 

Adjustment

FY 2007

CR-rate

Proposed 

Reprogram

mings

FY 2007

Proposed

Operating 

Level

FY 2008 

Requested

Level

FTE - - - -

Object Classification:

11.1 Full-Time Permanent Positions..................... $0 $0 $0 $0 $0

11.1 Other than Full-Time Permanent Positions.... 0 0 0 0

11.5 Other Personnel Compensation.................... 0 0 0 0 0

11.8 Special Personal Services Pa

0

yments............ 0 0 0 0 0

11.9 Personnel Compensation (Total)............... $0 $0 $0 $0 $0 $0 $0

12.0 Personnel Benefits........................................ 0 0 0 0 0

13.0 Benefits to Former Personnel........................ 0 0 0 0

21.0 Travel............................................................ 57 81 (24) 57 24 81 40

22.0 Transportation of Things............................... 0 0 0 0 0

23.1 Rental Pa

0

yments to GSA.............................. 219 467 (137) 330 137 467 200

23.2 Rent Payments to Others.............................. 0 0 0 0 0

23.3 Communications, Utilities, & Misc................. 122 0 0 0 0

24.0 Printing and Reproduction............................. 0 0 0 0 0

25.1 Advisory & Assistance Services.................... 10,576 2,769 (812) 1,957 812 2,769 1,000

25.2 Other Services.............................................. 9,802 24,567 (7,208) 17,359 7,208 24,567 14,000

25.3 Purchase of Goods/Serv. from Govt. Accts... 2,092 3,738 (1,097) 2,641 1,097 3,738 1,970

25.4 Operation & Maintenance of Facilities........... 0 0 0 0 0

25.5 Research & Development Contracts............. 0 0 0 0 0

25.6 Medical Care................................................. 0 0 0 0 0

25.7 Operation & Maintenance of Equipment........ 0 787 (231) 556 231 787 500

25.8 Subsistence & Support of Persons................ 0 0 0 0

26.0 Supplies and Materials.................................. 210 292 (86) 206 86 292 200

31.0 Equipment..................................................... 1,090 1,331 (391) 940 391 1,331 800

32.0 Lands and Structures.................................... 0 0 0 0 0

33.0 Investments & Loans....................................

0

. 0 0 0 0

41.0 Grants, Subsidies.........................................

0

. 0 0 0 0

42.0 Insurance Claims & Indemn.......................... 0 0 0 0 0

43.0 Interest and Dividends...........................

0

... 0 0 0 0

44.0 Refunds........................................................

0

. 0 0 0 0

Total Budget Authority....................................

0

... $24,168 $34,032 ($9,986) $24,046 $9,986 $34,032 $18,710

Budget Activities:

Department-wide Systems & Capital Investment...... $24,168 $34,032 ($9,986) $24,046 $9,986 $34,032 $18,710

Total Budget Authority....................................... $24,168 $34,032 ($9,986) $24,046 $9,986 $34,032 $18,710

DSCIP - 7 
2B – Appropriation Language 

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY 

DEPARTMENT-WIDE SYSTEMS AND CAPITAL 

INVESTMENT PROGRAM 

Federal Funds 

GENERAL AND SPECIAL FUNDS: 

For development and acquisition of automatic data 

processing equipment, software, and services for the 

Department of the Treasury, $18,710,000, to remain 

available until September 30, 2010: Provided, that these 

funds shall be transferred to accounts and in amounts as 

necessary to satisfy the requirements of the Department’s 

offices, bureaus, and other organizations: Provided 

further, That this transfer authority shall be in addition to 

any other transfer authority provided in this Act: Provided 

further, That none of the funds appropriated shall be used 

to support or supplement ‘‘Internal Revenue Service, 

Information Systems’’ or ‘‘Internal Revenue Service, 

Business Systems Modernization’’. 

No legislative changes 

requested. 

2C – Legislative Proposals 

DSCIP does not have any pending legislative proposals. 

DSCIP - 8 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

$24,168 $24,168 $34,032 $24,046 $18,710 0.00% -22.19%

Subtotal New Appropriated Resources 0 $24,168 0 $24,168 0 $34,032 0 $24,046 0 $18,710 0.00% -22.19%

Other Resources:

Subtotal Other Resources 0 $0 0 $0 0 $0 0 $0 0 $0 0.00% 0.0

Total Resources Available for Obligation 0 $24,168 0 $24,168 0 $34,032 0 $24,046 0 $18,710 0.00% -22.19%

FY 2006 FY 2006 FY 2007 FY 2007 FY 2008 FY 2007

% Change

Resources Available for Obligation Enacted Obligations President's Budget CR-rate Request to FY 2008

Department-wide Systems & Capital 

Investment Program

0%

3A – Department-wide Systems and Capital Investments Program ($18,710,000 

from direct appropriations): DSCIP is authorized to be used by or on behalf of Treasury 

Department bureaus, at the Secretary’s discretion, to modernize business processes and 

increase efficiency through technology investments. Highlights of some of the 

efficiencies and benefits from these investments include: 

Enterprise Content Management: Developing a Department-wide ECM system is a 

critical component to improving the work processes and productivity of the Department. 

The initiative will establish a pilot ECM project that aligns with Government-wide 

initiatives, promotes common standards across the Treasury Department, and positions 

the Department of the Treasury for an enterprise-wide system. 

Cyber Security Assurance: Ensuring the Department of the Treasury is able to protect 

its critical infrastructure/key resources from attack, to address cyber security weaknesses, 

and to provide a Department-wide capability for real time assessment of security posture 

and alerts to threats that will promote mission assurance. 

Disaster Recovery Capabilities: This upgrade is critical to ensure the stability of 

essential operations of the Department of the Treasury in the event of an emergency. The 

upgrade will enable the ability of the Treasury Department’s information technology 

infrastructure to recover in the event of a disaster or major service failure. 

Implementation of E-Government Initiatives: The President’s Management Agenda 

(PMA) and E-Government initiatives drive the Treasury Department to identify 

opportunities to leverage existing systems and services in order to reduce costs and 

duplication within the Department of the Treasury and across government. The Treasury 

Department continues to review and monitor projects targeted for migration and eventual 

shut-down. 

DSCIP - 9 
3.2.1 – Department-wide Systems and Capital Investments Program Budget and 

Performance Plan 

Dollars in Thousands

Department-wide Systems and Capital 

Investments Program Budget Activity

Includes Strategic Objective M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $36,185 $32,002 $24,168 $34,032 $18,710

 Other Resources 0 0 0 0 0

Total Operating Level $36,185 $32,002 $24,168 $34,032 $18,710

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 0 0 0 0 0

Total FTE (direct and reimbursable) 0 0 0 0 0

The purpose of DSCIP funds is to modernize business processes and increase efficiencies 

through IT investment. All of the DSCIP efforts provide tangible benefits in their 

specific areas to produce an improved overall IT environment for the Department of the 

Treasury. The following section describes what the Treasury Department expects to 

accomplish with the requested DSCIP funding and the specific benefits each program

will provide at the completion of FY 2008. 

Enterprise Content Management Funding for the Enterprise Content Management 

(ECM) program will be used to implement a pilot enterprise-wide ECM project for the 

Department of the Treasury. The pilot ECM project will address the critical and urgent 

business needs of the Office of Foreign Asset Control (OFAC) and the Financial Crimes 

Enforcement Network (FinCEN), both of which are struggling under an increasingly 

burdensome paper-based system of operations. This approach to ECM will minimize 

duplication of effort and infrastructure investments by capitalizing on Department and 

government-wide efforts. By the end of FY 2008, the Treasury Department will have 

significantly improved the workflow processes for both OFAC and FinCEN, as well as 

positioned the Department for a full transition to a Department-wide ECM solution. 

Cyber Security – CIP Cyber Security – Critical Infrastructure Protection funds will be 

used to update the Treasury Department’s Critical Infrastructure / Key Resources 

(CI/KR) list and to further protect CI/KR systems against possible terrorist attack. CIP 

will meet the Treasury Computer Security Incident Response Center (TCSIRC) reporting 

requirements for DHS. 

Cyber Security – Information Security Through this program, the Treasury Department 

will have greater protection against network intrusions, which can result in significant 

disruptions and delays in its business activities. Funding in this area will also support 

reviews of selected bureau security programs. 

E-Government Enterprise Architecture Enterprise Architecture (EA) provides the 

Treasury Department visibility to its lower level information technology systems. This 

will allow for the collection of system architecture information into a central database, 

which will be used to identify areas for improved systems efficiency and effectiveness. 

DSCIP - 10 
E-Government Initiatives The Treasury Department funds 12 of the 25 E-Government

initiatives and six of the nine E-Government Lines of Business, which includes funding 

from the DSCIP account. More information on the benefits of each E-Government 

initiative can be found in the E-Government chapter of this Budget request. Overall, 

funding for the E-Government initiative will allow the Treasury Department to execute 

all required memoranda of understanding with Presidential E-Government Managing 

Partners. 

Integrated Wireless Network The Integrated Wireless Network effort will result in the 

purchase and technical refresh of equipment needed to support law enforcement 

personnel. By the end of FY 2008, the Treasury Department will have a greater ability to 

ensure the safety of law enforcement officers and improve its investigative, surveillance, 

and physical security capabilities. 

Treasury Back-up Disaster Recovery Back-up Disaster Recovery activities will allow the 

Treasury Department to conduct server structure and storage area network upgrades that 

will better protect data that is critical to senior level administration and Treasury 

Department officials in the event of an emergency. 

Treasury Secure Data Network Funding for the continued improvement of the Treasury 

Secure Data Network (TSDN) operating system and hardware components will assure 

continued functionality throughout FY 2008. As a consequence, the Treasury 

Department will continue to have reliable access to the SIPRNET and the Department of 

Defense classified communications network, which will ensure ongoing communications 

with officials in law enforcement as well as the Departments of Defense and State. 

DSCIP - 11 
Section 4 – Supporting Materials 

4B – Information Technology Strategy 

DSCIP supports a broad range of IT programs and initiatives which are critical to 

improving the Treasury Department’s IT security capabilities, protecting its critical 

infrastructure, maturing the Department of the Treasury’s enterprise architecture (EA), 

and achieving enterprise-wide benefits through E-Government and other Departmentwide initiatives. These program areas are aligned with and support OCIO and 

Departmental IT strategic goals and objectives. In particular, these efforts play an 

important role in helping the Treasury Department improve its performance on PMA 

requirements for expanding E-Government. While the Department of the Treasury 

initially was designated as “Red” for its E-Government PMA status, the Treasury 

Department has made significant progress over the past two years and achieved an 

upgrade to “Yellow” status in FY 2006. 

The Treasury Department’s work to improve its E-Government PMA status continues to 

be a top priority. Improving the Department of the Treasury’s PMA performance 

requires a concerted effort across the Treasury Department to strengthen multiple 

program areas such as EA, Capital Planning, and Cyber Security. These initiatives 

support the Treasury Department’s focus on business and technical modernization, 

strengthening its IT security posture, ensuring a resilient IT environment, and migrating 

to common solutions as appropriate. Performance and success for these initiatives is 

measured by the Treasury Department’s E-Government PMA score, as well as the 

Department’s EA maturity score from OMB, status against Federal Information Security 

Management Act metrics, compliance with OMB direction and guidance regarding 

consolidating and leveraging existing capabilities and investments, and meeting projectspecific cost, schedule, and performance goals. 

DSCIP - 12 
Office of Inspector General 

Mission Statement 

To (1) conduct and supervise audits and investigations of Treasury programs and 

operations; (2) provide leadership and coordination and recommend policies for activities 

designed to (a) promote economy, efficiency, and effectiveness in the administration of 

Treasury programs and operations, and (b) prevent and detect fraud, waste, and abuse in 

Treasury programs and operations; and (3) keep the Secretary and the Congress fully and 

currently informed about problems, abuses, and deficiencies in Treasury programs and 

operations. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate 

% from 

CR-rate

Audit $11,549 $11,908 $11,682 $12,661 $979 8.38%

Investigations 5,281 5,444 5,340 5,789 449 8.41%

Total Appropriated Resources $16,830 $17,352 $17,022 $18,450 $1,428 8.39%

FY 2008 Priorities 

• Complete 56 audits, 

• Complete 100 percent of OIG statutory mandated audits on time, and 

• Refer 105 fraud, waste or abuse investigative cases for criminal prosecution, 

civil litigation or administrative action. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

Section 2 – Budget Adjustments and Appropriation Language................................... 5

2.1 – Budget Adjustments Table..................................................................................... 5 

2A – Budget Increases and Decreases Description......................................................... 5 

2.2 – Operating Levels Table.......................................................................................... 6 

2B – Appropriation Language ........................................................................................ 7 

2C – Legislative Proposals.............................................................................................. 7 

Section 3 – Budget and Performance Plan ..................................................................... 8

3.1 – Appropriation Detail Table.................................................................................... 8 

3A – Audit....................................................................................................................... 8 

3.2.1 – Audit Budget and Performance Plan................................................................... 9 

3B – Investigations ...................................................................................................... 10 

3.2.2 – Investigations Budget and Performance Plan ................................................... 10 

Section 4 – Supporting Materials.................................................................................. 12

4.1 – Human Resources Table ...................................................................................... 12 

4A – Human Capital Strategy Description ................................................................... 12 

4.2 – Summary of IT Resources Table ......................................................................... 13 

4B – Information Technology Strategy ........................................................................ 14 

4.3 – PART Evaluation Table....................................................................................... 14 

OIG - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Treasury Office of Inspector General (OIG) provides independent oversight of the 

Department of Treasury and eight bureaus. The OIG has two primary offices, the Office 

of Audit (OA) and the Office of Investigations (OI). 

The OIG’s requested funding will be used to provide critical audit and investigative 

services, ensuring the effectiveness and integrity of Treasury’s programs and operations. 

We will continue, as our first audit priority, to address mandated requirements related to 

financial statements, information security, Treasury procurements on behalf of the 

Department of Defense, and as necessary, failed financial institutions resulting in 

material losses (more than $25 million) to the deposit insurance funds. While there are a 

number of critical areas where the OIG will also provide audit oversight, highlights of

three of the Department’s most serious management challenges and where we plan to 

focus our work include: 

Programs to Combat Terrorist Financing and Money Laundering -- Treasury faces 

unique challenges in carrying out its responsibilities under the Bank Secrecy Act 

(BSA) and USA Patriot Act to prevent and detect money laundering and terrorist 

financing. To effectively prevent and detect financial crimes and terrorist financing it is 

necessary to have: (1) strong control environments at financial institutions that ensure 

that business is conducted with reputable parties, and large currency transactions and 

suspicious activities are properly and timely reported to Treasury, (2) strong federal 

and state regulatory agencies that examine and enforce BSA and USA Patriot Act 

requirements at financial institutions, and (3) strong analytical capacity to identify and 

refer to law enforcement leads provided through reports filed by financial institutions. 

While FinCEN is the Treasury bureau responsible for administering BSA, it relies on 

other Treasury and non-Treasury agencies to enforce compliance with the Act’s 

requirements. The Office of Foreign Assets Control (OFAC), the Treasury office 

responsible for administering U.S. foreign sanction programs, also relies on other 

Treasury and non-Treasury agencies to ensure compliance with OFAC requirements. 

Past audits and Congressional hearings have surfaced serious regulatory gaps in the 

detection of and/or timely enforcement action against financial institutions for BSA 

and related violations. This management challenge will continue to be a major focus of

our audit program. 

Efforts to Ensure the Security of Treasury ’s Information Systems -- The Department 

faces serious challenges in bringing its systems into compliance with information 

technology security policies, procedures, standards, and guidelines. In its fiscal year 2006 

Federal Information Security Management Act (FISMA) independent evaluation, the 

OIG continued to report significant deficiencies in the Department’s information security 

programs and practices, constituting substantial non-compliance with the FISMA 

requirements. Although the Department recently established a reliable systems inventory 

(a significant problem in the past) improvements are still needed in the areas of: 

OIG - 2 
certification and accreditation, security awareness, training employees with significant 

security responsibilities, tracking corrective actions, identifying and documenting system

interfaces, security self-assessments, configuration management, and incident response. 

During 2006, OMB required agencies to perform specific actions to protect certain 

personally identifiable information. The OIG reported that the Department faces 

significant challenges to meet these requirements. 

Treasury’s Management of Capital Investments -- Treasury needs to better manage large 

acquisitions of systems and other capital investments. OIG reported significant cost 

escalations in the Department’s HR Connect system and the Treasury and Annex Repair 

and Restoration (TBARR) project. OIG also reported that the Department’s Treasury 

Communication Enterprise (TCE) system, estimated to cost $1 billion, was poorly 

planned, executed, and documented. Among other things, the transition to TCE was 

delayed due in part to a successful protest of the bid award, and the Department changing 

course on how it addressed the bid protest decision. More recently, after nearly 2 years 

in development and $15 million spent, FinCEN terminated its contract for the storage 

and retrieval component of BSA Direct after significant concerns were raised about 

schedule delays and project management. 

Investigative priorities for FY 2008 are: 

• Investigating complaints of alleged criminal and serious misconduct, 

• Investigating allegations of fraud and other crimes involving Treasury 

contracts, grants, guarantees (fictitious instruments), and federal funds, 

• Investigating instances of misdirected and stolen payments usually accompanied 

by identity theft enterprises, 

• Investigating a variety of financial programs (OTS, OCC, & TTB), like those 

where fraud and other crimes are involved in the issuance of licenses or benefits 

provided to citizens, 

• Performing oversight or quality assurance reviews of the Treasury's 

police operations at BEP and the U.S., and 

• Proactive efforts in detecting, investigating, and deterring electronic crimes 

and other threats to the Department’s physical and cyber critical 

infrastructure. 

Resources required to support OIG operations for FY 2008 are $18,450,000 from direct 

appropriations, and $1,300,000 from reimbursable agreements for contract audits of other 

Treasury bureaus. 

1B – Program History and Future Outlook 

In FY 2005, the OIG completed 54 audits and evaluations, and opened 168 new cases and 

referred 85 investigations for criminal prosecution, civil litigation, or corrective 

administrative action. OIG audits identified potential monetary benefits (cost savings 

OIG - 3 
and/or funds put to better use) totaling nearly $52 million, and our investigative efforts 

led to more than $6 million collected in fines, restitution, recoveries and settlements paid 

to the government or aggrieved parties. 

In FY 2006, OIG efforts resulted in 57 audits completed, 488 complaints reviewed for

potential investigation or inquiry, 129 new cases opened, 144 investigations referred, 

potential monetary benefits of $35 million identified, and nearly $600 thousand 

collected in fines, restitution, recoveries, and settlements. 

In FY 2007, the Office of Audit expects to perform or supervise contractors to meet 

mandated audit requirements and focus its self-initiated audit resources to address the 

major management and performance challenges identified by the Inspector General. 

Those challenges are (1) Corporate Management, (2) Management of Capital 

Investments, (3) Information Security, (4) Linking Resources to Results and (5) AntiMoney Laundering and Terrorist Financing/Bank Secrecy Act Enforcement. In FY 

2007, the Office of Investigations plans to continue investigating all reports of fraud, 

waste and abuse, and other criminal activity. FY 2007 resources will enable OI to 

maintain the improvements made to aggressively investigate, close, and refer cases in a 

timely manner. OI will also continue to conduct a limited number of proactive integrity 

projects such as the fraudulent improper payments project initiated in FY 2006. 

The requested FY 2008 resource level will allow OIG to maintain performance at a 

level consistent with FY 2006 and FY 2007. OIG has continued to direct a significant

portion of its limited resources to auditing Treasury programs that combat terrorist 

financing and money laundering, including a number of important audits at FinCEN, 

OFAC, OCC, and OTS. 

OIG expects to complete 56 audits and evaluations and refer 105 investigations in FY 

2008, however OIG continues to lack sufficient resources to comprehensively audit the

Department’s programs and operations. 

OIG - 4 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

Appropriation: OIG Salaries & Expenses FTE Amount

FY 2006 Appropriation (P.L. 109-115) 115 $17,000

Rescission (P.L. 109-148) 0 ($170)

FY 2006 Enacted 115 $16,830

FY 2007 President's Budget 115 $17,352

CR-rate Adjustment (330)

FY 2007 CR-rate 115 $17,022

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

Base Adjustment 882

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 95

Pay Annualization 71

Pay Inflation Adjustment 380

Total FY 2008 Base 115 $18,450

Total FY 2008 Request 115 $18,450

2A – Budget Increases and Decreases Description 

Adjustments ........................................................................................-$330,000 / +0 FTE 

CR-rate Adjustment -$330,000 / +0 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Technical Adjustment to FY 2007 Base due to CR ........................+$882,000 / +0 FTE 

Base Adjustment +$882,000 / +0 FTE Technical adjustment to FY 2007 Base due to CR. 

Maintaining Current Levels (MCLs) ..............................................+$546,000 / +0 FTE 

Non-Pay Inflation Adjustment +$95,000 / +0 FTE Funds are requested for non-labor 

inflation and cost increases, such as contracts, travel, supplies, equipment, and GSA rent. 

Pay Annualization +$71,000 / +0 FTE Funds are requested for the FY 2008 cost of the 

January 2007 pay increase. 

Pay Inflation Adjustment +$380,000 / +0 FTE Pay adjustment for January 2008 pay 

increase and related increased benefit costs. 

OIG - 5 
2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: OIG Salaries & Expenses FY 2006 

Enacted

FY 2007 

President's

Budget

CR-rate 

Adjustment

FY 2007

CR-rate

Proposed

Reprogra

mmings

FY 2007

Proposed 

Operating 

Level

FY 2008 

Requested

Level

FTE 115 115 115 115 115

Object Classification:

11.1 Full-Time Permanent Positions..................... $9,904 $10,655 ($150) $10,505 $10,505 $10,765

11.1 Other than Full-Time Permanent Positions.... 245 45 45 45 60

11.5 Other Personnel Compensation.................... 600 90 90 90 500

11.8 Special Personal Services Payments............ 0 0 0 0 0

11.9 Personnel Compensation (Total)............... $10,749 $10,790 ($150) $10,640 $0 $10,640 $11,325

12.0 Personnel Benefits........................................ 2,070 2,443 (50) 2,393 2,393 2,775

13.0 Benefits to Former Personnel........................ 0 0 0 0

21.0 Travel............................................................ 600 440 440 440 475

22.0 Transportation of Things............................... 0 0 0 0 0

23.1 Rental Payments to GSA.............................. 1,652 1,410 (130) 1,280 1,280 1,326

23.2 Rent Payments to Others.............................. 0 0 0 0 0

23.3 Communications, Utilities, & Misc................. 404 350 350 350 439

24.0 Printing and Reproduction............................. 0 10 10 10 15

25.1 Advisory & Assistance Services.................... 0 0 0 0 0

25.2 Other Services.............................................. 100 285 285 285 385

25.3 Purchase of Goods/Serv. from Govt. Accts

0

... 550 900 900 900 975

25.4 Operation & Maintenance of Facilities........... 100 202 202 202 0

25.5 Research & Development Contracts............. 0 0 0 0 0

25.6 Medical Care................................................. 0 32 32 32 40

25.7 Operation & Maintenance of Equipment........ 67 200 200 200 225

25.8 Subsistence & Support of Persons................ 0 0 0 0

26.0 Supplies and Materials.................................. 135 90 90 90 150

31.0 Equipment..................................................... 403 200 200 200 320

32.0 Lands and Structures.................................... 0 0 0 0 0

33.0 Investments & Loans....................................

0

. 0 0 0 0

41.0 Grants, Subsidies.........................................

0

. 0 0 0 0

42.0 Insurance Claims & Indemn.......................... 0 0 0 0 0

43.0 Interest and Dividends...........................

0

... 0 0 0 0

44.0 Refunds........................................................

0

. 0 0 0 0

Total Budget Authority....................................

0

... $16,830 $17,352 ($330) $17,022 $0 $17,022 $18,450

Budget Activities:

Audit $11,549 $11,908 ($226) $11,682 $11,682 $12,661

Investigations 5,281 5,444 (104) $5,340 5,340 5,789

Total Budget Authority....................................... $16,830 $17,352 ($330) $17,022 $0 $17,022 $18,450 

OIG - 6 
2B – Appropriation Language 

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY 

OFFICE OF INSPECTOR GENERAL 

Federal Funds 

SALARIES AND EXPENSES: 

For necessary expenses of the Office of Inspector General 

in carrying out the provisions of the Inspector General Act 

of 1978, as amended, $18,450,000, of which not to exceed 

$2,000,000 for official travel expenses, including hire of 

passenger motor vehicles; of which not to exceed $100,000 

for unforeseen emergencies of a confidential nature, to be 

allocated and expended under the direction of the 

Inspector General of the Treasury; and of which not to 

exceed $2,500 shall be available for official reception and 

representation expenses.

2C – Legislative Proposals 

The OIG has no legislative proposals for FY 2008. 

OIG - 7 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Audit 74 $11,549 75 $11,549 74 $11,908 74 $11,681 74 $12,661 0.0% 8.39%

Investigations 41 5,281 41 5,281 41 5,444 41 5,341 41 5,789 0.0% 8.39%

Subtotal New Appropriated Resources 115 $16,830 116 $16,830 115 $17,352 115 $17,022 115 $18,450 0.00% 8.39%

Other Resources:

Offsetting Collections - Reimbursable (Note 1) 5 $2,342 4 $2,342 5 $2,342 2 $1,300 0 $1,300 -100.0% 0.00%

Subtotal Other Resources 5 $2,342 4 $2,342 5 $2,342 2 $1,300 0 $1,300 -100.00% 0.00%

Total Resources Available for Obligation 120 $19,172 120 $19,172 120 $19,694 117 $18,322 115 $19,750 -1.71% 7.79%

Note 1 - Reimbursable funding for IGATI operations and for other bureau contract audit support. FY 2008 reduction reflects IGATI's move to a consolidated IG institute. 

FY 2007

% Change

FY 2006 FY 2006 FY 2007 FY 2007 FY 2008

Resources Available for Obligation Enacted Obligations Presidents Budget CR-Rate Request to FY 2008

3A – Audit ($12,661,000 from direct appropriations and $1,300,000 from 

reimbursable programs): The Office of Audit conducts audits of eight Treasury bureaus 

and all non-IRS Treasury offices; produces more than 50 reports annually; and provides 

firsthand, unbiased perspectives and recommendations for improving the economy, 

efficiency, and effectiveness of Treasury programs and operations. The Office of Audit 

often identifies significant cost savings to the government, principally through selfinitiated audits. 

The Office of Audit also responds to requests by Treasury officials and the Congress for 

specific work. While statute requires certain audits be conducted every year, the number 

of additional congressionally-required audits and requests has increased in recent years. 

OIG - 8 
3.2.1 – Audit Budget and Performance Plan 

Dollars in Thousands 

Audit Budget Activity Includes Strategic Objective M5A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $9,434 $11,299 $11,549 $11,908 $12,661

 Other Resources 1,272 2,342 2,342 2,342 1,300

Total Operating Level $10,706 $13,641 $13,891 $14,250 $13,961

Human Resources

 Appropriated FTE 72 74 74 74 74

 Other FTE 7 6 5 5 0

Total FTE (direct and reimbursable) 79 80 79 79 74

Audit Budget Activity Includes Strategic Objective M5A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 48 53 56 56 56

Actual 49 54 57

Number of completed audits and evaluations 

(Ot) 

Met Yes Yes Yes

Target 100% 100% 100% 100% 100%

Actual 100% 100% 100%

Percent of statutory audits completed by the 

required date (%) (E) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: In FY 2005, the OIG completed 54 audits and evaluations, 

completed all statutory audits by the required dates and identified potential monetary

benefits (cost savings and/or funds put to better use) totaling nearly $52 million. In FY

2006, OIG efforts resulted in 57 audits completed, all statutory audits completed on time 

and $35 million in potential monetary benefits identified.

In FY 2007, the Office of Audit will continue to perform or supervise contractors in 

meeting mandated audit requirements. The Office of Audit will focus its limited selfinitiated audit resources to address the major management and performance challenges 

identified by the Inspector General. Those challenges are (1) Corporate Management, 

(2) Management of Capital Investments, (3) Information Security, (4) Linking 

Resources to Results and (5) Anti-Money Laundering and Terrorist Financing/Bank 

Secrecy Act Enforcement. 

Similarly for FY 2008, the Office of Audit will continue, as its first audit priority, to 

address mandated requirements related to financial statements, information security, and

as necessary, failed financial institutions resulting in material losses (more than $25 

million) to the deposit insurance funds. While there are a number of critical areas where 

the OIG will also provide audit oversight, our focus will be on the Department’s serious 

management challenges related to programs to combat terrorist financing and money 

laundering, the security of Treasury’s information systems, and Treasury’s management 

of capital investments. 

OIG - 9 
3B – Investigations ($5,789,000 from direct appropriations): The Office of 

Investigations prevents, detects and investigates complaints of fraud, waste and abuse at 

eight Treasury bureaus and all non-IRS Treasury offices. This includes the detection and 

prevention or deterrence of employee misconduct and fraud, or related financial crimes 

within or directed against Treasury. The Office of Investigations refers its cases to the 

Department of Justice and state or local prosecutors for criminal prosecution or civil 

litigation, or to agency officials for corrective administrative action. 

3.2.2 – Investigations Budget and Performance Plan 

Dollars in Thousands 

Investigations Budget Activity Includes Strategic Objective M5A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $3,489 $5,069 $5,281 $5,444 $5,789

 Other Resources 0 0 0 0 0

Total Operating Level $3,489 $5,069 $5,281 $5,444 $5,789

Human Resources

 Appropriated FTE 27 41 41 41 41

 Other FTE 0 0 0 0 0

Total FTE (direct and reimbursable) 27 41 41 41 41

Investigations Budget Activity Includes Strategic Objective M5A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 72 85 105 105

Actual 85 144

Number of investigations referred for criminal 

prosecution, civil litigation or corrective 

administrative action. (Oe) Met Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: In FY 2005, the OIG opened 168 new cases and referred 85

investigations for criminal prosecution, civil litigation, or corrective administrative 

action, and OIG investigative efforts led to more than $6 million collected in fines, 

restitution, recoveries and settlements paid to the government or aggrieved parties 

collected. 

In FY 2006, the OIG reviewed 488 complaints for potential investigation or inquiry, 

opened 129 new investigations, and referred 149 investigations, leading to nearly $600 

thousand in fines, restitution, recoveries, and settlements. 

In FY 2007, the Office of Investigations (OI) plans to continue investigating all 

reports of fraud, waste and abuse and other criminal activity. FY 2007 resources will 

enable the Office of Investigations to maintain the improvements made in an effort to 

aggressively investigate, close, and refer cases in a timely manner. 

Given the current investigative resource level, the Office of Investigations continues to 

prioritize its workload by directing investigators to work on the most significant cases 

first. This, coupled with the realignment of OI in 2006, to include increasing 

OIG - 10 
supervision, should better position the OIG to reduce most delays associated with 

processing our criminal and serious employee misconduct investigations. 

In FY 2008 the Office of Investigations will continue investigating all reports of fraud, 

waste and abuse, and other criminal activity, and will maintain current efforts to 

aggressively investigate, close and refer cases for criminal prosecution, civil litigation or 

administrative action in a timely manner. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

OIG - 11 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 109 116 115

Increases:

Reason #1: Normal Accession 13 9 10

Subtotal, Increases 13 9 10

Decreases:

Reason #1: Normal Attrition -6 -10 -10

Subtotal, Decreases -6 -10 -10

Year-end Actual/Estimated FTEs 116 115 115

Net Change from prior year SOY to budget year EOY -1

4A – Human Capital Strategy Description 

The OIG identified two mission critical occupations that closely align to its two budget 

activities, audit and investigations, and has integrated workforce plans for these 

specialized professionals (auditors, criminal investigators) with strategic and annual plan 

goals and objectives. 

The OIG has had exceptional recruitment success using automated tools to re-establish 

and then maintain its human capital pipeline for the past four years, with OIG job 

announcements attracting up to 1,000 applicants, and selections made and positions 

offered within 30-days, on average. 

OIG - 12 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 FY 2008Major IT Investments

Budget

Activity/Funding 

Source

Identify the Program 

that the System is

Aligned to

Operating 

Plan Obligations

Operating 

Plan

President's 

Budget Request

Subtotal, Major IT Investments $0.0 $0.0 $0.0 0.0% $0.0 0.0% - 0.0%Non-Major IT Investments $0.4 $0.5 $0.3 -38.8% $0.4 30.0% 0.4 2.6%NONE - OIG STEADY STATE OPERATING COSTSInfrastructure Investments $0.0 $0.0 $0.0 0.0% $0.0 0.0% - 0.0%Enterprise Architecture $0.0 $0.0 $0.0 0.0% $0.0 0.0% - 0.0%Total IT Investments $0.4 $0.5 $0.3 -38.8% $0.4 30.0% 0.4 2.6%1/ FY 2006 Obligations of FY 2006 Enacted amounts

FY 2005 % Change 

from FY05 

Actuals to

FY06

% Change 

from FY06 to

FY07

% Change from 

FY07 to FY08

OIG - 13 
4B – Information Technology Strategy 

IT funding has been critical in enabling OIG to make significant progress in providing 

technology refreshment that allows our auditors, investigators, and support personnel to 

use hardware and software actively maintained by the manufacturers. IT funding also 

strengthens OIG’s entity-wide IT security program, with equipment designed for antivirus detection/protection, anti-spam detection, anti-spy detection, intrusion 

detection/prevention, monitoring and patch management, and disaster recovery. This 

ensures that the OIG IT infrastructure operates in a secure manner and that the 

information collected during audits and investigations of the Department’s operations and 

resources are not susceptible to computer attacks and terrorist activities. Maintaining the 

OIG IT infrastructure and its IT security program at an acceptable level requires on-going 

upgrades of tools and technologies. 

IT funding has also enhanced OIG’s ability to perform computer forensics during 

investigations and computer vulnerability scanning during audits of the Department’s IT 

operations and resources. Maintaining these capabilities requires on-going upgrades of 

tools and technologies. 

4.3 – PART Evaluation Table 

The OIG is not, nor is it scheduled to be, PARTed. 

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

OIG - 14 
Treasury Inspector General for Tax 

Administration 

Mission Statement 

To provide audit and investigative services that promote economy, efficiency, and 

integrity in the administration of the internal revenue laws. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$from 

CR-rate 

% from

CR-rate

Audit $49,761 $51,521 $49,686 $52,959 $3,273 6.59%

Investigations 82,192 84,948 82,267 87,594 5,327 6.48%

Total Appropriated Resources $131,953 $136,469 $131,953 $140,553 $8,600 6.52%

FY 2008 Priorities 

• Adapting to the Internal Revenue Service’s (IRS) continuously evolving 

operations and mitigating intensified risks associated with modernization, 

outsourcing, and enforcement efforts. 

• Responding to threats and attacks against IRS personnel, property, and sensitive 

information. 

• Improving the integrity of IRS operations by detecting and deterring fraud, waste, 

abuse or misconduct by IRS employees. 

• Conducting comprehensive audits that include recommendations for cutting costs 

and enhancing IRS’ service to taxpayers. 

• Informing Congress and the Secretary of the Treasury of problems and progress 

made to resolve them. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 2 

Section 2 – Budget Adjustments and Appropriation Language................................... 6

2.1 – Budget Adjustments Table..................................................................................... 6 

2A – Budget Increases and Decreases Description......................................................... 6 

2.2 – Operating Levels Table.......................................................................................... 7 

2B – Appropriation Language ........................................................................................ 8 

2C – Legislative Proposals.............................................................................................. 8 

Section 3 – Budget and Performance Plan ..................................................................... 9

3.1 – Appropriation Detail Table.................................................................................... 9 

3A – Audit....................................................................................................................... 9 

3.2.1 – Audit Budget and Performance Plan................................................................. 11 

3B – Investigations ....................................................................................................... 12 

3.2.2 – Investigations Budget and Performance Plan ................................................... 13 

Section 4 – Supporting Materials.................................................................................. 14

4.1 – Human Resources Table ...................................................................................... 14 

4A – Human Capital Strategy Description ................................................................... 14 

4.2 – Summary of IT Resources Table ......................................................................... 16 

4B – Information Technology Strategy ........................................................................ 17 

4.3 – PART Evaluation Table....................................................................................... 19 

TIGTA - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Treasury Inspector General for Tax Administration (TIGTA) was created to provide 

independent oversight of the Internal Revenue Service (IRS). TIGTA’s investigations

and audits protect and promote the fair administration of the American tax system. Its 

responsibilities include ensuring that the IRS is accountable for more than $2 trillion in 

tax revenue received each year. TIGTA’s investigations: protect the IRS against 

breaches of integrity by IRS employees, contractors, and other tax professionals; provide 

for employee and infrastructure security; and protect the IRS from external attempts to 

threaten or corrupt the administration of the tax laws. TIGTA conducts audits that advise 

Congress, the Secretary of the Treasury, and IRS management of high risk issues, 

problems, and deficiencies related to the administration of IRS programs and operations. 

TIGTA’s audit recommendations aim to improve IRS systems and operations, while 

maintaining fair and equitable treatment of taxpayers. 

TIGTA’s investigative and audit priorities include: 

• Adapting to the IRS’ continuously evolving operations and mitigating 

intensified risks associated with modernization, outsourcing, and enforcement 

efforts;

• Responding to threats and attacks from individuals, anti-government groups, 

and terrorism against IRS personnel, property, and sensitive information; 

• Improving the integrity of IRS operations by detecting and deterring fraud, 

waste, abuse, or misconduct by IRS employees; 

• Identifying inefficiencies and high-risk weaknesses in tax administration 

through comprehensive audits that ensure the protection of taxpayer rights, 

generate cost savings, protect tax revenue, and enhance IRS’ services to 

taxpayers; and 

• Advising Congress and the Secretary of the Treasury of high-risk problems 

and progress made to resolve them. 

The total resources required to support TIGTA activities for FY 2008 are $141,753,000 

including $140,553,000 from direct appropriations and $1,200,000 from offsetting 

collections and reimbursable agreements. 

1B – Program History and Future Outlook 

TIGTA’s investigations and audits are integral to the efficient and equitable application 

of the nation’s tax laws and thereby ensure that this critical source of federal revenue is 

prudently and fairly administered and secure from internal and external threats. 

Oversight activities are explicitly designed to identify high-risk systemic inefficiencies in 

TIGTA - 2 
IRS operations and investigate exploited weaknesses in tax administration. Previously a 

longstanding enforcement office within the IRS, TIGTA was established as an 

independent office in January 1999 in accordance with the Internal Revenue Service 

Restructuring and Reform Act of 1998 (RRA 98). It was mandated to provide 

independent audit and investigative services necessary to improve the quality and 

credibility of IRS oversight. 

In FY 2006, TIGTA’s accomplishments included: 

Advising Congress: TIGTA issued 171 audit reports, and also provided 40 testimonies, 

briefings, and responses to Congress and its professional staff regarding investigative and 

audit activities. Through this direct communication, TIGTA aims to address the interest 

of congressional committees on critical issues and eliminate unsubstantiated concerns 

that may needlessly impede IRS operations. Accordingly, TIGTA recently established an 

Inspection and Evaluation Group to provide additional flexibilities to address evolving 

topics and address significant issues that require a quick turnaround. This group provides 

rapid responses to requests from Congress and other stakeholders for reviews and 

guidance regarding tax administration programs and activities. 

Hurricanes Katrina and Rita Review: TIGTA participated in the Inspectors General’s 

coordinated oversight of the federal government’s multi-billion dollar hurricane relief 

effort. TIGTA initiated reviews intended to assess IRS preparation for processing tax 

returns of impacted taxpayers, ensure an adequate approval process for new tax-exempt 

disaster relief organizations, protect taxpayer data and evaluate business resumption 

plans. TIGTA’s investigations targeted areas susceptible to abuse or misuse of relief 

mechanisms and exploitation of victims. TIGTA’s involvement not only verified that tax 

relief was appropriately applied to victims in most cases, but also ensured that 

weaknesses in the IRS’ disaster recovery and execution operations were identified and 

resolved for future years. 

Implementing New Statutory Requirement Regarding Taxpayer Assistance Services: In 

May of 2005, the IRS announced plans to close 68 Taxpayer Assistance Centers (TACs) 

in order to generate an estimated $45 million to $55 million in cost savings. 

Congressional concerns resulted in new legislation prohibiting the IRS from using 

FY 2006 appropriated funds to reduce any taxpayer service function or program until 

TIGTA assessed the impact on taxpayer service and compliance. TIGTA adjusted 

priorities to meet this unfunded congressional mandate in a timely and effective manner. 

This review ensured that taxpayer services were not inappropriately reduced in vital 

areas. 

Overall Audit Outcomes: As of September 30, 2006, a total of 171 audit reports were 

issued, identifying approximately $1.8 billion in potential costs savings and protected 

revenue. 

 

Overall Investigative Outcomes: As of September 30, 2006, 3,412 investigations were 

closed and achieved 79 percent positive results (e.g., referrals for criminal and civil 

TIGTA - 3 
prosecution and administrative adjudications), including 1,485 cases of employee 

misconduct referred to the IRS for administrative action and 268 cases accepted for 

prosecution. 

TIGTA has achieved its performance and quality expectations in part by implementing 

several efficiency and cost-cutting initiatives. Specifically, TIGTA has: 

• Implemented and expanded telecommuting and hoteling1 programs that have 

enhanced employee productivity and reduced TIGTA’s rent costs; 

• Closed offices and reduced managerial and support staff positions; 

• Outsourced certain personnel, finance, and accounting services to the Bureau of 

Public Debt’s (BPD) Administrative Resource Center; and, 

• Maximized efficient use of resources by ensuring that TIGTA emphasizes core 

mission-related work. 

 

FY 2008 Priorities: 

Ensuring the Privacy and Security of Taxpayer Information: Millions of taxpayers 

entrust the IRS with sensitive financial and personal data, which is processed and stored 

by IRS computer systems. This trust is the cornerstone of the nation’s voluntary tax 

compliance system. The risk of confidential data being compromised has intensified over 

the last few years. The Department of Commerce estimates that more than 50 million 

identities were compromised in 2005. TIGTA plays a vital role in ensuring the privacy 

and security of taxpayer information from internal and external threats. 

 

The Taxpayer Browsing Protection Act of 19972

 designates willful unauthorized access 

or inspection of any taxpayer records a criminal offense. An integral part of TIGTA’s 

employee integrity program involves investigation of unauthorized access (UNAX) of 

confidential taxpayer records by IRS employees, other federal employees, contractors, 

and state government employees. From FY 2001 to FY 2006, TIGTA has initiated 2,878 

UNAX investigations, resulting in 1,375 adverse personnel actions taken by the IRS, and 

86 criminal prosecutions, for UNAX violations. 

The IRS is also a prime target for attacks on its computer systems by anti-government 

groups, international and domestic terrorists, and disgruntled employees. In addition to 

identity theft concerns, computer attacks can cause revenue loss and impede productivity 

by disrupting computer operations. In compliance with the Federal Information Security 

Management Act (FISMA)3

, TIGTA conducts an annual evaluation of the IRS 

information security program and practices. During the FY 2005 evaluation, TIGTA 

 

1

 Hoteling is a flexible work arrangement whereby an employee already participating in the telecommuting 

program on a full or expanded basis (generally over 30 hours per week) does not have a permanently 

assigned personal workspace but may reserve office space on an as-needed basis. 2 Pub. L. No. 105-35, 111 Stat. 1103.

3 FISMA is part of the E Government Act of 2002, Pub. L. No. 107-347, Title III, Section 301, 2002.

TIGTA - 4 
found that the IRS was paying insufficient attention to the security of all sensitive 

systems and contractor activities. TIGTA noted deficiencies in continuous monitoring, 

tracking corrective actions, training employees with key security responsibilities, and 

contractor oversight. An additional TIGTA review exposed inconsistent maintenance of 

security settings that could be exploited either to take control of the computer or render it 

unusable. 

Private Debt Collection: The IRS’ delinquent tax debt collection effort will utilize 

Private Collection Agencies (PCAs). Overseeing PCAs is a top priority for TIGTA in the 

coming fiscal years. TIGTA’s previous experience with detecting lockbox thefts and 

insufficient contractor oversight provide an investigative foundation for minimizing the 

incidence of similar violations in this area. TIGTA has coordinated with the IRS 

throughout the initial phase of implementation by addressing concerns regarding security 

and protection of taxpayer rights and privacy, and developing integrity and fraud 

awareness training for contract employees. The IRS placed 11,564 delinquent tax 

accounts with a value of $65 million with three approved PCAs in September 2006, and 

will place an additional 107,000 accounts with a value of approximately $656 million in 

2007. Full implementation, involving 10 to 12 contractors, is scheduled to begin in 

January 2008. 

TIGTA reviews will assess program controls and cost effectiveness, and evaluate whether 

the IRS achieves its revenue projections. Additional investigative responsibilities to deter 

fraudulent behavior will include conducting remittance and integrity tests, providing 

integrity awareness briefings to contract employees, and investigating contract 

irregularities. TIGTA’s involvement will validate that the IRS effectively exercises its 

new authority to use PCAs, while ensuring that taxpayers’ due process and privacy rights 

are protected. 

Procurement: Contract expenditures constitute approximately 20 percent of the IRS 

annual budget. TIGTA has identified erroneous and improper payments as one of the top 

management challenges the IRS faces. Currently, TIGTA coordinates with the Defense 

Contract Audit Agency to perform some contract audits and conducts several 

independent reviews of contractor invoicing to ensure that the IRS is properly and 

accurately paying for goods and services in accordance with contract terms and 

conditions. TIGTA also conducts reactive and proactive investigations to identify and 

deter criminal activity on the part of contractors. From FY 2002 through FY 2006, 

TIGTA initiated 86 contract fraud investigations, resulting in five prosecutions and the 

recovery of more than $20 million. TIGTA will continue to review a percentage of the 

amounts paid by IRS to private contractors. 

TIGTA - 5 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands

Appropriation: TIGTA, Salaries & Expenses FTE Amount

FY 2006 Appropriation (P.L. 109-115) 856 $133,286

Rescission (P.L. 109-148) (6) (1,333)

FY 2006 Enacted 850 $131,953

FY 2007 President's Budget 850 $136,469

CR-rate Adjustment (33) (4,516)

FY 2007 CR-rate 817 $131,953

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

Base Adjustment 18 3,726

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 672

Pay Annualization 579

Pay Inflation Adjustment 3,623

Total FY 2008 Base 835 $140,553

Total FY 2008 Request 835 $140,553

2A – Budget Increases and Decreases Description 

Adjustments ....................................................................................-$4,516,000 / -33 FTE 

CR-rate Adjustment -$4,516,000 / -33 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Technical Adjustment to FY 2007 Base due to CR ...................+$3,726,000 / +18 FTE 

Base Adjustment +$3,726,000 / +18 FTE Technical adjustment to FY 2007 Base due to 

CR. 

Maintaining Current Levels (MCLs) ...........................................+$4,874,000 / +0 FTE 

Non-Pay Inflation Adjustment +$672,000 / +0 FTE Funds are requested for non-labor 

inflation and cost increases, such as contracts, travel, supplies, equipment, and GSA rent. 

Pay Annualization +$579,000 / +0 FTE Annualization of January 2007 pay increase to 

provide full year funding for that pay increase during FY 2008. 

Pay Inflation Adjustment +$3,623,000 / +0 FTE Pay adjustment for January 2008 pay 

increase and related increased benefit costs. 

TIGTA - 6 
2.2 – Operating Levels Table 

Dollars in Thousands

Appropriation Title: TIGTA Salaries & Expenses FY 2006

Enacted

FY 2007

President's

Budget

CR-rate 

Adjustment

FY 2007 CRrate

Proposed

Reprogrammings

FY 2007 

Proposed

Operating

Level

FY 2008 

Requested

Level

FTE 850 850 (33) 817 - 817 835

Object Classification:

11.1 Full-Time Permanent Positions........................ $72,245 $74,363 ($3,411) $70,952 $70,952 $75,921

11.1 Other than Full-Time Permanent Positions...... 524 555 555 555 576

11.5 Other Personnel Compensation....................... 8,590 8,809 8,809 8,809 9,398

11.8 Special Personal Services Payments.............. 0 0 0 0

11.9 Personnel Compensation (Total)..................... 81,359 83,727 ($3,411) 80,316 80,316 85,895

12.0 Personnel Benefits........................................... 23,645 24,708 ($1,105) 23,603 23,603 25,226

13.0 Benefits to Former Personnel.......................... 0 0 0 0

21.0 Travel.............................................................. 4,249 4,446 4,446 4,446 4,552

22.0 Transportation of Things.................................. 13 24 24 24 24

23.1 Rental Payments to GSA................................. 9,437 7,983 7,983 7,983 8,024

23.2 Rent Payments to Others................................ 246 275 275 275 282

23.3 Communications, Utilities, & Misc.................... 2,167 1,960 1,960 1,960 2,158

24.0 Printing and Reproduction............................... 9 8 8 8 8

25.1 Advisory & Assistance Services....................... 1,105 1,125 1,125 1,125 1,152

25.2 Other Services................................................. 862 899 899 899 921

25.3 Purchase of Goods/Serv. from Govt. Accts...... 3,158 5,668 5,668 5,668 6,530

25.4 Operation & Maintenance of Facilities............. 219 398 398 398 407

25.5 Research & Development Contracts................ 0 0 0 0

25.6 Medical Care................................................... 0 0 0 0 0

25.7 O

0

peration & Maintenance of Equipment.......... 1,201 1,223 1,223 1,223 1,252

25.8 Subsistence & Support of Persons.................. 0 0 0 0 0

26.0 Supplies and Materials.................................... 1,157 1,143 1,143 1,143 1,170

31.0 Equipment....................................................... 3,025 2,685 2,685 2,685 2,750

42.0 Insurance Claims & Indemn............................. 50 146 146 146 150

91.0 Confidential Expenditures................................ 51 51 51 51 52

Total Budget Authority....................................... $131,953 $136,469 ($4,516) $131,953 $0 $131,953 $140,553

Budget Activities:

Audit............................................................... $49,761 $51,521 ($1,835) $49,686 $49,686 $52,959

Investigations...................................................... 82,192 84,948 ($2,681) 82,267 82,267 87,594

Total Budget Authority....................................... $131,953 $136,469 ($4,516) $131,953 $0 $131,953 $140,553

TIGTA - 7 
2B – Appropriation Language 

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY 

TREASURY INSPECTOR GENERAL FOR TAX 

ADMINISTRATION 

Federal Funds 

SALARIES AND EXPENSES: 

 For necessary expenses of the Treasury Inspector General 

for Tax Administration in carrying out the Inspector 

General Act of 1978, as amended, including purchase (not 

to exceed 150 for replacement only for police-type use)

and hire of passenger motor vehicles (31U.S.C. 1343(b));

services authorized by 5 U.S.C. 3109, at such rates as may 

be determined by the Inspector General for Tax 

Administration; $140,533,000, of which not to exceed 

$6,000,000 for official travel expenses; of which not to 

exceed $500,000 for unforeseen emergencies of a 

confidential nature, to be allocated and expended under 

the direction of the Inspector General for Tax 

Administration; and of which not to exceed $1,500 shall be 

available for official reception and representation 

expenses. 

2C – Legislative Proposals 

TIGTA has no legislative proposals for FY 2008. 

TIGTA - 8 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Audit 355 $49,761 346 $48,608 355 $51,521 341 $49,686 349 $52,959 2.35% 6.59%

Investigations 495 82,192 489 82,994 495 $84,948 476 $82,267 486 87,594 2.10% 6.48%

Subtotal New Appropriated Resources 850 $131,953 835 $131,602 850 $136,469 817 $131,953 835 $140,553 2.20% 6.52%

Other Resources:

Offsetting Collections - Reimbursable 3 $1,200 3 $1,625 3 $1,200 3 $1,200 3 $1,200 0.00% 0.00%

Subtotal Other Resources 3 $1,200 3 $1,625 3 $1,200 3 $1,200 3 $1,200 0.00% 0.00%

Total Resources Available for Obligation 853 $133,153 838 $133,227 853 $137,669 820 $133,153 838 $141,753 2.20% 6.46%

1/ FY 2006 Obligations of FY 2006 Enacted amounts

Enacted Obligations President's Budget to FY 2008 1 CR-rate Request

FY 2007

Resources Available for Obligation

FY 2006 FY 2006 FY 2007 FY 2007 FY 2008

% Change

3A – Audit ($52,959,000 from direct appropriations and $725,000 from reimbursable 

programs): The Office of Audit’s (OA) mission is to provide comprehensive coverage 

and oversight of all aspects of the IRS’ daily operations. Audits not only focus on the

economy and efficiency of IRS functions but also ensure that taxpayers’ rights are

protected and the taxpaying public is adequately served. Overall, as of 

September 30, 2006, audit reports produced potential financial accomplishments of 

$1.8 billion, and potentially impacted approximately 1.8 million taxpayer accounts in 

areas such as taxpayer burden, rights, and entitlements. 

OA develops an annual audit plan that communicates oversight priorities to Congress, the 

Department of the Treasury, and the IRS. Emphasis is placed on mandatory coverage 

imposed by RRA 98 and other statutory authorities, as well as issues impacting computer 

security, taxpayer rights and privacy, and financial-related audits. OA’s work focuses on 

IRS’ major management challenges, IRS’ progress in achieving its strategic goals, 

eliminating IRS’ systemic weaknesses, and IRS’ response to the President’s Management 

Agenda initiatives. By focusing on these critical areas, OA ensures that TIGTA audits 

identify and recommend improvements in IRS programs, including: 

Tax Compliance: In February 2006, the IRS estimated the gross tax gap, defined as the 

difference between the estimated amount taxpayers owe and the amount they voluntarily 

and timely pay, to be $345 billion for Tax Year 2001. TIGTA evaluated the reliability of 

the IRS-developed tax gap figures and concluded that the IRS lacked sufficient 

information to completely and accurately assess the tax gap and voluntary compliance 

rate. A reliable estimate of the overall tax gap and its components is critical to tax 

administration and tax policy decision makers. Continued TIGTA oversight of tax gap 

issues, including data reliability, enforcement laws, and taxpayer assistance, is necessary 

to ensure that the IRS enhances voluntary compliance by balancing taxpayer services and 

enforcement without jeopardizing taxpayer rights. 

An OA review of the IRS penalty-setting process for information returns related to 

foreign operations and transactions revealed deficiencies in the assessment of late-filing 

penalties. The audit identified missed opportunities for promoting better compliance with 

TIGTA - 9 
filing requirements by not assessing late-filing penalties more frequently. OA estimated 

that the IRS could generate approximately $60.3 million per year, or $301 million over 

five years, in additional revenue by using automation to close the gap between penalties 

assessed and the number of penalties that should be assessed when forms are filed late. 

OA recommended that the IRS convene a study group to develop a business case to 

decide whether or not to pursue automating the penalty-setting process. IRS management 

agreed with these recommendations and indicated that initial steps to assess automation 

will be implemented.

Quality of Taxpayer Services: The IRS has experienced a steady growth in electronic 

filing (e-filing) of income tax returns over the past several years. However, OA has 

expressed concern regarding the significant slowing of the growth of returns e-filed in 

2006. A slower growth rate extends the time period needed to achieve the goal of 

80 percent e-filed returns and delays the associated cost savings. A significant 

contributing factor was a 22 percent decline from the previous year in the number of 

taxpayers utilizing IRS free online filing options, under the Free File Program. OA raised 

concerns regarding the quality and accessibility of free e-filing services offered by the 

IRS.

The Subcommittee on Oversight of the House Committee on Ways and Means requested 

that OA review recent amendments made to the IRS’ Free File Alliance Agreement in 

order to evaluate the differences from the previous agreement and to assess the impact on 

electronic filing and taxpayer services. OA’s review showed that the amended agreement 

substantially reduced the number of taxpayers eligible to use the program and that the 

Free File services are often inaccessible, time-consuming, and difficult to use for eligible 

taxpayers. OA's recommendations will help to ensure that the free filing options 

provided by the IRS contribute to a higher growth rate of e-filing.

Minimizing Erroneous and Improper Payments: An OA review identified specific 

reforms to improve IRS processes designed to detect and deter multiple uses of taxpayer 

identification numbers. When a taxpayer identification number is utilized multiple times 

during a tax year, it creates the opportunity for taxpayers to receive tax benefits to which 

they are not entitled. The audit found that the IRS could improve its processes by 

capitalizing on existing paper return processes; expanding current programs to educate 

taxpayers and tax preparers on correct use of identification numbers; and enhancing the 

reliability of the Duplicate Taxpayer Identification Number Use database. OA estimated 

that the IRS could protect over $153 million in tax revenue over a five-year period by 

leading a collaborative effort to identify a workable solution to these multiple use cases. 

IRS management agreed with the recommendations and is taking corrective action. 

OA faces the challenge of addressing increasing requests from Congress and other IRS 

stakeholders in a timely and efficient manner. In FY 2006, OA reallocated resources in 

order to perform congressionally requested audits and comply with new statutory 

provisions. The importance of TIGTA’s mission and the effectiveness of its oversight are 

demonstrated by the increased number of requests for audits TIGTA receives. TIGTA 

TIGTA - 10 
expects the trend of increased congressional interest and requests for action to continue 

into future years. 

Other Resources: TIGTA receives $725,000 in offsetting collections and 

reimbursements to support activity related to Defense Contract Audit Agency (DCAA) 

audits conducted on behalf of the IRS and other activity conducted on behalf of the 

Department of the Treasury. 

3.2.1 – Audit Budget and Performance Plan 

Dollars in Thousands 

Audit Budget Activity Includes Strategic Objective M5A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources 

 Appropriated Resources $48,387 $48,392 $49,761 $51,521 $52,959

 Other Resources 50 1,092 725 725 725

Total Operating Level $48,437 $49,484 $50,486 $52,246 $53,684

Human Resources 

 Appropriated FTE 369 357 355 355 349

 Other FTE 0 0 0 0 0

Total FTE (direct and reimbursable) 369 357 355 355 349

Audit Budget Activity Includes Strategic Objective M5A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline TBD

Actual 

Percentage of Audit Products Delivered When 

Promised to Stakeholders 

Met 

Target Baseline TBD

Actual 

Percentage of Recommendations Made That 

Have Been Implemented 

Met 

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: TIGTA is proposing two new measures. The first one 

determines whether TIGTA audit products are timely. The likelihood that TIGTA 

products will be used is enhanced if they are delivered when needed to support 

Congressional and Internal Revenue Service (IRS) decision making. 

The Office of Audit makes recommendations designed to improve administration of the 

Federal tax system. For there to be a resulting financial or non-financial benefit, the 

Internal Revenue Service (IRS) must implement these recommendations. The second 

measure assesses TIGTA’s effect on improving the IRS’ accountability, operations, and 

services. TIGTA tracks the percentage of recommendations that were made four years 

ago which have been implemented, rather than tracking the recommendations when they 

are made initially, because the IRS needs time to act on recommendations. 

TIGTA - 11 
3B – Investigations ($87,594,000 from direct appropriations and $475,000 from 

reimbursable programs): TIGTA’s mission is more extensive than other IGs in that it has 

the statutory responsibility to protect the integrity of tax administration and the ability of 

the IRS to collect revenue for the federal government. To accomplish this, TIGTA’s 

Office of Investigations (OI) investigates allegations of criminal violations and 

administrative misconduct by IRS employees, protects the IRS against external attempts 

to corrupt tax administration, and ensures IRS employee safety and IRS data and 

infrastructure security. 

Employee Integrity: The IRS’ ability to deliver taxpayer service, enforce tax laws 

effectively, and collect the proper amount of taxes can be undermined by employee 

misconduct. TIGTA’s investigations of employee misconduct allegations include those 

involving extortion, theft, taxpayer abuses, false statements, financial fraud, and 

unauthorized access (UNAX) of confidential taxpayer records by IRS employees. 

External Attempts to Corrupt Tax Administration: External attempts to corrupt tax 

administration impede the IRS’ ability to collect revenue. TIGTA’s investigations in this 

area include bribes offered by taxpayers to compromise IRS employees, the use of 

fraudulent IRS documentation to commit crimes, taxpayer abuse by tax practitioners, 

impersonation of IRS employees, and the corruption of IRS programs through 

procurement fraud. 

Particularly important to TIGTA are phishing scams that falsely depict e-mails from the 

IRS.4

 Such schemes attempt to retrieve a user’s Social Security Number and banking 

information by replicating an official IRS seal and/or requesting information required for 

depositing tax refunds. Since November 2005, TIGTA and the IRS have received 

17,921 (as of December 31, 2006) complaints or inquiries regarding these internet 

schemes, identifying approximately 203 separate ones that were traced to 28 different 

countries. Oversight in this area is necessary to ensure that misuse of the IRS name, 

impersonation of an IRS employee, and identity theft incidents are resolved properly. 

Employee and Infrastructure Security: In 1998, The President of the United States 

designated IRS operations as a critical infrastructure.5

 TIGTA meets the challenge of 

maintaining IRS employee and infrastructure security by investigating incidents of 

sabotage and threats or assaults made against IRS employees, facilities, and 

infrastructure. Potential threats to tax administration are identified through TIGTA’s 

Criminal Intelligence Program, which utilizes law enforcement and intelligence resources 

to proactively detect suspected individuals and groups. 

Congressional concern regarding the magnitude of uncollected revenue has prompted the 

IRS to intensify enforcement activities. If effective, heightened enforcement is likely to 

cause a rise in external threats to IRS employees and infrastructure. Both TIGTA’s 

proactive and reactive investigative initiatives are critical in mitigating such future risks. 

OI currently participates on the FBI Joint Terrorism Task Forces (JTTF) and conducts 

 

4

 Phishing involves sending e-mails to users falsely claiming to be established, legitimate enterprises in

order to solicit private information for the purpose of identity theft and other crimes. 5 Presidential Decision Directive NSC-63.

TIGTA - 12 
criminal intelligence gathering to uncover and track external threats to tax administration 

from individuals, anti-government groups, and terrorists. In FY 2006, OI initiated 275 

investigations of assaults and/or threats made against IRS employees and 26 

investigations of assaults and/or threats made against IRS facilities. 

Investigative work in these three core areas is imperative for protecting the integrity of 

tax administration. The results of this work help ensure that the public has confidence in 

its dealings with the IRS, and thereby promote voluntary compliance with federal tax 

laws. 

Other Resources: TIGTA receives $475,000 in offsetting collections and 

reimbursements to support activity conducted on behalf of the Department of the 

Treasury. 

3.2.2 – Investigations Budget and Performance Plan 

Dollars in Thousands 

Investigations Budget Activity Includes Strategic Objective M5A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources 

 Appropriated Resources $78,932 $79,701 $82,192 $84,948 $87,594

 Other Resources 3,023 1,784 475 475 475

Total Operating Level $81,955 $81,485 $82,667 $85,423 $88,069

Human Resources 

 Appropriated FTE 516 495 495 495 486

 Other FTE 15 9 3 3 3

Total FTE (direct and reimbursable) 531 504 498 498 489

Investigations Budget Activity Includes Strategic Objective M5A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline 67% 70% 73% 73%

Actual 64% 82% 79%

Percentage of positive results from investigative 

activities (%) (Oe) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: Examples of the types of cases in the positive results 

category include discovery of: bribes offered by taxpayers to compromise IRS 

employees; manipulation of IRS systems and programs through the use of bogus liens 

and IRS financial reporting instruments; impersonation of IRS officials; and, 

unauthorized access to confidential taxpayer information by IRS employees. As of 

September 30, 2006, actual performance has exceeded expectations (actual performance 

was 79 percent, while the target was 70 percent). These results are indicative of 

TIGTA’s continuous focus on quality results. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

TIGTA - 13 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 855 835 817

Increases:

Reason #1: Technical adjustment to FY 2007

base due to CR 18

Subtotal, Increases 0 0 18

Decreases:

Reason #1: Partial hiring freeze -20

Reason #2: CR-rate Adjustment -18

Subtotal, Decreases -20 -18 0

Year-end Actual/Estimated FTEs 835 817 835

Net Change from prior year SOY to budget year EOY 0

4A – Human Capital Strategy Description 

TIGTA’s human capital strategy is aligned with the goals, vision, and priorities of the 

agency as a whole. One of the major strategic goals of the bureau is to “be an 

organization that values its people.” The objective associated with this goal is to “ensure 

a high-quality, diverse, and motivated workforce with the knowledge, skills, and abilities 

needed to produce quality products in an efficient and effective manner.” Also, TIGTA 

has revamped its performance management program for all employees (including 

managers) to differentiate levels of performance, to incorporate TIGTA’s strategic goals 

and objectives, and to hold employees accountable for performance. 

TIGTA’s Human Capital group strategically lays out a multi-year approach for 

addressing its critical human capital issues. This approach supports TIGTA’s mission by 

empowering TIGTA’s management to fulfill the agency’s legislative mandates and 

business goals, and by providing technical expertise, resource management, and strategic 

solutions regarding human capital policy, Bureau of Public Debt (BPD) contract

TIGTA - 14 
oversight, performance management, personnel security, personnel development, and 

work/life issues. 

TIGTA must deal with some critical staffing challenges (both now and in the future), in 

terms of having the right number of people with the right skills to accomplish its mission. 

Because of the increasingly modernized and computerized IRS operating systems and 

environment, the most critical gaps TIGTA faces are the 0511 Auditor and 1811 Criminal 

Investigator occupations. These gaps are the result of a combination of: (1) the current 

employee population lacking specific, needed skills to audit and/or investigate highly 

complicated computerized systems and/or operating environments; and (2) TIGTA’s 

limited past successes in recruiting specifically for the 0511 Auditor (with specialized 

computer skills) occupation in the Washington, DC area, where most of this type of work 

is located. 

Per HR Connect data, as of December 18, 2006, 35 percent of TIGTA’s current staff is 

retirement eligible through FY 2010, which threatens TIGTA’s ability to effectively 

fulfill its core mission. 

To address the skills gap specifically in the 0511 Auditor occupation, TIGTA classified 

and recruited 2210 Information Technology Specialists with experience in auditing 

computerized operating environments. This proved somewhat successful, as TIGTA was 

able to hire a small group of employees under this occupational series. In addition, 

TIGTA expanded the post of duty locations for employees needed in this occupational 

series to include cities outside the Washington, DC, area. 

The TIGTA workforce is not being supplemented by on-site contractors. However, the 

majority of TIGTA’s human resources, accounting, travel, and acquisitions workload has 

been outsourced to BPD’s Administrative Resource Center. 

TIGTA - 15 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 FY 2008Major IT Investments

Budget

Activity/Funding 

Source

Identify the Program

that the System is 

Aligned to

Operating 

Plan Obligations

Operating 

Plan

President's 

Budget Request

-

Subtotal, Major IT Investments $0.0 $0.0 $0.0 $0.0 $0.0Performance and Results Information System (PARIS)

TIGTA: Investigations Activity $1.0 $1.0 $1.0

PARIS Property Module (PPM) TIGTA: Investigations Activity 0.5 0.5 0.5Non-Major IT Investments $0.0 $0.0 $1.5 $1.5 $1.5 0.0%TIGTA Office Automation

TIGTA: Audit and Investigations Activities $2.5 $2.5 $2.5 $2.5 $8.1

TIGTA Telecommunications

TIGTA: Audit and Investigations Activities 1.3 1.3 1.3 1.3 3.1

TIGTA Infrasturcture 

TIGTA: Audit and Investigations Activities 0.4 0.4 0.4 0.4 1.0

TIGTA Security 

TIGTA: Audit and Investigations Activities 0.3 0.3 0.3 0.3 0.8

Subtotal, Infrastructure Investments $4.4 $4.4 $4.4 0.0% $4.4 0.0% $13.0 192.5%

2/

Enterprise Architecture $0.3 $0.3 $0.3 0.0% $0.3 0.0% $0.3 0.0%Total IT Investments $4.7 $4.7 $6.2 32.1% $6.2 0.0% $14.7 138.0%1/ FY 2006 Obligations of FY 2006 Enacted amounts2/ The $8.6 million increase in Infrastructure from FY 2007 to FY 2008 is due to the inclusion of TIGTA labor costs which were previously not reflected 

FY 2005 % Change 

from FY05

Actuals to

FY06

% Change 

from FY06 to 

FY07

% Change from

FY07 to FY08

TIGTA - 16 
4B – Information Technology Strategy 

The Office of Information Technology (OIT) provides cost effective information 

technology products and services on behalf of TIGTA. All OIT activities are focused on 

providing effective and secure access to data sources that are critical to the successful 

completion of the TIGTA mission. OIT personnel routinely work with investigators and 

auditors, providing integrated support and/or data analysis services to foster the 

independence of TIGTA oversight and the integrity of its investigative and audit findings. 

Office Automation: OIT provides traditional office automation services for all TIGTA 

employees. This includes provisioning of personal computers, productivity software, 

electronic mail, and other local area network services, such as network storage for 

effective data backup and recovery. OIT office automation is based on a standardized 

tool suite for internal TIGTA business operations. This tool suite is augmented to 

provide specialized software tools that permit investigators and auditors to access and

analyze data residing on a wide variety of IRS and other governmental information 

systems. OIT monitors these tools to ensure availability and to determine when 

technology maintenance and refreshment activities are needed for effective protection of 

TIGTA-accessed data. 

Telecommunications: OIT supports a wide area network (WAN) with access points 

throughout the United States and Puerto Rico, in direct support of a geographically 

distributed investigative and audit workforce. The WAN provides adequate bandwidth 

for internal and external data transmissions while providing secure access to other 

governmental computer networks and entities. For example, the WAN provides a secure 

interconnection between TIGTA and IRS that is used for electronic data exchange as well 

as for cost effective access to IRS information systems. The WAN also enables secure, 

remote access from alternative work locations. Alternative locations include the 

approximate 625 localities in which IRS conducts business without a local TIGTA 

presence. It also includes worksites that have been approved under the TIGTA telework 

program. TIGTA also operates a Land Mobile Radio (LMR) system that permits 

investigators to safely conduct field operations with reliable wireless communication 

devices. 

Infrastructure: OIT operates information systems at various offices. In accordance with 

the OIT Strategic Plan and continuing cost containment measures, OIT is consolidating 

information technology services, where feasible, into data center facilities. The 

consolidation effort is designed to increase information system and resource utilization, 

eliminate unneeded redundancies, and improve ability to support core investigative and 

audit activities. As part of a TIGTA data center, extensive data analysis services are 

provided by OIT in direct support of investigative and audit activities. For example, 

these services permit TIGTA to meet its responsibilities under the Taxpayer Browsing 

Protection Act of 1997. In addition to consolidation of TIGTA’s IT Infrastructure 

operations TIGTA has provided information on its Data Centers, Telecom (Voice 

Networks), Data Networks, Desktop/Seat Management and Help Desk through the 

TIGTA - 17 
Department to the Infrastructure Optimization Initiative LoB and will evaluate Centers of 

Excellence as alternatives to providing its own infrastructure 

Enterprise Architecture and Security: TIGTA operates several programs to comply with 

various legislative mandates and to improve the reliability, availability, and effectiveness 

of its information technology. For example, the enterprise architecture initiative 

responds to the Clinger-Cohen Act to align business practices with technology needs. It 

will provide for better decision making ability on information technology investment and 

related resource allocation. The security program focuses on securing data accessed by 

TIGTA through compliance with specific provisions of the E-Government Act of 2002 

and the Federal Information Security Management Act (FISMA). This program spans 

systems certification and accreditation, incident response, and continuity of operations. 

Currently, all TIGTA FISMA systems are certified and accredited. OIT also coordinates 

with the IRS on areas of mutual concern, especially as it pertains to continued TIGTA 

access to IRS information systems as the IRS strengthens its own security posture in 

response to TIGTA, and other, audit findings. 

Non-Major Investments: OIT maintains two internal management information systems 

that have recently been reclassified as non-major investments under Capital Planning and 

Investment Control (CPIC) guidelines. The Performance and Results Information 

System (PARIS) supports investigative compliance with the Government Performance 

and Results Act (GPRA). The system facilitates GPRA compliance by collecting data 

needed to measure performance of investigative activities, specifically as it pertains to 

complaint management and investigating cases. The PARIS Property Module (PPM) is a 

custodial accounting system used to support the bureau’s Personal Property Management 

Program. PPM is used to track capitalized and expensed assets used in support of 

investigative and audit activities and to track assets seized during law enforcement 

actions. 

TIGTA’s Information Technology Strategy can be found in its Information Resource 

Management Plan. TIGTA will be working with the Department shortly to articulate IT 

investment performance measures that are thoroughly developed, quantifiable, and 

appropriate. 

TIGTA is in the process of implementing an IT Program Management Office (PMO). 

The PMO’s mission is two-fold. The first is to provide overall responsibility for planning, 

directing, and coordinating activities pertaining to the review of technology and business 

unit projects on an enterprise level. The second is to increase project management 

competence and foster sustained success of projects carried out by OIT. 

In conducting this mission the PMO will develop and maintain an IT investment portfolio 

that captures specific project and investment management data elements necessary to 

evaluate IT projects or acquisitions across the stages of their life cycle. 

Status Report – the PMO will facilitate the status reporting and milestone information for 

the TIGTA Investment Review Board (IRB) to monitor all capital investments under 

development to ensure that cost, schedule, and performance targets are being met. In the 

TIGTA - 18 
event that the PMO reports that a project is facing cost overruns, major schedule delays, 

or performance shortfalls, the IRB will determine the need to cancel the project and 

redirect freed resources to other priorities. The IRB must coordinate the canceling of 

projects and redistribution of funds for those projects that the Treasury Investment 

Review Board (TIRB) has approved. 

4.3 – PART Evaluation Table 

Not applicable for TIGTA. 

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

TIGTA - 19 
Community Development Financial Institutions 

Fund 

Mission Statement 

To expand the capacity of financial institutions to provide credit, capital and financial 

services to underserved populations and communities in the United States. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Program Account Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate 

% from

CR-rate

Community Development 

Financial Institutions 

Program $30,969 $0 $23,007 $24,437 $1,430 6.22%

New Markets Tax Credit 

Program 4,254 4,314 3,802 4,120 318 8.36%

Bank Enterprise Award 13,417 0 9,591 0 (9,591) -100.00%

Native Initiatives 5,810 0 3,600 0 (3,600) -100.00%

Portfolio Management 0 3,507 0 0 0 0.00%

Total Appropriated Resources $54,450 $7,821 $40,000 $28,557 ($11,443) -28.61%

FY 2008 Priorities 

• Provide allocations of tax credits under the New Markets Tax Credit Program, 

• Provide grants, loans and equity investments under the CDFI Program, and 

• Manage the Fund’s existing portfolio of awards.
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 2 

Section 2 – Budget Adjustments and Appropriation Language................................... 4

2.1 – Budget Adjustments Table..................................................................................... 4 

2A – Budget Increases and Decreases Description......................................................... 4 

2.2 – Operating Levels Table.......................................................................................... 6 

2B – Appropriation Language ........................................................................................ 7 

2C – Legislative Proposals.............................................................................................. 7 

Section 3 – Budget and Performance Plan ..................................................................... 8

3.1 – Appropriation Detail Table.................................................................................... 8 

3A – Community Development Financial Institutions Program ................................... 8 

3.2.1 – Community Development Financial Institutions Program Budget and 

Performance Plan.......................................................................................................... 10 

3B – New Markets Tax Credit Program ...................................................................... 11 

3.2.2 – New Markets Tax Credit Program Budget and Performance Plan................... 12 

Section 4 – Supporting Materials.................................................................................. 14

4.1 – Human Resources Table ...................................................................................... 14 

4A – Human Capital Strategy Description ................................................................... 14 

4.2 – Summary of IT Resources Table ......................................................................... 15 

4B – Information Technology Strategy ........................................................................ 16 

4.3 – PART Evaluation Table....................................................................................... 17 

CDFI - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The mission of the Community Development Financial Institution Fund (the Fund) is to 

expand the capacity of financial institutions to provide credit, capital and financial 

services to underserved populations and communities in the United States. 

The Fund has three priorities: 

1. Issue Allocations of Tax Credits Under the New Markets Tax Credit (NMTC) Program

– The NMTC Program attracts private sector capital into low-income communities 

through Community Development Entities (CDEs). CDEs raise funds by providing tax 

credits to private investors in exchange for equity investments, which are then invested in 

low-income communities. CDEs apply for allocations of NMTCs through annual, 

competitive allocation rounds. 

2. Make Grants Under the Community Development Financial Institutions (CDFI)

Program – The CDFI Program provides financial assistance grants, technical assistance 

grants, and training to carry out the Fund’s mission of expanding the capacity of financial 

institutions to provide credit, capital and financial services to underserved populations 

and communities in the United States.

3. Manage the Existing Portfolio of Awards – Certain activities pertaining to the existing 

portfolio of grant awards are required. These activities consist of finalizing the terms of

assistance agreements with recent awardees, making disbursements under awards not 

fully disbursed as of the end of FY 2007, and monitoring awardee compliance with the 

terms of their three-year award assistance agreements. This later step includes reviewing 

annual reports provided by awardees to ensure that their performance meets the goals as 

stipulated in the assistance agreements and that unmet performance is explained. 

1B – Program History and Future Outlook 

The CDFI Fund administers direct funding programs in support of Community 

Development Financial Institutions (CDFIs) and also administers the New Markets Tax 

Credit (NMTC) Program. 

In FY 2006, the Fund processed $208 million of grant applications which resulted in 

awards totaling approximately $43 million through the Fund’s direct funding programs. 

The Fund also processed $28.3 billion of applications to the New Markets Tax Credit 

program, for which 63 allocations totaling $4.1 billion were made. These awards and 

allocations were processed in a seamless and timely manner using the Fund’s electronic 

award processing system. 

CDFI - 2 
As required under the Presidential Management Agenda (PMA) initiatives, during FY 

2006 the Fund took in 278 applications for its three grant programs through the 

consolidated Grants.gov intake system. The Fund also began preparing its migration plan 

to the PMA Grants Management Line of Business (GMLoB) initiative and has selected 

the Department of Health and Human Services, Administration for Children and Families 

as its partner for this effort. 

In FY 2006, the Fund reported 22,329 jobs created or retained by CDFI awardees and 

NMTC allocatees. In addition, the Fund’s financial assistance awards leveraged an 

additional $1.4 billion dollars, which equates to a leverage factor of $27:$1 (every $1 of 

the Fund’s financial assistance awards resulted in an additional $27 raised and leveraged 

by awardees). 

A significant accomplishment during FY 2005 was the full implementation of a webbased system that allows for the collection of data from Fund awardees – the Community 

Investment Impact System (CIIS). Data collected through FY 2006 provided the specific 

location and characteristics of each loan in an awardee’s portfolio and allows the Fund to 

measure impact at the census tract level and compare awardees’ lending behavior to that 

of traditional financial institutions. This management information system is important 

because CIIS enables the Fund to measure its performance against its targets and 

demonstrate how and where the Fund’s dollars are used. This impact performance 

management system is unique within the community development industry. 

The awarding of tax credit allocations under the NMTC Program was due to expire at the 

end of calendar year 2007. However, the 109th Congress passed legislation (P.L. 109-

432) in its final hours which included an extension of the New Markets Tax Credit 

Program through December 31, 2008, with an additional credit volume supporting $3.5 

billion in investor capital. 

CDFI - 3 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

Appropriation: Community Development Financial Institutions Fund FTE Amount

FY 2006 Appropriation (P.L. 109-115) 68 $55,000

Rescission (P.L. 109-148) 0 (550)

FY 2006 Enacted 0 $54,450

FY 2007 President's Budget 35 $7,821

CR-rate Adjustment 28 32,179

FY 2007 CR-rate 63 $40,000

Changes to Base: 

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 77

Pay Annualization 24

Pay Inflation Adjustment 149

Total FY 2008 Base 63 $40,250

Program Decreases:

Bank Enterprise Award Program (7) (9,591)

Native Initiatives (6) (3,600)

Program Increases:

Community Development Financial Institutions Prog. 11 1,309

New Markets Tax Credit Program 2 189

Subtotal FY 2008 Program Changes 0 (11,693)

Total FY 2008 Request 63 $28,557

2A – Budget Increases and Decreases Description 

Adjustments ................................................................................+$32,179,000 / +28 FTE 

CR-rate Adjustment +$32,179,000 / +28 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Maintaining Current Levels (MCLs) ..............................................+$250,000 / +0 FTE 

Non-Pay Inflation Adjustment +$77,000 / +0 FTE Funds are requested for the non-labor 

related items such as contracts, travel, supplies, equipment and GSA rent adjustments. 

Pay Annualization +$24,000 / +0 FTE Funds are requested for the FY 2008 cost of the 

January 2007 pay increase. 

Pay Inflation Adjustment +$149,000 / +0 FTE Funds are requested for the proposed 

January 2008 pay raise. 

Program Decreases ......................................................................-$13,191,000 / -13 FTE 

Bank Enterprise Award Program -$9,591,000 / -7 FTE The Fund is not requesting 

resources for the Bank Enterprise Award (BEA) Program in FY 2008. 

Native Initiatives -$3,600,000 / -6 FTE No separate authorization exists for Native 

Initiatives so no separate set aside is being requested in FY 2008. 

CDFI - 4 
Program Increases .......................................................................+$1,498,000 / +13 FTE 

Community Development Financial Institutions Prog. +$1,309,000 / +11 FTE The Fund 

is seeking an increased level of funding for this program. Because no separate 

authorization exists for Native Initiatives, no separate funding is being requested in FY 

2008 for Native Initiatives and the related 6 FTEs used to administer Native Initiatives 

will instead be used to administer the CDFI Program. 

In addition, due to no funding being requested for the BEA Program in FY 2008, five of 

the seven FTEs utilized by the BEA Program will be moved to the CDFI Program. 

New Markets Tax Credit Program +$189,000 / +2 FTE Due to no funding being 

requested for the BEA Program in FY 2008, 2 (of the 7) FTEs utilized by the BEA 

Program will be moved to the NMTC Program. 

CDFI - 5 
2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Community Development

Financial Institutions Fund FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-Rate 

Adjustment

FY 2007

CR-Rate

Proposed

Reprogrammings

FY 2007 

Proposed

Operating

Level

FY 2008 

Requested

Level

FTE 68 35 28 63 63 63

Object Classification:

11.1 Full-Time Permanent Positions......................... $5,349 $3,681 $1,513 $5,194 $5,194 $5,267

11.1 Other than Full-Time Permanent Positions....... 0 0 0 0 0 0

11.5 Other Personnel Compensation........................ 0 0 0 0 0 0

11.8 Special Personal Services Payments................ 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $5,349 $3,681 $1,513 $5,194 $5,194 $5,267

12.0 Personnel Benefits............................................ 1,372 942 414 1,356 1,356 1,373

13.0 Benefits to Former Personnel...........................

0

. 0 0 0 0 0

21.0 Travel................................................................

0

. 103 70 42 112 112 112

22.0 Transportation of Things.................................... 20 20 0 20 20 20

23.1 Rental Payments to GSA................................... 1,118 898 517 1,415 1,415 1,428

23.2 Rent Payments to Others.................................. 48 15 79 94 94 94

23.3 Communications, Utilities, & Misc..................... 262 172 0 172 172 180

23.5 Telecommunications (includes WCF)........... 0 0 131 131 131 137

24.0 Printing and Reproduction................................. 10 10 10 20 20 20

25.1 Advisory & Assistance Services........................ 3,722 1,566 1,563 3,129 3,129 2,511

25.2 Other Services................................................... 393 169 169 338 338 271

25.3 Purchase of Goods/Serv. from Govt. Accts...... 1,093 206 443 649 649 598

25.4 Operation & Maintenance of Facilities............... 0 0 0 0 0

25.5 Research & Development Contracts................. 0 0 0 0 0 0

25.6 Medical Care..................................................... 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment...........

0

. 0 0 0 0 0

25.8 Subsistence & Support of Persons...................

0

. 0 0 0 0 0

26.0 Supplies and Materials...................................... 47 18 77 95 95 94

31.0 Equipment......................................................... 75 54 21 75 75 75

32.0 Lands and Structures........................................ 0 0 0 0 0 0

33.0 Investments & Loans......................................... 1,802 0 870 870 870 740

41.0 Grants, Subsidies.............................................. 39,036 0 26,330 26,330 26,330 15,637

42.0 Insurance Claims & Indemn.............................. 0 0 0 0 0 0

43.0 Interest and Dividends..............................

0

... 0 0 0 0 0

44.0 Refunds............................................................. 0 0 0 0 0 0

Total Budget Authority.......................................

0

... $54,450 $7,821 $32,179 $40,000 $0 $40,000 $28,557

Budget Activities:

Community Development Financial Institutions 

Program $30,969 $0 $23,007 $23,007 $23,007 $24,437

New Markets Tax Credit Program 4,254 4,314 (512) 3,802 3,802 4,120

Bank Enterprise Awards Program 13,417 0 9,591 9,591 9,591 0

Native Initiatives 5,810 0 3,600 3,600 3,600 0

Portfolio Management 0 3,507 (3,507) 0 0

Total Budget Authority.......................................

0

... $54,450 $7,821 $32,179 $40,000 $0 $40,000 $28,557

CDFI - 6 
2B – Appropriation Language 

Appropriations Language Explanation of Changes 

DEPARTMENT OF THE TREASURY 

COMMUNITY DEVELOPMENT FINANCIAL 

INSTITUTIONS FUND PROGRAM ACCOUNT 

To carry out the Community Development Banking and 

Financial Institutions Act of 1994 (Public Law 103–325), 

including services authorized by 5 U.S.C. 3109, but at 

rates for individuals not to exceed the per diem rate 

equivalent to the rate for ES–3, $28,557,000, to remain 

available until September 30, 2009, of which up to 

$12,200,000 may be used for administrative expenses, 

including administration of the New Markets Tax Credit, 

up to $2,500,000 may be used for the cost of direct loans, 

and up to $250,000 may be used for administrative 

expenses to carry out the direct loan program: Provided, 

That the cost of direct loans, including the cost of 

modifying such loans, shall be as defined in section 502 of 

the Congressional Budget Act of 1974, as amended: 

Provided further, That these funds are available to 

subsidize gross obligations for the principal amount of 

direct loans not to exceed $5,000,000. 

Eliminates unauthorized 

set aside for Native 

Initiatives. 

2C – Legislative Proposals 

The CDFI Fund has no legislative proposals for FY 2008. 

CDFI - 7 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

33 $30,969 23 $30,268 0 $0 31 $23,007 42 $24,437 35.48% 6.22%

New Markets Tax Credit Program 19 $4,254 15 $3,936 19 $4,314 19 $3,802 21 $4,120 10.53% 8.36%

Bank Enterprise Awards Program 6 $13,417 5 $13,286 0 $0 7 $9,591 0 $0 -100.00% -100.00%

Native Initiatives 10 $5,810 5 $5,416 0 $0 6 $3,600 0 $0 -100.00% -100.00%

0 $0 0 $0 16 $3,507 0 $0 0 $0 0.00% 0.00%

Subtotal New Appropriated Resources 68 $54,450 48 $52,906 35 $7,821 63 $40,000 63 $28,557 0.00% -28.61%

Other Resources:

Unobligated Balances 0 $4,033 0 $3,602 0 $0 0 $2,046 0 $500 0.00% -75.56%

Offsetting Collections 0 $732 0 $682 0 $0 0 $1,000 0 $1,000 0.00% 0.00%

Recoveries 0 $1,481 0 $1,431 0 $0 0 $2,000 0 $1,000 0.00% -50.00%

Subtotal Other Resources 0 $6,246 0 $5,715 0 $0 0 $5,046 0 $2,500 0.00% -50.46%

Total Resources Available for Obligation 68 $60,696 48 $58,621 35 $7,821 63 $45,046 63 $31,057 0.00% -31.05%

Portfolio Management

CR-Rate Request to FY 2008

Community Development Financial

Institutions Program

Resources Available for Obligation Enacted Obligations President's Budget

% Change

FY 2006 FY 2006 FY 2007 FY 2007 FY 2008 FY 2007

3A – Community Development Financial Institutions Program ($24,437,000 from 

direct appropriations): The CDFI Program enables the Fund to carry out its mission of 

expanding the capacity of financial institutions to provide credit, capital and financial 

services to underserved populations and communities in the United States. The CDFI 

Program also addresses Treasury’s strategic objective to increase economic growth and 

create jobs. The program is comprised of three components: Financial Assistance, 

Technical Assistance, and Training. 

• Financial Assistance awards are only provided to entities that have been certified 

by the Fund as meeting the statutory criteria to be a CDFI. Because of the wide 

range of institution types that can be certified as CDFIs, the financial assistance 

application process contains a degree of complexity not shared by other Fund 

award programs. Each applicant must describe and demonstrate its financial 

health, management capacity, and ability, based on historic and future projected 

activity, to deliver a product or service that will increase access to capital, credit 

and quality financial services in underserved communities. For every $1 in 

financial assistance awards, awardees are able to raise an additional $27, so the 

approximately $12.4 million in FY 2008 FA awards should result in an additional 

$335 million raised and deployed into low income communities. 

• Technical Assistance grants serve to secure a sound foundation for developing 

CDFIs and can be used for training, technology and other one-time costs 

generally related to start-up or major growth phases of a CDFI. 

• Training programs are designed to support identified areas of skills improvement 

for CDFIs and other members of the financial service industry. The program

supports Treasury’s objective to increase economic growth and create jobs by 

providing needed education and support for skills development to enable relevant 

parties to deliver or utilize financial services. 

CDFI - 8 
Other Resources: Other resources of funds in FY 2008 total $2,500,000 which are 

available for use by the CDFI Program, as follows (amounts in thousands): 

Amount

Available

Unobligated Balances 

$ 500

Offsetting Collections

$ 1,000

Recoveries

$ 1,000

$ 2,500

Consists of awards obligated during FY 2007 which were subsequently

deobligated, and so are available for obligation in FY 2008.

Consists of amounts appropriated for FY 2007 not obligated by the end of 

that fiscal year. The Fund's appropriations are available for use over a twoyear period

Consists of investment income as well as the proceeds from the redemption 

of investments, available for new awards

The Fund’s Financial Assistance Awards Pay for Themselves 

Financial assistance (FA) awards in the form of grants, loans and equity investments are 

used by awardees to invest in businesses and real estate in economically distressed areas. 

These investments create jobs and increase the amount of residential housing and 

commercial real estate. 

These jobs created, along with the increase in residential housing and commercial real 

estate, result in an increase in tax revenue (consisting of Federal, state and local income

taxes, and social security taxes), reduce the amount of state unemployment benefits paid 

out, and increase the amount of local property taxes. 

The Fund calculates that FA awards disbursed by the Fund during FY 2004 of 

approximately $68 million will create approximately 10,600 jobs, finance almost 34,000 

residential housing units, and will finance $245 million of commercial real estate. The 

resulting annual increase in Federal, state and local taxes and benefits will be 

approximately $84 million, as follows: 

 

• Federal tax benefits: an additional $12.9 million, consisting of Federal income

and social security taxes; 

• State benefits: an additional $21.9 million consisting of state income taxes and a 

reduction in the amount of unemployment benefits paid out; and 

• Local tax benefits: an additional $49.6 million in residential and commercial real 

estate taxes collected. 

CDFI - 9 
Based on the above, Fund FA awards pay for themselves in five years with just the 

increase in Federal tax revenue alone. When state and local benefits are factored in, Fund 

awards pay for themselves in a single year 

3.2.1 – Community Development Financial Institutions Program Budget and 

Performance Plan 

Dollars in Thousands 

Community Development Financial 

Institutions Program Budget Activity

Includes Strategic Objective E1A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $41,160 $31,560 $30,969 $0 $24,437

 Other Resources 0 0 0 0 0

Total Operating Level $41,160 $31,560 $30,969 $0 $24,437

Human Resources

 Appropriated FTE 41 33 33 0 42

 Other FTE 0 0 0 0 0

Total FTE (direct and reimbursable) 41 33 33 0 42

Community Development Financial 

Institutions Program Budget Activity

Includes Strategic Objective E1A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $5,130 $6,920 $5,130

Actual $5,130 $8,710

Administrative costs per Financial Assistance 

(FA) application processed (E) 

Met Yes No

Target $669 $500 $1,100 $861 $643

Actual $1,300 $1,800 $1,400

Dollars of private and non-CDFI Fund 

investments that CDFIs are able to leverage 

because of their CDFI Fund Financial 

Assistance. (in millions) (Oe)

Met Yes Yes Yes

Target 5,852 26,995 29,158 34,009 37,000

Actual 9,212 23,656 22,329

Number of full-time equivalent jobs created or 

maintained in underserved communities by

businesses financed by CDFI Program 

Awardees and New Markets Tax Credit (NMTC) 

Allocatees (Oe) 

Met Yes No No

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

FY 2007 Performance Targets are based on the FY 2007 CR-rate 

Description of Performance: 

In fiscal year 2006, the Fund made $24 million in FA awards to CDFIs that primarily 

serve rural and urban low-income communities. 

In FY 2006, the Fund reported that it significantly exceeded the $1.1 billion private 

leverage goal for FA funds by leveraging $1.4 billion in private and non-CDFI Fund 

dollars. The Fund also exceeded the reported FY 2004 and FY 2005 private leverage 

goals. Furthermore, awardees have reported greater project leverage by partnering with 

other entities to finance projects. Overall, the leverage ratio has increased from $20:$1 to 

$27:$1 from fiscal year 2004 to fiscal year 2006. 

 

CDFI - 10 
FY 2005 was the second year in a row that the Fund greatly exceeded the established 

target of leveraging its award dollars. As a result, in November 2005, the Fund adjusted 

the outyear targets which are now based on these higher actual leverage ratios to ensure 

that the targets are challenging, yet realistic. 

The table above shows performance information pertaining to the number of jobs created 

or retained for all budget activities. The breakdown of this information by budget 

activity is as follows: 

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target

CDFI 5,852 5,417 7,132 5,990 5,615

NMTC Baseline 21,288 22,026 28,019 31,385

BEA* - 250 - - -

Total Target 26,955 5,852 29,158 34,009 37,000 

Actual

CDFI 7,179 12,335 13,777 NA NA

NMTC 905 11,321 8,552 NA NA

BEA* 1,128 NA NA NA NA

Total Actual 23,656 9,212 22,329 NA NA

*The BEA Program was a component of the target number in FY 2005. 

The performance measure was rewritten and BEA is no longer included.

The Fund did not achieve the goal of 29,158 full-time equivalent (FTE) jobs expected for 

FY 2006. The shortfall is driven by an overestimate of the number of jobs that the 

NMTC program would create or maintain per year. The Fund developed the FY 2006 

NMTC FTE jobs target based on data from the allocatees’ FY 2003 performance. The 

Fund encountered two difficulties when working with the FY 2003 data set. First, the 

data set is small representing only eight organizations and 28 transactions. Second, the 

data set represents the initial year of the NMTC activity, so the transactions may not be 

“typical” moving forward. The Fund is currently reviewing allocatees’ FY 2005 actual 

performance data. Once these data are final, the Fund plans to use them and the FY 2004 

actual performance data to revise future year performance targets. 

3B – New Markets Tax Credit Program ($4,120,000 from direct appropriations): The 

NMTC Program spurs investment of private capital into a range of privately managed 

investment vehicles called Community Development Entities (CDEs). CDEs apply for 

allocations of NMTCs through annual, competitive allocation rounds. CDEs receiving an 

allocation of tax credits provide tax credits to private sector investors in exchange for 

equity investments in the CDEs. The CDEs then use the proceeds from these equity 

investments to make loans and equity investments in New Markets businesses located in 

CDFI - 11 
and serving economically distressed communities. The investors in the CDEs receive a 

credit against Federal income taxes for making the qualified equity investments, which 

must in turn be used to invest in low-income communities. The credit provided to 

investors totals 39 percent of the cost of the investment and is claimed over a seven-year 

credit allowance period. A total of $19.5 billion in investor capital will be raised under 

the NMTC Program. Four funding rounds have been completed corresponding to tax 

credit allocations supporting $12.1 billion in private sector capital, with the final round to 

occur in FY 2008. The final allocation round will provide tax credit allocations 

supporting $3.5 billion in investor capital. 

The Gulf Opportunity Zone legislation, passed in December of 2005 to reach areas 

harmed by Hurricane Katrina, authorized the Fund to provide an allocation of tax credits 

supporting an additional $1 billion of investor capital to qualified applicants in Alabama, 

Mississippi and Louisiana. The Fund allocated tax credits supporting $600 million of this 

amount in addition to the $3.5 billion it awarded in the fourth round in 2005. The Fund 

will allocate tax credits supporting the remaining $400 million when it makes the 2007 

allocation of $3.5 billion. 

The FY 2008 budget request will fund the costs required to administer the NMTC 

program (because it is a tax credit program, there is no required program funding such as 

under the Fund’s grant programs). 

3.2.2 – New Markets Tax Credit Program Budget and Performance Plan 

Dollars in Thousands 

New Markets Tax Credit Program 

Budget Activity

Includes Strategic Objective E1A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $4,700 $6,494 $4,254 $4,314 $4,120

 Other Resources 0 0 0 0 0

Total Operating Level $4,700 $6,494 $4,254 $4,314 $4,120

Human Resources

 Appropriated FTE 19 19 19 19 21

 Other FTE 0 0 0 0 0

Total FTE (direct and reimbursable) 19 19 19 19 21

New Markets Tax Credit Program Budget 

Activity

Includes Strategic Objective E1A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $5,390 $4,875 $5,390

Actual $5,390 $4,360

Administrative costs per number of New Markets 

Tax Credit (NMTC) applications processed ($) 

(E) Met Yes Yes

Target Baseline $1.4 $1.6 $2.1 $2.5

Actual $0.1 $1.1 $2

Amount of investments in low-income 

communities that Community Development 

Entitites (CDEs) have made with capital raised 

through their New Markets Tax Credit (NMTC) 

tax credit allocations ($ in billions)(Oe) 

Met Yes No Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

FY 2007 Performance Targets are based on the FY 2007 CR-rate 

CDFI - 12 
Description of Performance: 

In fiscal year 2006, the Fund made $4.1 billion in tax credit allocations, providing 

recipients the potential ability to raise this amount of capital to invest in low-income

communities. The Fund works closely with the IRS to implement this program. 

In FY 2006, CDEs exceeded the anticipated $1.6 billion in Qualified Low Income

Community Investments (QLICIs), by closing $2.0 billion in QLICIs. Given the newness 

of the NMTC Program, the Fund is just beginning to get a realistic picture of how quickly 

the NMTC dollars will flow. The Fund will continue to analyze the increasing rate that 

allocatees raise equity and make qualified investments, and use this analysis to set 

appropriate targets going forward. 

Currently performance pertaining to the number of jobs created or maintained, as it 

pertains to the NMTC Program, is included in the measure found under the CDFI 

Program budget activity on page 10. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

CDFI - 13 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 50 48 63

Increases:

Reason #1: Backfilling of prior-year and 

current-year vacant positions. 4 20 10

Subtotal, Increases 4 20 10

Decreases:

Reason #1: Normal Attrition. -6 -5 -6

Reason #2: Net reduction due to reduction in 

program funding. -4

Subtotal, Decreases -6 -5 -10

Year-end Actual/Estimated FTEs 48 63 63

Net Change from prior year SOY to budget year EOY 15

4A – Human Capital Strategy Description 

The FY 2007 CR-Rate provides resources for the Bank Enterprise Award (BEA) 

program, Native Initiatives, and the CDFI program. This $40 million budget will also 

fund the administrative costs for operating the New Markets Tax Credit Program. 

A total of 7 FTEs administer the BEA Program of which 4 FTEs pertain to specific 

individuals and 3 FTEs pertain to BEA-related tasks performed by several people. All 

BEA-related skills are transferable to other Fund activities. Without the need to 

administer the BEA Program in FY 2008, the Fund will transfer the 7 BEA FTEs to other 

Fund activities, and not hire any new positions in FY 2008. The Human Capital 

Challenge for FY 2008 is to manage the number of FTEs and the related skill sets in FY 

2007 to minimize the need for any FTE changes in FY 2008 and thereafter in the event of 

program funding changes. 

In addition, the FY 2008 budget request does not include the separate set aside for Native 

Initiatives. The related FTEs used to administer the Native Initiatives program will 

instead be used to administer the CDFI Program. 

CDFI - 14 
4.2 – Summary of IT Resources Table 

Dollars in Millions

FY 2006 FY 2007 

Major IT

Investments /1 Budget Activity/Funding Source

Identify the Program that

the System is Aligned to

Operating

Plan Obligations

Operating

Plan

President's 

Budget 

NoneSubtotal, Major IT Investments $0.0 $0.0 $0.0 0.0% $0.0 Non-Major IT InvestmentsCommunity InvestmentImpact System (CIIS)

Community Development Financial Institutionsand New Markets Tax Credit Programs

Community Development Financial Institutions and New Markets Tax Credit Programs

0.65 1.00 0.67 -33.0% 0.00 

Subtotal, Non-Major IT Investments $0.65 $1.00 $0.67 -33.0% $0.00 Infrastructure InvestmentsCDFI Infrastructure (Telecommunications)

Community Development Financial Institutions,Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

Community Development Financial Institutions, Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

0.20 0.20 0.20 0.0% 0.15 

CDFI Infrastructure (Office Automation)

Community Development Financial Institutions,Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

Community Development Financial Institutions, Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

2.26 2.46 2.69 9.3% 0.75 

CDFI Infrastructure(IT Security)

Community Development Financial Institutions,Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

Community Development Financial Institutions, Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

0.24 0.11 0.36 227.3% 0.00 

CDFI Infrastructure (Infrastructure)

Community Development Financial Institutions,Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

Community Development Financial Institutions, Bank Enterprise Awards, Native Initiatives and New Markets Tax Credit Programs

0.32 0.08 0.19 137.5% 0.10 

Subtotal, Infrastructure Investments $3.02 $2.85 $3.44 20.7% $1.00 Enterprise ArchitectureNoneSubtotal, Enterprise Architecture $0.00 $0.00 $0.00 0.0% $0.00 Total IT Investments $3.67 $3.85 $4.11 6.8% $1.00 /1 These investments do not meet the criteria for OMB's Exhibit 300

FY 2005 % Change 

from FY05

Actuals to

FY06

fr

CDFI - 15 
4B – Information Technology Strategy 

The CDFI Fund does not have any Major IT investments (using Department of the 

Treasury guidelines for defining Major IT investments), and, as such, is not required to 

submit an OMB 300. The CDFI Fund does, however, have a formal IT review and 

planning process which is overseen by the Technology Investment Board Executive 

Committee (TIBEC), which consists of three senior agency officials and is advised by the 

Chief Information Officer. The goal of this committee is to ensure that the CDFI Fund’s 

IT investments are tied to the organization’s strategic plan, support the agency’s mission 

and remain strictly within the approved budget. The TIBEC also ensures that the 

agency’s IT strategic goals conform with required legislation and Treasury and 

Presidential goals, such as the Federal Information Security Management Act (FISMA), 

Grants.gov and the Grants Management Line of Business. 

CDFI - 16 
4.3 – PART Evaluation Table 

PART Name: Bank Enterprise Award (BEA) Program

Year PARTed: FY 2002

Rating: Results Not Demonstrated/Measures Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. While there is some evidence that BEA awardees use awards to reinvest in community development 

initiatives, program results are hard to measure because it cannot be determined how awardees would 

behave in the absence of the program.

2. As the award is for past performance, there are no prospective performance requirements on how

awardees spend award funds. This prevents the Fund from ensuring that program awardees commit to the

long-term goals of the program.

3. Conduct an independent evaluation of the program.

4. Measure progress in meeting long-term outcome goals and annual performance goals.

5. Make statutory changes to the authorizing legislation that would clearly distinguish this program from the

mandates of the Community Reinvestment Act and would insure that award funds are spent on community

development activities.

1. The Fund determined that it could more effectively achieve its strategic objectives if the BEA Program 

regulations and NOFA were revised to target awards:

To CDFIs with a greater need for the incentive provided by the BEA Program award, and

To "personal wealth" and "community asset" building activities.

The BEA Program revised interim rule and subsequent NOFAs contain several revisions to ensure that the 

program:

Better targets awards to community development activities in distressed areas, and

5. The Fund considered amending the BEA statute to allow it to make awards based on prospective 

commitments to engage in innovative investment activities but determined that it was not politically feasible.

Achieves greater operational efficiencies for applicants and the Fund.

2. The Fund had been planning to conduct an evaluation of the BEA Program in FY 2006 but discontinued 

that planning when it was believed that the Program would cease to exist in FY 2006.

3. The Fund had been planning to conduct an evaluation of the BEA Program in FY 2006 but discontinued 

that planning when it was believed that the Program would cease to exist in FY 2006. Congress ultimately

appropriated funding for the BEA Program in FY 2006. As part of its FY 2006 appropriation, Congress 

requested that GAO perform a review of the BEA Program, which was recently completed. The GAO issued 

its report in July 2006.

4. The Fund began measuring progress toward meeting long-term and annual goals in FY 2003 and has

measured progress annually since then.

CDFI - 17 
PART Name: CDFI Fund: Finance and Technical Assistance

Year PARTed: FY 2004

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

2. The Fund has built the IT system needed to set a target for the second long-term measure.

5. A contract to evaluate the program was awarded in FY 2005 and is currently underway.

a. Fewer than 10 states administer CDFI programs and none of these state programs fully meets the

capital needs of the CDFIs in its state. Furthermore, CDFIs in 40 states do not have access to any state

CDFI program.

b. There are too few private sector equity investments available to meet CDFIs' needs for capital.

3. The Fund conducted the analysis needed, set the baseline for the efficiency measure and began

measuring progress in FY 2006.

4. The Fund made disaggregated data available to the public in January 2005 and will continue to do so

annually.

1. The CDFI Program is not unique because several states administer similar programs and CDFIs can use

private sector equity investment to accomplish activities they otherwise would accomplish with CDFI Fund

awards.

1. The Fund is not taking any action related to the duplication/redundancy finding because:

4. Make disaggregated program performance data available to the public.

5. Conduct an independent evaluation of the program.

2. Set a target and timeframe for the second long-term measure.

3. Establish a baseline for the efficiency measure, set a target, and measure progress in achieving this

target.

CDFI - 18 
PART Name: New Markets Tax Credit (NMTC)

Year PARTed: FY 2004

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

4. In FY 2005 the Fund issued an RFP for an independent evaluation of the program and the multi-year

evaluation began in the last quarter of FY 2006.

3. The Fund conducted the analysis needed, set the baseline for the efficiency measure and began

measuring progress in FY 2006.

2. NMTC Program allocatees submitted data in June 2005 that the Fund needed in order to set performance

measure targets. The Fund set targets and began measuring its achievements in FY 2005.

1. The program is not unique because other federal, state and local tax credit programs are available and

because numerous programs at HUD (CDBG) and Commerce (EDA) augment the NMTC Program goal of

improving low-income communities.

2. Set targets for the annual performance measures and measure performance in achieving them.

3. Establish a baseline for the efficiency measure, set a target, and measure progress in achieving this

target.

1. The Fund is not taking any action on the duplicative/redundancy finding because, in the Fund's opinion, 

the other available programs complement rather than duplicate the NMTC Program.

4. Conduct an independent evaluation of the program.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

CDFI - 19 
Financial Crimes Enforcement Network 

Mission Statement 

To safeguard the nation’s financial system from the abuses of financial crime, including 

terrorist financing, money laundering, and other illicit activity. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate

% from

CR-rate

BSA Administration and 

Analysis $64,458 $81,143 $62,132 $76,889 $14,757 23.75%

Regulatory Support 

Programs 8,436 8,651 8,436 8,955 519 6.15%

Total Appropriated Resources $72,894 $89,794 $70,568 $85,844 $15,276 21.65%

FY 2008 Priorities 

• Improve project management practices throughout the organization for information 

technology and non-information technology planning; and 

• Strengthen recovery capability for mission-critical information technology systems 

and emergency operation capabilities in the event of a sustained outage or other 

emergency. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 2 

Section 2 – Budget Adjustments and Appropriation Language................................... 7

2.1 – Budget Adjustments Table..................................................................................... 7 

2A – Budget Increases and Decreases Description......................................................... 7 

2.2 – Operating Levels Table.......................................................................................... 9 

2B – Appropriation Language ...................................................................................... 10 

2C – Legislative Proposals............................................................................................ 10 

Section 3 – Budget and Performance Plan ................................................................... 11

3.1 – Appropriation Detail Table.................................................................................. 11 

3A – BSA Administration and Analysis..................................................................... 11 

3.2.1 – BSA Administration and Analysis Budget and Performance Plan.................. 13 

3B – Regulatory Support Programs............................................................................. 14 

3.2.2 – Regulatory Support Programs Budget and Performance Plan.......................... 15 

Section 4 – Supporting Materials.................................................................................. 16

4.1 – Human Resources Table ...................................................................................... 16 

4A – Human Capital Strategy Description ................................................................... 16 

4.2 – Summary of IT Resources Table ......................................................................... 19 

4B – Information Technology Strategy ........................................................................ 20 

4.3 – PART Evaluation Table....................................................................................... 21 

FinCEN - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Financial Crimes Enforcement Network (FinCEN), a bureau within Treasury’s 

Office of Terrorism and Financial Intelligence, is responsible for administering the Bank 

Secrecy Act (BSA). The BSA requires financial instituions to file reports on certain 

types of financial activity and to establish appropriate internal controls to guard against 

money laundering, terrorist financing, and other types of illicit finance. FinCEN fulfills 

its responsibility as BSA administrator by supporting law enforcement, intelligence, and 

regulatory agencies through sharing and analysis of financial intelligence; building global 

cooperation with counterpart financial intelligence units; and networking people, ideas, 

and information. 

 

FinCEN’s administration of the BSA has helped create transparency in the financial 

system, thus strengthening the nation’s defenses against criminals that launder illicit 

proceeds in the United States. FinCEN’s use of powerful tools, such as the BSA and the 

USA PATRIOT Act, help accomplish its mission of protecting the financial system from

abuse. 

Finally, FinCEN’s vision is to become an adaptive, responsive organization through 

efficient and effective collaboration with applicable individuals, entities, and agencies. 

FinCEN’s priorities are linked to the following strategic goals: 

• Protecting the financial system through effective administration of the BSA; 

• Combating terrorism, money laundering, and other financial crime through analysis of 

BSA data and other relevant information; 

• Intensifying international anti-money laundering collaboration through the global 

network of financial intelligence units; and 

• Facilitating regulatory compliance, data management, and information sharing through 

E-Government. 

1B – Program History and Future Outlook 

To fulfill its mission, goals and priorities, FinCEN: (1) issues, interprets, and enforces 

compliance with regulations implementing the BSA, including provisions of Title III of

the USA PATRIOT Act; (2) supports and oversees compliance examination functions 

delegated to other federal regulators; (3) manages the collection, processing, storage, and 

dissemination of BSA data; (4) maintains a government-wide access service to the BSA 

data and networks users with overlapping interests; (5) in coordination with Treasury’s 

Office of Intelligence and Analysis, conducts analysis in support of policy makers, law 

enforcement, regulatory and intelligence agencies, and the financial industry; and (6) 

coordinates with and collaborates on anti-terrorism and anti-money laundering initiatives 

with domestic law enforcement and intelligence agencies, and with the foreign financial 

intelligence unit counterparts. 

FinCEN - 2 
FinCEN works closely with federal and certain state regulatory agencies that examine 

financial institutions for BSA compliance to ensure consistency across regulated 

industries in the examination for compliance and with the application of BSA 

requirements. Through these efforts and direct outreach, FinCEN also assists regulated 

financial institutions in establishing risk-based anti-money laundering programs with 

appropriate policies, procedures, and internal controls, maintaining certain records, and 

filing reports on certain types of financial activity, as required under the BSA. As 

appropriate, FinCEN investigates alleged violations, and issues letters of caution or 

warning. When required, FinCEN imposes civil money penalties for egregious BSA 

violations. 

FinCEN supports law enforcement agencies, intelligence agencies, and foreign Financial 

Intelligence Units (FIU) investigating financial crimes by providing specialized and 

unique analysis of the BSA data along with data from law enforcement, intelligence, and 

commercial sources. FinCEN’s analyses support regulatory and policy decisions, and are 

used to develop threat assessments, industry reports, and technical guides describing 

financial transaction mechanisms. The analysis links data collected under the BSA with 

other data to provide support for regulatory and policy decisions, to support law 

enforcement agencies investigating financial crimes, and to support intelligence agencies. 

FinCEN proactively identifies individuals and networks with suspicious financial activity 

and refers that information to appropriate law enforcement agencies. 

In the global arena, FinCEN supports international initiatives to educate other 

jurisdictions about the BSA regulatory regime and to establish international anti-money 

laundering regulatory standards and norms. The bureau also seeks to expand and 

organize the exchange of financial information; improve the expertise and capabilities of

personnel in money laundering and terrorist financing areas; and foster better and more 

secure communication among FIUs through technology. 

As administrator of the BSA, FinCEN must ensure the effective collection, management, 

and dissemination of the highly sensitive confidential information collected under the 

Act. FinCEN provides direct access to BSA data to authorized law enforcement, 

regulatory, and intelligence agencies. FinCEN will continue to integrate and modernize 

the various components of the BSA data collection and sharing systems. These efforts 

include upgrading the BSA E-Filing system to provide a more robust collection function, 

improving the quality of BSA data by preventing the omission of critical information, 

validating the information collected, and upgrading the BSA analytical tools used by 

FinCEN analysts. 

FinCEN’s regulatory efforts focus on meeting the expectations of both the regulated 

communities and those who examine for BSA compliance, and better protecting the 

financial system through effective administration of the BSA. Specific FY 2006 

accomplishments in the regulatory area were: 

• Enhanced outreach to regulated industries through increased written and oral guidance 

concerning BSA requirements; 

FinCEN - 3 
• Issued a final rule requiring financial institutions to implement appropriate, specific, 

and, where necessary, enhanced due diligence policies, procedures, and controls 

regarding correspondent accounts established or maintained for certain foreign 

financial institutions and appropriate, specific due diligence policies, procedures, and 

controls and, where necessary, enhanced scrutiny regarding private banking accounts 

established or maintained for non-U.S. persons, in accordance with Section 312 of the 

USA PATRIOT Act; 

• Issued a final rule requiring mutual funds and certain insurance companies to report 

suspicious activity; 

• Proposed a rule imposing special measures against foreign financial institutions 

determined to be of primary money laundering concern, in accordance with Section 

311 of the USA PATRIOT Act; 

• Signed additional information sharing agreements for the exchange of BSA 

examination information with state banking and credit union authorities; and 

• Issued major enforcement actions for egregious BSA violations. 

FinCEN will expand regulatory efforts in FY 2007/FY 2008 to include: 

• Implementing regulatory amendments and other modifications relating to money 

services businesses, subsequent to a review of the existing regulatory framework and 

current issues; 

• Continuing to draft an anti-money laundering program rule for loan and finance 

companies; 

• Finalizing anti-money laundering program rules for investment advisers, commodity 

trading advisors, commodity pool operators, and unregistered investment companies; 

• Continuing a review of the company service provider/corporate agent industry to 

determine the appropriateness of issuing guidance/advisories and/or an anti-money 

laundering program requirement for that industry; 

• Increasing coordination with other agencies to identify and educate unregistered 

and/or unlicensed money services businesses; 

• Increasing efforts to provide regulatory partners with analytical products and 

information to identify institutions with potential compliance problems, thereby 

enhancing consistency across examinations; 

• Continuing to issue major enforcement actions, as necessary, for systemic noncompliance with BSA requirements, including joint or concurrent actions with federal 

and state regulatory agencies; and 

• Issuing one or more notices of proposed rulemaking to further define stored value and 

to require certain participants to register, file suspicious activity reports and establish 

customer programs. 

FinCEN’s analytic efforts focus on assisting federal and state regulatory authorities in 

identifying vulnerabilities within the financial sector and the law enforcement community 

in detecting, deterring and investigating terrorism funding, money laundering and 

financial crime. Specific FY 2006 accomplishments in the analysis area were: 

• Enhanced support to law enforcement agencies by increasing advanced, specialized or 

unique analysis of BSA information and other records, and by providing training in 

FinCEN - 4 
advanced analytical tools to law enforcement agencies in support of terrorism and 

money laundering investigations; 

• Published analytical products covering patterns and trends in financial crimes that 

serve as a basis for policy decisions and strategic action to reduce the threat of 

financial crime. Also published a technical industry reference guide for law 

enforcement officials; 

• Completed collaborative analytic efforts with other organizations, including foreign 

financial intelligence units; 

• Published two editions of FinCEN’s SAR Activity Review-By the Numbers, a 

compilation of numerical data gathered from Suspicious Activity Reports (SARs) filed 

since 1996 and used by financial institutions, law enforcement, regulators and other 

readers; 

• Completed assessment of potential money laundering vulnerabilities associated with 

limited liability companies; 

• Continued to support candidate FIUs in the Middle East, Asia and Africa for 

admission to the Egmont Group, conducted on-site assessments of potential new 

members, and provided technical assistance to a number of key countries with 

emerging FIUs; 

• Supported Treasury initiatives by identifying jurisdictions or institutions as candidates 

for imposition of special measures under section 311 of the USA PATRIOT Act; and 

• Participated in the Financial Action Task Force (FATF) and the global network of 

FATF-style regional bodies. This included coordinating development of a FATF 

multilateral database of money laundering and terrorist financing cases, for use in 

researching financial crime trends and indicators. 

FinCEN will continue to develop and enhance its analytical and technical capabilities in 

FY 2007/2008, especially in the area of advanced or unique BSA analysis. These efforts 

include: 

• Improving the pro-active evaluation, analysis and referral of potential terrorismrelated Suspicious Activity Reports (SAR) to the law enforcement and intelligence 

communities; 

• Improving capabilities and methodologies for geographic and industry threat 

assessments and for financial analysis;

• Producing an annual threat/targeting assessment of the Southwest Border;

• Developing better customer access to FinCEN’s strategic products through its secure 

and public web sites;

• Increasing the number of analyst exchanges with partner FIUs;

• Increasing outreach to U.S. law enforcement and regulatory agencies to educate them

on the benefits provided by the global network of FIUs in terms of investigative and 

intelligence resources and information sharing; 

• Improving the expertise and capabilities of personnel in money laundering and 

terrorist financing areas; and 

• Fostering more secure communication among FIUs through the application of 

technology. 

FinCEN - 5 
FinCEN’s BSA data collection and sharing efforts focus on improving its overall 

information infrastructure and enhancing its IT management capabilities. Specific FY 

2006 accomplishments related to the collection and sharing of BSA data were: 

• Executed memoranda of understanding with 34 law enforcement and intelligence 

agencies for access to the BSA Data; 

• Modernized the Secure Outreach access system, 314(a) system, and 90 percent of the 

Egmont Secure Web System upgrade; 

• Increased the percentage of BSA reports filed electronically by 19 percent by 

providing outreach and technical assistance to the largest filers; 

• Established a monitoring program to improve the quality of SAR data, by identifying 

the critical fields that are most often left blank; and 

• Conducted a feasibility study regarding a cross-border wire transfer system, as 

mandated by the Intelligence Reform and Terrorism Prevention Act of 2004. 

FinCEN will accelerate data collection and sharing efforts in FY 2007/FY2008 to 

include: 

• Creating an action plan to improve data management and analysis as a follow-on to 

the BSA Direct retrieval and sharing component project assessment; 

• Upgrading various technology components to meet the expanded user population, 

increasing electronic filing alternatives, and enhancing the ability to integrate 

additional text/data mining tools; 

• Conducting a cost-benefit analysis with the financial services industry and law 

enforcement to determine the benefits and costs to all parties affected by the potential 

regulatory requirement of the cross-border electronic funds system, and, if a final 

decision is made by Treasury to proceed, beginning development of the technological 

systems required to receive, securely store, analyze and disseminate these data; 

• Establish and maintain a disaster recovery capability for critical systems to minimize 

or eliminate system downtime in the event of the loss of access or system use at 

FinCEN’s primary location; and 

• Enhance project management capability and oversight of information technology 

projects by expanding Capital Investment Planning, Enterprise Architecture, 

Configuration Management and Change Management controls. 

FinCEN - 6 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

Appropriation: Appropriation Name FTE Amount

FY 2006 Appropriation (P.L. 109-115) 330 $73,630

Rescission (P.L. 109-148) 0 $(736)

FY 2006 Enacted 330 $72,894

FY 2007 President's Budget 352 $89,794

CR-rate Adjustment (18) (19,226)

FY 2007 CR-rate 334 $70,568

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

Annualization of the FY 2006 Initiatives 18 2,498 

FY 2007 Initiatives 3,373 

FY 2007 MCL 3,395 

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 1,335 

Pay Annualization 203 

Pay Inflation Adjustment 1,239 

Initiative Annualization:

Annualization of FY 2007 Initiative: BSA E-Filing 740 

Total FY 2008 Base 352 $83,351

Program Increases:

Disaster Recovery Capability 743 

Enhance Project Management Capability 4 1,750 

Subtotal FY 2008 Program Changes 4 2,493

Total FY 2008 Request 356 $85,844

2A – Budget Increases and Decreases Description 

Adjustments ..................................................................................-$19,226,000 / -18 FTE 

CR-rate Adjustment -$19,226,000 / -18 FTE Adjustment from the FY 2007 President's Budget to 

reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Technical Adjustment to FY 2007 Base due to CR ...................+$9,266,000 / +18 FTE 

Annualization of the FY 2006 Initiatives +$2,498,000 / +18 FTE This provides additional 

funding to annualize the staffing initiative approved in FY 2006. The increased staff enables the 

bureau to better assess and respond to the challenges posed by terrorist financiers and operatives, 

money launderers, and other perpetrators of financial crime against domestic and global financial 

systems. 

FY 2007 Initiatives +$3,373,000 / +0 FTE Restores requested funding for FY 2007 increases for 

BSA E-Filing ($873,000) and the Cross-Border Wire Transfer ($2,500,000). The BSA E-Filing 

funds will enable FinCEN to implement enhancements to improve operations of the Bank 

Secrecy Act (BSA) collection processes, including reference number assignment, error 

notification or other correspondence, and improved editing of certain types of filing errors. The 

requested Cross-Border Wire Transfer System funds will enable FinCEN to begin the design 

and, if the Secretary gives final approval, the initial development of the technological systems 

required to receive, securely store, analyze, and disseminate reports of cross-border electronic 

funds transfers. This is in accordance with the Intelligence Reform Act of 2004, Section 6302. 

FinCEN - 7 
FY 2007 MCL +$3,395,000 / +0 FTE This provides restoration of funding required for the FY 

2007 costs of the FY 2006 pay increase of $229,000; the proposed January 2007 pay raise and 

other labor related benefits of $635,000; non-labor related items such as contracts, travel, 

supplies, equipments, and GSA rent adjustments of $1,065,000, and deferred replacement of 

information technology equipment and other planned contracts of $1,466,000. 

Maintaining Current Levels (MCLs) ...........................................+$2,777,000 / +0 FTE 

Non-Pay Inflation Adjustment +$1,335,000 / +0 FTE Funds are requested for non-labor related 

items such as contracts, travel, supplies, equipment and GSA rent adjustments. 

Pay Annualization +$203,000 / +0 FTE Funds are requested for the FY 2008 cost of the January 

2007 pay increase. 

Pay Inflation Adjustment +$1,239,000 / +0 FTE Funds are requested for the proposed January 

2008 pay raise. 

Initiative Annualization ....................................................................+$740,000 / +0 FTE 

Annualization of FY 2007 Initiative: BSA E-Filing +$740,000 / +0 FTE This provides additional 

funding to annualize the remaining required modernization and service level increases that were 

included in the FY 2007 Budget Request. The BSA E-Filing program has experienced continued 

success in increasing the number of filers and electronic filings. To meet the future 90 percent 

E-filing target, FinCEN must increase funding to support the expected user population. For 

example, with every 10 percent increase in E-filing volumes, additional support staff is required. 

In addition, most filers require a test on the filing system prior to beginning live input, requiring 

additional contractor assistance. To improve the system, FinCEN will continue to expand 

options for single form filers, including the new pdf format option began in FY 2007. Finally, 

overall improvements are in the system network (which also goes with the implementation of 

IPV6) in terms of adding capacity, networking equipment upgrades, and backup capabilities. 

Program Increases .........................................................................+$2,493,000 / +4 FTE 

Disaster Recovery Capability +$743,000 / +0 FTE Funds are requested to provide ongoing site 

maintenance, telecommunications and system hosting for the critical information technology 

system disaster recovery site established in FY 2006/2007 through redirection of one-time prior 

year funding. By establishing this capability for critical system redundancy, FinCEN has 

reduced the system recovery time from six months to four hours and significantly reduced the 

risk of losing access to critical systems. The maintenance of the disaster recovery capability will 

allow FinCEN, in the event of a sustained outage or other emergency, to continue critical 

systems that access the BSA data through the Secure Outreach portal, provide 314a information 

sharing capability with financial institutions, allow Financial Intelligence Units to reply to 

requests for information, or continue to receiving new BSA reports through the BSA E-Filing 

system. 

Enhance Project Management Capability +$1,750,000 / +4 FTE The 2008 President’s Budget 

request includes additional resources to meet OMB, Treasury and GAO recognized requirements 

to improve FinCEN’s project management capability. A recent review of FinCEN’s programs 

has identified a need to strengthen project management practices throughout the organization, 

FinCEN - 8 
including both information technology and non-information technology projects. A portion of 

this initiative will fund IT program and support activities including capital planning, enterprise 

architecture, information security, and contractor technical assistance. FinCEN has traditionally 

performed many of these activities as a collateral duty with limited assistance from the Federal 

Funded Research and Development Centers (FFRDC) and private contractors. Another portion 

of this initiative will fund project management oversight to ensure successful planning and 

execution for all of FinCEN’s project management efforts. 

2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: FMS Salaries & Expenses FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

 FY 2007 

CR-rate

Proposed

Reprogramming

 FY 2007

Proposed

Operating

Level

 FY 2008 

Requested

Level 

FTE 330 352 (18) 334 334 338

Object Classification:

11.1 Full-Time Permanent Positions..................................... $27,310 $29,345 ($1,434) $27,911 $27,911 $30,790

11.1 Other than Full-Time Permanent Positions.............. 284 284 284 284 284

11.5 Other Personnel Compensation................................... 526 526 526 526 526

11.8 Special Personal Services Payments..................... 0 0 - - -

11.9 Personnel Compensation (Total)............................. 28,120 30,155 (1,434) 28,721 28,721 31,600

12.0 Personnel Benefits...................................................................... 7,156 7,789 (397) 7,392 7,392 8,433

13.0 Benefits to Former Personnel............................................... 0 0 - - -

21.0 Travel.................................................................................. 1,332 1,561 (681) 880 880 1,490

22.0 Transportation of Things........................................... 0 0 - - 

23.1 Rental Payments to GSA................................................ 4,800 4,968 4,968 4,968 5,117

23.2 Rent Payments to Others............................................... 43 55 55 55 55

23.3 Communications, Utilities, & Misc................................................ 1,070 995 995 995 1,273

24.0 Printing and Reproduction.......................................................... 250 250 250 250 400

25.1 Advisory & Assistance Services................................................... 522 750 (47) 703 703 1,815

25.2 Other Services.................................................................... 9,279 19,642 (11,548) 8,094 8,094 11,758

25.3 Purchase of Goods/Serv. from Govt. Accts...... 9,454 9,892 (623) 9,269 9,269 12,706

25.4 Operation & Maintenance of Facilities................... 960 960 (60) 900 900 960

25.5 Research & Development Contracts................................ 0 0 - - -

25.6 Medical Care............................................................................. 120 128 (8) 120 120 145

25.7 Operation & Maintenance of Equipment...................... 6,008 6,150 (387) 5,763 5,763 4,990

25.8 Subsistence & Support of Persons.................................... 0 0 - - -

26.0 Supplies and Materials.................................................... 369 395 (20) 375 375 409

31.0 Equipment.......................................................................... 3,411 6,104 (4,021) 2,083 2,083 4,693

32.0 Lands and Structures................................................... 0 0 - - -

33.0 Investments & Loans.................................................... 0 0 - - -

41.0 Grants, Subsidies........................................................... 0 0 - - -

42.0 Insurance Claims & Indemn................................................. 0 0 - - -

43.0 Interest and Dividends...................................................... 0 0 - - -

44.0 Refunds.............................................................................. 0 0 - - -

Total Budget Authority................................................ $72,894 $89,794 ($19,226) $70,568 $0 $70,568 $85,844

 -

Budget Activities:

BSA Administration and Analysis................................... $64,458 $81,143 (19,011) 62,132 62,132 76,889

Regulatory Programs................................... 8,436 8,651 (215) 8,436 8,436 8,955

Total Budget Authority................................................ $72,894 $89,794 ($19,226) $70,568 $0 $70,568 $85,844

FinCEN - 9 
2B – Appropriation Language 

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY 

FINANCIAL CRIMES ENFORCEMENT NETWORK 

Federal Funds 

SALARIES AND EXPENSES: 

For necessary expenses of the Financial Crimes 

Enforcement Network, including hire of passenger motor 

vehicles; travel and training expenses of non-Federal and 

foreign government personnel to attend meetings and 

training concerned with domestic and foreign financial 

intelligence activities, law enforcement, and financial 

regulation; not to exceed $14,000 for official reception and 

representation expenses; and for assistance to Federal law 

enforcement agencies, with or without reimbursement, 

$85,844,000 of which not to exceed $16,340,000 shall 

remain available until September 30, 2010; and of which 

$8,955,000 shall remain available until September 30, 

2009: Provided, that funds appropriated in this account 

may be used to procure personal services contracts. 

 

 

 

2C – Legislative Proposals 

FinCEN has no legislative proposals for FY 2008. 

FinCEN - 10 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

BSA Administration and Analysis 330 $64,458 330 $64,458 352 $81,143 334 $62,132 356 $76,889 6.59% 23.75%

Regulatory Support Programs 0 8,436 8,436 0 $8,651 0 $8,436 0 8,955 6.15%

Subtotal New Appropriated Resources 330 $72,894 330 $72,894 352 $89,794 334 $70,568 356 $85,844 6.59% 21.65%

Other Resources:

Recoveries

Offsetting collections - reimbursables 1 $4,473 1 $4,473 1 $1,541 1 $1,541 1 $1,541 0.00%

 Available 50% Carry-over 260 260 0 0 0

Available multi-year/no-year funds 7,028 7,028 9,353 9,353 7,028 -24.86%

Transfers In/Out

Subtotal Other Resources 1 $11,761 1 $11,761 1 $10,894 1 $10,894 1 $8,569

Total Resources Available for Obligation 331 $84,655 331 $84,655 353 $100,688 335 $81,462 357 $94,413 6.57% 15.90%

FY 2006 FY 2008

Obligations Request

FY 2007

Enacted President's Budget CR-Rate to FY 2008

FY 2007

Resources Available for Obligation

FY 2006 FY 2007

% Change

3A – BSA Administration and Analysis ($76,889,000 from direct appropriations and 

$1,541,000 from reimbursable programs): This activity comprises FinCEN’s efforts to 

administer the Bank Secrecy Act (BSA), such as promulgating regulations, providing outreach 

and guidance to the regulated industries, initiating regulatory enforcement actions, providing 

oversight of the compliance with the Bank Secrecy Act, and, with the Internal Revenue Service, 

managing the information filed by the regulated industries. Internationally, FinCEN promotes 

the development of anti-money laundering regimes through training and technical assistance. 

This activity also incorporates efforts to support large-scale, complex law enforcement 

investigations involving terrorist financing, money laundering, and other financial crimes. It also 

includes facilitating the exchange of investigative information with foreign jurisdictions, and 

identifying foreign and domestic money laundering and terrorist financing trends, patterns, and 

techniques; and liaison with and support of intelligence initiatives within the intelligence 

community and within Treasury. 

In the regulatory area, FinCEN will be able to achieve the following FY 2008 quantifiable results 

and accomplishments with the requested funds: 

• Process enforcement matters within the target of one year; 

• Create performance targets designed to show progress based on a survey of Regulatory 

Resource Center customers rating guidance received as understandable; 

• Continue to work toward developing measures of the impact of program activities on 

preventing the misuse of the financial system by those engaged in illicit activities; and 

• Increase the number of information sharing agreements with federal and state regulatory 

agencies to 52. 

In the analytical and global areas, FinCEN will be able to achieve the following FY 2008 

quantifiable results and accomplishments with the requested funds: 

• Increase the percentage of customers finding FinCEN’s analytic reports highly valuable to 79 

percent; 

FinCEN - 11 
• Evaluate the feasibility of a better assessment of the law enforcement impact of FinCEN's

products; 

• Increase participation in conferences and seminars to provide enhanced technical assistance 

and training to financial intelligence units and foreign delegations; and 

• Connect 98 percent of the countries admitted to Egmont to the Egmont Secure Web within 

one year of admission. 

FinCEN will achieve the following FY 2008 quantifiable results and accomplishments for 

collecting and sharing BSA data with the requested funds: 

• Increase e-filing towards the long-term target of 90 percent; 

• Reduce the cost per BSA form E-filed to $0.15; 

• Increase the number of top filers who file reports electronically towards the long-term goal of 

650; and 

• Increase the number of users accessing BSA data towards the long-term goal 10,000. 

FinCEN - 12 
3.2.1 – BSA Administration and Analysis Budget and Performance Plan 

Dollars in Thousands 

BSA Administration and Analysis 

Budget Activity

Includes Strategic Objective F3A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $49,127 $63,635 $64,458 $81,143 $76,889 

 Other Resources 3,341 1,541 4,473 1,541 1,541 

Total Operating Level $52,468 $65,176 $68,931 $82,684 $78,430

Human Resources

 Appropriated FTE 277 309 330 352 356 

 Other FTE 1 1 1 1 1 

Total FTE (direct and reimbursable) 278 310 331 353 357

BSA Administration and Analysis

Budget Activity

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 1.2 1.1 1 1 1

Actual 1 1.3 1

Met Yes No Yes

Target Baseline 45 50

Actual 41 48

Met Yes Yes

Target Baseline Baseline Baseline* TBD

Actual 7.90% 8%

Met

Target Baseline 78% 79%

Actual 77%

Met Yes

Target Baseline 90% 90%

Actual 94%

Met Yes

Target Baseline 90% 90%

Actual 92%

Met Yes

*FinCEN requires three years of data to establish a baseline for this performance measure to ensure that at least one

examination is included for all financial institutions covered by BSA regulations.

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

Includes Strategic Objective F3A

Average time to process enforcement 

matters (in Years) (E)

Percentage of BSA compliance 

examinations conducted on depository 

institutions that indicate a systemic

compliance failure with their BSA program.

(Ot)

Percentage of customers finding FinCEN’s

analytic reports highly valuable (Oe)

Percentage of Regulatory Resource Center

customers rating the guidance received as

understandable (Oe)

Percentage of customers satisfied with the

BSA Direct E-Filing component (Oe)

Number of federal and state regulatory

agencies with which FinCEN has concluded 

memoranda of understanding information 

sharing agreements (Ot)

52

Description of Performance. 

FinCEN conducted a baseline survey of the Regulatory Resource Center customers rating the 

regulatory guidance received as understandable and established an FY 2006 baseline of 94 

percent. Providing understandable guidance to financial institutions is critical to establishing 

programs that comply with the BSA. 

In FY 2007, FinCEN will continue to work toward developing improved outcome measures to 

address the impact of program activities on preventing the misuse of the financial system by 

those engaged in illicit activities. As part of the 2006 Program Assessment Rating Tool (PART) 

process, FinCEN established a measure for the percentage of bank examinations conducted by 

FinCEN - 13 
the Federal Banking Agencies indicating a systemic failure of the anti-money laundering 

program rule, with a baseline to be established in FY 2007. FinCEN will work toward 

effectively interpreting and utilizing the measure in its efforts to monitor, understand, and 

improve aspects of Bank Secrecy Act compliance. In addition, FinCEN will explore the 

feasibility of developing useful measures for other industries, such as money services businesses. 

FinCEN works closely with its regulatory partners to take enforcement action against institutions 

that systemically and egregiously violate the provisions of the BSA, including through 

imposition of civil money penalties in appropriate matters. Timely enforcement action 

communicates urgency to financial institutions, and is paramount to deterring non-compliance. 

In FY 2006, FinCEN met its target measure of 1.0 years average time to process cases. The 

year-to-date actual result of 1.0 years reflects effective use of resources. 

FinCEN supports law enforcement and its regulatory industry partners by facilitating information 

sharing and providing analyses of BSA data. In FY 2006, a survey of FinCEN’s customers 

found that 69 percent rated FinCEN’s analytic products as valuable, which did not meet 

FinCEN’s 75 percent target. FinCEN’s original target of 75 percent respondents rating their 

analytic product as valuable was established in FY 2005, and was based on one year of data. 

FinCEN has revised this measure as a result of the FY 2006 PART process to more accurately 

target its disparate audiences as well as its different products. The reformulated measure more 

closely ties to how BSA data is used by law enforcement, regulators and international partners to 

identify, stop, and prevent abuse of the financial system. 

In FY 2006 FinCEN had surpassed its target of 30 days by transmitting information to Financial 

Institution Hotline Tip SARs within 19 days. This measure tracks the median time taken from

date of receipt of Financial Institution Hotline tip SAR to transmittal of the report to law 

enforcement or the intelligence community. 

FinCEN conducted a baseline survey of the users of the BSA Direct E-Filing system to 

determine the overall satisfaction level and to identify where improvements are needed. The FY 

2006 results indicate that 92 percent of respondents are satisfied with the BSA Direct E-Filing 

system. 

3B – Regulatory Support Programs ($8,955,000 from direct appropriations): This activity 

supports implementation, strengthening and clarification of the anti-money laundering program, 

recordkeeping, and reporting requirements of the BSA for financial institutions subject to those 

requirements. FinCEN will also continue efforts with the Internal Revenue Service, especially 

related to the money services business industry, to ensure compliance, respond to public 

inquiries, distribute forms and publications, and support collection and maintenance of the BSA 

data. These resources support Internal Revenue Service BSA compliance activities for nonbanking financial institutions, especially related to the money services business industry. 

FinCEN - 14 
3.2.2 – Regulatory Support Programs Budget and Performance Plan 

Dollars in Thousands 

Regulatory Support Programs Budget 

Activity

Includes Strategic Objective F3A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $8,104 $8,287 $8,436 $8,651 $8,955 

 Other Resources 0 0 0 0 0 

Total Operating Level $8,104 $8,287 $8,436 $8,651 $8,955

Human Resources

 Appropriated FTE 0 0 0 0 0 

 Other FTE 0 0 0 0 0 

Total FTE (direct and reimbursable) 0 0 0 0 0

Description of Performance. 

We will be able to achieve the following FY 2008 quantifiable results and accomplishments 

related to money services businesses with the requested funds: 

• Support the collection and processing activities at Internal Revenue Service. 

• Track the number of Money Service Businesses (MSBs) registered. The current level is 

32,081 and the goal is to maintain at least that level. 

• Continue efforts to identify potentially unregistered MSBs by performing the following: 

analyzing SAR information on a monthly basis for indications of possible unregistered MSBs; 

coordinating with law enforcement and state regulatory agencies on appropriate outreach; and 

continuing efforts to educate MSBs regarding requirements for registration by publishing 

guidance and participating in industry forums and events. 

• Continue to investigate methods for measuring the extent of BSA compliance among MSBs. 

For detailed information about each performance measure, including definition, verification and 

validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

FinCEN - 15 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 277 296 352

Increases:

Reason #1: Normal Accession 15 15 15

Reason #2: New Staffing Initiatives 13 18 4

Reason #3: Prior Year High Accessions 20 38

Subtotal, Increases: 48 71 19

Decreases:

Reason #1: Normal Attrition -15 -15 -15

Reason #2: Extra High Attrition -14

Subtotal, Decreases: -29 -15 -15

Targets 310 352

Year-end Actual/Estimated FTEs 296 352 356

Net Change from prior year SOY to budget year EOY 60

4A – Human Capital Strategy Description 

The Financial Crimes Enforcement Network created a strategic human capital objective to 

attract, develop and retain a high-performing diverse workforce. The key areas of the strategic 

human capital objective and related accomplishments are listed below. 

Strategic Alignment: Each of the four strategic objectives in FinCEN’s FY 2006-2008 Strategic 

Plan include areas that require more employees and/or employees with enhanced skills. 

Additionally, the Strategic Plan has a management objective to attract, develop and retain a highperforming diverse workforce. 

Workforce Planning & Deployment: FinCEN estimates that 21 percent of the current workforce 

will be eligible for retirement between now and FY 2010. In terms of competitive sourcing, 

FinCEN submitted its FY 2006 FAIR Act Inventory to the Department in April 2006, and 

continues to rely upon the private sector to perform its commercial activities, especially in the 

information technology environment. 

FinCEN - 16 
Leadership and Knowledge Management: FinCEN leaders and managers effectively manage 

people and sustain a learning environment that drives continuous improvement in performance. 

In FY 2006, FinCEN implemented an aggressive training strategy for its managers. By the end 

of the fiscal year, it is anticipated that all managers will have completed external training in 

executive leadership competencies. In addition, all managers were trained in how to handle 

conduct and performance problems. FinCEN’s leadership actively encourages employees to take 

advantage of the increased training opportunities available. 

Results-Oriented Performance Culture: In order to create a results-oriented, high performing 

workforce, FinCEN abolished the pass/fail performance system in FY 2005 and established a 

new 5-tier performance management system. The new performance system requires each 

employee to establish an individual development plan and three individual commitments linked 

directly to the strategic plan. The new performance system allows managers to differentiate 

performance levels among employees and hold employees accountable for meeting specified 

performance goals and targets. 

Subsequently, FinCEN implemented the Awards and Recognition Program, including the 

Director’s Awards and Recognition Program. In May 2005, the Director’s Awards Program

acknowledged 11 employees of whom 18 percent were minorities and 45 percent female. 

Following the first year on a multi-tier performance management program, 68 percent of the 

workforce was rated above the fully successful level and were appropriately recognized, while 

.02 percent were rated below fully successful and appropriate remedial actions were taken. 

Diversity: FinCEN completed several efforts to ensure a diverse workforce is maintained. 

Major efforts are listed below: 

• Held an annual Diversity Day Conference consisting of six workshops on various topics. 

Approximately 70 percent of the workforce attended the conference; 

• Continued participation in the Treasury Diversity Council and its support group; 

• Established and maintained a Diversity Advisory Committee; 

• Established a mandatory Equal Employment Opportunity (EEO)/Diversity element addressing 

EEO principles, workplace conflict, supporting EEO plans and diversity hiring requirements 

in all supervisory performance plans; and 

• Created an EEO/Diversity Manager and Employee of the Year award to recognize individuals 

who made outstanding contributions to building and maintaining a diverse, high-quality 

workforce. 

Talent: FinCEN established a new training office charged with developing defined paths for 

career progression, mentoring and coaching programs to identify and grow talent, and enhancing 

the skills of existing employees. In terms of mission critical occupation, FinCEN has targeted 

Intelligence Research Specialists and Information Technology Specialists for enhanced skills 

training to meet identified skills gaps. In FY 2006 specialized training was provided on 

improving job performance in these occupations. 

Additionally, FinCEN took advantage of many hiring authorities and flexibilities within the last 

year. For example, in FY 2006, 16 students were hired under the Student Temporary 

Employment Program (STEP); 10 in FY 2005, and 8 in FY 2004. Two students have been hired 

FinCEN - 17 
under the Student Career Employment Program (SCEP). FinCEN utilized both the Veterans 

Employment Opportunity Act (VEOA) and the Veteran Rehabilitation Act (VRA) by making 

two appointments on each authority over the past three years, and within the last two years made 

four appointments utilizing the Outstanding Scholar Program. 

Accountability: In the 3rd quarter FY 2006 Quarterly Hiring Timeline Report, FinCEN averaged 

42 days, which is under the 45 day hiring timeframe. Additionally, in the Performance Appraisal 

Assessment Tool, FinCEN quoted Federal Human Capital Survey results indicating that 81% of 

FinCEN employees know how their work relates to the agency’s goals and priorities and 76% 

feel that they are held accountable for achieving results. FinCEN was also able to clearly show 

distinctions of and consequences in levels of performance FinCEN just completed a workforce 

analysis of retirement eligibility of its Mission Critical Occupations for both 2011 and 2016 and 

recently did a FinCEN employee survey to follow up on some issues from the last Federal 

Human Capital Survey. 

FinCEN - 18 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments (in $ Millions) Note: All years includes FTE Costs and reimbursable FY 2006 FY 2007 Major IT Investments Budget Activity Operating Plan Obligations Operating Plan

President's

Budget 

BSA Direct Components

 Secure Outreach BSA Administration and Analysis 1.9 1.9 1.9 0.0% 2.3 21.1% 

 BSA E-Filing BSA Administration and Analysis 1.7 1.7 1.8 5.9% 3.2 77.8% 

 BSA Retrival and Sharing BSA Administration and Analysis 7.9 7.9 4.3 -45.6%

 Crossborder Wire Transfer System BSA Administration and Analysis 10.0 N/A 

Total Major IT Investments 11.5 11.5 8.0 -30.4% 15.5 93.8% 

Total Non-Major IT Investments 4.8 4.8 4.8 0.0% 8.9 85.4% 

Total Infrastructure Investments 8.2 8.2 10.9 32.9% 9.0 -17.4% 

Enterprise Architecture 0.1 0.1 0.3 200.0% 0.2 -33.3% Total IT Investments 24.6 24.6 24.0 -2.4% 33.6 40.0% 

* The BSA E-Filing FY 2008 Request includes the FY 2007 President’s Budget program funds plus the annualization of approved FY 2006 FTE increase, which was counted in IT InfraPresident's Budget.

FY 2005 % Change from

FY05 

Obligations to

FY06

% Change from

FY06 to FY07

FinCEN - 19 
4B – Information Technology Strategy 

FinCEN’s Information Technology (IT) Strategic Plan is intended to provide insights into the 

bureau’s vision of how best to leverage the rapidly evolving technology environment to satisfy 

its critical business goals; comply with federal mandates and guidance; and ensure FinCEN’s 

place in the Department of the Treasury as an excellent manager of information assets. The 

mission of FinCEN’s IT management and staff is to effectively and efficiently apply proven, 

commercially available products and explore new technologies in support of the organization’s 

efforts to safeguard the financial system from the abuse of financial crime. 

The goals of the FinCEN IT Strategic Plan are to: support regulatory compliance and promote 

electronic interchange information; facilitate analysis of collected data; facilitate the electronic 

dissemination of information; align the IT infrastructure with operational needs; and develop a 

model information resources management program. FinCEN currently has performance metrics 

for each major IT goal and identifies these in the IT Strategic Plan. 

Performance measure highlights for each IT strategic goal are listed below: 

• Goal 1: increase the number of BSA reports filed electronically, increase the number of users 

finding information accessed to be useful and easy to find, and decrease the timeframe

required for financial institutions to begin using FinCEN systems and technologies; 

• Goal 2: reduce the time needed to search the BSA data by integrating multiple data systems 

into one single BSA data repository; 

• Goal 3: reduce the time for users to obtain authorized access to the BSA data, increase the 

number of BSA users and ensure that all qualifying Egmont members have access to the 

Egmont Secure Web; 

• Goal 4: reduce the average down time for system and network maintenance; and 

• Management Goal 5: expand the number of staff certified in best project management 

practices and increase the percentage of IT staff who report understanding of roles in the IT 

organization. 

Projects are also continually reviewed to ensure continued modernization, especially for security 

purposes, or to provide cost savings. 

FinCEN - 20 
4.3 – PART Evaluation Table 

PART N

A

ame: Bank Secrecy Act Data Collection, Retrieval and S

005

haring

RTed:

ffective

indings/Recommendations

nderway

trategic

OMB Major F

1. The program has long-term

Bureau Actions Planned or U

performance measures that focus on the program's purpose and s

goals, but more work is needed to measure data quality.

1. Surveying users to determine if they are receiving needed information in a timely manner, if the

information is helpful, and if there are any problems with the information and format. This survey will be

conducted in stages. A survey on BSA e–filers is the first component; FY 2006 baseline survey results show

that 92 percent of the customers were satisfied with E-filing. For this component, future targets will be to maintain

a score of at least 90 percent. In FY 2007, in addition to a survey for e-filing, FinCEN will begin surveying the

WebCBRS and Secure Outreach users.

2. Creating targets to measure the number of top 650 filers who file reports electronically. FinCEN has

created the targets and implemented the performance measure.

3. Creating a performance measure to measure the quality of information provided on Suspicious Activity

Reports, possibly by measuring the number of completed fields that are critical to law enforcement. FinCEN

plans to measure the critical field omission rate of E-filed SARS; FY 2005 baseline was a rate of 18%. 

wo

Y

FinCEN is working on establishing FY 2006 actuals. Targets will be decided once FinCEN has at least t

years of data points. FinCEN expects to have future targets for this measure by the second quarter of F

2007.

2. Federal managers are held accountable for cost, schedule and performance results. However, some

activities are managed by another entity and are outside the scope of the performance measures.

he

he

lectronically,

3. The program can show improved efficiencies and cost effectiveness for collecting and sharing data. T

program has been able to show substantial increases in the number of users directly accessing data, t

share of filings submitted e

FY 2

Moderately E

Year P

Rating:

FinCEN - 21 
PART N

A

ame: Bank Secrecy Act (BSA) A

006

nalysis

RTed:

indings/Recommendations

nderway

roducts.

ntiorldwide.

s

1. Developing a plan to improve the survey response rate from domestic law enforcement.

2. FinCEN currently administers a survey to its customers to evaluate the impact and usefulness of it

analytic reports, but more work is needed to develop a method for better assessing the law enforcement

impact of FinCEN’s analytic products.

roduces,

as

3. FinCEN has developed plans to expand the percentage of advanced analytical products that it p

but significant effort will be required to achieve its long-term target of 75 percent in FY 2008. FinCEN h

increased the percentage of advanced analytic products from 1.6 percent in FY 2004 to 30 percent in FY 2006.

1. The Financial Crimes Enforcement Network (FinCEN) currently administers a survey to its customers to

evaluate the impact and usefulness of its analytic reports. The response rate for 2006 was significantly

increased for financial institutions and foreign intelligence units (FIUs), but more work is needed to increase

the response rate for domestic law enforcement customers.

3. Developing measures of the impact of FinCEN's efforts to strengthen anti-terrorist financing and a

money laundering programs w

2. Evaluating the feasibility of better assessing law enforcement impact of FinCEN’s p

Bureau Actions Planned or U

OMB Major F

FY 2

Adequate

Year P

Rating:

FinCEN - 22 
PART Name: Bank Secrecy Act (BSA) Administration

Year PARTed: FY 2006

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. Questions have been raised concerning compliance and burden issues relating to the regulations FinCEN 

issues, and more time is needed to examine the costs and benefits of the reporting requirements.

1. Expanding outreach efforts to certain targeted industries to augment their understanding of the value of

BSA data. 

2. Developing a long-range plan to expand compliance oversight and reporting by state regulators for newly

covered industries. 

3. Developing measures of the impact of program activities on preventing the misuse of the financial system

by those engaged in illicit activities. 

2. Although FinCEN has made progress in executing memoranda of understanding agreements (MOUs)

governing the exchange of information with federal and state regulatory agencies, additional time is needed 

to ensure BSA compliance in more vulnerable industries, particularly the money services business industry.

3. The program has annual performance measures that focus on the implementation of the Bank Secrecy 

Act, such as the number of MOUs that have been entered into, but more work is needed to measure the

impact of program activities on preventing the misuse of the financial system by those engaged in illicit 

activities.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

FinCEN - 23 
Alcohol and Tobacco Tax and Trade Bureau 

Mission Statement 

To collect alcohol, tobacco, firearms and ammunition excise taxes, to ensure that alcohol 

beverages are labeled, advertised, and marketed in accordance with the law, and to 

administer the laws and regulations in a manner that protects the revenue, protects the 

consumer, and promotes voluntary compliance. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate 

% from

CR-rate

Collect the Revenue $49,618 $45,376 $46,010 $47,693 $1,683 3.66%

Protect the Public 40,597 47,228 44,205 45,822 1,617 3.66%

Total Appropriated Resources $90,215 $92,604 $90,215 $93,515 $3,300 3.66%

The activity pattern for FY 2007 should be reversed, in that Collect the Revenue should be $47,228 (51%) and Protect the Public $45,376 (49%). 

FY 2008 Priorities 

• Collect roughly $15 billion in excise taxes; 

• Process more than 6,700 original permit applications that allow for the 

commencement of new alcohol and tobacco businesses and 26,000 amended 

permits to accommodate changes to existing businesses; 

• Process over 125,000 applications for certificates of label approval that allow 

industry members to introduce new alcohol beverage products into the 

marketplace; 

• Collect excise taxes for the governments of Puerto Rico and the Virgin Islands 

under the “cover-over” imposed on rum and distilled spirits; 

• Process approximately 3,000 claims filed by manufacturers of non-beverage 

alcohol products resulting in drawback of $300 to $400 million; 

• Collect 98 percent of the federal excise tax receipts electronically; 

• Complete approximately 80 to 100 audits of large taxpayers who pay 

approximately $3 billion in annual federal excise taxes; and 

• Conduct over 700 field investigations of alcohol and tobacco industry 

members including permit application investigations, responding to consumer 

complaints, investigating Federal Alcohol Administration Act (FAA) trade 

practice violations, and conducting alcohol beverage product integrity 

verifications. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

Section 2 – Budget Adjustments and Appropriation Language................................... 7

2.1 – Budget Adjustments Table..................................................................................... 7 

2A – Budget Increases and Decreases Description......................................................... 7 

2.2 – Operating Levels Table.......................................................................................... 9 

2B – Appropriation Language ...................................................................................... 10 

2C – Legislative Proposals............................................................................................ 10 

Section 3 – Budget and Performance Plan ................................................................... 11

3.1 – Appropriation Detail Table.................................................................................. 11 

3A – Collect the Revenue ............................................................................................ 11 

3.2.1 – Collect the Revenue Budget and Performance Plan ......................................... 12 

3B – Protect the Public ................................................................................................ 12 

3.2.2 – Protect the Public Budget and Performance Plan ............................................. 13 

Section 4 – Supporting Materials.................................................................................. 15

4.1 – Human Resources Table ...................................................................................... 15 

4A – Human Capital Strategy Description ................................................................... 15 

4.2 – Summary of IT Resources Table ......................................................................... 17 

4B – Information Technology Strategy ........................................................................ 18 

4.3 – PART Evaluation Table....................................................................................... 19 

 TTB - 1
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Alcohol and Tobacco Tax and Trade Bureau (TTB) serves as the nation’s primary 

federal authority in the regulation of the alcohol and tobacco industries. TTB is 

responsible for the administration and enforcement of two major areas of federal law, 

namely: those sections of the Internal Revenue Code associated with the collection of

excise taxes on alcohol, tobacco, firearms and ammunition; and the Federal Alcohol 

Administration Act, which provides for the regulation of those engaged in the alcohol 

beverage industry and the protection of consumers of alcohol beverages. 

In Fiscal Year (FY) 2008, TTB will continue to focus efforts on helping industry 

members comply with alcohol and tobacco laws and regulations, thus ensuring that all the 

appropriate excise taxes are collected and that consumers are provided with alcohol 

beverages that meet all federal production, labeling, advertising and marketing standards. 

TTB’s priorities are directly linked to the following key strategic objectives: 

• Collect all the Revenue that is rightfully due: 

 Through partnership with industry, states, and other federal agencies, develop 

alternative methods of promoting voluntary tax compliance; 

 Ensure correct payment of taxes through audit of “major” and “at-risk” taxpayers; 

 Account accurately for the revenue assessed and collected; 

 Reduce the taxpayer paperwork burden associated with collection of the revenue 

by creating alternative electronic filing methods; 

 Ensure consistent tax administration; and 

 Prevent tax evasion and identify other criminal conduct in the regulated 

industries, including diversion and smuggling of taxable commodities. 

• Protect the Public through education, inspection, and investigation: 

 Ensure the integrity of the products, people, and companies in the marketplace; 

 Enforce compliance with federal laws related to the issuance of permits to 

industry members and the production, labeling, advertising, and marketing of 

alcohol products; 

 Utilize electronic government to reduce taxpayer burden and improve service with 

online filing for permit applications and formula submissions, business activity 

reports, claims, applications, COLAs, and other forms; 

 Perform appropriate testing, laboratory analyses, and review documents of 

regulated commodities to ensure product safety and integrity; 

 Review and act on labels and formulas for domestic and imported beverage 

alcohol products and maintain public access to approved COLAs; 

 Respond to industry and consumer complaints. Investigate product contamination 

and adulteration incidents or allegations; and 

 Investigate violations of trade practices, labeling, and advertising in the beverage 

alcohol industry. 

The total resources required to support TTB activities for FY 2008 are $95,215,000, 

including $93,515,000 from direct appropriations and $1,700,000 from reimbursable fees. 

 TTB - 2
1B – Program History and Future Outlook 

Program History - TTB has two primary activities that focus on collecting all the 

revenue rightfully due and providing the public with products that meet industry 

standards set by federal law. 

Collect the Revenue - TTB is charged with collecting alcohol, tobacco, firearms, and 

ammunition excise taxes. These products generate nearly $15 billion in tax revenue 

annually, making TTB the third largest tax collection agency in the federal government. 

The excise taxes collected by TTB come from approximately 7,500 businesses, and the 

taxes are imposed and collected at the producer and importers level of operations. 

Members of the regulated industries paying excise taxes are distilleries, breweries, 

bonded wineries, bonded wine cellars, manufacturers of paper and tubes for tobacco 

products, manufacturers of tobacco products, and manufacturers and importers of 

firearms and ammunition. About 200 of the largest taxpayers account for 98 percent of

the annual excise tax collected. In FY 2006, the majority of taxes collected were from 

tobacco (50 percent) and alcohol (48 percent), with the remainder from firearms and 

ammunition (2 percent). 

Strategies used to collect all the revenue rightfully due include identifying any gaps in tax 

payment, any illegal entities, or individuals operating outside the excise tax system, 

developing a balanced field approach of audits and investigations that targets noncompliant industry members, and establishing an identifiable presence within the industry 

that encourages voluntary compliance. Alcohol and tobacco taxes collected by TTB are 

remitted to the Department of the Treasury General Fund. Firearms and ammunition 

excise taxes are remitted to the Fish and Wildlife Restoration Fund under provisions of

the Pittman-Robertson Act of 1937. 

The investments in this activity resulted in the following performance highlights and 

accomplishments during FY 2006: 

• TTB collected $14.8 billion in excise taxes, interest, and other revenues from

alcohol, tobacco, firearms, and ammunition industries from 7,500 excise 

taxpayers holding permits. 

• TTB expanded the e-filing program to allow all excise taxpayers to file and pay 

taxes and file monthly operational reports electronically through the Pay.Gov 

system. TTB has registered over 1,600 taxpayers to use Pay.Gov. In FY 2006, 98 

percent of TTB’s tax receipts were collected electronically. 

• Voluntary compliance – 76 percent of taxpayers filed payments on or before the 

scheduled due date. 

• TTB continued its multi-year effort to audit the largest taxpayers who are 

responsible for 98 percent of the annual $14.8 billion federal excise tax 

collections. The cumulative audit results include an additional $4.4 million in 

collections identifying $8.1 million in tax, penalties, and interest potentially due 

as result of audit work completed in FY 2006. 

• TTB processed $359 million in cover-over payments to Puerto Rico and $6

million to the Virgin Islands. Federal excise taxes collected on rum produced in 

Puerto Rico and the Virgin Islands and subsequently imported into the United 

 TTB - 3
States are “covered-over” (or paid into) the treasuries of Puerto Rico and the 

Virgin Islands. 

• TTB processed $338 million in drawback claims. Under current law, persons 

who use non-beverage alcohol in the manufacture of medicines, food products, 

flavors, extracts, or perfume and other non-potable products may be eligible to 

claim drawback of excise taxes paid on distilled spirits used in their products. 

The TTB laboratory analyzes and approves a product formula before a company 

can manufacture a product and file a claim. 

• TTB laboratories analyzed 2,259 beverage alcohol samples for product integrity, 

pre-import analysis, and 5010-tax credit determination. TTB also analyzed 312 

tobacco product samples for tax classification. TTB laboratories review 

formulations or analyze alcohol and tobacco products to ensure compliance with 

TTB tax and classification regulations. 

Protect the Public - TTB works to ensure the integrity of the alcohol and tobacco 

industries and of beverage alcohol products found in the marketplace, and regulates 

roughly 40,000 alcohol and tobacco businesses. Under this activity, TTB enforces 

federal laws related to the issuance of permits to industry members and the production, 

labeling, advertising, and marketing of alcohol products. TTB conducts these activities 

through investigations, application reviews, laboratory testing, and educational programs. 

TTB works with industry, foreign and state governments, and other interested parties to 

make it easier to comply with regulatory requirements and to maintain the appropriate 

level of oversight to ensure public safety. Education, partnerships, and open 

communication are paramount strategies in facilitating compliance with regulatory 

requirements. 

The investments in this budget activity resulted in the following performance highlights 

and accomplishments during FY 2006: 

• TTB processed 114,000 Certificate of Label Approval (COLAs) applications, 37 

percent of which were filed electronically through COLAs Online. By FY 2008, 

TTB anticipates over 48 percent of all COLAs will be e-filed. The Federal 

Alcohol Administration Act requires importers and bottlers of alcoholic beverages 

to obtain a COLA prior to introduction of the product into commerce. 

• TTB issued 5,400 original and 21,000 amended permits. TTB issues original and 

amended permits to persons who are engaged in the alcohol and tobacco 

industries. Illicit activity in these industries has the potential to be highly 

lucrative so it is crucial that organized crime and terrorists are kept out of these 

industries. TTB conducted 473 field investigations on the most high-risk 

applications to ensure objectives of the Anti-Terrorism Act of 2001 were met. 

• TTB participated in negotiations between the United States and Mexico regarding 

cross-border trade in tequila, which resulted in an agreement that was signed on 

January 17, 2006. This agreement protects approximately $560 million per year 

of tequila imports in terms of gross revenues to major members of the distilled 

spirits industry. 

• TTB played a significant role in negotiating an agreement between the U.S. and 

the European Community regarding trade in wine, which was signed on March 

 TTB - 4
10, 2006. This agreement covers wine-making practices and labeling, and will 

facilitate bilateral trade in wine valued at $2.8 billion annually. The U.S. wine 

export figures for trade with the European Community in FY 2005 was $323 

million. Exports of U.S. wine for 2006 have already surpassed 2005 figures in 

terms of value, at $405 million for the Jan-Oct 2006 timeframe. Similarly, 2006 

bilateral trade totals are expected to exceed those of 2005 as both U.S. exports and 

EU imports are up (43 percent and 14.6 percent, respectively). 

• TTB’s international trade work also involved assistance in the labeling agreement 

with the World Wine Trade Group (WWTG). WWTG members include the U.S., 

Argentina, Australia, Canada, Chile, and New Zealand. The labeling agreement, 

which was initialed on September 20, 2006 and is scheduled to be signed in 

January 2007, will facilitate the export trade in wine from the U.S. to WWTG 

countries. The value of the 2005 U.S. wine export trade to WWTG countries (the 

latest data available) is as follows: 

o Canada - $128 million 

o Argentina - $.551 million 

o New Zealand - $.369 million 

o Australia - $4 million 

o Chile - $.183 million 

• TTB conducted 832 field application investigations of industry members 

regarding consumer complaints, trade practice violations, and product and 

labeling integrity verifications. 

Specific Challenges in FY 2008 – The alcohol beverage industry in the U.S. is over a 

$150 billion industry which pays over $7 billion in excise taxes each year. Economic 

forecasts predict continued modest growth in the alcohol industry. Total taxes collected 

on alcoholic beverages rose less than one percent for the period ended September 30, 

2006, to $7.1 billion from $7 billion in the year prior. TTB envisions that in the next few 

years the increase in new alcohol businesses will be most prominent in the number of 

new alcohol fuel plants (ethanol), wineries, craft breweries, and craft distilleries. 

TTB collected $7.3 billion in taxes on tobacco products in FY 2006, approximately equal 

to collections in FY 2005. US Customs and Border Protection’s collection of taxes on 

imported tobacco products declined, from $429 million in FY 2005 to $352 million in FY 

2006. While part of this decline represents a decrease in consumption of roughly 0.7 

percent, this decline is also attributable to a proliferation of the sale of illegal or smuggled 

cigarettes. There has also been a slight decline in the number of permitted tobacco 

importers in operation, from 685 tobacco importers in 2005 to 644 tobacco importers in 

2006. However, TTB has recently identified over 150 companies and individuals that 

have been importing tobacco products without permits. Other trends identified include 

the decrease in the internet sales of cigarettes, but an increase in the online sales of pipe 

tobacco, roll your own tobacco, cigars and little cigars in the past year. There is also an 

increase in the use and sale of water pipe tobacco, or shisha tobacco that is either 

imported from the Middle East or domestically manufactured. This type of tobacco is 

taxable as pipe tobacco. Recent investigations and audits have also reflected potential 

criminal violations within TTB permitted industry members operations. Some examples 

 TTB - 5
of these are: criminal recordkeeping violations and reimportation of previously exported 

tobacco products. 

TTB continually strives to make improvements to its processes, systems, and availability 

of information in order to enhance its ability to service TTB’s industry members. In 

terms of revenue collection in FY 2008, TTB plans to conduct 80 to 100 excise tax 

audits, and to promote voluntary compliance in the payment of federal excise taxes by 

maintaining a strong field presence. The audits are accomplished using a staff of 

approximately 80 professional auditors located throughout the United States. In April 

2006, the Tax Audit Division (TAD) developed a Strategic Audit Plan for its fiscal years 

2007 through 2009, and will go forward with focusing TTB’s resources on taxpayers 

paying more than 90 percent of the tax, as well as on taxpayers who meet other indicators 

(risk model rankings, referrals, and targeted risk areas).

TTB expects continued growth in the number of beverage alcohol samples analyzed by 

TTB laboratories. In addition, TTB anticipates a significantly larger increase in tobacco 

samples submitted to the laboratories because of the new standards of identity for 

classifying cigarettes and little cigars. In FY 2008, the TTB labs will work towards 

developing methods to support tax collection activities in the tobacco program. 

Effective January 1, 2006, taxpayers under this category may pay their taxes and submit 

their returns on a quarterly basis, as provided under the Internal Revenue Code. The 

statutory provision authorizing the filing of quarterly rather than semi-monthly returns for 

certain qualified taxpayers has not resulted in a robust quarterly filing program because 

the statutorily prescribed bonding requirements create a financial disincentive for 

taxpayers to avail themselves of the quarterly filing option. In particular, in the case of 

brewers and distillers, the statutory bonding requirement is tied to the tax liability in a 

given return period. Since the use of a quarterly filing would trigger a higher tax liability 

for that period, the bonding requirement increases, causing additional bonding costs to 

the taxpayer that are not counterbalanced by the savings recognized by the extended 

return period. 

Preparing for the Future in FY 2008 - Succession planning is high on the list of TTB 

strategic priorities, especially regarding TTB’s investigative forces. TTB expects to lose 

40 percent of its workforce between 2006 and 2010 due to retirements and other attrition. 

To mitigate these losses, TTB continues to use the personnel interventions identified in 

the Pay Demonstration project to enable the Bureau to improve its capacity to recruit, 

develop, and retain high-caliber employees. TTB uses tailored approaches designed, 

developed, and implemented specifically for the Bureau’s continuing and evolving needs 

in order to meet mission requirements and remain competitive for highly skilled talent. 

Continuation of the Pay Demonstration authority is a key component in TTB’s ability to 

close skill gaps in mission critical occupations. In FY 2006, TTB contracted for a study 

to provide an independent evaluation of this program, and the results will be examined in 

2007. The FY 2008 budget seeks authority be granted for continuation of this program 

by one year. 

 TTB - 6
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands

Appropriation: TTB Salaries and Expenses FTE Amount

FY 2006 Appropriation (P.L. 109-115) 544 $91,126

Rescission (P.L. 109-148) 0 ($911)

FY 2006 Enacted 544 $90,215

FY 2007 President's Budget 544 $92,604

CR-rate Adjustment (2,389)

FY 2007 CR-rate 544 $90,215

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

Non-Pay Inflation Adjustment 404

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 931

Pay Annualization 287

Pay Inflation Adjustment 1,678

Total FY 2008 Base 544 $93,515

Program Decreases:

Field Operations / National Revenue Center (441)

Program Reinvestment:

Field Operations / Tobacco Enforcement Division 441

Subtotal FY 2008 Program Changes 0 0

Total FY 2008 Request 544 $93,515

2A – Budget Increases and Decreases Description 

Adjustments .....................................................................................-$2,389,000 / +0 FTE 

CR-rate Adjustment -$2,389,000 / +0 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Technical Adjustment to FY 2007 Base due to CR ........................+$404,000 / +0 FTE 

Non-Pay Inflation Adjustment +$404,000 / +0 FTE Technical adjustment to FY 2007 

base due to CR. 

Maintaining Current Levels (MCLs) ...........................................+$2,896,000 / +0 FTE 

Non-Pay Inflation Adjustment +$931,000 / +0 FTE Funds are requested for non-labor 

related items such as contracts, travel, supplies, equipment and GSA rent adjustments. 

Pay Annualization +$287,000 / +0 FTE Funds are requested for the FY 2008 cost of the 

January 2007 pay increase. 

Pay Inflation Adjustment +$1,678,000 / +0 FTE Funds are requested for the proposed 

January 2008 pay raise. 

Program Decreases ............................................................................-$441,000 / +0 FTE 

Field Operations / National Revenue Center -$441,000 / +0 FTE TTB realigned its staff 

resources from the National Revenue Center to create the Tobacco Enforcement Division. 

 TTB - 7
Program Reinvestment .....................................................................+$441,000 / +0 FTE 

Field Operations / Tobacco Enforcement Division +$441,000 / +0 FTE TTB realigned 

its staff resources to create the Tobacco Enforcement Division to monitor domestic 

tobacco trade and act as the bureau's tobacco coordinator. This action will improve 

identification of potential targets for investigation, and TTB will be able to ensure that

only qualified applicants enter the tobacco trade, ensure compliance with the tax laws, 

and to facilitate voluntary compliance. 

 TTB - 8
2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: TTB Salaries & Expenses FY 2006

Enacted

FY 2007

President's

Budget

Proposed 

Reprogrammings

CR-rate 

Adjustment

FY 2007 CRRateFY 2007 Proposed

Operating Level

FY 2008 

Requested Level

FTE 544 544 - - 544 544 544

Object Classification:

11.1 Full-Time Permanent Positions........................ $40,865 $40,693 $0 $1,608 $42,301 $42,301 $43,640

11.1 Other than Full-Time Permanent Positions...... 0 0 $0 0 $0 $0 0

11.5 Other Personnel Compensation....................... 0 718 $0 (20) $698 $698 778

11.8 Special Personal Services Payments.............. 0 0 $0 0 $0 $0 0

11.9 Personnel Compensation (Total).................. $40,865 $41,411 $0 $1,588 $42,999 $42,999 $44,418

12.0 Personnel Benefits........................................... 10,541 10,868 $0 111 $10,979 $10,979 11,525

13.0 Benefits to Former Personnel.......................... 0 0 $0 0 $0 $0 0

21.0 Travel.............................................................. 3,282 4,410 $0 $3,265 $3,265 3,363

22.0 Transportation of Thin

(1,145)

gs.................................. 136 104 $0 $98 $98 101

23.1 Rental Pa

(6)

yments to GSA................................. 4,775 4,725 $0 218 $4,943 $4,943 4,981

23.2 Rent Payments to Others................................ 314 0 $0 0 $0 $0 0

23.3 Communications, Utilities, & Misc.................... 5,043 4,806 $0 $4,787 $4,787 4,931

24.0 Printin

(19)

g and Reproduction............................... 408 0 $0 367 $367 $367 378

25.1 Advisory & Assistance Services....................... 0 0 $0 0 $0 $0 0

25.2 Other Services................................................. 21,761 23,959 $0 $20,753 $20,753 21,734

25.3 Purchase of Goods/Serv. from Govt. Accts...

(3,206)

... 0 0 $0 0 $0 $0 0

25.4 Operation & Maintenance of Facilities............. 0 0 $0 0 $0 $0 0

25.5 Research & Development Contracts................ 0 0 $0 0 $0 $0 0

25.6 Medical Care................................................... 0 0 $0 0 $0 $0 0

25.7 Operation & Maintenance of Equipment.......... 0 0 $0 0 $0 $0 0

25.8 Subsistence & Support of Persons.................. 0 0 $0 0 $0 $0 0

26.0 Supplies and Materials.................................... 621 682 $0 $650 $650 670

31.0 Equipment....................................................... 2,119 1,639 $0 $1,374 $1,374 1,415

32.0 Lands and Structures......................................

(32)

(265)

. 350 0 $0 0 $0 $0 0

33.0 Investments & Loans....................................... 0 0 $0 0 $0 $0 0

41.0 Grants, Subsidies............................................ 0 0 $0 0 $0 $0 0

42.0 Insurance Claims & Indemn............................. 0 0 $0 0 $0 $0 0

43.0 Interest and Dividends................................. 0 0 $0 0 $0 $0 0

44.0 Refunds........................................................... 0 0 $0 0 $0 $0 0

Total Budget Authority....................................... $90,215 $92,604 $0 $90,215 $90,215 $93,515

Budget Activities:

Protect the Public $40,597 $47,228 44,205 44,205 $45,822

Collect the Revenue 49,618 45,376 1,852 46,010 46,010 47,693

Total Budget Authority....................................... $90,215 $92,604 $0 $90,215 $90,215 $93,515

($2,389)

(1,852) ($1,171)

(1,218)

($2,389)

 TTB - 9
2B – Appropriation Language 

Appropriations Language Explanation of Changes 

DEPARTMENT OF THE TREASURY 

ALCOHOL AND TOBACCO TAX AND 

TRADE BUREAU 

Federal Funds 

SALARIES AND EXPENSES:

For necessary expenses of carrying out 

section 1111 of the Homeland Security Act 

of 2002, including hire of passenger motor 

vehicles, $93,515,000 of which not to 

exceed $6,000 for official reception and 

representation expenses; not to exceed 

$50,000 for cooperative research and 

development programs for laboratory 

services; and provision of laboratory 

assistance to State and local agencies with 

or without reimbursement. 

Treasury General Provisions:

Sec 216. Section 122(g) (1) of Public Law 

105-119 as amended (5 U.S.C. 3104 note), 

is further amended by striking “8 years” 

and inserting “10 years”. 

TTB proposes to continue the Pay 

Demonstration Program (Pay Demo) by 

amending the administrative provision 

language to extend the program one 

additional year. This project was 

established to enhance Treasury’s ability 

to effectively recruit and retain highly 

qualified employees. It seeks to do so 

by implementing changes in personnel 

management practices for designated 

occupations. Pay Demo has been 

extended every year since it was first 

established in FY 1999. In FY 2006, 

TTB contracted for a study to provide 

an independent evaluation of this 

program. The results of the study will 

be examined in 2007.

2C – Legislative Proposals 

Extend Pay Demonstration Program one additional year. TTB proposes to continue the 

Pay Demonstration Program by amending the general provision language to extend the 

program one additional year.

 TTB - 10
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

3A – Collect the Revenue ($47,693,000 from direct appropriations and $867,000 from 

reimbursable programs): The Collect the Revenue activity works toward providing the 

most effective and efficient systems for the collection of tax revenue, eliminating or 

preventing tax evasion and other criminal conduct, and providing high quality service 

while imposing the least regulatory burden on taxpayers. TTB will employ a number of 

strategies to ensure that the revenue that is rightfully due is collected. The Tax Audit 

Division (TAD) will focus its audit resources on taxpayers paying more than 90 percent 

of the tax, as well as on taxpayers who meet other risk indicators. The Office of Field 

Operations will continue to provide industry outreach to facilitate voluntary compliance, 

investigate allegations or indications of tax fraud, verify destruction of large quantities of 

taxable commodities, and conduct compliance investigations of non-taxpaying permittees 

who have substantial potential for tax liability. 

Reducing taxpayer burden and improving service remain priorities at TTB. The ultimate 

goal is to allow permittees and taxpayers to file all payments, returns, and applications 

online with the National Revenue Center. The FY 2008 budget request enables the 

continuation of efforts to achieving the performance measures supporting TTB’s strategic 

goal of providing the most effective and efficient system for the collection of all revenue 

that is rightfully due, eliminating or preventing tax evasion and other criminal conduct, 

and providing high quality service while imposing the least regulatory burden. 

Offsetting Collections – Non Federal Sources (Puerto Rico)............................$867,000 

The reimbursable funds are to cover the costs associated with the functioning and support 

of the Puerto Rico office, and are paid from the “cover-over” (return) which is offset 

from the roughly $359 million in cover over taxes collected in the United States on 

products originating in Puerto Rico. TTB conducts annual audits / investigations of 

industry members regarding the collection of revenue, application processing and product 

integrity. Revenue inspections are used to conduct tax examinations on major producers 

of alcohol and tobacco. 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Re ources: s

Salaries & Expenses

Collect the Revenue

Protect the Public

299 49,618 267 45,938 277 45,376 277 $46,010 277 47,693 0.00% 3.66%

245 40,597 257 44,136 267 47,228 267 44,205 267 45,822 0.00% 3.66%

Subtotal New Appropriated Resources 544 $90,215 524 $90,074 544 $92,604 544 $90,215 544 $93,515 0.00% 3.66%

Other Resources:

Offsetting Collections - Reimbursable (Puerto Rico) 15 $1,700 10 $1,700 15 $1,700 15 $1,700 15 $1,700 0.00% 0.00%

Subtotal Other Resources 15 $1,700 10 $1,700 15 $1,700 15 $1,700 15 $1,700 0.00% 0.00%

Total Resources Available for Obligation 559 $91,915 534 $91,774 559 $94,304 559 $91,915 559 $95,215 0.00% 3.59%

FY 2006 FY 2008

Obligations President's Budget Request

FY 2007

Enacted CR Rate to FY 2008

FY 2007

% Change

Resources Available for Obligation

FY 2006 FY 2007

 TTB - 11
3.2.1 – Collect the Revenue Budget and Performance Plan 

Dollars in Thousands

Collect the Revenue Budget Activity Includes Strategic Objective F4A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $56,801 $45,285 $49,618 $45,376 $47,693

 Other Resources 1,700 935 935 867 867

Total Operating Level $58,501 $46,220 $50,553 $46,243 $48,560

Human Resources

 Appropriated FTE 363 299 299 277 277

 Other FTE 15 8 8 8 8

Total FTE (direct and reimbursable) 378 307 307 285 285

Collect the Revenue Budget Activity Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 65% 90% 12% 74%

Actual 82% 93%

Cumulative percentage of excise tax revenue 

audited over 3 years (%) (Ot) 

Met Yes Yes

Target 70% 74% 74% 76%

Actual 70% 75.95%

Percentage of Voluntary Compliance in filing tax

payments timely and accurately (in terms of 

number of compliant industry members)(%) (Oe) Met Yes Yes

Target 82 84 86 86 87

Actual 81.2 86.3 87.2

Percentage of Voluntary Compliance in filing tax

payments timely and accurately (in terms of 

revenue) (%) (Oe) Met No Yes Yes

Target 98% 98% 98% 98% 98%

Actual 97.3% 98% 98%

Percentage of total tax receipts collected 

electronically (%) (E) 

Met No Yes Yes

Target 0.4% 0.34% 0.34% 0.34%

Actual 0.37% 0.31%

Resources as a percentage of revenue (%) (E) 

Met Yes Yes

Target Baseline $76 $76

Actual $76

Unit cost to process an excise tax return based 

on new legislation ($) (E) 

Met Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: 

TTB met five of its five performance measures under the Collect the Revenue strategy. 

A sixth measure was a baseline measure. TTB collected $14.78 billion in excise taxes, 

interest, and other revenues from alcohol, tobacco, firearms, and ammunition industries. 

 

3B – Protect the Public ($45,822,000 from direct appropriations and $833,000 from 

reimbursable programs): The Protect the Public activity ensures the integrity of products 

and industry members in the marketplace, ensures compliance with laws and regulations

by regulated industries, and provides information to the public as a means to prevent 

consumer deception. Under this activity, TTB enforces compliance with federal laws 

related to the issuance of permits to industry members and the production, labeling, 

advertising, and marketing of alcohol products. TTB conducts investigations, application 

reviews, laboratory testing, and educational programs in support of its mission. TTB 

works with industry, other federal and state governments, and other interested parties to 

 TTB - 12
make it easier to comply with regulatory requirements, while maintaining the appropriate 

level of oversight to ensure public safety. Innovation, partnerships, and open 

communication are paramount to achieving this strategic goal. 

Offsetting Collections – Non Federal Sources (Puerto Rico)............................$833,000 

The reimbursable funds are to cover the costs associated with the functioning and support 

of the Puerto Rico office, and are paid from the “cover-over” (return) which is offset 

from the roughly $359 million in cover over taxes collected in the United States on 

products originating in Puerto Rico. TTB conducts annual audits / investigations of 

industry members regarding the collection of revenue, application processing and product 

integrity. Revenue inspections are used to conduct tax examinations on major producers 

of alcohol and tobacco. 

3.2.2 – Protect the Public Budget and Performance Plan 

Dollars in Thousands 

Protect the Public Budget Activity Includes Strategic Objective E2A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources 

 Appropriated Resources $22,727 $37,051 $40,597 $47,228 $45,822

 Other Resources 0 765 765 833 833

Total Operating Level $22,727 $37,816 $41,362 $48,061 $46,655

Human Resources 

 Appropriated FTE 181 245 245 267 267

 Other FTE 0 7 7 7 7

Total FTE (direct and reimbursable) 181 252 252 274 274

Protect the Public Budget Activity Includes Strategic Objective E2A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline TBD

Actual 

Compliance Level of New Industry Members 

Met 

Target 7% 16% 27% 47% 48%

Actual 10% 25% 38%

Percent of electronically filed Certificate of Label 

Approval applications (%) (E) 

Met Yes Yes Yes

Target 60% 30% 55% 45% 0%

Actual 23% 50% 44%

Percentage of COLA approval applications 

processed within 9 calendar days of receipt (%) 

(E) (This measure will become inactive 

beginning in FY 2008.) 

Met No Yes No

Target Baseline TBD

Actual 

Percentage of current industry members that 

were found to have links to criminal or terrorist 

organizations or were otherwise a prohibited 

person 

Met 

Target 67% 80% 80% 82%

Actual 81% 86%

Percentage of permit application (original and 

amended) processed by the National Revenue 

Center within 60 days (%) (E) Met Yes Yes

Target Baseline TBD

Actual 

The unit cost to process a Certificate of Label 

Approval 

Met 

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

 TTB - 13
Description of Performance: 

TTB met two of its three performance measures under the Protect the Public Strategy. 

The one measure not met is the “Percentage of Certificates of Label Approval 

applications processed within nine calendar days following receipt.” This measure is 

difficult to achieve because the Certificate of Label Approval workloads are expected to 

continue to rise while staff will remain at a constant level. In FY 2008, the “Percentage

of COLA approval applications processed within 9 calendar days of receipt” measure will 

be inactivated and replaced with a new efficiency measure “The unit cost of producing a 

Certificate of Label Approval.” 

TTB proposes to add three new measures under Protect the Public: “The unit cost to 

process a wine COLA”; “Compliance level of new industry members”; and “Current 

industry members linked to terrorist organizations.” 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

 TTB - 14
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 514 524 544

Increases:

 Recruitment of Auditors and Investigators 10 20

Subtotal, Increases 10 20 0

Decreases:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 524 544 544

1/

Net Change from prior year SOY to budget year EOY 0

1/ Reason: TTB was established in January 2003 as a result of the Homeland Security Act of 2002. At the end of FY 2006 TTB had 537 

staff on board, an equivalent direct FTE level of 524. TTB is authorized to fill 544 direct FTEs.

4A – Human Capital Strategy Description 

By properly managing its human capital needs, TTB supports the Department of the 

Treasury’s strategic goals: 

 

• Increase Citizens’ Economic Security, and; 

• Manage the U.S. Government’s Finances Effectively, 

To accomplish and fulfill both TTB’s and the Department of the Treasury’s strategic 

plans, TTB has taken several steps in order to not only maintain its current professional 

workforce but also improve it. TTB has completed its first Human Capital Strategic Plan 

that is aligned with the Bureau Strategic Plan. The plan documents strategies to improve 

skill and competency gaps, demographics, workforce management and performance 

measurement efforts, and succession planning. The model for strategically assessing 

TTB’s skills gap outlook for future years is predicated on assumptions regarding future 

changes in the workforce, including retirement eligibility rules and rates of attrition. The 

skills gap forecast will be developed by assessing and modeling the changing nature of 

TTB’s mission critical occupations and the bureau’s mission. 

 TTB - 15
The Pay Demonstration program (PAY DEMO) will continue to be used by the bureau to 

develop and retain high caliber employees. TTB expects to lose 40 percent of its 

workforce between 2007 and 2010 due to retirements and other attrition. To 

accommodate these losses from the baseline, TTB continues to use personnel 

interventions identified in the PAY DEMO project to enable the bureau to improve its 

capacity to recruit, develop, and retain high-caliber employees. TTB uses tailored 

approaches designed, developed, and implemented specifically for the bureau’s 

continuing and evolving needs in order to meet mission requirements and remain 

competitive with private industry and other federal agencies for highly skilled talent. 

TTB has roughly 120 participants in the PAY DEMO that function in mission critical 

occupations such as chemists, industry analysts, auditors, and information technology 

specialists. 

HR Highlights 

• TTB developed a Federal Employment Opportunity Recruitment Plan (FEORP) for 

FY 2005 – FY 2008 to promote the employment and advancement of minorities and 

women within the bureau. 

• TTB established its FY 2005 – FY 2008 Disabled Veterans Affirmative Action Plan 

to promote the hiring and advancement of disabled veterans within the bureau. 

• TTB revised its Senior Executive Service performance plans to document the linkage 

with the bureau’s strategic objectives and cascaded to the next lower level of

management. 

• TTB implemented Career Connector for use in filling supervisory/managerial jobs as 

a tool to improve the hiring process. 

• TTB established a telework program that covers all TTB offices and most employees, 

and implemented a hoteling program at certain field offices. These initiatives save 

the bureau valuable dollars that were invested in improved services to stakeholders. 

• Beginning in June 2004, TTB outsourced all of its human resource functions to the 

Bureau of Public Debt (BPD). The human resource services provided by BPD 

include staffing and recruitment, personnel/payroll actions, employee benefits and 

retirement, time and attendance, official personnel records, classification, training, 

employee/labor relations, and performance management. Performance benchmarks 

and measures have been established to monitor contract performance. 

• TTB is in the process of developing succession plans for mission critical occupations 

and a comprehensive Human Capital Plan. The successful implementation of these 

two initiatives will contribute to TTB obtaining a green score. 

• TTB finalized its human capital strategic plan which is aligned with TTB’s mission. 

TTB documented strategies for improving skill and competency gaps, improving 

demographics, workforce management and performance measurement efforts, and 

succession management planning. The plan has been posted to the TTB intra-web 

and is accessible to all employees. 

 TTB - 16
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 Major IT Investments Budget Activity Operating Plan Obligations Operating Plan

President's

Budget 

Total - - - - - 

Non-Major IT Investments

FET/IRIS Collect Revenue/Protect Public All - - 1.7 100.0% -10Total - - 1.7 100.0% - -10

Infrastructure Investments

TTB Infrastructure base Collect Revenue/Protect Public All 14.8 14.8 18.0 21.6% 17.2 -4

Salaries & Benefits (5 FTEs) Collect Revenue/Protect Public All 0.65 0.65 0.80 23.1% 0.81 1

Total 15.5 15.5 18.8 21.3% 18.0 -

Total IT Investments - Prosight Numbers 15.5 15.5 20.5 32.3% 18.0 -1

% Change fr

FY06 to FY0

Identify program

that system is 

aligned to

FY 2005 % Change from

FY05 Obligations to 

FY06

 TTB - 17
4B – Information Technology Strategy 

TTB has a modernization blueprint that focuses information technology (IT) investments 

on important bureau functions and defines how those functions will be measurably 

improved. All TTB systems and projects have business cases that have been approved by 

the Department of the Treasury’s Office of the Chief Information Officer, and 100 

percent of IT systems have certification and accreditation. The bureau will aggressively 

pursue all e-Gov opportunities that will reduce taxpayer burden for tax filing and increase 

all regulatory compliance. TTB has established its own investment review board that 

evaluates and makes preliminary selection decisions by addressing high level questions: 

• Does the initiative have value to TTB? 

• Is there a balance of benefits against costs and risks?

• Is TTB eliminating duplication and stovepipe projects?

TTB’s investment review board ensures compliance with guidance and legislation. A 

scoring criterion was developed to help ensure that only sound and viable initiatives that 

support the bureau’s mission and strategic goals are included in the portfolio. 

 TTB - 18
4.3 – PART Evaluation Table 

PART Name: Collect the Revenue

Year PARTed: FY 2004

Rating: Effective 

Score: 93%

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

2. TTB currently uses the BPD ARC accounting system, which allows for the allocation and tracking of 

distribution of the funds. This system had not been in service for a full year's data when the PART study was

in process.

3. TTB is in the process of completing a major business reengineering study on its Protect the Publlic 

Mission. However, the work that has been performed on this study will impact how TTB performs cost 

benefit studies in the future. The impact should be noticeable in the coming year. 

2. Improving estimates of how funds are distributed across TTB's two lines of business to ensure that funds 

are obligated in accordance with planned schedules

3. Developing a baseline to compare the incremental cost and net benefits of regulation.

Table 4.3

PART Evaluation

1. Developing baselines for annual performance measures .

1. TTB is in the process of completing the baselines for its annual performance measures in FY 2006.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

 TTB - 19
Financial Management Service 

Mission Statement 

To provide central payment services to Federal Program Agencies (FPAs), operate the 

federal government’s collections and deposit systems, provide government-wide 

accounting and reporting services, and manage the collection of delinquent debt. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate 

% from 

CR-rate 

Payments $144,135 $147,358 $147,130 $146,465 ($665) -0.45%

Collections 16,931 17,396 17,367 19,869 2,502 14.41%

Debt Collection 10,162 5,250 5,250 0 (5,250) -100.00%

Government-wide 

Accounting and Reporting 62,653 63,650 63,545 68,857 5,312 8.36%

Total Appropriated Resources $233,881 $233,654 $233,292 $235,191 $1,899 0.81%

FY 2008 Priorities 

• Provide federal payments timely and accurately and continue to move toward an allelectronic Treasury for payments. 

• Provide timely collection of federal government receipts, at the lowest cost, and 

continue to move toward an all-electronic Treasury. 

• Maximize collection of government delinquent debt by providing efficient and 

effective centralized debt collection services. 

• Issue accurate, accessible, and timely financial reports and improve the compilation 

process and audit opinion on the Financial Report of the U.S. Government.
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

Section 2 – Budget Adjustments and Appropriation Language................................... 6

2.1 – Budget Adjustments Table..................................................................................... 6 

2A – Budget Increases and Decreases Description......................................................... 6 

2.2 – Operating Levels Table........................................................................................ 10 

2B – Appropriation Language ...................................................................................... 11 

2B – Permanent, Indefinite Appropriations.................................................................. 11 

2.3 – Permanent, Indefinite Appropriations Table........................................................ 12 

2C – Legislative Proposals............................................................................................ 12 

Section 3 – Budget and Performance Plan ................................................................... 13

3.1 – Appropriation Detail Table.................................................................................. 13 

3A – Payments............................................................................................................. 13 

3.2.1 – Payments Budget and Performance Plan .......................................................... 15 

3B – Collections........................................................................................................... 16 

3.2.2 – Collections Budget and Performance Plan ....................................................... 17 

3C – Debt Collection ................................................................................................... 18 

3.2.3 – Debt Collection Budget and Performance Plan ................................................ 19 

3D – Government-wide Accounting and Reporting .................................................... 20 

3.2.4 – Government-wide Accounting and Reporting Budget and Performance Plan . 21 

Section 4 – Supporting Materials.................................................................................. 22

4.1 – Human Resources Table ...................................................................................... 22 

4A – Human Capital Strategy Description ................................................................... 22 

4.2 – Summary of IT Resources Table ......................................................................... 25 

4B – Information Technology Strategy ........................................................................ 26 

4.3 – PART Evaluation Table....................................................................................... 27 

FMS - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Financial Management Service (FMS) plays a key role in supporting the Department 

of the Treasury’s strategic goal of managing the United States Government’s finances 

effectively by operating as the financial manager and principal fiscal agent for the federal 

government. This role includes managing the nation’s finances by collecting money due 

to the United States, making its payments and performing central accounting functions. 

As the government’s financial manager, FMS oversees a daily cash flow in excess of 

$50 billion, disbursing 85 percent of the federal government’s payments, including 

income tax refunds, Social Security benefits, veterans’ benefits and other federal 

payments to individuals and businesses. FMS also administers the world’s largest 

collection system, collecting approximately $2.9 trillion in FY 2006. It also provides 

cash management guidance to Federal Program Agencies (FPAs), maintains the 

government’s accounting books and compiles and publishes government-wide financial 

information used to monitor the government’s financial status. Finally, it serves as the 

government’s central debt collection agency for delinquent non-tax debt. 

The Strategic Goals of FMS are: 

• Provide federal payments timely and accurately, and move toward an all-electronic 

Treasury for payments. 

• Provide timely collection of federal government receipts, at the lowest cost, through 

an all-electronic Treasury. 

• Maximize collection of government delinquent debt by providing efficient and 

effective centralized debt collection services. 

• Produce accurate, accessible, and timely government-wide financial information and 

reports which contribute to improved quality of the nation's financial decision 

making. 

• Facilitate the achievement of a clean audit opinion on the Financial Report of the U.S. 

Government through FMS’ internal operations and support to government agencies. 

• Establish policies and processes to facilitate the integration of e-commerce 

technologies into FMS’ business programs and infrastructure. 

The total resources required to support FMS activities for FY 2008 are $450,370,000 

including $235,191,000 from direct appropriations and $215,179,000 from offsetting 

collections and reimbursable agreements. 

FMS - 2 
1B – Program History and Future Outlook 

FMS provides critical services to millions of United States taxpayers and other 

customers. It embodies Treasury’s leadership strategy to create value for the American 

people, provide responsible and effective stewardship over the government’s finances, 

and focus on quality service results and innovation. History and future outlook by 

program are as follows: 

Payments

The Payments program develops and implements federal payment policy and procedures, 

issues and distributes payments, promotes the use of electronics in the payment process, 

and assists agencies in converting payments from paper checks to Electronic Funds 

Transfer (EFT). This includes controlling and providing financial integrity to the 

payments process through reconciliation, accounting, and claims activities. In FY 2006, 

FMS issued over 964 million non-Defense payments worth $1.5 trillion to a wide variety 

of recipients, such as those who receive Social Security benefits, IRS tax refunds and 

veteran’s benefits. Seventy-seven percent of all payments disbursed were via direct 

deposit. 

 

Streamlining the payments processes while continually investing in state-of-the-art 

technology is integral in processing payments accurately, timely, and more safely and 

securely for the taxpayer. In FY 2008, FMS will continue to expand the use of electronic 

media to deliver federal payments. This helps provide a safer, more secure and more 

reliable method of payment for recipients, and decreases the number of paper checks 

issued, which minimizes costs and inefficiencies associated with the non-electronic 

delivery of benefits. 

Collections

The Collections program collects revenues needed to operate the federal government 

through the effective management of the government’s collections infrastructure. In 

FY 2006, FMS collected approximately $2.9 trillion through a network of more than 

9,000 financial institutions and 79 percent of the dollars FMS collected was done so 

electronically. Dollar revenue collected in FY 2006 exceeded those collected in FY 2005 

by 10 percent. The most important program that supports electronic collections is the 

Electronic Federal Tax Payment System (EFTPS). EFTPS is a tax payment system that 

offers all businesses and individuals the convenience of making their federal tax 

payments electronically 24 hours a day, 7 days a week, instead of using checks. In FY 

2006, taxpayers paid $1.9 trillion using EFTPS, up 16 percent from FY 2005, and the 

number of payments to the government rose 11 percent to 80.4 million. 

In FY 2008, FMS will continue to provide electronic collection mechanisms that use the 

most advanced and secure collection technologies and are flexible enough to 

accommodate the varying needs and technical sophistication of all taxpayers and FPAs. 

FMS will direct its EFTPS efforts to financial institutions that process paper tax coupons 

as well as the tax practitioner community and small businesses to further expand the use 

of EFTPS. FMS will also assist agencies in converting collections from paper to 

FMS - 3 
electronic media by converting checks to electronic payments at the point of receipt and 

truncating paper remittances and invoices by imaging those documents. Security 

oversight efforts will increase at financial agent processing facilities and banking 

institutions as a way to proactively identify security control weaknesses and to detect and 

deter fraud, waste, theft and unauthorized access associated with the collection of 

government remittances and protection of sensitive information. 

Debt Collection

The Debt Collection program recovers delinquent government and child support debt by 

providing centralized debt collection, oversight, and operational services to FPAs and 

states as required by the Debt Collection Improvement Act of 1996 (DCIA) and related 

legislation. 

In FY 2006, FMS collected a record $3.34 billion in delinquent debt, including $1.59 

billion in past due child support, $1.23 billion in federal non-tax debt, and more than 

$520 million in federal tax levies and state tax debt offsets. Debt referrals from creditor 

agencies were at 95 percent of eligible debt at the end of FY 2006. As a result of 

continued improvements to the program, collections have steadily increased to more than 

$27.7 billion since the enactment of the DCIA in 1996. In calendar year 2006, IRS 

referred an additional $47 billion of tax debts for continuous levy, a 25 percent increase 

from calendar year 2005. 

In FY 2008, FMS will continue to focus on incorporating all non-Treasury disbursed 

salary and vendor payments into FMS’ offset program for collecting delinquent debt. By 

FY 2008, Integrated FedDebt will combine the Cross-Servicing program and the 

Treasury Offset Program (TOP) into one system. This will reduce redundancies, improve 

data integrity, and provide direct on-line access to agencies. FMS will also continue to 

roll out Debt Check, FMS’ on-line program used to help agencies bar delinquent debtors 

from obtaining new loans or loan guarantees. 

Government-wide Accounting and Reporting

The Government-wide Accounting and Reporting program maintains the federal 

government’s books and accounts for its monetary assets and liabilities by operating and 

overseeing the government’s central accounting and reporting system. For the third 

consecutive year, FMS released the Financial Report of the United States Government

(FR) 75 days after the fiscal year-end. The FR presents a picture of government-wide 

finances that complements the traditional federal government budget information. It is 

invaluable when assessing the long-term impact of the government’s policy decisions and 

the timely availability of this additional information is critical to a fully informed budget 

process. To complement and support the accelerated release of the FR, Treasury 

continues to release the Monthly Treasury Statement (the monthly public source of 

budgetary results) on the eighth workday of each month. With this release schedule, 

agency financial managers are better able to verify and use the data in their own reports. 

In FY 2008, FMS will continue to revamp government-wide accounting processes to 

provide more useful and reliable financial information on a regular basis. FMS is 

FMS - 4 
building and implementing a system that replaces existing government-wide accounting 

functions and processes that vastly improves the exchange of financial information 

among FMS, Federal Program Agencies, OMB and the banking community. This project 

will improve the reliability, usefulness, and timeliness of the government’s financial 

information, provide agencies and other users with better access to that information, and 

will eliminate duplicate reporting and reconciliation burdens by agencies, resulting in 

significant government-wide savings. As part of the system redesign, FMS provides 

agencies with a web-based account statement resembling a bank statement, which 

contains summarized Treasury fund account balance activity. Once fully implemented, 

agencies will have daily direct access through a web-based system to the data supporting 

the items on the account statement for reconciliation and fund reclassification, rather than 

having to use multiple systems. Fund balance information will be available to agencies 

on a near real-time (one-day lag) basis. This will move the government one step closer to 

achieving its objective of producing financial information on a regular, recurring basis 

more quickly and reliably. 

FMS - 5 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

Appropriation: Salaries and Expenses FTE Amount

FY 2006 Appropriation (P.L. 109-115) 1818 $236,243

Rescission (P.L. 109-148) 0 $(2,362)

FY 2006 Enacted 1818 $233,881

FY 2007 President's Budget 1,761 $233,654

CR-rate Adjustment (362)

FY 2007 CR-rate 1,761 $233,292

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

Base Adjustment (2,043)

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 2,079

Pay Annualization 778

Pay Inflation Adjustment 4,829

Non-Recurring Costs:

Accounting Architecture (424)

Workstation Replacement (800)

Total FY 2008 Base 1,761 $237,711

Program Decreases:

Claims Contract Support (210)

Debt Fee Revenue (56) (5,250)

Government Financial Reporting System (GFRS) (533)

Government-wide Accounting and Reporting (400)

Payments Capital Investments (PCI) (920)

Realignment to Enhance Collections/Government-wide Accounting and 

Reporting (61) (4,700)

Program Reinvestment:

Realignment/Restructuring Study 2,000

Capital Assets Refresh 1,400

Enhancements to Collections/Government-wide Accounting and 

Reporting 48 3,700

Financial Information Reporting Standardization (FIRST) 2,393

Subtotal FY 2008 Program Changes (69) (2,520)

Total FY 2008 Request 1,692 $235,191

2A – Budget Increases and Decreases Description 

Adjustments ........................................................................................-$362,000 / +0 FTE 

CR-rate Adjustment -$362,000 / +0 FTE Adjustment from the FY 2007 President's 

Budget to reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Technical Adjustment to FY 2007 Base due to CR ......................-$2,043,000 / +0 FTE 

Base Adjustment -$2,043,000 / +0 FTE Technical adjustment to FY 2007 base due to CR 

Maintaining Current Levels (MCLs) ...........................................+$7,686,000 / +0 FTE 

Non-Pay Inflation Adjustment +$2,079,000 / +0 FTE Funds are requested for other nonlabor related items such as contracts, travel, supplies, equipment and GSA rent. 

FMS - 6 
Pay Annualization +$778,000 / +0 FTE Funds are requested for the FY 2008 cost of the 

January 2007 pay raise. 

Pay Inflation Adjustment +$4,829,000 / +0 FTE Funds are requested for the FY 2008 

pay raise. 

Non-Recurring Costs ......................................................................-$1,224,000 / +0 FTE 

Accounting Architecture -$424,000 / +0 FTE Funding has been identified in 

Government-wide Accounting and Reporting from prior year Accounting Architecture 

initiatives. 

Workstation Replacement -$800,000 / +0 FTE A portion of prior year funds from

Workstation Replacement initiatives. 

Program Decreases ....................................................................-$12,013,000 / -117 FTE 

Claims Contract Support -$210,000 / +0 FTE Funding from improvements in the 

payments claims activity, can be redirected to the Financial Information Reporting 

Standardization (FIRST) initiative. 

Debt Fee Revenue -$5,250,000 / -56 FTE As a result of projected increased debt 

revenues, FMS is able to redirect the remaining funds allocated to the debt collection 

activity without adversely impacting the program. 

Government Financial Reporting System (GFRS) -$533,000 / +0 FTE Funding identified 

in GFRS will be redirected to FIRST initiative. 

Government-wide Accounting and Reporting -$400,000 / +0 FTE As a result of 

efficiencies gained through modernization and a decreased requirement for contractor 

support for legacy applications, program funds in Government-wide Accounting and 

Reporting can be redirected. 

Payments Capital Investments (PCI) -$920,000 / +0 FTE Funding in the PCI project will 

be redirected. 

Realignment to Enhance Collections/Government-wide Accounting and Reporting -

$4,700,000 / -61 FTE Due to continued modernization of the Payments function by FMS 

there has been a major shift from routine transaction processing to highly complex 

analytical reviews of data and information relating to trend analysis, comparative 

analysis, error resolution and customer relationship management. Associated dollars and 

FTE from Payments can be realigned to Collections and Government-wide Accounting 

and Reporting which will more accurately reflect program requirements. 

FMS - 7 
Program Reinvestment ................................................................+$9,493,000 / +48 FTE 

Realignment/Restructuring Study +$2,000,000 / +0 FTE As part of its strategic planning 

process and to ensure continued success in meeting key mission performance measures, 

FMS senior leadership identified challenges and proposed to find solutions through a 

dynamic and continuous review of operations. All aspects of the organization have been 

scrutinized including successes, funding constraints, management, data operations, work 

flow processes, personnel, skill sets and peripheral issues such as physical site locations. 

Funding is requested to examine the functional distribution of key operations and 

physical location of employees, capital assets and other property. FMS will relocate and 

transfer the Hyattsville Regional Operation Center data center functions to the Kansas 

City Regional Operations Center (KROC). The primary benefit is improved safety of 

FMS employees, garnered by separating primary data center and platforms from

operational activities at the Prince George’s Metro Complex to a more secure location. 

Improved national security, continuity of operations and disaster recovery will be 

possible by reestablishing critical applications, some which are part of the National 

Critical Infrastructure. The transfer of functions and capital assets to KROC will allow 

FMS to avoid significant salary and benefit costs through a reduction in FTE in FY 2010, 

and reduced contractor and electrical costs. 

KROC is a logical and intelligent choice as a primary computer operations center. It 

currently runs several applications on a production basis while serving as the primary 

FMS back-up site. FMS examined how it conducts business, including where the work is 

best done, opportunities to consolidate like functions, and how to perform the work 

better. This initiative is fully funded with redirects from Debt Fee Revenue. 

Capital Assets Refresh +$1,400,000 / +0 FTE FMS needs to “refresh” its capital assets to 

maintain a healthy and viable enterprise information technology infrastructure. These 

assets host system applications that support the National Critical Financial Infrastructure 

and support FMS' mission. Therefore, FMS must ensure that its systems, assets and 

software are reliable as they are used to issue close to a billion payments a year valued at 

$1.5 trillion and to collect information to calculate the daily cash position and the cash 

forecasting needs of the United States Treasury. Properly maintaining the existing 

information technology infrastructure allows FMS the flexibility to create systems such 

as the Payment Application Modernization (PAM) and Financial Information Reporting 

Standardization (FIRST), which will have the ability to provide for government-wide 

savings. FMS will have efficiencies as fewer but more powerful hardware replaces 

existing hardware as part of the relocation of the FMS data center to Kansas City 

Regional Operations Center (KROC). FMS, using the Strategic Asset Management 

Model, has identified the level at which its assets should be maintained in order to be 

effective. Funds will be used to upgrade equipment for the FMS data center relocation to 

KROC. FMS will continuously analyze its current capital assets and non-capital 

inventory to determine required investment needed to ensure a strong, dependable 

enterprise infrastructure. FMS’ IT capital assets and non-capital inventory will be 

maintained in excellent condition, providing a reliable and stable enterprise for FMS and 

its customers. This initiative is fully funded with redirects from Debt Fee Revenue. 

FMS - 8 
Enhancements to Collections/Government-wide Accounting and Reporting +$3,700,000 / 

+48 FTE FMS’ continued modernization of the payments function has resulted in a 

major shift from routine transaction processing to highly complex analytical reviews of 

data and information relating to trend analysis, comparative analysis, error resolution and 

customer relationship management. Associated dollars and FTE from Payments can be 

realigned to Collections and Government-wide Accounting and Reporting which will 

more accurately reflect program requirements. 

Financial Information Reporting Standardization (FIRST) +$2,393,000 / +0 FTE FIRST 

integrates budget and financial reports from Federal Program Agencies. It will improve 

the integrity of information by validating data and balances against FMS’ central 

accounting system. This investment will move FMS closer to achieving its strategic goal 

of producing accurate, accessible and timely government-wide financial information and 

reports that contribute to improved quality of the nation’s financial decision making. 

FIRST will accomplish this by: 

• Making the United States Standard General Ledger accessible to a wider audience 

and easier to use through an interactive database on the Internet. 

• Combining five current FMS stovepipe accounting data collection systems into one 

quarterly submission. 

• Improving the accuracy, consistency and timeliness of agency reporting by validating 

the agency data and balances against authoritative balances in FMS’ central 

accounting system. 

Consistent reporting is required for central managers to make good decisions and crucial 

to attaining FMS’ strategic goal of facilitating the achievement of a clean audit opinion 

on the Financial Report of the United States Government (FR). 

The government-wide savings expected when the project is fully completed in FY 2011 

is conservatively estimated by FMS at $31 million annually. If FMS does not build 

FIRST, the five current reporting systems will need upgrading to comply with FMS’ 

enterprise architecture, at significant cost without improving functionality. 

Funds for FIRST will be redirected from the following: $533,000 from Government 

Financial Reporting System (GFRS), $1,650,000 from Debt Fee Collection Revenue, and 

$210,000 from Claims Contract Support. 

FMS - 9 
2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: FMS Salaries & Expenses FY 2006

Enacted

FY 2007

President's 

Budget

CR-rate

Adjustment

FY 2007

CR-rate

Proposed

Reprogra

mmings

FY 2007

Proposed

Operating 

Level

FY 2008

Requested

Level

FTE 1,818 1,818 1,818 1,818 1,692

Object Classification:

11.1 Full-Time Permanent Positions..................... $117,054 $117,054 $117,054 $117,054 $118,955

11.1 Other than Full-Time Permanent Positions.... 1,500 1,500 1,500 1,500 1,500

11.5 Other Personnel Compensation.................... 2,500 2,500 2,500 2,500 3,000

11.8 Special Personal Services Payments............ 0 0 0 0 0

11.9 Personnel Compensation (Total)............... 121,054 121,054 121,054 $0 $121,054 $123,455

12.0 Personnel Benefits........................................ 25,950 26,000 26,000 26,000 26,200

13.0 Benefits to Former Personnel........................ 175 175 175 175 175

21.0 Travel............................................................ 1,553 1,553 1,553 1,553 1,603

22.0 Transportation of Things............................... 195 195 195 195 195

23.1 Rental Payments to GSA.............................. 14,950 14,900 14,900 14,900 13,500

23.2 Rent Payments to Others.............................. 365 365 365 365 365

23.3 Communications, Utilities, & Misc................. 12,658 12,858 12,858 12,858 12,569

24.0 Printing and Reproduction............................. 700 700 700 700 500

25.1 Advisory & Assistance Services.................... 4,750 4,750 4,750 4,750 4,800

25.2 Other Services.............................................. 22,157 22,443 (362) 22,081 22,081 22,081

25.3 Purchase of Goods/Serv. from Govt. Accts... 6,000 6,000 6,000 6,000 7,037

25.4 Operation & Maintenance of Facilities........... 950 1,000 1,000 1,000 1,000

25.5 Research & Development Contracts............. 0 0 0 0 0

25.6 Medical Care................................................. 0 0 0 0 0

25.7 Operation & Maintenance of Equipment........ 7,500 7,500 7,500 7,500 7,500

25.8 Subsistence & Support of Persons................ 0 0 0 0

26.0 Supplies and Materials.................................. 4,250 4,250 4,250 4,250 4,300

31.0 Equipment..................................................... 10,149 9,386 9,386 9,386 9,386

32.0 Lands and Structures.................................... 475 475 475 475 475

33.0 Investments & Loans....................................

0

. 0 0 0 0

41.0 Grants, Subsidies.........................................

0

. 0 0 0 0

42.0 Insurance Claims & Indemn.......................... 50 50 50 50 50

43.0 Interest and Dividends...........................

0

... 0 0 0 0

44.0 Refunds........................................................

0

. 0 0 0 0

Total Budget Authority....................................

0

... $233,881 $233,654 ($362) $233,292 $0 $233,292 $235,191

Budget Activities:

Payments...................................................... $144,135 $147,358 $147,130 $147,130 $146,465

Collections...................................................... 16,931 17,396 17,367 17,367 19,869

Debt Collection................................................ 10,162 5,250 5,250 5,250 0

Government-wide Accounting and Reporting......... 62,653 63,650 63,545 63,545 68,857

Total Budget Authority....................................... $233,881 $233,654 ($362) $233,292 $0 $233,292 $235,191

FMS - 10 
2B – Appropriation Language 

Appropriations Language Explanation of Changes

 

DEPARTMENT OF THE TREASURY

FINANCIAL MANAGEMENT SERVICE 

 

Federal Funds 

 

Salaries and Expenses

For necessary expenses of the Financial Management 

Service, $235,191,000, of which not to exceed 

$9,220,000 shall remain available until September 30, 

2010, for information systems modernization initiatives;

and of which not to exceed $2,500 shall be available for 

official reception and representation expenses. 

 

 

2B – Permanent, Indefinite Appropriations 

Federal Reserve Bank Permanent, Indefinite Appropriation

The Federal Reserve Banks (FRBs) act as fiscal agents of the United States when directed 

by the Secretary of the Treasury in accordance with 12 United States Code (U.S.C.) 391. 

The FRBs support the fiscal operations and provide banking and financial services on 

behalf of the Treasury of the United States. The Federal Reserve Reimbursement and 

Fiscal Responsibility Act of 1997 amended section 3302 (f) of title 31, U.S.C. and 

provided a permanent and indefinite appropriation of amounts necessary to pay the FRBs 

for the services they provide as fiscal agents on behalf of the Treasury. Since the FRBs 

support each FMS program activity, the performance measures listed in the Salaries and 

Expense section of this budget apply to the work done by the FRBs. FMS estimates that 

the cost of FRB services for FY 2008 will be approximately $295 million. 

Financial Agent Services Permanent, Indefinite Appropriation

Congress has given the Secretary of the Treasury longstanding, broad discretion to 

deposit money in financial institutions and to obtain banking services by designating 

financial institutions to act/serve as Financial Agents of the United States Government. 

The services are in support of such programs as EFTPS, the Lockbox Networks, plastic 

cards, e-commerce systems, and CA$HLINKII, a deposit reporting and cash 

concentration system. These and other programs are vital to FMS’ Strategic Goals, the 

FMS - 11 
government’s financial critical infrastructure, and the President’s emphasis on expanding 

E-Government. The services provided by such financial institutions are authorized under 

numerous statutes including, but not limited to, 12.U.S.C. 90 and 265. 

In FY 2004, Treasury received a permanent indefinite appropriation to pay for these 

services. FMS estimates that the cost of Financial Agent services for FY 2008 will be 

approximately $426 million. Of this amount, agencies provide approximately $40 

million in reimbursements to FMS, which is deposited into the General Fund. 

2.3 – Permanent, Indefinite Appropriations Table 

FY 2006 FY 2007 FY 2008

Enacted CR-rate Request

Federal Reserve Bank $220,000 $245,000 $295,000

Financial Agent Services $322,000 $311,000 $426,000

Table 2.3

Permanent, Indefinite Appropriations

(Dollars in Thousands)

Permanent, Indefinite Appropriation

2C – Legislative Proposals 

Payment Transaction Integrity - - Allow the federal government to trace and 

recover federal payments sent electronically to the wrong account. The proposal, 

which amends 12 U.S.C. 3413, revises an existing exception to the Right to Financial 

Privacy Act so that improper electronic payments and improperly negotiated Treasury 

checks can be traced and recovered. This revision will also permit the federal 

government to verify that the correct party is making electronic payments to or receiving 

electronic payments from the government.

Estimated collections: $273 million the first year, $3.105 billion over ten years. 

Eliminate the Ten-Year Limitations Period on Offset -- This proposal would eliminate 

the ten-year limitation on the collection of delinquent non-tax federal debts by 

administrative offset. Delinquent debts could be collected by offset without regard to any 

statutory, regulatory or administrative limitation on the period within which debts may be 

collected. The proposed change would allow for the collection by offset of other federal 

debts consistent with the current law for student loans. 

Estimated collections: $11 million the first year, $65 million over ten years. 

FMS - 12 
Assessment of the Transaction Costs for the Referral of Tax Debts from the IRS to 

the Financial Management Service for Debt Collection Levy -- Under current law, when 

the Internal Revenue Service (IRS) levies a federal payment to collect a delinquent tax debt under 

the Federal Payment Levy Program operated by the FMS, the IRS pays a fee out of its annual 

appropriation to FMS to process the transaction. The budget proposes to instead have the debtor 

pay the transaction costs in addition to their original debt. This would allow the IRS to fully

utilize the levy program, maximize revenue, and shift the cost of enforcement to delinquent tax 

debtors. 

Estimated collections: This proposal is budget neutral over ten years as the increased collections 

from the public (i.e., the debtors) offsets the increased direct spending for FMS for the 

administration of the debt collection program. 

Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Payments 1,173 $144,135 1,016 $142,979 1,173 $147,358 1,173 $147,130 1,112 $146,465 -5.20% -0.45%

Collections 113 16,931 136 18,291 113 17,396 113 $17,367 137 19,869 21.24% 14.41%

Debt Collection 113 10,162 47 5,393 113 5,250 56 5,250 0 0 -100.00% -100.00%

Gov. Accounting and Reporting 419 62,653 405 67,338 419 63,650 419 63,545 443 68,857 5.73% 8.36%

Subtotal New Appropriated Resources 1,818 $233,881 1,604 $234,001 1,818 $233,654 1,761 $233,292 1,692 $235,191 -3.92% 0.81%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 320 $167,770 373 $183,363 320 $196,282 370 $196,282 428 $215,179 15.68% 9.63%

Available multi-year/no-year funds

Transfers In/Out

Subtotal Other Resources 320 $167,770 373 $183,363 320 $196,282 370 $196,282 428 $215,179 15.68% 9.63%

Total Resources Available for Obligation 2,138 $401,651 1,977 $417,364 2,138 $429,936 2,131 $429,574 2,120 $450,370 -0.52% 4.84%

% Change

Enacted CR-rate to FY 2008

FY 2007

Resources Available for Obligation

FY 2006 FY 2006 FY 2007 FY 2008

Obligations Request

FY 2007

President's Budget

3A – Payments ($146,465,000 from direct appropriations and $137,849,000 from 

reimbursable programs): The Payments activity issues and distributes payments, 

develops and implements federal payment policy and procedures, promotes the use of 

electronics in the payment process, and assists agencies in converting payments from

paper checks to Electronic Funds Transfer (EFT). This activity controls and provides 

financial integrity to the payments process through reconciliation, accounting and claims

activities. The claims activity settles claims against the United States resulting from

federal government checks which have been forged, lost, stolen or destroyed, and collects 

monies from those parties liable for fraudulent or otherwise improper negotiation of 

government checks. It also includes processing claims and reclamations for EFT 

payments. In FY 2006, FMS issued over 964 million non-Defense payments, with a 

dollar value of approximately $1.5 trillion and 77 percent of these transactions were 

issued by EFT, an increase of one percent over FY 2005. 

FMS continues to expand and market the use of electronic media to deliver federal 

payments, improve service to payment recipients, and reduce government program costs. 

This helps decrease the number of paper checks issued and minimize costs associated 

FMS - 13 
with postage, the re-issuance of lost, stolen and misplaced checks, and inefficiencies 

associated with the non-electronic delivery of benefits. 

Direct deposit offers payment recipients ease and convenience, and protects against fraud 

and identity theft. Direct deposit also generates significant cost savings to the 

government over paper checks. Each payment converted from paper to direct deposit 

saves the taxpayer about 80 cents per transaction. However, FMS faces challenges in 

increasing growth in electronic payments. The direct deposit growth rate for federal 

benefit payments has leveled off from increases in the late 1990s. As the government 

prepares for the huge increase in retiring baby boomers in the near future, it is critical that 

FMS reverse this trend. To increase the use of direct deposit for federal benefit 

payments, FMS began a nationwide campaign called “Go Direct” to encourage current 

check recipients to switch to direct deposit. The goal for the first year of the campaign 

was to convert approximately half a million check recipients to direct deposit, and the 

campaign, in fact, exceeded that goal, savings millions of dollars for the United States 

Treasury in the years to come. In addition, FMS is implementing a pilot program in FY 

2007, which is directed at the un-banked, to disburse benefit payments through debit 

cards. FMS is also developing plans (entitled Universal Direct Deposit) which will 

require at some future date all newly enrolled beneficiaries to receive payments 

electronically unless they do not have a bank account. 

In support of its payments function, FMS has also undertaken considerable efforts to 

modernize its payment systems, incorporating new technologies and the internet. Some

programs that will continue to be in focus are: 

• Stored Value Card (SVC): This is a smartcard, similar to a credit/debit card, using an 

encrypted computer chip to process "electronic money" stored on the card. This 

program is aimed at reducing the float-loss associated with the more than $2 billion in 

coin and currency in circulation at military bases, ships at sea, and other closed 

government locations around the world. From 1997 to the end of FY 2006, over 5.5 

million Electronic Funds Transfer transactions representing a dollar value in excess of 

$816 million were processed via the SVC programs. 

• Payments Application Modernization (PAM): This is an FMS effort in coordination 

with the Federal Reserve Bank of Kansas City to modernize the current mainframebased software applications that are used to disburse approximately one billion 

federal payments worth over $1.5 trillion annually. PAM involves replacing over 30 

COBOL and Assembler applications that have evolved over the last several decades, 

with a single standardized application. Additionally, new and enhanced functionality 

will be incorporated to support improvements in the payment process. 

• ASAP.gov (Automated Standard Application for Payments): This is a web-based 

system built by FMS in coordination with the Federal Reserve Bank of Richmond. 

Through this all electronic grants payment system organizations including states, 

universities, for-profits, and non-profits receive federal funds from accounts preauthorized by Federal agencies. ASAP is one of two systems authorized by the Chief 

Financial Officer’s Council to disburse civilian grant payments on behalf of program

FMS - 14 
agencies. Eighteen federal agencies use ASAP.gov and total FY 2006 disbursements 

to organizations were $425 billion. FMS expects disbursements through ASAP.gov 

to increase dramatically with the addition of new agencies. 

• Treasury Check Information System (TCIS): This new web-based system was 

designed by Federal Reserve Bank of Philadelphia using commercial off the shelf 

software products. In June 2006, TCIS replaced the outdated Check Payment and 

Reconciliation System. It provides FMS with an electronic office environment for 

check activities including the reconciliation of more than 220 million check payments 

and the processing of over 1.5 million claims inquiries per year. Agencies are now 

able to access on-line both check and Automated Clearinghouse payment information 

through TCIS, and no longer have to use two systems to obtain this information. 

Other Resources:

Offsetting collections and reimbursements totaling $137,849,000 are collected for 

disbursement of federal agency payments to beneficiaries, including Social Security 

payments, Railroad Retirement Board payments, tax refunds and the Department of 

Veterans Affairs benefit payments. 

3.2.1 – Payments Budget and Performance Plan 

Dollars in Thousands 

Payments Budget Activity Includes Strategic Objective F4C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $136,534 $141,287 $144,135 $147,358 $146,465

 Other Resources 115,188 132,845 127,085 135,031 137,849

Total Operating Level $251,722 $274,132 $271,220 $282,389 $284,314

Human Resources

 Appropriated FTE 1,173 1,173 1,173 1,173 1,112

 Other FTE 39 39 43 40 41

Total FTE (direct and reimbursable) 1,212 1,212 1,216 1,213 1,153

Payments Budget Activity Includes Strategic Objective F4C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 75% 76% 78% 78% 79%

Actual 75% 76% 77%

Percentage of Treasury Payments and 

associated information made electronically (%) 

(Oe) Met Yes Yes No

Target 100% 100% 100% 100% 100%

Actual 100% 100% 100%

Percentage of paper check and Electronic Funds 

Transfer (EFT) payments made accurately and 

on time (%) (Oe) Met Yes Yes Yes

Target Baseline $0.35 $0.35 $0.39 $0.39

Actual $0.35 $0.36 $0.37

Unit cost for Federal Government payments ($) 

(E) 

Met Yes No No

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: FMS disburses 85 percent of the federal government's

payments to a wide variety of recipients, such as those who receive Social Security 

FMS - 15 
Administration payments, Internal Revenue Service tax refunds, and the Department of 

Veterans Affairs benefits. In FY 2006, FMS issued over 964 million non-Defense 

payments, with a dollar value of approximately $1.5 trillion. Seventy seven percent of 

these transactions are issued by Electronic Funds Transfer, an increase of one percent 

over FY 2005. Paper checks account for the remainder of disbursements. 

3B – Collections ($19,869,000 from direct appropriations): The Collections activity 

collects revenues needed to operate the federal government through the management of 

the federal government’s collections infrastructure. FMS collected approximately $2.9 

trillion in FY 2006 through a network of more than 9,000 financial institutions. It also 

manages the collection of federal revenues such as individual and corporate income tax 

deposits, customs duties, loan repayments, fines and proceeds from leases. FMS 

establishes and implements collection policies, regulations, standards and procedures for 

the federal government. The majority of dollar collections are made electronically - 79 

percent for FY 2006, a 10 percent increase over 2005. 

FMS develops and operates a variety of collection mechanisms and systems to meet 

program agency needs. It has initiated a comprehensive effort to streamline, modernize 

and improve the processes and systems supporting Treasury’s collections and cash 

management program. It continues to promote the use of electronics in the collections 

process and assist agencies in converting collections from paper to electronic media with 

programs such as: 

• Electronic Federal Tax Payment System (EFTPS): This is an accurate, secure and 

convenient way to pay all federal tax payments, including corporate, excise and 

employment taxes and 1040 quarterly estimated taxes via the internet or a telephone 

voice response system. EFTPS processes 95 percent of United States tax dollars and 

is required for businesses with annual federal tax obligations above $200,000. FMS 

is also working to communicate the benefits of EFTPS – accuracy, security, 

simplicity and flexibility – to financial institutions, small businesses and tax 

practitioners. The goal is to encourage businesses and individuals to pay their federal 

taxes electronically through EFTPS rather than by using paper Federal Tax Deposit 

coupons, which number close to 38 million. FMS is also partnering with the state of 

Illinois in a pilot program between the Illinois Department of Revenue, FMS and the 

Internal Revenue Service. The program marks the first time business taxpayers can 

make state withholding tax deposits through EFTPS Online at the same time as their 

federal payments with a single PIN and password. Illinois is also examining whether 

making EFTPS available for state taxpayers will improve the efficiency of the state 

tax collection system. Results of this pilot will be used to help the Treasury 

Department determine whether to expand this service to other states and to add other 

state taxes for payment through EFTPS. The first phase of the EFTPS state pilot 

program officially was launched on January 11, 2007 in Chicago. 

FMS - 16 
• Pay.gov: This is a government collection portal that provides a single platform for EGovernment services and allows citizens, businesses and federal agencies to conduct 

business via the internet. Pay.gov provides collections, form submittal, bill 

presentment, authentication and agency financial reporting services. Since inception, 

it has processed approximately 14.4 million transactions valued at over $52 billion. 

Pay.gov responds to the increasing demands of consumers and businesses for 

electronic alternatives by providing the opportunity to complete forms and 

applications, make payments, and submit queries on-line 24 hours a day, 7 days a 

week. Pay.gov, which has been implemented with 95 federal agencies representing 

286 cashflows, collected $29.5 billion in FY 2006. 

• Paper Check Conversion Over-the-Counter System (PCC-OTC): This 

program/service converts paper checks into Electronic Funds Transfers (EFT) debits 

against the check writer’s bank account. PCC is being used at over the counter 

locations for agency deposits. As of October 2006, PCC-OTC processed more than 

6.6 million items representing more than $6.3 billion. Beginning in April 2005, the 

PCC system implemented “Check 21” functionality that allows for the image 

truncation and image clearing of negotiable instruments that cannot be converted into 

EFT debits. 

• Electronic Check Processing (ECP): This is a service that processes all paper checks 

received at a financial agent lockbox within the General Lockbox Network. The 

system has the capacity to either convert a check to an EFT debit transaction or 

truncate the check into an image document under the auspices of Check 21. It 

provides a government-wide enterprise solution for imaging checks and remittance 

forms and a central repository for agencies to access their check transactions via a 

secure internet site. While similar to the Paper Check Conversion/Over the Counter 

system, ECP is recognized as a separate service because it requires different 

technology to process a higher volume of transactions and larger files from financial 

institutions, relative to the lower volumes processed over-the-counter at federal 

agencies. 

3.2.2 – Collections Budget and Performance Plan 

Dollars in Thousands 

Collections Budget Activity Includes Strategic Objectives F4A, F4B, and F4C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $16,426 $16,693 $16,931 $17,396 $19,869

 Other Resources 15,162 3,500 0 0 0

Total Operating Level $31,588 $20,193 $16,931 $17,396 $19,869

Human Resources

 Appropriated FTE 113 113 113 113 137

 Other FTE 0 0 0 0 0

Total FTE (direct and reimbursable) 113 113 113 113 137

FMS - 17 
Collections Budget Activity Includes Strategic Objectives F4A, F4B, and F4C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 81% 82% 83% 80% 81%

Actual 81% 79% 79%

Percentage collected electronically of total dollar 

amount of Federal government receipts (%) (Oe)

Met Yes No No

Target Baseline $1.4 $1.37 $1.33 $1.3

Actual $1.4 $1.2 $1.1

Unit cost to process a Federal revenue collection 

transaction ($) (E) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: FMS collected approximately $2.9 trillion in FY 2006 

through a network of more than 9,000 financial institutions. It also manages the 

collection of federal revenues such as individual and corporate income tax deposits, 

customs duties, loan repayments, fines, and proceeds from leases. FMS establishes and 

implements collection policies, regulations, standards and procedures for the federal 

government. FMS develops and operates a variety of collection mechanisms and systems 

(e.g. Electronic Federal Tax Payment System, lockboxes, Treasury General Accounts, 

debit/credit cards, and Pay.gov) to meet program agency needs. The majority of the 

dollar amounts of FMS collections are made electronically; 79 percent for FY 2006. 

FMS continues to promote the use of technology in the collections process and assists 

agencies in converting collections from paper to electronic media. 

3C – Debt Collection ($77,330,000 from reimbursable programs): The Debt Collection 

activity collects delinquent government and child support debt by providing centralized 

debt collection, oversight and operational services to Federal Program Agencies and 

states as required by the Debt Collection Improvement Act of 1996 and related 

legislation. The services include, but are not limited to, collecting delinquent debts 

through cross-servicing and offsetting federal payments, providing a database for use as a 

tool for barring delinquent debtors, providing post-judgment collection, advising and 

educating agencies towards improving debt management, and referrals to the Department 

of Justice. 

 FMS collects delinquent debt through two major programs: the Treasury Offset Program

(TOP) and cross-servicing. The Treasury Offset Program compares the names and 

Taxpayer Identifying Numbers (TINs) of debtors with the names and TINs of recipients 

of federal payments. If there is a match, the federal payment is reduced, or “offset,” to 

satisfy the overdue debt. 

Cross-servicing activities are conducted through FedDebt, a comprehensive system that 

replaced FMS’ prior cross-servicing system in October 2005. Cross-servicing includes 

applications for various collection tools such as offset, demand letters to debtors, 

repayment agreements, administrative wage garnishment, referrals to the Department of 

Justice, credit bureau reporting, reporting discharged debts to the Internal Revenue 

Service (IRS), and use of private collection agencies. 

In 2005, FMS implemented the initial phase of FedDebt. Future releases will integrate 

the Treasury Offset Program and cross-servicing into FedDebt, which will provide 

FMS - 18 
federal program agencies with batch and on-line capabilities for all users via a single 

sign-on interface and will employ a common file format for remitting cross-servicing or 

TOP debts. FedDebt provides increased flexibility; increased automation among a 

number of processes currently handled manually, and improved system access for federal 

agency customers and service partners. It allowed FMS to transfer a major portion of its 

debt collection functions performed in the Washington, D.C. area to the Birmingham

center in FY 2006 which has consolidated functions, streamlined operations, and reduced 

costs. FMS will continue development of FedDebt, making it more user-friendly by 

replacing the existing TOP program and enhancing applications to provide better service 

to agencies that refer debts for collection. 

FMS is working to incorporate additional payment types into the payment offset and levy 

programs. This effort is directed primarily at increasing collections of debt, especially 

tax debt owed by contractors and vendors. In addition, FMS will continue to promote 

and roll out Debt Check, its on-line database used to assist agencies in barring delinquent 

debtors from obtaining new loans or loan guarantees. 

3.2.3 – Debt Collection Budget and Performance Plan 

Dollars in Thousands 

Debt Collection Budget Activity Includes Strategic Objective F4A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $14,696 $9,855 $10,162 $5,250 $0

 Other Resources 31,049 33,675 40,185 61,251 77,330

Total Operating Level $45,745 $43,530 $50,347 $66,501 $77,330

Human Resources

 Appropriated FTE 113 113 113 56 0

 Other FTE 268 273 273 330 387

Total FTE (direct and reimbursable) 381 386 386 386 387

Debt Collection Budget Activity Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $36.4 $36.5 $36.75

Actual $36.23 $39.97

Amount of delinquent debt collected per $1 

spent ($) (E) 

Met No Yes

Target $2.9 $3 $3.1 $3.2 $3.25

Actual $3 $3.25 $3.34

Amount of delinquent debt collected through all 

available tools (Billions $) (Ot)

Met Yes Yes Yes

Target 90% 92% 93% 94% 95%

Actual 99% 97% 95%

Percentage of delinquent debt referred to FMS 

for collection compared to amount eligible for 

referral (%) (Ot) Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: In FY 2006, FMS collected a record $3.34 billion in 

delinquent debt, including $1.59 billion in past due child support, $1.23 billion in federal 

non-tax debt, and more than $520 million in federal tax levies and state tax debt offsets. 

Debt referrals from creditor agencies were at 95 percent of eligible debt at the end of FY 

2006. As a result of our continued improvements to the program, collections have 

FMS - 19 
steadily increased to more than $27.7 billion since the enactment of the Debt Collection 

Improvement Act in 1996. In calendar year 2006, IRS referred an additional $47 billion 

of tax debts for continuous levy, a twenty-five percent increase from calendar year 2005 

for the same period. 

3D – Government-wide Accounting and Reporting ($68,857,000 from direct 

appropriations): The Government-wide Accounting and Reporting activity maintains the 

federal government’s books and accounts for its monetary assets and liabilities by 

operating and overseeing the government’s central accounting and reporting system. It 

also works with federal agencies to adopt uniform accounting and reporting standards and 

systems and provides support, guidance and training to assist Federal Program Agencies 

(FPAs) in improving their government-wide accounting and reporting responsibilities. 

FMS gathers and publishes government-wide financial information which is used in 

establishing fiscal and debt management policies and is also used by the public and 

private sectors to monitor the government’s financial status. These publications include: 

the Daily Treasury Statement, the Monthly Treasury Statement, the Treasury Bulletin, the 

Combined Statement of the United States Government, and the Financial Report of the 

United States Government (FR). 

FMS is building and implementing a system to improve the exchange of financial 

information among FMS, FPAs, Office of Management and Budget (OMB) and the 

banking community. Once completed, this Government-wide Accounting (GWA) 

Modernization Project will comprehensively replace current government-wide 

accounting functions and processes that are both internal and external to FMS. It will 

improve the reliability, usefulness, and timeliness of the government’s financial 

information, provide FPAs and other users with better access to that information, and will 

eliminate duplicate reporting and reconciliation burdens by agencies. In addition, FPAs 

will have better tools for reporting financial information and access to daily account 

statements for monitoring the status of their financial information at the Treasury 

Department. This initiative will result in significant savings throughout government as 

agencies will no longer have to prepare month-end reports classifying all of their 

disbursement and collection transactions or performing reconciliations on statements of

differences associated with this month-end reporting. 

FMS is taking significant steps in an attempt to address the material weaknesses found in 

the compilation process of Financial Report (FR) of the United States Government, 

including: 

• Requiring comprehensive accounting data from agencies on a quarterly basis that will 

allow FMS to better analyze the data for consistency and completeness. 

• Providing agencies with authoritative data to reconcile inter-agency transfers and 

other transactions that agencies report to the central accounting system. 

• Using the Chief Financial Officers (CFO) Council, Treasury Reporting Group as a 

forum to discuss these accounting and reporting issues that affect the FR. 

FMS - 20 
• Working with the CFO Council and OMB to develop more consistent business rules 

for intra-governmental transactions. 

• Encouraging greater auditor participation by requiring agency auditors to more 

closely scrutinize intra-governmental out-of-balance conditions with other agencies. 

The goal of these actions is to remove the compilation process as a barrier to a clean audit 

opinion for the FR. 

3.2.4 – Government-wide Accounting and Reporting Budget and Performance Plan 

Dollars in Thousands 

Government-wide Accounting and 

Reporting Budget Activity

Includes Strategic Objective F4D

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $59,554 $61,248 $62,653 $63,650 $68,857

 Other Resources 500 500 500 0 0

Total Operating Level $60,054 $61,748 $63,153 $63,650 $68,857

Human Resources

 Appropriated FTE 419 419 419 419 443

 Other FTE 4 4 4 0 0

Total FTE (direct and reimbursable) 423 423 423 419 443

Government-wide Accounting and Reporting 

Budget Activity

Includes Strategic Objective F4D

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 100% 100% 100% 100% 100%

Actual 100% 100% 100%

Percentage of government-wide accounting 

reports issued accurately (%) (Oe) 

Met Yes Yes Yes

Target 100% 100% 100% 100% 100%

Actual 100% 100% 100%

Percentage of government-wide accounting 

reports issued timely (%) (E) 

Met Yes Yes Yes

Target Baseline $10.69 $12.88

Actual $8.5

Unit Cost to Manage $1 Million Dollars of Cash 

Flow

Met Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: FMS issues 100 percent of its Government-wide 

accounting reports issued accurately and timely. For the third consecutive year, FMS 

released the Financial Report of the United States Government (FR) 75 days after the 

fiscal year-end. FMS established a new measure, “Unit cost to manage $1 million of 

cash flow”, which will begin in FY 2007. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

FMS - 21 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 1,645 1,604 1,761

Increases:

Reason #1

Normal Accession

164 65

Reason #2: Adjustment from actual to

budgeted 188

Subtotal, Increases 164 253 0

Decreases:

Reason #1: Normal Attrition -116

Reason #2: Reduction due to buyout -40 -39

Reason #3: Redirection of FTE to 

Reimbursable/Debt fund -49 -57 -56

Reason #4:

Reduction of FTE due to 

modernization of the payments 

function -13

Subtotal, Decreases -205 -96 -69

Year-end Actual/Estimated FTEs 1,604 1,761 1,692

Net Change from prior year SOY to budget year EOY 88

4A – Human Capital Strategy Description 

The Financial Management Service’s strategic management of human capital is 

consistent with its mission, vision and priorities supporting the President’s Management 

Agenda, and Treasury’s strategic goal to Manage the United States Government’s 

Finances Effectively. 

FMS is on the technology forefront in the performance of its mission. It has taken steps 

to improve the quality of its professional workforce. A Human Capital Strategic Plan has 

been developed to identify current structure weaknesses and build upon its strengths. 

Achieving the following objectives will support and strengthen its work force: 

• Strategic Alignment: A human capital strategy is aligned with mission, goals, 

organizational objectives and integrated into its strategic plans, performance plans 

and budgets. 

• Workforce Planning & Deployment: FMS is citizen-centered, delayered, missionfocused, and leverages E-Government and competitive sourcing. 

• Leadership & Knowledge Management: Leaders and managers effectively manage 

people, ensure continuity of leadership, and sustain a learning environment that drives 

FMS - 22 
continuous improvement in performance. Succession strategies result in a diverse 

leadership talent pool that is continually updated. 

• Results-Oriented Performance Culture: FMS has a diverse, results-oriented, high 

performance workforce, a performance management system and awards program that 

effectively differentiates between high and low performance. It holds employees 

accountable, links individual/team/unit performance to organizational goals and 

desired results. 

• Diversity: Under-representation is addressed, particularly in mission-critical 

occupations and leadership positions and processes are in place to sustain diversity. 

• Talent: FMS has significantly reduced mission-critical skills, knowledge and 

competency gaps. FMS is making significant progress and demonstrates continued 

improvement in meeting agreed-upon hiring timeline goals, i.e., the 45-day hiring 

model. 

• Accountability: Human capital decisions are guided by a data-driven results-oriented 

planning and accountability system. 

Through these objectives FMS has strengthened its human capital position. Proactive 

identification and filling of vacant positions is a part of recruiting and retaining new 

talent. Delegated Examination and student intern program authorities are used 

extensively to attract talent from some of the best colleges and universities. 

FMS has action plans to attain and maintain the right number of people with the right 

skills to accomplish the mission. It continually manages the ongoing challenge of 

recruiting and retaining highly skilled individuals in critical areas, including Accountants 

(with strong analytical skills) and IT Specialists. These challenges have increased with 

heightened competition from the private sector. In addition, there is ongoing position 

management and assessment of FTE distribution. As vacancies occur, they are reviewed 

and back-filled or the FTE is redirected as appropriate. This is how FMS counters the 

possibility of either a surplus or deficiency of staff in certain job occupations. 

Through FY 2010, 29 percent of FMS’ current employees are eligible for Optional 

Retirement and 47 percent are eligible for Discontinued Service or Early Retirement. 

Strategies are in place to close skill-gaps and fill staffing requirements in mission-critical 

occupations. This includes use of all available pay incentives within budget constraints 

(e.g., Recruitment and Retention Incentives) and specialized employee development 

programs: SES Candidate Development, Project Management Certification, Management 

Preparatory Development, Federal Career Intern Program, Leadership, and Mentoring. 

Another strategy to manage staffing needs is use of contractors and/or outsourcing. FMS 

supplements its workforce with contractors in security, building maintenance, IT support 

and various finance functions provided by the Bureau of the Public Debt. Financial 

FMS - 23 
institutions and Federal Reserve Banks serve as financial and fiscal agents of the 

Treasury Department in providing banking, payment and other financial services to FMS. 

 

FMS believes that a diverse workforce is vital to achieve its mission. It monitors 

recruitment and diversity goals to improve areas of under-representation and actively 

supports programs and initiatives to recruit minority college students. The following 

programs have been put into place to ensure a diverse workforce: 

• SES candidate program was developed to create a diverse pipeline of future senior 

executives. 

• Special emphasis programs were expanded and Equal Employment Opportunity 

(EEO) and diversity awareness training was instituted. 

• Hispanic recruitment was enhanced through the increased use of Hispanic 

Associations of Colleges and Universities (HACU) interns, which created a pipeline 

for new Hispanic employees. 

• Increased participation in the Washington Internship for Native Students (WINS) 

program. 

• Participation in the Department of Labor’s Workforce Recruitment Program for 

students with disabilities was increased. 

• Increased use of the Federal Career Internship Program (FCIP) to facilitate and 

accelerate general hiring of qualified and talented minority student interns. 

FMS has a solid and viable Human Capital Strategy to fulfill its primary mission. 

FMS - 24 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments 1/

(in $ Millions) FY 2006 FY 2007 Major IT Investments

Budget Activity/Funding 

Source

Operating 

Plan Obligations

Operating

Plan

President's 

Budget 

Automated Standard Application for Payment (ASAP) Payments $10.6 $10.6 $11.1 4.7% $12.4 11.6% Debt Management Accounting Systems (DMAS) Debt Management 3.1 3.1 5.2 66.3% 7.5 44.0% 

Electronic Federal Tax Payment System (EFTPS) -- jointEx. 300 w/IRS Collections 81.0 81.0 68.8 -15.1% 70.8 3.0% Financial Information Reporting and Standardization 

(FIRST) 2/ Governmentwide Accounting 2.9 2.9 7.7 162.4% 6.8 -11.7% 

Governmentwide Accounting Modernization (GWA) Governmentwide Accounting 20.5 20.5 21.4 4.0% 22.0 2.9% 

Integrated FedDebt Debt Management 21.0 21.0 19.9 -5.2% 13.2 -33.5% 

Intragovernmental Payments & Collections (IPAC) Governmentwide Accounting 9.8 9.8 7.2 -26.5% 6.5 -9.8% 

PACER Online Payments 4.6 4.2 4.5 7.1% 4.6 1.7% 

Payment Application Modernization (PAM) 3/ Payments 5.2 5.2 19.7 282.2% 19.3 -1.9% Pay.gov Collections 20.5 20.5 23.0 12.2% 21.3 -7.4% 

Secure Payment System (SPS) Payments 5.4 5.4 5.7 5.0% 5.8 1.8% 

Treasury Check Information System (TCIS) Payments 6.5 6.5 8.3 27.8% 8.2 -0.7% Subtotal, Major IT Investments $191.1 $190.7 $202.4 6.1% $198.4 -2.0% CashTrack Governmentwide Accounting 3.75 3.75 3.4 -9.3% 3.5 2.9% Shared Accounting Module (SAM) 4/ Governmentwide Accounting 0.7 0.7 2.63 275.7% 3.362 27.8% Transaction Reporting System (TRS) Governmentwide Accounting 4 4 3.8 -5.0% 3.418 -10.1% Treasury Receivable, Accounting, and Collections System (TRACS) Collections 1.9 1.9 1.5 -21.1% 1.5 0.0% 

Non-Major IT Investments $10.4 $10.4 $11.3 9.5% $11.8 4.0% FMS Enterprise Infrastructure (Consolidated) 57.5 57.5 65.4 13.7% 61.3 -6.3% 

FMS Computer Security/Disaster Recovery

(Consolidated) 11.7 11.7 13.5 15.8% 12.6 -6.8% 

FMS Strategic Asset Management/Capital Asset RefreshInitiative (Consolidated) - - - 0.0% - 0.0% 

Infrastructure Investments $69.2 $69.2 $78.9 14.0% $73.9 -6.4% Enterprise Architecture $0.9 $0.9 $1.8 96.6% $1.4 -21.7% Total IT Investments $271.6 $271.2 $294.4 8.6% $285.5 -3.0% 1/ Amounts include all funding sources and FTEs.2/ FY05 Costs for FIRST are for the legacy GFRS system which will be included in this new investment.3/ PAM FY06-FY08 amounts reflect rebaselined legacy system costs designed to more accurately reflect all costs associated with the RO Payment System.4/ SAM received credits from the FRB in FY 05, leading to lower costs for FY 05.

FY 2005 % Change

from FY05

Actuals to

FY06

% Change 

from FY06 to

FY07

FMS - 25 
4B – Information Technology Strategy 

FMS focuses its IT investments on furthering web-based applications and eliminating 

paper processes to support operational efficiency and the President’s Management 

Agenda (PMA) E-Government initiatives. FMS is committed to establishing policies and 

processes to facilitate the integration of E-Commerce technologies into its infrastructure. 

FMS has undertaken considerable efforts to modernize its systems by incorporating new 

technologies and making full use of the internet. Moving to an all-electronic Treasury, 

especially for payments and collections, is a Treasury Department and FMS strategic 

goal. 

IT funding is critical for FMS to make significant progress in strengthening its entitywide IT security especially in the areas of robust intrusion detection, monitoring and 

patch management, and assuring adequate disaster recovery. These investments ensure 

that FMS’ products and services are provided in a secure environment and the federal 

government’s payment, collection and cash forecasting critical infrastructure assets do 

not become susceptible to computer attacks, viruses and terrorist activities. FMS’ 

certification and accreditation process is robust and continuously improving. Currently, 

all major applications and general support systems are certified and accredited. 

Maintaining the FMS computer security program at an acceptable level requires ongoing 

upgrades of tools and technologies. 

FMS - 26 
4.3 – PART Evaluation Table 

PART Name: Debt Collection

Year PARTed: 2003

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

PART Name: Collections

Year PARTed: 2004

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

4. Propose legislation to increase and enhance debt collection opportunities.

4. FMS has submitted numerous legislative proposals which will enable FMS to significantly enhance our debt collection 

opportunities.

1. Develop a more ambitious long-term performance measure.

2. Set interim targets and describe interim actions necessary to achieve the long-term performance measure.

3. Level fund the debt collection program for FY 2005.

2. FMS establishes annual performance measures for collections and referrals of debt by agencies. These 

targets/measures and actions help direct efforts to achieve our long-term measure.

3. Operate within budgetary resources. With the FY 08 budget submission, FMS has zeroed-out the salary and expenses

appropriated funding requirements for this program and the program will be self-funded through fee revenue. FMS will

analyze projected collections and fees with the goal of ensuring fees will cover the full cost of the program. 

1. Continuously review the trend in debt collection and revise/update the long-term measure as necessary.

1. Work with program partners to explore opportunities to better reduce paper-based collections.

2. Provide 2006 funding at the same level as in 2005 (excluding funding received for services provided to other federal

agencies).

1. FMS is working with federal agencies participating in the General Lockbox Network to eliminate the paper checks that are

received converting paper checks into electronic Automated Clearing House transactions (Electronic Check Processing) or

truncating the paper check and processing an image of the check (Check 21).

2. FMS has partnered with customs and Border Protection (CBP) to convert the financial piece of CBP's Automated 

Commercial Environment (ACE) System to Pay.gov. The ACE cash flow totals $20 billion annually.

3. FMS will work with federal agencies as it begins to pilot and implement TGAnet, an automated system designed to

eliminate the paper deposit ticket which accompanies over the counter deposits by Federal agencies at financial institutions.

4. Operate within budgetary resources. 

FMS - 27 
PART Name: Payments

Year PARTed: FY 2005

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. Working with Federal agencies to reduce the number of paper check payments and increasing the number of more efficient and secure 

electronic payments. This reflects FMS' efforts to work toward its 2010 goal of 90 percent of all payments made electronically.

2. Implemented Go Direct, a nationwide campaign to encourage current Federal check recipients to switch to direct deposit.

3. Continue to pursue requiring at some future date, that all new benefit recipients receive their benefit payments electronically rather than

check unless they do not have a bank account.

1. The program must continue its efforts toward and all electronic treasury.

PART Name: Governmentwide Accounting

Year PARTed: FY 2006

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. Developing a baseline for the efficiency performance measure that measures the unit cost to manage one million dollars of cash flow.

3. Developing the Financial Information Reporting Standardization (FIRST) system in order to better integrate and reconcile budget and

accounting data.

1. The program must develop a baseline for its efficiency performance measure. While FMS has unit cost, timeliness, and accuracy 

measures in its internal and external performance reporting that are used to manage for improved efficiency, at the time of this PART 

evaluation, a baseline for the new unit cost measure had yet not been established.

2. More work needs to be done in order to ahieve a clean opinion on the Financial Report of the U.S. Government. Improvement is needed 

on material weakness in the areas of accounting data compilation/consolidation and reconciliation of intragovernmental reporting differences.

2. Develop authoritative balances from FMS systems to which agencies will be required to reconcile.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

FMS - 28 
Bureau of the Public Debt 

Mission Statement 

To borrow the money needed to operate the federal government, account for the resulting debt, 

and provide reimbursable support services to federal agencies. 

Program Summary by Appropriations Account Dollars in Thousands 

Appropriation FY 2006 FY 2007 FY 2007 FY 2008

Salaries and Expenses Enacted

President's 

Budget CR-rate Request

$ from 

CR-rate 

% from 

CR-rate 

Wholesale Securities 

Services $11,812 $11,986 $11,842 $12,474 $632 5.34% 

Government Agency 

Investment Services 13,255 13,451 13,289 13,239 (50) -0.38% 

Retail Securities Services 147,529 149,711 147,912 151,359 3,447 2.33% 

Summary Debt Accounting 5,558 5,641 5,573 5,799 226 4.06% 

Total Appropriated Resources $178,154 $180,789 $178,616 $182,871 $4,255 2.38%

Note: FY 2006 and FY 2007 Total Appropriated Resources includes $3,000,000 in projected user fee 

collections. FY 2008 Total Appropriated Resources includes $10,000,000 in projected user fee 

collections. 

FY 2008 Priorities 

• Conduct more than 200 error-free marketable securities auctions that will result in the issue 

of more than $4 trillion in Treasury bills, notes, bonds and Treasury Inflation-Protected 

Securities. 

• Administer some $3.76 trillion in investments for about 230 federal trust funds. 

• Manage 6,600 state and local government accounts valued at approximately $250 billion. 

• Complete 90 percent of retail customer service transactions within 12 business days. 

• Reconcile more than $72 trillion in securities transactions. 
Table of Contents 

Section 1 – Purpose..........................................................................................2

1A – Description of Bureau Vision and Priorities...................................................................... 2 

1B – Program History and Future Outlook................................................................................. 3 

Section 2 – Budget Adjustments and Appropriation Language....................................5

2.1 – Budget Adjustments Table................................................................................................. 5 

2A – Budget Increases and Decreases Description..................................................................... 5 

2.2 – Operating Levels Table...................................................................................................... 7 

2B – Appropriation Language .................................................................................................... 8 

2B – Permanent, Indefinite Appropriations................................................................................ 8 

2C – Legislative Proposals.......................................................................................................... 9 

Section 3 – Budget and Performance Plan............................................................10

3.1 – Appropriation Detail Table.............................................................................................. 10 

3A – Wholesale Securities Services ......................................................................................... 10 

3.2.1 – Wholesale Securities Services Budget and Performance Plan ..................................... 11 

3B – Government Agency Investment Services....................................................................... 12 

3.2.2 – Government Agency Investment Services Budget and Performance Plan................... 13 

3C – Retail Securities Services................................................................................................. 13 

3.2.3 – Retail Securities Services Budget and Performance Plan............................................. 14 

3D – Summary Debt Accounting.............................................................................................. 15 

3.2.4 – Summary Debt Accounting Budget and Performance Plan.......................................... 16 

Section 4 – Supporting Materials........................................................................17

4.1 – Human Resources Table .................................................................................................. 17 

4A – Human Capital Strategy Description ............................................................................... 17 

4.2 – Summary of IT Resources Table ..................................................................................... 19 

4B – Information Technology Strategy .................................................................................... 20 

4.3 – PART Evaluation Table................................................................................................... 21 

BPD - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Bureau of the Public Debt’s (BPD) vision is to lead the way for responsible, effective 

government through commitment to service, efficient operations, openness to change, and 

values-based behavior. In light of its mission and vision, BPD annually auctions and issues more 

than $4 trillion in Treasury bills, notes, bonds and Treasury Inflation-Protected Securities (TIPS); 

effectively administers the regulation of the primary and secondary Treasury securities markets; 

ensures that reliable systems and processes are in place for issuing, transferring, paying interest 

on, and redeeming Treasury securities; issues and redeems more than 79 million paper savings 

bonds each year; administers approximately $3.76 trillion in investments for some 230 federal 

trust funds; and provides timely and accurate information on the public debt. 

In support of Treasury’s objective to finance the needs of the federal government at the lowest 

cost over time, Public Debt’s top priority is to ensure that the most efficient systems are in place 

to conduct borrowing and deliver securities services to investors. To that end, BPD continues to 

enhance its TreasuryDirect system through which retail customers can purchase and manage 

their holdings of electronic Treasury securities through the internet. With the increased reliance 

on conducting business electronically, Public Debt also places a high priority on adopting 

technological advances to ensure that its systems remain secure. 

 

With its resources, Public Debt: 

• Conducts more than 200 marketable securities auctions annually, resulting in the issue of 

more than $4 trillion in Treasury bills, notes, bonds and TIPS; 

• Administers approximately $3.76 trillion in Government Account Series (GAS) investments, 

which comprise about 44 percent of the public debt outstanding; 

• Manages some 6,600 active State and Local Government Series (SLGS) accounts valued at 

$250 billion; 

• Serves more than 50 million retail customers holding marketable and savings securities, 

including nearly 600,000 investor accounts in the internet-based TreasuryDirect system; 

• Accounts for and reports on $228 billion in federal agency borrowings from Treasury in 

more than 80 accounts; 

• Accounts for and reports on the balance and composition of the more than $8 trillion public 

debt, the single largest liability on the federal government’s balance sheet, and reconciles 

more than $72 trillion in securities transactions reported from numerous systems to cash 

flowing in and out of the federal government each year; 

• Receives unqualified audit opinions on the Schedules of Federal Debt every year since there 

was a requirement to produce financial statements; 

• Provides reimbursable administrative and information technology services to more than 75 

federal agencies. 

The total resources required to support BPD activities for FY 2008 are $198,603,000, including 

$182,871,000 from direct appropriations, of which $10,000,000 is in user fees, and $15,732,000 

from offsetting collections and reimbursable programs. 

BPD - 2 
1B – Program History and Future Outlook 

In keeping with its vision, BPD is dedicated to maintaining high levels of performance, and its 

budget is structured to effectively align resources with performance. As a result, Public Debt 

will successfully carry out its mission, which contains three elements: 

Borrow the money needed to operate the federal government: Public Debt will continue to 

enhance the mechanisms for participation by a wide range of investors in its wholesale, 

government agency investment services, and retail programs. 

Wholesale Program: Over the years, Public Debt has dramatically reduced the times required to 

complete marketable securities auctions. It now consistently releases auction results within two 

minutes, plus or minus 30 seconds, of the auction close. This is extremely important because 

shorter and consistent auction releases reduce the time auction bidders are exposed to the risk of 

adverse market movements. Hence, by limiting this risk, the implicit premium associated with 

this period of uncertainty is reduced substantially. 

In FY 2007, BPD will replace its aging auction system to fully integrate the automated 

announcement, auction and issuance of marketable securities, and, at the same time, provide 

greater speed and flexibility to Treasury debt managers in bringing new types of securities to 

market. BPD has expanded its ability to provide contingency processing at three auction 

processing sites and provided a new feature to allow certain large non-primary dealer bidders to 

submit bids in a secure internet environment. The 2008 request includes funding to support and 

maintain the new auction system once this transition is complete. 

Public Debt will continue to improve the processes for submitting auction bids and enhancing 

auction systems. Investments in technology and continuity of operations will continue to ensure 

that payments to investors will be made timely with 100 percent accuracy. Public Debt has 

improved its service to large institutional investors by enhancing the automated bid submission 

system for all competitive auction participants in order to keep it current and make it more 

efficient. 

Government Agency Investment Services Program: Public Debt is committed to continuously 

provide efficient mechanisms to federal, state and local government entities who purchase GAS 

and SLGS securities and borrow from Treasury. The goal is to conduct 80 percent of 

customer-initiated transactions online by FY 2008. While BPD’s pace with this goal is well 

ahead of schedule, the Bureau will remain focused on obtaining the highest level of customer 

self-sufficiency. BPD will also continue to work with the Financial Management Service and 

federal agency customers to simplify their financial reporting and streamline the reconciliation 

processes associated with producing government-wide financial statements. 

Public Debt’s major operational initiative is to consolidate all Government Agency Investment 

Services functions into one automated system to reduce costs and facilitate future enhancements. 

To date, the GAS and borrowings are operating from the same automated platform and the effort 

to merge the SLGS program is underway. 

Retail Program: Public Debt will continue to enhance and support TreasuryDirect, the 

internet-accessed system where all Treasury securities are offered in electronic form. To 

BPD - 3 
accelerate efficiencies involved with all electronic processing, Public Debt will continue to 

encourage customers to convert their paper securities and holdings in the legacy direct-access 

marketable securities system to TreasuryDirect. Planned improvements to TreasuryDirect 

include enhancing technological and operational measures to further secure the system and 

adding the capability to establish accounts for non-individual entities, such as fiduciaries, trusts, 

and organizations. 

Issuing all Treasury securities electronically is a long-term goal for the retail program; however 

the timetable will depend on several factors. One of which, a key challenge, will be to 

communicate with customers about the benefits of dealing directly with Treasury to manage their 

investments online. As the public becomes increasingly comfortable with conducting financial 

business online, Public Debt believes more and more customers will appreciate these benefits. 

Account for the resulting debt: Public Debt is working to improve the clarity, utility and 

availability of federal debt information. The goal is to produce daily public debt financial 

statements by year-end FY 2007. This supports the President’s Management Agenda goal of 

providing accurate and timely financial information. Public Debt will also continue its focus on 

providing financial statements that receive unqualified audit opinions and support improved 

government-wide accounting. Additionally, Public Debt will continue to provide accurate 

accounting data with intragovernmental payments and implement other procedures to reduce and 

ultimately eliminate reconciliation problems in the federal government-wide financial 

statements. 

Provide reimbursable support services to federal agencies: Although this is part of Public Debt’s 

mission statement, appropriated funds are not used. BPD’s Administrative Resource Center, a 

recognized Shared Service Provider (SSP), supplies reimbursable support services to federal 

agencies, generating revenue to pay all organizational expenses. This designation fosters 

customer growth, as agencies will be encouraged by the Office of Management and Budget and 

the General Services Administration to use the efficiencies offered by SSPs, thus allowing 

customers to focus on mission-related activities. For FY 2008, BPD’s Administrative Resource 

Center projects to serve 63 customers with $80 million in revenue. 

BPD also offers investment accounting, training request processing, administrative support to 

Treasury-managed trust funds, and IT services under the Economy Act. All reimbursable support 

services are expected to experience strong growth over the next several years. 

BPD - 4 
Section 2 – Budget Adjustments and Appropriation Language 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

Appropriation: Administering the Public Debt FTE Amount

FY 2006 Appropriation (P.L. 109-115) 1,390 $179,923

Rescission (P.L. 109-148) 0 (1,769)

FY 2006 Enacted 1,390 $178,154

FY 2007 President's Budget 1,390 $180,789

CR-rate Adjustment (2,173) 

FY 2007 CR-rate 1,390 $178,616

Changes to Base: 

Technical Adjustment to FY 2007 Base due to CR:

Pay Inflation Adjustment 336 

Maintaining Current Levels (MCLs):

Non-Pay Inflation Adjustment 1,666 

Pay Annualization 590 

Pay Inflation Adjustment 3,456 

Total FY 2008 Base 1,390 $184,664

Program Decreases:

Decline in non-recurring DME Spending for SaBRe (233) 

Decline in non-recurring spending for GAISS (563) 

Projected Growth in TreasuryDirect (1,997) 

Program Reinvestment:

E-Commerce Risk Management Program 1,000 

Subtotal FY 2008 Program Changes 0 ($1,793)

Total FY 2008 Request 1,390 $182,871

Adjustments to Request:

User Fees (10,000) 

Subtotal FY 2008 Offsetting Fees and Rescissions 0 (10,000)

Total FY 2008 1,390 $172,871

2A – Budget Increases and Decreases Description 

Adjustments .....................................................................................-$2,173,000 / +0 FTE 

CR-rate Adjustment -$2,173,000 / +0 FTE Adjustment from the FY 2007 President's Budget to 

reach the FY 2007 Continuing Resolution annualized rate (CR-rate). 

Technical Adjustment to FY 2007 Base due to CR ........................+$336,000 / +0 FTE 

Pay Inflation Adjustment +$336,000 / +0 FTE Technical adjustment to FY 2007 Base due to 

CR. 

Maintaining Current Levels (MCLs) ...........................................+$5,712,000 / +0 FTE 

Non-Pay Inflation Adjustment +$1,666,000 / +0 FTE Funds are requested for non-labor related 

items such as contracts, travel, supplies, equipment, and GSA rent adjustments. 

Pay Annualization +$590,000 / +0 FTE Funds are requested for the FY 2008 cost of the January 

2007 pay increase. 

Pay Inflation Adjustment +$3,456,000 / +0 FTE Funds are requested for the proposed January 

2008 pay raise. This includes funds for two compensable days. 

BPD - 5 
Program Decreases .........................................................................-$2,793,000 / +0 FTE 

Decline in non-recurring DME Spending for SaBRe -$233,000 / +0 FTE Funds are reduced for 

the Savings Bond Replacement System due to non-recurring Development Modernization and 

Enhancement spending. 

Decline in non-recurring Spending for GAISS -$563,000 / +0 FTE Funds are reduced for the 

Government Agency Investment Services System due to non-recurring spending. 

Projected Growth in TreasuryDirect -$1,997,000 / +0 FTE Projected reduction in costs due to 

the growth of TreasuryDirect and as investors choose to transfer legacy system holdings to 

TreasuryDirect accounts. 

Program Reinvestment ..................................................................+$1,000,000 / +0 FTE 

E-Commerce Risk Management Program +$1,000,000 / +0 FTE To strengthen security for the 

TreasuryDirect program, the purchase of software licenses and technology will provide for the 

implementation of two-factor authentication. It will also fund the renewal of software licenses, 

enhancement of security features, customer support and the cyclical replacement of security 

tokens. This enhancement will strengthen an E-Commerce program that is critical to effective 

and efficient debt management and further reduction of paper transactions. 

Adjustments to Request ................................................................-$10,000,000 / +0 FTE 

User Fees -$10,000,000 / +0 FTE The account maintenance fees that BPD charges to account 

holders in the Legacy TreasuryDirect system with an account balance of more than $100,000 in 

par value, will be raised from $25 to $100 per year. The increased fees will help to partially 

offset the cost to the Treasury of providing these services. Although the fees may induce some

customers to transfer their account holdings to the new internet-accessed TreasuryDirect system, 

the expected receipts are adjusted to reflect this possibility. 

BPD - 6 
2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Administering the Public Debt FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007

CR-rate

Proposed

Reprogrammings

FY 2007 

Proposed 

Operating 

Level

FY 2008 

Requested

Level

FTE 1,390 1,390 1,390 1,390 1,390

Object Classification:

11.1 Full-Time Permanent Positions................................. $83,379 $85,735 - $85,735 - $85,735 $89,149

11.3 Other than Full-Time Permanent Positions.............. 199 205 - 205 - 205 213

11.5 Other Personnel Compensation................................ 4,282 2,883 - 2,883 - 2,883 2,989

11.8 Special Personal Services Payments..................... - - - - - - -

11.9 Personnel Compensation (Total)........................... $87,860 $88,823 $ - $88,823 $ - $88,823 $92,351

12.0 Personnel Benefits.................................................... 22,422 22,549 - 22,549 - 22,549 23,403

13.0 Benefits to Former Personnel................................... 16 16 - 16 - 16 28

21.0 Travel........................................................................ 1,206 1,233 - 1,233 - 1,233 1,732

22.0 Transportation of Things........................................... 7 70 - 70 - 70 85

23.1 Rental Payments to GSA.......................................... 6,120 6,205 - 6,205 - 6,205 6,393

23.2 Rent Payments to Others.......................................... 96 98 (93) 5 - 5 5

23.3 Communications, Utilities, & Misc............................. 16,528 16,892 (1,047) 15,845 - 15,845 15,384

24.0 Printing and Reproduction......................................... 2,051 2,096 (140) 1,956 - 1,956 1,837

25.1 Advisory & Assistance Services................................ 213 218 - 218 - 218 472

25.2 Other Services.......................................................... 24,582 25,162 - 25,162 - 25,162 25,402

25.3 Purchase of Goods/Serv. from Govt. Accts...... 9,039 9,237 (426) 8,811 - 8,811 7,392

25.4 Operation & Maintenance of Facilities................... - - - - - - 742

25.5 Research & Development Contracts......................... - - - - - - -

25.6 Medical Care............................................................. - - - - - - 18

25.7 Operation & Maintenance of Equipment................... 2,125 2,172 - 2,172 - 2,172 2,273

25.8 Subsistence & Support of Persons........................... - - - - - - -

26.0 Supplies and Materials.............................................. 2,462 2,516 (151) 2,365 - 2,365 2,222

31.0 Equipment................................................................. 3,376 3,450 (316) 3,134 - 3,134 3,030

32.0 Lands and Structures................................................ 33 34 - 34 - 34 89

33.0 Investments & Loans................................................ - - - - - - -

41.0 Grants, Subsidies...................................................... - - - - - - -

42.0 Insurance Claims & Indemn...................................... 4 4 - 4 - 4 2

43.0 Interest and Dividends....................................... 14 14 - 14 - 14 11

44.0 Refunds.................................................................... - - - - - - -

Total Budget Authority................................................ $178,154 $180,789 (2,173) $178,616 $ - $178,616 $182,871

Budget Activities:

Wholesale Securities Services $11,812 $11,986 (144) $11,842 - $11,842 $12,474

Government Agency Investment Services 13,255 13,451 (162) 13,289 - 13,289 $13,239

Retail Securities Services 147,529 149,711 (1,799) 147,912 - 147,912 $151,359

Summary Debt Accounting 5,558 5,641 (68) 5,573 - 5,573 $5,799

Total Budget Authority................................................ $178,154 $180,789 (2,173) $178,616 $ - $178,616 $182,871

BPD - 7 
2B – Appropriation Language 

Appropriations Language Explanation of Changes 

DEPARTMENT OF THE TREASURY 

BUREAU OF THE PUBLIC DEBT 

Federal Funds 

Administering the Public Debt 

For necessary expenses connected with any public-debt 

issues of the United States, $182,871,000, of which not to 

exceed $2,500 shall be available for official reception 

and representation expenses, and of which not to exceed 

$2,000,000 shall remain available until 

September 30, 2010 for systems modernization: 

Provided, That the sum appropriated herein from the 

general fund for fiscal year 2008 shall be reduced by not 

more than $10,000,000 as definitive securities issue fees 

and Legacy Treasury Direct Investor Account 

Maintenance fees are collected, so as to result in a final 

fiscal year 2008 appropriation from the general fund 

estimated at $172,871,000. In addition, $70,000 to be 

derived from the Oil Spill Liability Trust Fund, to 

reimburse the Bureau for administrative and personnel 

expenses for financial management of the Fund, as 

authorized by section 1012 of Public Law 101-380. 

2B – Permanent, Indefinite Appropriations 

Reimbursements to the Federal Reserve Banks

Public Law 101-509, 104 Stat. 1394, established a permanent indefinite appropriation to pay 

such sums as necessary to reimburse the Federal Reserve Banks (FRB) for acting as fiscal agents 

of the federal government in support of financing the public debt. A permanent indefinite 

account was established in FY 1992. Claims for reimbursements or services related to this 

account are closely monitored for compliance with the Instructions for Filing Reimbursement 

Claims for Fiscal Agency Services Provided to the Bureau of the Public Debt (current edition). 

The FY 2008 funding to support FRB reimbursements is $95,755,000. 

BPD - 8 
Government Losses in Shipment

Public Law 103-329 established a permanent indefinite appropriation to pay such sums as 

necessary to make payments for the replacement of valuables, or the value thereof, lost, 

destroyed, or damaged in the course of United States government shipments. The Government 

Losses in Shipment Act was approved July 8, 1937, to dispense with the necessity for insurance 

by the government against loss or damage to valuables in shipment and for other purposes. The 

Act was amended in 1943 to cover losses resulting from the redemption of savings bonds (for 

example, stolen bonds which were fraudulently negotiated even though the paying agent 

followed identification guidelines established by the Treasury). All authority of the Treasury 

under the Act has been delegated to the Commissioner of the Bureau of the Public Debt. In 

FY 2008, the funding estimated to support payments for the replacement of valuables is 

$500,000. 

2C – Legislative Proposals 

BPD has no Legislative Proposals for FY 2008. 

BPD - 9 
Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Wholesale Securities Services 98 $11,812 136 $17,987 98 $11,986 98 $11,842 145 $12,474 47.96% 5.34%

Government Agency Investment Services 112 13,255 110 14,599 112 13,451 112 13,289 118 13,239 5.36% -0.38%

Retail Securities Services 1,134 147,529 1,004 132,939 1,134 149,711 1,134 147,912 1,075 151,359 -5.20% 2.33%

Summary Debt Accounting 46 5,558 49 6,431 46 5,641 46 5,573 52 5,799 13.04% 4.06%

Subtotal New Appropriated Resources 1,390 $178,154 1,299 $171,956 1,390 $180,789 1,390 $178,616 1,390 $182,871 0.00% 2.38%

Other Resources:

Offsetting Collections - Reimbursable 64 $16,730 69 $17,456 18 $15,204 18 $15,204 21 $15,732 16.67% 3.47%

Available multi-year/no-year funds 3,654 2,523 3,111 3,111

User Fees 2,793

Subtotal Other Resources 64 $20,384 69 $22,772 18 $18,315 18 $18,315 21 $15,732 16.67% -14.10%

Total Resources Available for Obligation 1,454 $198,538 1,368 $194,728 1,408 $199,104 1,408 $196,931 1,411 $198,603 0.21% 0.85%

1/ Subtotal New Appropriated Resources includes $3,000,000 in projected user fee collections.

2/ Subtotal New Appropriated Resources includes $10,000,000 in projected user fee collections.

to FY 2008

FY 2007

% Change

FY 2007

Resources Availab President's Budget 1/ le for Obligation

FY 2006 FY 2006 FY 2007 FY 2008

Enacted 1/ Obligations CR-rate 1/ Request 2/

3A – Wholesale Securities Services ($12,474,000 from direct appropriations and $1,354,000 

from reimbursable programs): The Wholesale Securities Services activity involves the 

announcement, auction and issue of marketable Treasury bills, notes, bonds and Treasury 

Inflation-Protected Securities. It also provides an efficient infrastructure for the transfer, custody 

and redemption of these securities. Large market participants buy most of Treasury’s marketable 

securities at auction. In FY 2006, Public Debt conducted more than 200 marketable securities 

auctions resulting in the issuance of more than $4 trillion in securities. Treasury’s commercial 

book-entry system holds approximately $4.3 trillion, or 98 percent, of Treasury marketable 

securities. Treasury uses this system to issue most of its marketable debt, make principal and 

interest payments, and support the active secondary market in Treasury securities. It is estimated 

that about $1.23 trillion per day in Treasury securities are transferred among account holders in 

the commercial book-entry system. 

 

This activity directly supports Treasury’s objective of financing the government at the lowest 

possible borrowing cost to taxpayers over time. To help meet this objective, BPD continuously 

improves its auction and debt management systems to provide investors with critical 

auction-related information faster and enhance customers’ abilities to participate easily and 

securely in Treasury auctions. BPD will also seek opportunities in U.S. and global markets to 

listen and learn from holders of its securities and share information with them. The Bureau will 

also educate current and potential investors about Treasury’s debt financing policies, the auction 

process and its securities. 

Another responsibility the Bureau has is regulating the government securities market. Public 

Debt administers Treasury’s regulations that provide investor protection and maintain the 

integrity, liquidity, and efficiency in the government securities market under the Government 

Securities Act of 1986. BPD also administers the rules for Treasury’s securities auctions and 

buybacks and prescribes provisions for collateral eligibility and valuation. One of its recent 

BPD - 10 
regulatory initiatives was to rewrite, in plain language, the Uniform Offering Circular, which 

explains Treasury’s marketable securities auction rules. 

Other Resources: 

Reimbursements totaling $1,354,000 are collected for providing: administrative and IT support 

for the Administrative Resource Center, Public Key Infrastructure (PKI) and Secure Socket 

Layer (SSL) operations for Treasury and training request processing for the Alcohol and 

Tobacco Tax and Trade Bureau. 

3.2.1 – Wholesale Securities Services Budget and Performance Plan 

Dollars in Thousands 

Wholesale Securities Services Budget 

Activity

Includes Strategic Objective F4B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $12,064 $11,905 $11,812 $11,986 $12,474 

 Other Resources 274 666 1,189 1,077 1,354 

Total Operating Level $12,338 $12,571 $13,001 $13,063 $13,828

Human Resources

 Appropriated FTE 92 92 98 98 145 

 Other FTE 0 0 3 0 0 

Total FTE (direct and reimbursable) 92 92 101 98 145

Wholesale Securities Services Budget 

Activity

Includes Strategic Objective F4B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $133,683 $219,114 $159,580

Actual $126,828 $148,926

Cost per debt financing operation ($) (E) 

Met Yes No

Target 95% 95% 95% 95% 95% 

Actual 99.53% 95% 100%

Percent of auction results released in 2 minutes 

+/- 30 seconds (%) (Oe) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. Satisfaction 

Description of Performance: In FY 2006, Public Debt released auction results within two 

minutes, plus or minus 30 seconds, 100 percent of the time, surpassing its performance target of 

95 percent. In addition, in FY 2007, BPD will replace its aging auction system to fully integrate 

the automated announcement, auction and issuance of marketable securities and provide greater 

speed and flexibility to Treasury debt managers in bringing new types of securities to market. 

BPD has also expanded its ability to provide contingency processing at three auction processing 

sites and provided a new feature to allow certain large non-primary dealer bidders to submit bids 

in a secure internet environment. 

BPD - 11 
3B – Government Agency Investment Services ($13,239,000 from direct appropriations and 

$3,068,000 from reimbursable programs): The Government Agency Investment Services 

program supports federal, state and local government agency investments in non-marketable 

Treasury securities as well as federal agency borrowing from Treasury. 

Public Debt offers two major non-marketable special purpose investment programs to 

government agencies. Government Account Series (GAS) securities are issued only to federal 

agencies with statutory investment authority. There are currently about 230 trust and investment 

funds held by some 75 agencies. For 18 of the funds, Public Debt also maintains the investment 

accounts and performs additional administrative functions on behalf of the Secretary of the 

Treasury. These additional functions include processing receipts into and transfers out of the 

funds to the related federal program agencies for the purpose of administering the underlying 

programs that are supported by the trust funds. Some of the more recognizable federal trust 

funds are the four Social Security and Medicare Funds, as well as the Unemployment and 

Highway Trust Funds. With more than $3.76 trillion in investments, federal government and 

other entities’ holdings of GAS securities comprise approximately 44 percent of the public debt 

outstanding. 

State and Local Government Series (SLGS) securities are issued to state and local government 

entities across the nation. At approximately $250 billion outstanding, the SLGS program is 

important to over 6,600 state and local government entities that use these securities to help 

comply with provisions of the Internal Revenue Code. 

BPD also accounts for and reports on the principal borrowings from and repayments to Treasury 

for approximately 80 funds managed by other federal agencies, as well as the related interest due 

to Treasury. These agencies are statutorily authorized to borrow from Treasury to make loans 

for a broad range of purposes, such as education, housing, farming, and small business support. 

The funds hold roughly $228 billion in loans and loan guarantees. These federal agencies can 

conduct their principal transactions online via the Government-Wide Accounting system. The 

corresponding interest transactions are also processed online through the Intra-governmental 

Payment and Collection system. 

At the federal level, Public Debt’s services in this activity also directly assist customers in 

producing timely and accurate financial information that contributes to the reliability and 

usefulness of the government-wide financial statements. Instant access to account information 

has significantly simplified reconciliation and audit confirmation efforts across the country and 

assisted SLGS purchasers in complying with the Internal Revenue Service’s requirements related 

to the issuance of tax exempt securities. 

 

Other Resources: 

Reimbursements totaling $3,068,000 are collected for providing: administrative and IT support 

for the Administrative Resource Center, Public Key Infrastructure (PKI) and Secure Socket 

Layer (SSL) operations for Treasury, training request processing for the Alcohol and Tobacco 

Tax and Trade Bureau, investment accounting performed on behalf of the Secretary of the 

Treasury, and investment accounting services for the Department of Housing and Urban 

Development and the Securities and Exchange Commission.

BPD - 12 
3.2.2 – Government Agency Investment Services Budget and Performance Plan 

Dollars in Thousands 

Government Agency Investment 

Services Budget Activity

Includes Strategic Objective F4B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $13,756 $13,360 $13,255 $13,451 $13,239 

 Other Resources 2,530 3,278 3,634 3,101 3,068 

Total Operating Level $16,286 $16,638 $16,889 $16,552 $16,307

Human Resources

 Appropriated FTE 105 105 112 112 118 

 Other FTE 5 17 17 11 14 

Total FTE (direct and reimbursable) 110 122 129 123 132

Government Agency Investment Services 

Budget Activity

Includes Strategic Objective F4B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $90.15 $64.5 $62.5

Actual $88.74 $62.64

Cost per federal funds investment transaction ($) 

(E) 

Met Yes Yes

Target Baseline 65% 75% 80% 

Actual 72.7% 97.03%

Percentage of Government Agency customer 

initiated transactions conducted online (%) (Oe) 

Met Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. Satisfaction 

Description of Performance: Public Debt has established a long-term goal to expand automation 

to its customers. BPD will enhance online services provided to federal, state and local 

government customers so that Public Debt will meet its long-term goal of conducting 80 percent 

of customer-initiated transactions online by the end of FY 2008. Currently, Public Debt receives 

more than 95 percent of all investment transactions online. These results are due to three factors. 

First, all loans receivable transactions are conducted using the Government-Wide Accounting 

application. Second, regulatory changes effective as of August 2005 require investors in state 

and local government securities to perform all investment transactions online using the SLGSafe 

internet application. Finally, the Federal Investments Program made a comprehensive effort to 

convert and train its user community to conduct investment transactions through the FedInvest 

internet application. 

3C – Retail Securities Services ($151,359,000 from direct appropriations, including 

$10,000,000 from user fee collections, and $10,768,000 from offsetting collections and 

reimbursable programs): Public Debt’s Retail Securities Services program serves more than 

50 million retail customers who hold marketable and savings securities directly with Treasury in 

support of the government’s financing needs. The focus of this program is to deliver Treasury 

securities services at the lowest reasonable operational cost through the internet-accessed 

TreasuryDirect system. TreasuryDirect offers all Treasury securities available to the public—

Series EE and I savings bonds and Treasury bills, notes, bonds, and TIPS—in book-entry form. 

By enabling investors to manage their savings bond and marketable securities holdings online, 

Public Debt will serve customers more effectively and manage resources more efficiently. 

BPD - 13 
To accelerate the efficiencies that will result from electronic investing, Public Debt is 

encouraging customers to convert their holdings to TreasuryDirect. The potential for 

conversions is significant—there are over 700 million paper savings bonds and nearly 400,000 

accounts in the legacy marketable securities system. The conversion effort will be ongoing over 

a number of years. 

Throughout this multi-year push toward book-entry and all-electronic processing, Public Debt 

will remain committed to supporting customers of legacy programs but will also actively 

encourage them to move to TreasuryDirect. These efforts will position Treasury to eliminate 

paper securities and replace the legacy marketable system when the time is right. These changes 

build on a tradition of continuous operational improvement and position Public Debt to offer 

high quality and easy-to-use investment services to millions of retail customers. 

Other Resources: 

Offsetting collections totaling $10,000,000 are collected for definitive securities issue and 

Legacy TreasuryDirect Investor Account maintenance fees, while $10,768,000 in 

reimbursements are collected for providing: administrative and IT support for the Administrative 

Resource Center, Public Key Infrastructure (PKI) and Secure Socket Layer (SSL) operations for 

Treasury, training request processing for the Alcohol and Tobacco Tax and Trade Bureau, and 

computer matching for the Social Security Administration. 

3.2.3 – Retail Securities Services Budget and Performance Plan 

Dollars in Thousands 

Retail Securities Services Budget 

Activity

Includes Strategic Objective F4B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $145,419 $147,298 $147,529 $149,711 $151,359 

 Other Resources 3,260 8,557 15,002 13,630 10,768 

Total Operating Level $148,679 $155,855 $162,531 $163,341 $162,127

Human Resources

 Appropriated FTE 1,092 1,060 1,134 1,134 1,075 

 Other FTE 0 0 42 7 7 

Total FTE (direct and reimbursable) 1,092 1,060 1,176 1,141 1,082

Retail Securities Services Budget Activity Includes Strategic Objective F4B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $7.75 $4.73 $4.57

Actual $8.51 $4.97

Cost per TreasuryDirect assisted transaction ($) 

(E) 

Met Yes Yes

Target Baseline $2.99 $2.21 $1.79 

Actual $3.43 $3.06

Cost per TreasuryDirect online transaction ($) 

(E) 

Met Yes No

Target 90% 90% 90% 90% 90%

Actual 92.5% 88.7% 98%

Percentage of retail customer service 

transactions completed within 12 business days 

(%) (Oe) Met Yes No Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. Satisfaction 

BPD - 14 
Description of Performance: In FY 2006, BPD processed 98 percent of retail customer service 

transactions within 13 business days, surpassing its performance target of 90 percent. For 

FY 2007, the Bureau’s goal is to complete 90 percent of retail customer service transactions 

within 12 business days and strive toward a long-term goal to complete 90 percent of retail 

customer service transactions within ten business days by FY 2010. Efficiencies gained from

improved work processes and an increase in electronic transactions will allow Public Debt to 

meet these goals. 

3D – Summary Debt Accounting ($5,799,000 from direct appropriations and $542,000 from 

reimbursable programs): The Summary Debt Accounting program accurately accounts for and 

reports timely on the outstanding public debt and related interest expenses. The program

provides daily information on the balance and composition of the public debt, and summary level 

accounts represent the control totals for dozens of subordinate investment systems. 

Each year, Public Debt reconciles more than $72 trillion in securities transactions reported from

numerous systems to cash flowing in and out of the federal government. BPD’s summary level 

accounting system provides detailed financial information on the more than $8 trillion public 

debt and associated interest expense for publication in the annual Financial Report of the United 

States Government, Treasury’s Performance and Accountability Report, and the Schedules of 

Federal Debt Managed by the Bureau of the Public Debt. 

The Bureau publishes information on the balance and composition of the public debt in the 

Monthly Statement of the Public Debt of the United States on its website. Strategically, BPD’s 

direction is to make the Schedules of Federal Debt and other related financial data available on a 

daily basis. 

Public Debt has always been committed to maintaining strong accounting controls to ensure the 

integrity of operations and the accuracy of the information provided to the public. The Bureau 

has consistently received unqualified audit opinions on the Schedules of Federal Debt, which 

presents details supporting the largest single liability on the government-wide financial 

statement. 

Other Resources: 

Offsetting collections and reimbursements totaling $542,000 are collected for providing: 

administrative and IT support for the Administrative Resource Center, Public Key Infrastructure 

(PKI) and Secure Socket Layer (SSL) operations for Treasury and training request processing for 

the Alcohol and Tobacco Tax and Trade Bureau. 

BPD - 15 
3.2.4 – Summary Debt Accounting Budget and Performance Plan 

Dollars in Thousands 

Summary Debt Accounting Budget 

Activity

Includes Strategic Objective F4D

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Enacted Enacted Enacted President's 

Budget

Request

Financial Resources

 Appropriated Resources $5,788 $5,602 $5,558 $5,641 $5,799 

 Other Resources 131 143 559 507 542 

Total Operating Level $5,919 $5,745 $6,117 $6,148 $6,341

Human Resources

 Appropriated FTE 44 44 46 46 52 

 Other FTE 0 0 2 0 0 

Total FTE (direct and reimbursable) 44 44 48 46 52

Summary Debt Accounting Budget Activity Includes Strategic Objective F4D

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $11.59 $10.34 $10.49

Actual $12.62 $10.96

Cost per summary debt accounting transaction 

($) (E) 

Met Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. Satisfaction 

Description of Performance: Public Debt established an efficiency measure to track the cost per 

transaction of performing Summary Debt accounting. Public Debt accounts for and reports on 

all financial activity related to the public debt of the United States. The transactions being 

tracked are those that must be accounted for to calculate the amount of public debt outstanding 

and interest paid on the public debt. These transactions include, for example, issues, 

redemptions, and interest payments on all Treasury securities. Lower costs per item are driven 

by transaction volumes increasing as a result of continued efforts to convert customers from

paper to electronic holdings. Volumes were assumed constant in FY 2008, resulting in an 

estimated cost per item of $10.49. 

For detailed information about each performance measure, including definition, verification and 

validation, please go to: http://www.treas.gov/offices/management/dcfo/accountabilityreports/2006-par/Part_IV_Appendices.pdf

BPD - 16 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 1,206 1,299 1,390

Increases:

Reason #1:

Increase in direct FTE due to realignment of

core administrative and policy functions back 

into Public Debt from the Franchise Fund. 93

Reason #2:

Increase in direct FTE due to realizing a full 

year of FTE reporting for employees hired late 

in FY 2006. 91

Subtotal, Increases 93 91 0

Decreases:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 1,299 1,390 1,390

Net Change from prior year SOY to budget year EOY 91

4A – Human Capital Strategy Description 

Public Debt’s strategic management of human capital is consistent with its mission, vision, and 

priorities and supports not only the President’s Management Agenda, but also Treasury’s 

strategic goal to Manage the U.S. Government’s Finances Effectively. 

Public Debt has high expectations of all employees and recognizes the value of their 

contributions. BPD’s performance appraisal system is supplemented with specific expectations 

appropriate to the individual employee and the Bureau’s current priorities and strategic 

initiatives. As a result, employees know what is expected of them and how these expectations 

relate to the mission, objectives, and performance goals. Public Debt’s appraisals effectively 

distinguish between high and low levels of performance. 

Leadership training is important at Public Debt. BPD offers extensive in-house training and 

takes advantage of many opportunities to use the Office of Personnel Management’s 

Management Development Centers to develop leadership competencies in leads, supervisors, 

managers, and executives. Senior-level employees receive training through the Treasury 

Executive Institute, the Treasury Executive Leadership Program, and the Federal Executive 

Institute. 

Human capital initiatives, including succession planning, are an important part of Public Debt’s 

Strategic Plan. The Bureau has a Management Candidate Development Program and a Senior 

Executive Service Candidate Development Program that were designed and implemented to 

BPD - 17 
provide Public Debt with a trained, capable pool of managers and executives to fill future 

vacancies. All of these programs use Individual Development Plans, mentoring, shadowing, 

position exchanges, and skills development to build leadership/management skills. 

Public Debt has a comprehensive recruitment program in place to close skill gaps. BPD attends 

approximately 25 career fairs per year. Much of its recruitment occurs at colleges and 

universities with a diverse population or at diversity-specific career fairs. To further its 

recruiting efforts, Public Debt is also experimenting with more non-traditional recruiting 

methods such as diversity-specific internet sites to attract candidates. For example, sites such as 

HBCUConnect.com are making it easier for Public Debt to reach out and specifically target 

students and alumni of Historically Black Colleges and Universities. BPD will continue to refine 

its efforts and look for more opportunities to attract and retain diversity candidates in an effort to 

establish a culturally diverse workforce. 

Public Debt uses the full realm of pay flexibilities to recruit and retain high quality candidates 

with the skills necessary to accomplish its mission. Specifically, Public Debt uses superior 

qualifications appointments, student loan repayments, and recruitment and retention incentives. 

BPD also uses special employment programs to hire quality candidates. The Bureau has been 

very successful using the Federal Career Intern Program, Student Career Experience Program, 

and Veterans’ Recruitment Act to provide a source of highly qualified applicants. The Bureau’s 

recognition of the need for a balanced family and work life makes it an attractive employer. The 

use of Flexi-time, Alternative Work Schedule, and Flexi-place schedules assist BPD in recruiting 

and retaining highly talented individuals. 

Public Debt has identified three Mission Critical Occupations (MCOs): Customer Service 

Specialist (CSS), Accountant, and Financial Systems Analyst. Although BPD’s workforce will 

remain relatively stable over the next five years, the retirement eligibility among the CSS 

positions is relatively high compared to its other MCOs. To offset the potential retirement issue 

among the CSS positions, BPD recruits applicants with basic communication and customer 

service skills. Once on board, these basic skills, coupled with specific training, ensure a ready 

source of qualified employees. Public Debt’s workforce analysis indicates that as employees 

retire, it will continue to have a sufficient pool of internal candidates to fill the CSS positions. 

Public Debt believes that training is crucial. BPD determines the readiness of its workforce, 

including MCOs, through skills gap assessments. BPD works with focus groups to assess the 

training needs necessary to keep employee skills current and to develop the future training 

opportunities needed to prevent skills gaps. These focus groups were developed to ensure that 

Public Debt’s employees are among the best trained in the government and are able to stay 

abreast of new technologies affecting their work. These groups concentrate on broad ranging 

disciplines including: Accounting, Administration and Analysis, Computer End-Users, 

Customer Service and Communication, Management, Information Technology, and Human 

Resources. 

BPD - 18 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments 

FY 2006 FY 2007 

Major IT Investments Budget Activity

Identify the Program that the System is

Aligned to

Operating 

Plan Obligations

Operating

Plan Enacted 

Invest One Government Agency Investment Services Administering the Public Debt $1.7 $1.7 $1.8 5.9% - 

Oracle Federal Financials Systems

Wholesale Securities Services, Retail Securities Services, Government Agency Investment Services, Summary Debt Accounting

Administering the Public Debt 2.9 2.9 3.3 13.8% 4.0 

Public Debt Accounting and Reporting System (PARS) Summary Debt Accounting Administering the Public Debt 2.0 2.0 2.0 0.0% 2.1 

SaBRe Retail Securities Services Administering the Public Debt 4.2 4.2 4.3 2.4% 4.9 

Special Purpose Securities System 

(SPSS) Government Agency Investment Services Administering the Public Debt 1.7 1.7 1.8 5.9% - 

TreasuryDirect Retail Securities Services Administering the Public Debt 4.4 4.4 5.0 13.6% 5.2 

Government Agency InvestmentServices System (GAISS) 1/ Government Agency Investment Services Administering the Public Debt - - - N/A 5.4 

Treasury Automated Auction Processing System (TAAPS) Wholesale Securities Services Administering the Public Debt and Reimbursements to Federal Reserve Banks 2.5 2.5 44.9 N/A 47.1 

Subtotal, Major IT Investments $19.4 $19.4 $63.1 225.2% $68.8 

Non-Major IT Investments $16.4 $16.4 $9.5 -42.3% $9.7 

Infrastructure Investments $24.6 $24.6 $25.4 3.3% $29.9 

Enterprise Architecture $0.0 $0.3 $0.4 27.7% $0.6 

Total IT Investments $60.4 $60.7 $98.3 62.0% $109.0 

1/ InvestOne and SPSS have merged into GAISS beginning FY 2007. 

FY 2005 % Change 

from FY05 

Obligations to 

FY06

% 

fro

BPD - 19 
4B – Information Technology Strategy 

Public Debt's major IT systems directly relate to and support its four budget activities. The goals 

of each of the four budget activities are specifically tied to the Bureau’s strategic and annual 

performance plans, and fully support Treasury’s long-term direction. Because BPD’s operations 

have been highly automated, these systems are the primary means by which the Bureau achieves 

objectives and addresses major challenges. 

Public Debt has developed and continually enhances systems to process a wide range of 

servicing transactions, initiate trillions of dollars in customer payments, and account for the 

public debt at both the detail and summary accounting levels. By delivering services to 

customers online and automating work processes, these major IT investments support BPD’s 

vision of responsible, effective government through commitment to service, efficient operations, 

openness to change, and values-based behavior. These major IT investments represent the most 

cost-effective means to conduct borrowings and deliver securities services to investors. 

The Bureau’s IT portfolio of mission critical systems is comprised of certified and accredited 

applications. Systems modification expenses are being incurred for the continued operation of 

TreasuryDirect, which will eventually serve as a replacement for other, more expensive, systems. 

To ensure continuity of operations for these significant technology investments, Public Debt 

partnered with the Financial Management Service for the use of one of their geographically 

remote processing centers for hot site contingency. Data is pre-staged and updated in near real 

time, and recoverability at this location has been fully tested. 

BPD - 20 
4.3 – PART Evaluation Table 

PART Name: Administering the Public Debt

Year PARTed: FY 2005

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. Continue to improve annual performance measures.

Public Debt identified three new long-term goals that will continue its long-standing tradition of operational 

efficiency and effectiveness.

2. Identify new long-term goals to improve efficiency and effectiveness.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

BPD - 21 
Internal Revenue Service 

Mission Statement 

Provide America’s taxpayers top-quality service by helping them understand and meet 

their tax responsibilities and by applying the tax law with integrity and fairness to all. 

Program Summary by Appropriations Account 

FY 2006 FY 2007 FY 2007

Appropriation Enacted

President's 

Budget* CR-rate*

President's 

Budget*

 $ Change 

over CR-rate

% Change 

over CR-rate

Taxpayer Services $2,142,042 $2,079,151 $2,046,908 $2,103,089 $56,181 2.74%

Enforcement 4,708,441 4,797,126 4,660,572 4,925,498 $264,926 5.68%

Operations Support 3,461,205 3,488,404 3,519,228 3,769,587 $250,359 7.11%

Business Systems Modernization 242,010 212,310 196,810 282,090 $85,280 43.33%

Health Insurance Tax Credit Administration 20,008 14,846 14,846 15,235 $389 2.62%

Total Appropriated Resources $10,573,706 $10,591,837 $10,438,364 $11,095,499 $657,135 6.30%

*

The FY 2007 budget is supplemented by $242 million in users fees (includes $135 million in new user fees) and the FY 2008 budget is supplemented by $180 million in user fees.

HITCA). In addition, FY 2007 CR-rate includes proposed interappropriation transfers.

Table 1.1

FY 2008

NOTE: Throughout this document FY 2006 and prior years have been presented in the new budget structure for comparability across fiscal years. This differs from the President's Budget 

Appendix which presents FY 2006 as it was executed. The FY 2006 enacted level excludes rescission of unobligated balances ($29 million from Taxpayer Services and $9 million from

Dollars in Thousands

FY 2008 Priorities 

In 2008 the IRS will focus its efforts on implementing Treasury’s tax compliance 

improvement strategy (see http://www.treasury.gov/press/releases/hp111.htm). This 

includes the following priorities: 

• Maintain balance between taxpayer service and enforcement 

• Improving tax compliance by: 

o Increasing front-line enforcement resources to improve tax compliance 

o Increasing voluntary compliance through improved taxpayer service options 

and enhanced research 

o Implementing legislative and regulatory changes 

• Invest in technology to reverse infrastructure deterioration, accelerate modernization, 

and improve the productivity of existing resources
Section 1 – Purpose ........................................................................................................... 4

1A – Description of Bureau Vision and Priorities...................................................... 4 

Summary Budget Adjustment Table (Taxpayer Service/Enforcement) ..................... 8 

1B – Program History and Future Outlook............................................................... 10 

Section 2 – Budget Adjustments & Appropriations Language .................................. 18

Program Summary by Appropriations Account and Budget Activity...................... 18 

Appropriation Detail Table....................................................................................... 19 

Summary Budget Adjustment Table......................................................................... 20 

2A – Budget Decreases and Increases Description (IRS)......................................... 21 

Increased e-File Savings ....................................................................................... 22 

Increase Efficiency through Submission Processing Site Consolidations............ 23 

Upgrade Critical IT Infrastructure ........................................................................ 24 

Enhance Computer Security Incident Response Center (CSIRC) and Network 

Infrastructure Security .......................................................................................... 25 

Fund Business Systems Modernization ................................................................ 26 

Improve Compliance Estimates, Measures, and Detection of Non-Compliance.. 29 

Improve Compliance Among Small Business and Self-Employed Taxpayers .... 29 

Implement Legislative Proposals to Improve Compliance................................... 32 

Increase Compliance for Large Multinational Businesses.................................... 35 

Establish New Document Matching – Kansas City.............................................. 38 

Increase Individual Filing Compliance................................................................. 39 

Increase Tax-Exempt Entity Compliance ............................................................. 40 

Increase Criminal Tax Investigations ................................................................... 41 

Research Effect of Service on Taxpayer Compliance .......................................... 43 

Expand Volunteer Income Tax Assistance........................................................... 44 

Implement Taxpayer Assistance Blueprint........................................................... 45 

Operating Levels Table............................................................................................. 48 

2B – Appropriations Language and Explanation of Changes................................... 49 

2C – Legislative Proposals........................................................................................ 52 

Section 3 – Budget and Performance Plan ................................................................... 54

Taxpayer Services (TS)........................................................................................... 54 

Appropriation Description ................................................................................ 54 

Appropriations Detail Table ............................................................................. 54 

Budget Adjustment Table ................................................................................. 55 

Operating Levels Table..................................................................................... 56 

TS Budget Activity: Pre-Filing Taxpayer Assistance and Education..................... 57 

3A - Description................................................................................................ 57 

3B – Budget and Performance Plan.................................................................. 58 

TS Budget Activity: Filing and Account Services.................................................... 60 

3A – Description............................................................................................... 60 

3B – Budget and Performance Plan.................................................................. 61 

IRS - 1
Enforcement (ENF)................................................................................................. 64 

Appropriation Description ................................................................................ 64 

Appropriation Detail Table............................................................................... 64 

Budget Adjustment Table ................................................................................. 65 

Operating Levels Table..................................................................................... 66 

ENF Budget Activity: Investigations........................................................................ 67 

3A – Description............................................................................................... 67 

3B – Budget and Performance Plan.................................................................. 68 

ENF Budget Activity: Exam and Collections........................................................... 69 

3A – Description............................................................................................... 69 

3B – Budget and Performance Plan.................................................................. 71 

ENF Budget Activity: Regulatory ............................................................................ 73 

3A – Description............................................................................................... 73 

3B – Budget and Performance Plan.................................................................. 74 

Operations Support (OS) ....................................................................................... 77 

Appropriation Description ................................................................................ 77 

Appropriation Detail Table............................................................................... 77 

Budget Adjustment Table ................................................................................. 78 

Operating Levels Table..................................................................................... 79 

OS Budget Activity: Infrastructure .......................................................................... 80 

3A - Description................................................................................................ 80 

3B – Budget and Performance Plan.................................................................. 80 

OS Budget Activity: Shared Services and Support .................................................. 81 

3A – Description............................................................................................... 81 

3B – Budget and Performance Plan.................................................................. 83 

OS Budget Activity: Information Services............................................................... 85 

3A – Description............................................................................................... 85 

3B – Budget and Performance Plan.................................................................. 87 

Business Systems Modernization (BSM) .............................................................. 90 

Appropriation Description ................................................................................ 90 

Appropriation Detail Table............................................................................... 90 

Budget Adjustment Table ................................................................................. 91 

Operating Levels Table..................................................................................... 92 

BSM Budget Activity: Business Systems Modernization ......................................... 93 

3A – Description............................................................................................... 93 

Health Insurance Tax Credit Administration (HITCA)..................................... 98 

Appropriation Description ................................................................................ 98 

Appropriation Detail Table............................................................................... 98 

Budget Adjustment Table ................................................................................. 99 

Operating Levels Table................................................................................... 100 

HITCA Budget Activity: Health Insurance Tax Credit Administration ................ 101 

3A - Description.............................................................................................. 101 

3B – Budget and Performance Plan................................................................ 102 

IRS - 2
Section 4 – Supporting Materials ................................................................................ 103

4A – Human Capital Strategy Description ............................................................. 103 

Human Resources Table ......................................................................................... 105 

4B – Information Technology Strategy .................................................................. 106 

Summary of IT Resources Table ............................................................................ 110 

Program Assessment Rating Tool (PART) Evaluation Table ................................ 112 

IRS Performance Measures Summary Table and Data Dictionary Link................ 122 

IRS - 3
Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

The Internal Revenue Service (IRS) administers America’s tax laws and collects revenue 

to fund most government operations and public services as well as implements Treasury’s 

tax compliance improvement strategy. The IRS taxpayer service programs provide 

assistance to millions of taxpayers to help them understand and meet their tax obligations. 

The IRS enforcement programs are aimed at deterring taxpayers inclined to evade their 

responsibilities while vigorously pursuing those who violate tax laws. 

The President’s Budget request for FY 2008 supports the IRS’ five-year strategic plan. 

This plan underscores the IRS commitment to provide quality service to taxpayers while 

enforcing America’s tax laws in a balanced manner. The IRS strategic plan goals are: 

• Improve Taxpayer Service – Help people understand their tax obligations and 

making it easier for them to participate in the tax system; 

• Enhance Enforcement of the Tax Law – Ensure taxpayers meet their tax 

obligations, so that when Americans pay their taxes, they can be confident their 

neighbors and competitors are also doing the same; and 

• Modernize the IRS through its People, Processes and Technology – 

Strategically manage resources, associated business processes and technology 

systems to effectively and efficiently meet service and enforcement strategic 

goals. 

In support of these goals, the FY 2008 Budget priorities follow the guiding principle of 

Service plus Enforcement equals Compliance and sustain the IRS’ objectives: 

• Modernize information systems and business processes to maximize resources 

and improve service and enforcement; 

• Enhance research to better allocate resources to IRS programs; 

• Discourage and deter non-compliance with emphasis on corrosive activity by 

corporations, high-income taxpayers and abusive domestic and off-shore tax 

entities; 

• Deter abuse within the tax-exempt community; and 

• Simplify the tax process and improve service options for the taxpaying public. 

Reducing the Tax Gap 

The IRS collects 95 percent of the revenues that fund the United States Government. The 

FY 2008 Budget request will accelerate deficit reduction by improving tax compliance to 

strengthen the Federal Government’s ability to collect more of these legally-owed taxes. 

IRS - 4
The tax gap is the difference between the amount of tax imposed on taxpayers for a given 

year and the amount that is paid voluntarily and timely. The IRS’ latest estimate shows 

that the overall gross tax gap for Tax Year 2001 was about $345 billion. 

Tax Year 2001 Federal Tax Gap

(Dollars in Billions)

Actual Amounts 

Updated Estimates

Dependent on Older Estimates

Status of the Estimates

Estimates in Bold Boxes 

Have Been Updated

Based on Detailed

TY01 NRP Results

Nonfiling*

27

Underpayment

33

Estate & Excise

Taxes

4

Corporation

Income Tax

30

Large 

Corporations

25

Small 

Corporations

5

Underreporting

285

Individual

Income Tax

197

Underreported

Business

Income

109

Underreported

Non-Business

Income

56

Overstated

Adjustments,

Deductions,

Exemptions, and 

Credits

32

Employment

Tax

54

FICA & 

Unemployment

Taxes

15 

Self-Employment

Tax

39

FICA & 

Unemployment

Taxes

15 

Self-Employment

Tax

39

Gross Tax Gap:345

(Noncompliance Rate : NCR = 16.3%)

*Updated using Census tabulations

This estimate, however, does not take into account taxes that were paid voluntarily but 

paid late, or recoveries from the IRS enforcement activities. Taking these factors into 

account, the “net tax gap” was an estimated $290 billion. 

The tax gap is comprised of three sources of taxpayer noncompliance: 

• Underreporting (not reporting one’s full tax liability even when the return is filed on 

time), 82 percent of the tax gap; 

• Underpayment (not paying by the due date the full amount of tax reported on a timely 

return), 10 percent of the tax gap; and 

• Non-filing (not filing required returns or not filing on time), eight percent of the tax 

gap. 

Increased resources for the IRS’ exam and collection programs yield direct measurable 

results. Once the new staff proposed in this request are trained and become more 

experienced, the enforcement revenue generated each year will be $699 million. 

However, this estimate excludes the likely larger revenue impact from the deterrence 

value of these and other IRS enforcement programs (e.g., criminal investigations). It also 

excludes the impact of taxpayer services on voluntary compliance. 

IRS - 5
The IRS cannot currently measure either the impact of deterrence or service, but they are 

positive. The complexity of the nation’s current tax system is a significant reason for the 

tax gap, and even sophisticated taxpayers make honest mistakes on their tax returns. 

Accordingly, helping taxpayers understand their obligations under the tax law is a critical 

part of improving voluntary compliance. To this end, the IRS remains committed to a 

balanced program assisting taxpayers in both understanding the tax law and remitting the 

proper amount of tax. 

It is the need to improve tax compliance that drives much of what the IRS does. IRS 

enforcement activities, such as examination and collection, directly target tax gap 

elements, while IRS taxpayer services provide the information and tools taxpayers need 

to calculate and understand their tax obligations; collect, process, and store filed forms; 

and collect and process tax receipt and refunds owed timely. This budget request sets 

forth the funding, policy and tax law changes need to implement Treasury’s tax 

compliance plan and make progress in improving tax compliance. 

Taxpayer Service and Enforcement Programs 

The FY 2008 President’s Budget request accelerates deficit reduction by strengthening 

the IRS’ ability to administer taxpayer service and increase enforcement and collection of 

federal unpaid tax liabilities. IRS programs and supporting functions appropriated in the 

three operating accounts - taxpayer service, enforcement and operations support – are 

strategically aligned with either taxpayer service or tax law enforcement activities. 

Enforcement Program: The IRS continues its emphasis on tax law enforcement, 

increasing collection of delinquent tax debt from $34 billion in 2002 to $49 billion in 

2006, an increase of 44 percent. Since 2003, federal government receipts have also 

increase by over $600 billion with revenue growth greatest in the areas of corporate taxes 

and high-income individual taxes. In FY 2008, the President’s Budget increases funding 

for enforcement to $7,228.2 million. This includes $291.3 million for new enforcement 

initiatives and $225.7 million in inflationary cost increases offset by efficiencies savings 

of $82.2 million. As in 2006 and 2007, the Administration proposes to include these 

enforcement increases as a Budget Enforcement Act program integrity cap adjustment 

(see chapter 15, Budget Reform Proposals in the Analytical Perspectives volume of the 

2008 Budget). IRS Enforcement resources are funded in the Enforcement and Operations 

Support appropriations accounts. 

Taxpayer Service Program: Helping the public understand its tax reporting and payment 

obligations is a cornerstone of taxpayer compliance. In FY 2008, the President’s Budget 

increases funding for taxpayer service to $3,570.0 million. This includes $56.1 million 

for new service initiatives and $112.7 million in inflationary cost increases offset by 

efficiency savings of $37.7 million. IRS Taxpayer Service resources are funded in the 

Taxpayer Service and Operations Support appropriation accounts. 

IRS - 6
FY 2007

CR-rate

Taxpayer Services $3,498.4 $3,438.7 $3,570.0 3.8%

Direct Appropriation $2,142.0 $2,046.9 $2,103.1

Operations Support $1,356.4 $1,391.8 $1,466.9

Enforcement $6,813.2 $6,788.0 $7,228.2 6.5%

Direct Appropriation $4,708.4 $4,660.6 $4,925.5

Operations Support $2,104.8 $2,127.4 $2,302.7

Total Taxpayer Services and Enforcement $10,311.6 $10,226.7 $10,798.2 5.6%

Taxpayer Service and Enforcement Programs

(Dollars in Millions)

Programs

% Change 

FY 2007 to 

FY 2008

FY 2006

Enacted

FY 2008 

President's 

Budget

FY 2008 President’s Budget Request 

The FY 2008 President’s Budget request for the IRS is $11,095.5 million, 6.3 percent 

above the FY 2007 Continuing Resolution (CR) level. The funding request for taxpayer 

service programs is $3,570.0 million; for enforcement programs is $7,228.2 million; for 

Business Systems Modernization (BSM) is $282.1 million; and for Health Insurance Tax 

Credit Administration is $15.2 million. The IRS total increase for FY 2008 of 

$657.1 million, which includes $27.6 million for a technical adjustment to the FY 2007 

base due to the CR; $340.0 million for maintaining current levels offset by $120.0 million 

in efficiency savings; and a net program increase of $409.5 million to enhance the IRS’ 

infrastructure and modernization, enforcement, and taxpayer service programs that focus 

on reducing the tax gap. By 2010, these FY 2008 investments will increase annual 

enforcement revenue by $699 million. In addition, it is estimated that the tax compliance 

improvement legislative proposals will generate approximately $29 billion over the next 

ten years. 

The IRS program initiatives focus on implementation of Treasury’s tax compliance 

improvement strategy and the most significant needs for FY 2008: 

• Improve IRS information technology infrastructure ($81.0 million and $62.1 million 

for the BSM program) to strengthen both taxpayer service and enforcement programs; 

• Expand enforcement activities targeted at improving compliance ($246.4 million); 

and 

• Enhance taxpayer service ($20 million) by continuing its efforts to increase and 

improve the delivery of services offered to taxpayers by expanding its research and 

implementing new technology (e.g., Spanish “Where’s My Refund?” and an 

estimated calling wait time feature). 

IRS - 7
Summary Budget Adjustment Table (Taxpayer Service/Enforcement) 

Taxpayer Service Program Summary Budget Adjustment Table 

(includes both direct costs in the Taxpayer Services appropriation 

 and indirect costs in the Operations Support appropriation) 

FTE Amount

FY 2007 President's Budget 35,931 $3,456,333

CR-rate Adjustment (330) (39,711)

(541) ($37,727)

(541)

($6,479)

(6,479)

FY 2007 CR-rate 35,601 $3,416,622

Interappropriation Transfer Corrections to Budget Restructure 43 22,136

FY 2007 Operating Plan at CR-rate 35,644 $3,438,758

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $193

Base Adjustment 193

Maintaining Current Levels (MCLs) $112,681

Pay Annualization 12,881

Pay Inflation Adjustment 74,475

Non-Pay Inflation Adjustment 25,325

Efficiency Savings

Subtotal, Changes to Base $75,147

FY 2008 Base 35,103 $3,513,905

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings

Program Reinvestments: 0 $6,479

Increase Efficiency through Submission Processing Site Consolidations 6,479

Program Increases:

Infrastructure Initiatives 0 $30,948

Upgrade Critical IT Infrastructure 24,477

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastructure Security 6,471

Enforcement Initiatives 44 $5,107

Improve Compliance Among Small Business and Self-Employed Taxpayers 31 3,309

Increase Compliance for Large Multinational Businesses 4 1,055

Expand Document Matching in Existing Sites 3 248

Increase Individual Filing Compliance 6 495

Taxpayer Service Initiatives 54 $20,000

Research Effect of Service on Taxpayer Compliance 8 5,000

Expand Volunteer Income Tax Assistance 46 5,000

Implement Taxpayer Assistance Blueprint 0 10,000

Subtotal, FY 2008 Program Changes 98 $56,055

Total, FY 2008 President's Budget Request 35,201 $3,569,960

Program: Taxpayer Service

Table 2.1

FY 2008 Budget Highlights

Dollars in Thousands

IRS - 8
Enforcement Program Summary Budget Adjustment Table 

(includes both direct costs in the Enforcement appropriation 

and indirect costs in the Operations Support appropriation) 

FTE Amount

FY 2007 President's Budget 56,771 $6,908,348

CR-rate Adjustment (988) (98,262)

(43) (22,136)

(643) ($82,254)

(643)

FY 2007 CR-rate 55,783 $6,810,086

Interappropriation Transfer Corrections to Budget Restructure

FY 2007 Operating Plan at CR-rate 55,740 $6,787,950

Changes to Base:

 Technical Adjustments to FY 2007 Base due to CR 0 $5,494

Base Adjustment 0 5,494

 Maintaining Current Levels (MCLs) $225,692

Pay Annualization 0 27,362

Pay Inflation Adjustment 0 157,054

Non-Pay Inflation Adjustment 0 41,276

 Efficiency Savings

Subtotal, Changes to Base $148,932

FY 2008 Base 55,097 $6,936,882

Program Changes:

Program Increases:

Infrastructure Initiatives 0 $50,052

Upgrade Critical IT Infrastructure 0 35,523

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastructure 0 14,529

Enforcement Initiatives 1,486 $241,280

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 258 41,022

Improve Compliance Among Small Business and Self-Employed Taxpayers 454 69,856

Implement Legislative Proposals to Improve Compliance 0 23,045

Increase Compliance for Large Multinational Businesses 154 25,145

Expand Document Matching in Existing Sites 214 27,958

Establish New Document Matching - Kansas City 205 23,205

Increase Individual Filing Compliance 55 6,049

Increase Tax-Exempt Entity Compliance 109 15,000

Increase Criminal Tax Investigations 37 10,000

Subtotal, FY 2008 Program Changes 1,486 $291,332

Total, FY 2008 President's Budget Request 56,583 $7,228,214

Program: Enforcement

Table 2.1

FY 2008 Budget Highlights

Dollars in Thousands

IRS - 9
1B – Program History and Future Outlook 

The IRS helps taxpayers understand and comply with federal income tax laws. Each 

year, IRS employees make millions of contacts with American taxpayers and businesses. 

These contacts encourage and facilitate self-sufficiency for taxpayers in meeting their tax 

obligations. The IRS also enforces the tax laws to ensure that non-compliant taxpayers 

pay their fair share. To improve voluntary tax compliance, the IRS must meet taxpayer 

expectations, respond quickly to technological and demographic changes and, provide the 

proper balance of service and enforcement. 

Strategic Goal I: Improve Taxpayer Service 

The IRS serves a constituency of more than 135 million individual tax filers. During the 

2006 filing season, the IRS issued more than 100 million refunds totaling over $277 

billion. In addition, the IRS processed another 46.9 million returns for partnerships, 

corporations, employment taxes and exempt organizations. Providing quality taxpayer 

service, and continuing to improve that service, remains a strategic priority for the IRS. 

The IRS allocates its resources among its service, education and outreach programs to 

ensure taxpayers understand their obligations and voluntarily pay their taxes. 

Assisting the public in meeting its tax obligations is the cornerstone of taxpayer 

compliance and is vital for maintaining public confidence in the tax system. Over the 

past several years, the IRS has made significant progress in improving customer service 

to the taxpayers: 

• The overall American Customer Satisfaction Index (ACSI) score for all individual tax 

filers increased 27 percent, from 51 in 1999 to 65 in 2006. This is the largest increase 

of all federal agencies surveyed by the ACSI during this period. Program 

improvements contributing to an increase in customer satisfaction rates were 

implemented as a result of a Program Assessment Rating Tool (PART) assessment 

conducted for the Taxpayer Service program in FY 2004. Improvements included the 

launch of an improved, interactive telephone Probe and Response Guide for the 2005 

filing season, and the implementation of a process using recorded call transcripts to 

create test call scenarios for training and certifying Customer Service 

Representatives. 

• In FY 2006, the IRS level of service reached rates of 90.9 and 93.2 percent for tax 

law and account accuracy, respectively, and toll-free level of service was maintained 

at 82 percent. 

• Nearly 14,000 large corporate taxpayers subject to the electronic filing mandate 

e-filed their returns successfully. The largest corporate taxpayers transmitted their 

returns without delay or backlog. The IRS processed this volume of very complex 

returns and accepted and acknowledged receipt within its 24-hour turnaround 

standard. 

IRS - 10
• IRS.gov is one of the most heavily visited sites on the internet. In FY 2006, the 

number of visits increased 9.8 percent and the number of pages viewed increased over 

three percent. 

• The IRS delivered another successful filing season in 2006 with 134.7 million total 

individual returns received compared to 128.6 million in 2005. For the second year in 

a row, more than half (72.8 million) of all individual returns were filed electronically, 

representing a 6.6 percent increase over FY 2005. The most striking change is the 

18.5 percent (22.2 million) increase in electronic filing from home computers. 

The mix of taxpayer services demanded by the public appears to be changing. Toll-free 

calls and visits to Taxpayer Assistance Centers (TACs) have declined. In FY 2006, the 

IRS completed more than 24.3 million automated calls compared to 25.7 million in 

FY 2005, and answered 32.7 million assistor calls compared to 33.4 million in FY 2005. 

The IRS also achieved the FY 2006 82 percent level of service goal, with an accuracy 

rate of 91 percent for tax law questions. The accuracy of responses to tax law questions 

at the TACs increased to 83 percent, compared to 75 percent in FY 2005. Waiting time 

at the TACs was minimized with more than eight out of ten customers being served in 

30 minutes or less. 

The TACs experienced an eight percent reduction in walk-in contacts due to the overall 

decline in the number of customers seeking face-to-face assistance. The reduced demand 

for these services can be attributed, in part, to increased usage of the newly redesigned, 

award-winning web site. The redesigned website enhances taxpayers’ ability to find 

desired content through improved search and navigation functions. In addition, the IRS 

offered a set of web-based business products for practitioners and other third parties. IRS 

e-Services such as the Internet-Employer Identification Number service and Transcript 

Delivery service experienced significant usage. Overall customer satisfaction with the 

award-winning IRS.gov website increased five percentage points based on the ACSI and 

use continued to grow. More than 1.3 billion web pages were viewed on IRS.gov and 

over 24 million taxpayers used the web application “Where’s My Refund?” to check the 

status of their refunds. 

In FY 2006, the IRS delivered the first phase of the Taxpayer Assistance Blueprint 

(TAB), a comprehensive study that reviewed current taxpayer service options and 

identified areas for improvements, including expanded taxpayer education and 

awareness, optimized use of partner services, increased self-service options, and 

expanded training and support tools for taxpayers. The Phase II report, which will be 

delivered in FY 2007, includes additional research and establishes the framework to 

develop short and long-term outcome goals and metrics for measuring the IRS’ progress 

on service improvements for taxpayers. 

In FY 2007 and FY 2008, the IRS will continue with its efforts to increase and improve 

the services offered to taxpayers, primarily focusing on those outside of the traditional 

telephone access. The IRS will increase self-service applications, continue to ensure web 

navigation is user-friendly, and also improve the quality and accuracy of its telephone 

responses. The IRS will expand its research and evaluate information regarding taxpayer 

IRS - 11
service needs, priorities, and preferences in order to improve delivery services. The IRS 

will also invest more in technology, process improvements, and training to achieve 

consistent and repeatable service with reduced costs. 

Strategic Goal II: Enhance Enforcement of the Tax Law 

A smoothly functioning tax administration system inspires confidence among taxpayers. 

Voluntary compliance with tax laws increases if all taxpayers believe that their neighbors 

are paying their fair share. 

Over the past decade, the IRS has improved its enforcement programs’ performance by 

streamlining and implementing centralized work processes. This resulted in improved 

workload selection techniques, increased managerial involvement in casework, and 

initiatives that reduce cycle time. As a result, in FY 2006, the IRS: 

• Collected more than $2.4 trillion dollars in tax revenue, including $48.7 billion 

through IRS enforcement activities; 

• Audited more than 1.2 million taxpayers, a seven percent increase from FY 2005, 

including an 18 percent increase in audits of high-income taxpayers (those earning 

$100,000 or more); 

• Increased small business audits (assets < $10 million) by eight percent and automated 

underreporter closures by 10 percent; 

• Closed 15 percent more collection cases and collected nine percent more from 

delinquent accounts in FY 2006 compared to FY 2005; and 

• Increased the fraud referral acceptance rate (i.e., the ratio of internal referrals within 

the IRS received to the number of those cases that are accepted by CI) to 71.8 percent 

exceeding the five year high achieved in FY 2005 of 68.8 percent and the total 

number of referrals accepted (445) was also higher than in FY 2005. 

• Increased the use of substitute for return authority by 66 percent (substitute for return 

authority allows the IRS to file a tax return for an individual or business when it does 

not file a required return). Examiners prepared and filed 665,000 returns for 

individuals and 182,000 returns for businesses classified as non-filers. 

The IRS also exceeded prior-year levels for coverage, efficiency and examination quality 

annual performance targets. In FY 2006, collection coverage increased to 54 percent, 

individual examination coverage improved while business examination coverage 

remained above seven percent, and automated underreporter efficiency increased almost 

eight percent to 1,832 cases. In addition, examination quality for industry and 

coordinated industry cases increased to 85 percent and 96 percent, respectively. 

Improvements in inventory management, decreases in cycle time, and enhanced training 

all contributed to improved productivity. Improved quality controls measuring critical 

elements of the examination, a reinforced focus on case quality to drive improvement 

efforts, and the delivery of business results, led to improved performance for the third 

consecutive year. 

IRS - 12
In FY 2007 and FY 2008, the IRS will continue to reengineer its examination and 

collection procedures to reduce time, increase yield, and expand coverage. As part of its 

regular examination program, the IRS is expanding the use of cost-efficient audit 

techniques. By increasing its use of reliable third-party data to verify information 

reported by taxpayers, the IRS can better target its audit resources. The IRS is expanding 

its efforts to shift to agency-wide strategies, which maximize efficiency by better aligning 

problems (such as non-filers and other areas of noncompliance) and their solutions within 

the organization. The IRS is committed to improving the efficiency of its audit process, 

measured by audit change rates and other appropriate benchmarks. 

However, efficiency gains in existing programs alone will not significantly reduce the tax 

gap. Some of the initiatives, including new legislative proposals, such as providing the 

IRS with access to more third-party data and simplifying the tax code, will also help 

make compliance activities more effective. 

Strategic Goal III: Modernize the IRS through its People, Processes and Technology 

Additional funding for information technology (IT) infrastructure and Business Systems 

Modernization (BSM) is the highest funding priority for FY 2008. The IRS cannot 

significantly improve compliance through its service and enforcement programs without 

a robust IT infrastructure. IT infrastructure investments support services to both 

taxpayers and other government agencies and enforcement by providing IRS frontline 

employees with the basic tools necessary to perform their jobs. A modernized and secure 

infrastructure will enhance the speed, security, and functionality necessary to keep pace 

with an automated economy. The IRS must keep pace with the growing demand and 

volume of electronic submission, payment, and refund transactions for tax remittances 

and offer taxpayers a variety of faster alternatives for satisfying their tax obligations. 

These efforts will continue to place greater demand on the IRS to provide a modernized 

and secure IT infrastructure. 

Furthermore, a successful modernization program is critical to supporting long-term tax 

administration operations. Successful BSM program delivery during the past two years 

demonstrates that the IRS has established a foundation of disciplined program 

management processes and controls. The IRS managed BSM projects with a degree of 

sustained success not seen since program inception. This accomplishment is especially 

noteworthy because the program achieved this while transitioning from a contractor-led 

program to an IRS-led program. 

The IRS also developed an IT Modernization Vision and Strategy (MV&S) for its IT 

systems for 2008 that align with and support the IRS Strategic Plan. Through the MV&S 

process, the IRS developed a plan showing how the IRS can effectively meet IT 

modernization goals in an incremental approach that provides near-term value. The plan 

focuses on delivery of four major tax administration systems - Customer Account Data 

Engine, Account Management Services, Modernized e-File, and Filing & Payment 

Compliance - addressing the IRS' strategic business priorities. The plan also capitalizes 

IRS - 13
on IT infrastructure initiatives and smaller IT project initiatives to support a unified 

approach in continued improvement to program operations. 

Throughout FY 2006, IRS modernization efforts continued to focus on its four core tax 

administration systems designed to provide more sophisticated tools to taxpayers and the 

IRS employees. The following highlights the IRS’ efforts in FY 2006 in advancing these 

core systems: 

• Introduced new Customer Account Data Engine (CADE) capabilities for the 2006 

filing season. CADE supports faster refunds to taxpayers, issuing direct deposit 

refunds between one and seven days faster, and paper refunds four to thirteen days 

faster than refunds generated by the legacy system. CADE posted over 7.3 million 

returns – more than a 400 percent increase over the previous year, and issued 7 

million refunds totaling in excess of $3.4 billion. CADE improved taxpayer service 

by allowing access to account information up to seven days sooner, increasing the 

likelihood of single telephone call resolution, faster issue detection, and more 

timely account settlement. CADE is expected to post between 25 and 30 million 

returns in 2007. 

• Began the development of Account Management Services (AMS), a project that 

will enable real-time access to taxpayer account information, to support much faster 

resolution of taxpayer issues by IRS customer service representatives. AMS, in 

conjunction with CADE, will enable the IRS to break the weekly update system 

paradigm that has existed since the 1960s, enabling the IRS to begin to provide 

settlement of all account information by end-of-day, similar to what one expects 

from major private-sector financial institutions. The first release of AMS is due the 

summer of 2007 to support real-time address change capability in CADE and 

enable faster notice processing for a number of math-error notices. 

• Implemented Release 3.2 of its Modernized e-File (MeF) project, which enabled the 

filing of both federal and state returns concurrently for corporations (Forms 1120 

and 1120-S) and tax-exempt organizations (Form 990). In 2006, the MeF platform 

supported an e-filing mandate for certain large corporations and tax-exempt entities. 

Tax returns for large corporations typically include hundreds, or even thousands, of 

pages. Receiving the data electronically improves the accuracy of the tax return, 

reduces the volume of paper tax returns submitted to IRS Service Centers, and 

accelerates the examination process by having all tax return data available 

electronically. Electronic capture of return information enables the IRS to quickly 

deliver the data to analysts and agents for compliance risk assessment and action. 

In 2006, MeF accepted over 550,000 corporate returns. The IRS is expanding the 

MeF taxpayer base in 2007 to include Partnership Income tax returns (Form 1065), 

eventually enabling nearly 2.7 million small business and self-employed taxpayers 

to benefit from electronic filing. The IRS is in the planning stage to migrate the 

1040 individual tax return to the Modernized e-File platform. The development and 

implementation of MeF 1040 capability will be complete in January of 2011 with 

initial planned deployment for January, 2009. 

IRS - 14
• Completed the first release of the Filing & Payment Compliance (F&PC) strategy. 

F&PC functionality analyzes tax collection cases and separates cases that require 

direct IRS involvement from those that can be handled by Private Collection 

Agencies (PCAs). The introduction of PCAs is expected to:

o Assist the IRS by addressing the volume of delinquent taxpayers that exceeds the 

 IRS’ capacity to work, approximately 250,000 cases per year; 

o Help eliminate backlogs in the large number of outstanding tax liabilities, which 

 have grown by 118 percent over the last 12 years, increasing tax revenue and 

 reducing the tax gap; and, 

Tax administration in the 21st century requires improved IRS information technology. 

For FY 2007 and FY 2008, the IRS is committed to continuing to make improvements in 

technology, including: 

• Replacing antiquated core legacy account management systems and technology 

with the Customer Account Data Engine (CADE); 

• Expanding and enhancing compliance activities through early detection, better 

case selection, and better case management; 

• Delivering effective customer service, including expanded e-file systems and web 

services at reduced cost; and, 

• Investing in infrastructure necessary to perform operations more efficiently, thus 

freeing up resources for enforcement and taxpayer service programs. 

Supporting the President's Management Agenda 

The FY 2008 Budget request for the IRS reflects the Department of the Treasury's 

commitment to further the objectives of the President's Management Agenda (PMA). In 

June 2006, the IRS developed an implementation plan for Budget-Performance 

Integration (BPI) that identifies the actions necessary to formulate and execute fullycosted performance and the means to determine the marginal cost of performance, 

consistent with the BPI requirements of the PMA. As part of this process, the IRS will 

initiate its plan to improve budget and performance integration using cost accounting 

pilots that focus on the interrelationship between financial data contained in the 

Integrated Financial System (IFS) and performance information (e.g., submission 

processing volume data) stored in IRS legacy systems. The cost pilots will facilitate: 

• Standardization of cost methodologies for determining and applying direct and 

indirect costs associated with performance measures; 

• Identification of additional system interfaces needed to support managerial cost 

accounting; 

• Development of a methodology for linking cost data and agency-level outcomes and 

outputs for the budget formulation and reporting process; and 

• Development of an IRS cost accounting policy. 

IRS - 15
FY 2008 Challenges 

The IRS seeks efficiencies in delivering taxpayer service and bolstering its enforcement 

efforts to improve compliance with the tax laws and, ultimately, increase tax revenue. 

Using the internet as a means of providing taxpayers access to tax information and 

services is one approach to achieving greater efficiencies. The use of private collection 

agencies to collect uncontested tax debt is another. In FY 2007 and beyond, the IRS will 

continue to seek alternative, cost-effective ways of improving taxpayer service and 

enforcement. The following discussion identifies some of the most significant internal 

and external challenges for the IRS. 

• Business Systems Modernization (BSM): The BSM program remains on the GAO 

high-risk list and also continues to be tracked as a declared "material weakness" 

because of the national significance of the program and the expectation that recent 

program improvements must be sustained over a longer period, given the extensive 

scope and time horizon of the program. During FY 2007, the IRS will continue to 

strengthen the management processes developed as part of its corrective action plan 

to address material weaknesses and will strive to sustain improvements relating to the 

efficient and effective delivery of the IRS’ IT systems. 

• Information Technology Modernization Vision and Strategy (MV&S): This 

governance and planning process for IRS IT leverages the IRS strategic plan and 

associated business plans to drive IT investment decisions, address the priorities around 

modernizing front-line tax administration, and enable technical capabilities provided 

by the infrastructure and security. The MV&S approach will leverage existing 

systems (where possible) and new development (where necessary) to optimize 

capacity, manage program costs, leverage common IT services across business 

domains, and deliver business value in smaller and more frequently fielded 

incremental releases. The MV&S will address the business priorities for the next five 

years, with particular emphasis on informing and guiding the definition of investment 

priorities for FY 2007 through FY 2009 across all investment tiers. Using the 

MV&S approach, the IRS enterprise IT solutions demonstrate alignment with the 

Treasury Enterprise Architecture. 

• Implement Treasury’s Tax Compliance Improvement Plan: Maximizing tax 

compliance is at the heart of the IRS emphasis on enforcement. The IRS will continue 

to improve enforcement by targeting its casework and enforcement activities to deliver 

results more effectively. The IRS will continue to analyze tax information and data 

from compliance research studies to better define and quantify the tax gap. The IRS 

will use the results of these efforts to improve its ability to counter the methods and 

means of those taxpayers who fail to report or pay what they owe. The IRS is 

focusing on discouraging and deterring non-compliance with an emphasis on corrosive 

activity by corporations, high-income individual taxpayers, and other contributors to the 

tax gap. 

• Abusive Tax Shelters: Identifying and dismantling Abusive Tax Avoidance 

Transactions (ATAT) remain a challenge and a high enforcement priority for the IRS. 

These transactions are corrosive to the equity and the fairness of the tax law for all 

taxpayers. Vigorous enforcement of the criminal provisions of the tax code, coupled 

IRS - 16
with appropriate civil sanctions, materially contributes to maintaining voluntary 

compliance and public confidence in the fairness of the tax system. Tax shelter 

promoters continue to modify schemes, making it difficult to detect patterns and 

identify participants on a timely basis. Recent trends indicate that the tax shelter 

population will continue to expand to small to mid-size corporations where the issues 

will be more difficult to identify and examine. Large corporate taxpayers are 

increasingly engaging in structured transactions. These structured transactions 

involve highly complex fact patterns and large dollar issues. Promoters of tax 

shelters are migrating from the large accounting firms to other firms and businesses 

that specialize in tax shelters. These promoters are less compliant for registration and 

less stable in their business operations, making it more difficult to pursue them for 

information and for penalties. 

• Taxpayer Assistance Blueprint (TAB): The IRS remains committed to taxpayer 

service and completed Phase I of the TAB in April 2006. Phase I describes the needs 

and preferences of taxpayers, including information on how taxpayers access the IRS 

services, what services they prefer, and whether the IRS meets their needs. The 

IRS expects to complete Phase II of the project in FY 2007, and will use the results to 

better focus its taxpayer services based on taxpayer needs, preferences, and 

demands. The research resulting from the TAB will enable the IRS to help taxpayers 

to better understand the tax law and, in return, remit the proper amount of tax. 

• The Complexity of the Tax Code: The complexity of the tax code is the most 

significant problem facing taxpayers and the IRS alike. The tax code contains well 

over a million words, addressing taxpayer provisions such as the alternative minimum 

tax and the earned income tax credit. Business taxpayers must contend with a 

multitude of rules that cover the depreciation of equipment; numerous and overlapping 

filing requirements for employment taxes; and vague standards that govern the 

classification of workers as either employees or independent contractors. The IRS must 

explain the Code in a way that taxpayers can understand. 

• Achieving 80 Percent e-Filing: For the 2006 filing season the IRS received 72.8 

million electronically-filed returns, a 6.6 percent increase over the previous year. 

Report language accompanying the FY 2007 Transportation, Treasury, the Judiciary, 

Housing and Urban Development Appropriation acknowledges that most experts 

realize that the IRS will not meet the original goal of 80 percent e-filing by 2007. The 

Appropriators, therefore, direct the IRS to develop a detailed plan by June 2007 on 

how to reach the 80 percent e-filing goal. 

IRS - 17
Section 2 – Budget Adjustments & Appropriations Language 

The Internal Revenue Service (IRS) budget request for FY 2008 is $11,095,499,000 in 

direct appropriations and 92,118 FTE. This is an increase of $657,135,000 or 6.3 

percent, and 400 FTE, over the FY 2007 Continuing Resolution (CR) rate of 

$10,438,364,000 and 91,718 FTE. The CR rate includes proposed interappropriation 

transfer corrections to budget restructure from Taxpayer Service ($12,243,000) and 

Enforcement ($47,833,000) to Operations Support ($60,076,000). 

Program Summary by Appropriations Account and Budget Activity 

Internal Revenue Service 

FY 2006 FY 2007 FY 2007

Appropriation Enacted

President's 

Budget CR-rate

President's 

Budget

 $ Change 

over CR-rate

% Change 

over CR-rate

Taxpayer Services $2,142,042 $2,079,151 $2,046,908 $2,103,089 $56,181 2.74%

 Pre-filing Taxpayer Assistance and Education 577,425 575,694 556,693 578,078 21,385 3.84%

 Filing and Account Services 1,564,617 1,503,457 1,490,215 1,525,011 34,796 2.33%

Enforcement 4,708,441 4,797,126 4,660,572 4,925,498 264,926 5.68%

 Investigations 579,555 591,090 579,883 602,872 22,989 3.96%

 Exam and Collections 3,919,275 4,054,760 3,932,599 4,165,233 232,634 5.92%

 Regulatory 209,611 151,276 148,090 157,393 9,303 6.28%

Operations Support 3,461,205 3,488,404 3,519,228 3,769,587 250,359 7.11%

 Infrastructure 864,403 873,146 873,146 908,095 34,949 4.00%

 Shared Services and Support 1,176,202 1,129,617 1,163,846 1,223,351 59,505 5.11%

 Information Services 1,420,600 1,485,641 1,482,236 1,638,141 155,905 10.52%

Business Systems Modernization 242,010 212,310 196,810 282,090 85,280 43.33%

Health Insurance Tax Credit Administration 20,008 14,846 14,846 15,235 389 2.62%

Total Appropriated Resources $10,573,706 $10,591,837 $10,438,364 $11,095,499 $657,135 6.30%

Dollars in Thousands

Table 1.1

FY 2008

IRS - 18
Appropriation Detail Table 

Internal Revenue Service 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Taxpayer Services 32,050 $2,142,042 31,386 $2,127,458 30,891 $2,079,151 30,597 $2,046,908 30,160 $2,103,089 -1.43% 2.74%

Enforcement 49,534 4,708,441 48,439 4,675,795 48,869 4,797,126 47,833 4,660,572 48,667 4,925,498 1.74% 5.68%

Operations Support 13,468 3,461,205 11,565 3,438,385 12,942 3,488,404 12,954 3,519,228 12,957 3,769,587 0.02% 7.11%

Business Systems Modernization 317 242,010 317 158,702 317 212,310 317 196,810 317 282,090 0.00% 43.33%

Health Insurance Tax Credit Administration 17 20,008 10 19,993 17 14,846 17 14,846 17 15,235 0.00% 2.62%

Subtotal New Appropriated Resources 95,386 $10,573,706 91,717 $10,420,333 93,036 $10,591,837 91,718 $10,438,364 92,118 $11,095,499 0.44% 6.30%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 1,350 $158,820 1,129 $89,857 682 $125,723 682 $125,723 696 $133,498 2.05% 6.18%

50% Carryover 23,418

Mandatory Appropriations - User Fees 19,000 19,000 242,000 242,000 180,000 -25.62%

Available multi-year/no-year funds 169,006 143,057 143,282 143,282 149,135 4.08%

Transfers In/Out 37

Subtotal Other Resources 1,350 $346,826 1,129 $275,369 682 $511,005 682 $511,005 696 $462,633 2.05% -9.47%

Total Resources Available for Obligation 96,736 $10,920,532 92,846 $10,695,702 93,718 $11,102,842 92,400 $10,949,369 92,814 $11,558,132 0.45% 5.56%

FY 2006

Table 3.1

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2008

IRS - 19
Summary Budget Adjustment Table 

Internal Revenue Service 

FTE Amount

FY 2007 President's Budget 93,036 $10,591,837

CR-rate Adjustment (1,318) (153,473)

(1,184) ($119,981)

(1,184)

($6,479)

(6,479)

FY 2007 CR-rate 91,718 $10,438,364

Interappropriation Transfer Corrections to Budget Restructure 0 0

FY 2007 Operating Plan at CR-rate 91,718 $10,438,364

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $27,573

Base Adjustment 0 27,573

Maintaining Current Levels (MCLs) $340,007

Pay Annualization 0 40,484

Pay Inflation Adjustment 0 232,630

Non-Pay Inflation Adjustment 0 $66,893

Efficiency Savings

Subtotal, Changes to Base $247,599

FY 2008 Base 90,534 $10,685,963

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings 0

Program Reinvestments: 0 $6,479

Increase Efficiency through Submission Processing Site Consolidations 6,479

Program Increases:

Infrastructure Initiatives 0 $143,149

Upgrade Critical IT Infrastructure 0 60,000

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastru 0 21,000

Fund Business Systems Modernization 0 62,149

Enforcement Initiatives 1,530 $246,387

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 258 41,022

Improve Compliance Among Small Business and Self-Employed Taxpayers 485 73,165

Implement Legislative Proposals to Improve Compliance 0 23,045

Increase Compliance for Large Multinational Businesses 158 26,200

Expand Document Matching in Existing Sites 214 27,958

Establish New Document Matching - Kansas City 208 23,453

Increase Individual Filing Compliance 61 6,544

Increase Tax-Exempt Entity Compliance 109 15,000

Increase Criminal Tax Investigations 37 10,000

Taxpayer Service Initiatives 54 $20,000

Research Effect of Service on Taxpayer Compliance 8 5,000

Expand Volunteer Income Tax Assistance 46 5,000

Implement Taxpayer Assistance Blueprint 0 10,000

Subtotal, FY 2008 Program Changes 1,584 $409,536

Total, FY 2008 President's Budget Request 92,118 $11,095,499

Appropriation: Internal Revenue Service

Table 2.1

FY 2008 Budget Highlights

Dollars in Thousands

IRS - 20
2A – Budget Decreases and Increases Description (IRS) 

Total Changes to Base +247,599,000 / -1,184 FTE 

Technical Adjustments to FY 2007 Base Due to CR 

+$27,573,000 / 0 FTE

An increase of $27.6 million is included as a technical adjustment to the FY 2007 base. 

This adjustment restores $21.9 million for BSM labor and projects and $5.7 for Operations 

Support infrastructure. 

Maintaining Current Levels (MCLs)

+$340,007,000 / 0 FTE 

Funds are requested for the FY 2008 costs of the annualization of the FY 2007 federal 

pay raise in FY 2008; the proposed FY 2008 federal pay raise; and other labor-related 

benefits; and non-labor related items such as contracts, travel, supplies, equipment, 

postage, and GSA rent. 

Efficiency Savings

 -$119,981,000 / -1,184 FTE

The IRS has identified organizational changes designed to increase operating efficiencies 

and reduce costs for FY 2008. 

In the enforcement programs, the IRS will realize a savings of $82.3 million and 643 FTE 

as a result of efficiency improvements. Savings will be achieved through enhancement of 

technology and support structure improvements such as deployment of the Electronic 

Installment Agreements (e-IA) system and expansion of the auto-generated notice 

initiative; streamlining and centralizing work process such as consolidating the number of 

Criminal Investigation Lead Development Centers from five to two, and expanding and 

improving implementation of the Fast Track Settlement (FTS) process (resolution of 

disputes during the examination phase rather than waiting for the appeal phase); and 

implementation of new work tools such as improved audit selection formulas. In 

addition, the completion of initial training programs by both examination and collection 

FY 2006 enforcement hires will increase efficiency by transitioning them and their 

trainers to full-time front-line activities. 

In the taxpayer service program, the IRS will realize a savings of $37.7 million and 541 

FTE. Increases in electronic filing will continue to have a significant impact on the 

Submission Processing Centers as individual paper return volumes decrease. The IRS 

will continue to achieve savings as the processing of paper returns is consolidated into 

fewer Submission Processing Centers. Additional savings will be gained through the 

implementation of technological improvements such as automating the issuance of 

Employer Identification Numbers and implementation of the Taxpayer Assistance 

Blueprint study recommendations. 

IRS - 21
Total FY 2008 Program Changes +$409,536,000 / +1,584 FTE 

Program Decreases/Savings -$6,479,000 / 0 FTE 

Increased e-File Savings

- $6,479,000 / 0 FTE 

This reduction is a result of savings from a projected decrease in FY 2008 of 

4.2 million (3.7 million individual and 0.5 million business) paper returns filed. Starting 

in FY 2007 and continuing through FY 2008, the IRS will ramp down the Philadelphia 

Submission Processing Center, generating savings of $6.5 million. The savings will be 

reinvested under the Increase Efficiency through Submission Processing Site 

Consolidations initiative to fund anticipated severance pay costs in FY 2008. 

The following table shows the actual and projected percent of returns processed 

electronically for FY 2004 – FY 2010 for individual and business returns. 

Measure FY 2004 

Actual 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Estimate 

FY 2009 

Estimate 

FY 2010 

Estimate 

Percent of 

Individual 

Returns 

Processed 

Electronically 

46.5 51.1 55.0 57.0 61.6 64.5 67.0 

Percent of 

Business 

Returns 

Processed 

Electronically 

17.4 17.8 17.8 19.5 21.2 23.6 25.2 

The IRS continues to strive to meet the established goal of 80 percent of all tax returns to 

be filed electronically. While the IRS has implemented several technological advances, 

such as modernizing the 1040 e-File system, projections show that the 80 percent e-File 

goal will not be met in FY 2007. As the IRS moves toward its strategic goal to improve 

taxpayer service by expanding options for electronic filing, payments, and 

communications, additional improvements in technology will be used to increase e-File 

marketing strategies to meet this goal in the future. However, without additional 

mandates to file electronically, such as the one recently imposed for corporations, the 

IRS’ ability to meet the electronic filing goal will remain a challenge. The Budget 

includes a proposal to expand the IRS’ authority to require electronic filing by 

corporations (see the Receipts chapter on the Analytical Perspectives volume of the 

Budget for legislative proposals). 

IRS - 22
Program Reinvestments +$6,479,000/ 0 FTE 

Increase Efficiency through Submission Processing Site Consolidations

+$6,479,000 / 0 FTE

This initiative provides $6.0 million to fund severance pay for employees separating as a 

result of ramp down of the Philadelphia Processing Center and $0.5 million for shared 

support service related costs. However, the IRS will maintain a large staff of service and 

enforcement personnel in Philadelphia. 

Increased electronic filing will continue to have a significant impact on Submission 

Processing Centers as individual paper return volumes decline. Individual paper returns 

are expected to decrease by 4.2 million in FY 2008. As a result, the IRS will continue its 

initiative to consolidate the processing of individual paper returns into fewer Submission 

Processing sites. The Philadelphia Submission Processing Center is undergoing a ramp 

down in FY 2007 and FY 2008. The total costs for severance pay associated with the 

Philadelphia ramp down totals $8,174,774. However, the estimated severance pay 

amount needed in FY 2008 is $5,967,585. This initiative is a direct reinvestment of the 

Increased e-File Savings initiative. 

The total severance pay costs for the Philadelphia Processing Center ramp down are 

broken down by position type and projected on-rolls numbers in the following table: 

Work As of Oct. Placed Estimated 

Schedule 2002 Internally Severence

Analysts PERM 29 29 9 20 $876,940

Cash Clerks PERM 41 29 0 29 $403,897

SEAS 106 62 0 62 $86,575

Clerks PERM 203 108 60 48 $482,775

SEAS 702 315 120 195 $264,892

Data Transcribers PERM 43 22 2 20 $272,104

SEAS 1,198 402 0 402 $501,007

Department Mgr. PERM 14 14 0 14 $691,957

SEAS 1 1 0 1 $0

Front-line Mgr. PERM 64 51 14 37 $998,004

SEAS 22 14 0 14 $129,993

Other PERM 19 15 2 13 $101,566

SEAS 20 17 0 17 $37,085

Secretaries PERM 40 36 20 16 $361,843

Senior Mgr. PERM 10 10 0 10 $1,172,422

Tax Examiners PERM 263 212 164 48 $1,070,281

SEAS 944 677 205 472 $723,433

3,719 2,014 596 1,418 $8,174,774

726 526 271 255 $6,431,789

2,993 1,488 325 1,163 $1,742,985

3,719 2,014 596 1,418 $8,174,774

By Oct. 2006 Remaining

TOTAL

TOTAL

Permanent Employees

Seasonal Employees

Employee Category

IRS - 23
The remaining $511,000 for FY 2008 is for Agency-Wide Shared Services (AWSS) costs 

in Philadelphia and Andover, as follows: 

• Philadelphia - $125,000 for redistribution and disbursement of existing furniture and 

equipment and $285,000 for dismantling and removing double-deck shelving 

systems. 

• Andover – $101,000 for redistribution/disbursement of existing furniture and 

equipment. 

This initiative supports the IRS’ operational priority to optimize and implement planned 

Submission Processing strategies, including the downsizing of paper operations to meet 

customer increases in electronic submissions and cost efficient opportunities in working 

the remaining paper workload. Returns processing efficiency will be improved. The 

workforce will be aligned to new priorities and technologies. The ramp down and 

consolidation of the Philadelphia Submission Processing sites will not impact taxpayers. 

Program Increases +$409,536,000 / +1,584 FTE 

Infrastructure Initiatives 

Upgrade Critical IT Infrastructure 

+$60,000,000 / 0 FTE

This initiative requests $60 million to reduce the backlog of IRS information technology 

(IT) equipment that has exceeded its life cycle. This initiative will provide the resources 

needed to keep IRS IT and telecommunications equipment operable and to current 

business standards. Failure to replace the IRS’ IT infrastructure will lead to increased 

maintenance costs and will increase the risk of disrupting business operations. Currently, 

critical business systems are operating on aged and outdated hardware, with the backlog 

of aged infrastructure increasing every year. Without an effective infrastructure, the risk 

to tax administration is significant. The question facing the IRS is not “if mission-critical 

components of the infrastructure will break,” but “what will break, when, and how 

significant will the impact be on tax administration?” 

The IRS faces a significant challenge with an aged and ineffective IT infrastructure. Two 

key challenges are: (1) a backlog of aged inventory, and (2) continued aging of the 

existing inventory. 

 

To address the growth in aged inventory, the IRS has committed to reserve another 

$135 million from its base budget for infrastructure replacement over the next three 

years. In FY 2006, the IRS identified efficiencies in the base IT budget that permitted the 

permanent reallocation of $45 million into the infrastructure base. The IRS plans to 

augment this funding with additional reallocations of $45 million in both FY 2007 and 

2008. By FY 2008, the IRS plans to have established a base budget for infrastructure 

IRS - 24
replacement equal to $180 million, which will mitigate the impact of rapid growth in 

aged inventory, but will not address the backlog of aged infrastructure. 

Planned expenditures in FY 2008 include, but are not limited to, the following: 

• Replacing Aged Computers – A significant component of this initiative includes aged 

infrastructure of employee workstations (e.g., desktop and laptop computers). The 

IRS estimates that over 50% of the laptop computers supporting Compliance 

employees are overage and need replacement. This overage equipment results in (1) 

increased down time; (2) reduced capability to communicate effectively; and (3) 

delays in retrieval of taxpayer data that is vital to daily compliance/enforcement 

activities. 

• Automated Call Distributor (ACD) Hardware – ACD hardware routes incoming and 

outgoing telephone calls to taxpayer assistance agents, operating as the electronic 

heart of the IRS call centers. Failed hardware could result in incoming taxpayer calls 

being routed improperly or dropped. 

• Prioritized Mission Critical Servers – Critical tax processing applications and 

solutions are currently operating on aged servers, with this problem worsening by 

2008. Failed hardware has recently resulted in permanent loss of business data as 

well as work stoppage of fundamental business processes. 

• WAN/LAN Routers and Switches – Routers and switches support not only IRS 

personal computer and laptops, but the data communication between systems. Failed 

WAN/LAN hardware can lead to poor application performance or communication 

shutdown, causing taxpayer information not being routed to the next step, or agents 

not being able to retrieve tax records in a timely manner. 

Enhance Computer Security Incident Response Center (CSIRC) and Network 

Infrastructure Security 

+$21,000,000 / 0 FTE

This initiative provides $13.1 million to fund enhancements for the Computer Security 

Incident Response Center (CSIRC). This will enable the IRS to keep pace with the everchanging security threat environment through increased detection and analysis capability, 

improved forensics, and the capacity to identify and respond to potential intrusions before 

they occur. 

The number of vulnerabilities (software flaw or configuration weakness) are rapidly 

increasing each year. These security vulnerabilities expose enterprise systems and 

processes to unnecessary risk of potential intrusions or unauthorized access, 

compromise/disclosure of sensitive taxpayer data, and/or disruption of service and 

process availability. Potential impacts include: 

• The disclosure of taxpayer data or disruption of electronic filing initiatives could have 

a crippling effect on the IRS mission and the taxpayers. 

IRS - 25
• Cyber-security breach could have a significant adverse impact on the IRS’ 

enforcement activities. A major incident could result in a significant disruption to 

enforcement efforts, costing numerous days of recovery efforts and inability to detect 

and protect IRS systems from cyber worms, such as the Sasser worm outbreak in 

2004, which resulted in a direct IRS business loss of more than $50 million. 

This initiative will mitigate these by employing additional security safeguards, using 

defense-in-depth, best-of-breed security technologies. This funding will establish a 

foundation to preemptively mitigate such risk in Modernization Project Support, Voice 

Over Internet Protocol, E-Filing, E-Commerce, adherence to the E-Gov initiative, the 

President's Management Agenda, Virtual Office, maintaining distinct network 

environments, TIGTA/OMB audits/recommendations, and support to FISMA 

compliance. 

In addition, this initiative includes $7.9 million to enhance network infrastructure 

security. These funds will provide the IRS capability to perform continuous monitoring 

of the security of operational systems, using security tools, tactics, techniques and 

procedures to perform network security compliance monitoring of all IT assets on the 

network. This will ensure all systems have the latest security patches and are in 

compliance with security configuration control requirements. 

Fund Business Systems Modernization

+$62,149,000 / 0 FTE

This initiative requests an additional $62.1 million to continue the development and 

deployment of the IRS modernization program in line with the Modernization Vision and 

Strategy (MV&S) recommendations. This increase will result in a total budget request 

for BSM of $282.1 million in FY 2008, and will allow the IRS to make progress on the 

following modernization projects: 

Customer Account Data Engine (CADE) 

• The IRS requests $58.5 million for CADE. CADE is IRS’ lynchpin 

modernization project replacing the antiquated master file. These master files are 

based on flat files with weekly updates achieved by batch processing of a 

sequential file repository. As a result, it takes the IRS two weeks to update 

taxpayer tax accounts. This performance compares poorly to the real-time 

updates provided by all other financial institutions. The delay in updating data 

allows data inconsistencies to develop among the various applications in use 

across the IRS. 

 

The master file system, based on 1960s architecture, uses programming language 

no longer taught or used elsewhere. That, coupled with the lack of system 

documentation, puts continued maintenance and updating of the master files at 

risk. Other downsides to the current master file system include high maintenance 

and operational costs, difficulty implementing policy or tax law changes, and 

IRS - 26
incompatibility with private industry and other government agencies’ systems, 

which limits IRS’ ability to partner with other parties and prevents electronic data 

exchanges. CADE will solve these problems. The IRS is developing CADE in 

stages and expects to be able to retire the Individual Master File in 2012. When 

fully operational, the CADE database will house tax information for more than 

200 million individual and business taxpayers’ returns. In FY 2008, 

$58.5 million will continue work on the CADE release content master plan. 

Account Management Services (AMS) 

• IRS is requesting $28.983 million for the Account Management Services Project 

(AMS). The initiative provides a Common User Interface for access and update 

of taxpayer accounts managed by CADE and the Individual Master File, 

Corporate Files on Line, and the Integrated Data Retrieval System. It will provide 

an enterprise-enabled inventory workflow capability (including referrals, assign, 

review, and audit) across operating divisions. Specific capabilities include the 

access and update of both legacy and CADE account information, account 

monitoring, management of activity history (Case History), and the generation of 

notices. AMS will provide immediate access to integrated account data, which 

improves the ability to resolve account inquiries with minimal taxpayer 

interaction and facilitates the taxpayer’s ability to self assist or self correct. AMS 

will allow IRS staff to create new accounts online at the request of a taxpayer. 

Also, it will assess taxpayers’ account status, trigger actions, and generate notices 

or letters based on selected queries.

A Schematic Showing Where CADE and AMS fit in the Taxpayer Data Flow 

Returns, 

Payments

Correspondenc

e

Post, Settle

Accounts Integrated Data 

Retrieval System

Capture 

Data

From Paper

Weekly

Daily Daily

Daily/

On Demand

Weekly Weekly

Customer Service Systems

Collection Systems

Master

Files

Taxpayer (Telephone & Correspondence)

Revenue

Accounting

Financial

Reporting

Treasury, GAO

Submissions Processing

Paper

Active Accounts

Taxpayer Account (10%)

Processing

(Computing Center)

Electronic 

Returns, Payments

Correspondence

Electronic 

Receipt of

Submissions

Validate &

Perfect

Data

Examination Systems

Corporate Files

On-Line

IDRS Database with 

replicated & new data

Daily

Daily/Weekly &

On Demand

Daily/

On Demand

Workflow, Work Management, Case Management, Pending 

Updates Customer Communications

Customer Account Data Engine

(CADE)

Account 

Management Services

• Post Transactions (tax 

assessments, payments, 

interest, penalty, 

extensions, bankruptcy, 

address changes, etc.

• Issue Refunds

• Identify Account Issues

• Generate Notices

• Financial balance and 

controls

• On-Line tools to view and 

update taxpayer data 

(adjustments, transfer 

money, apply credits, and 

do other updates to taxpayer 

accounts)

• Record activity history

• Monitor Account for follow 

up activity

• Compose and print notices

• Generate Notices

Taxpayers

Taxpayer 

Accounts

Tax 

Returns

Case / 

Activity

History

CADE applications 

update and maintain 

complete, timely and 

accurate information 

about the taxpayer, their 

accounts, and tax 

returns. This information 

is available for on 

demand access and 

update.

IRS - 27
Modernized e-File 

• In FY 2008, the IRS is requesting $55.802 million to fund the development of the 

1040 on the Modernized e-File (MeF) platform. The development and 

implementation of the MeF 1040 will take two years. MeF is the future of 

electronic filing. It provides a single XML-based standard for filing electronic tax 

returns. Standardizing the formats/structures for all filings will allow transmitters 

to submit multiple return types (such as 1120 and 941s) in the same transmission, 

something that restrains e-file growth currently. Tax return data will be stored in 

XML format in a modernized Tax Return Database with web-based access, 

allowing all viewers of the data to use their internet browser to view the entire tax 

return online, and it will look just like the paper document. 

Common Services Projects 

• The IRS is requesting $16 million for the introduction of the Common Services 

Projects (CSP), providing funding for new portals, which are technology 

platforms that meet many IRS business needs through web-based front-ends and 

provide secure access to data, applications, and services. 

 

The portals are mission-critical components of the enterprise infrastructure 

required to support key business processes and compliance initiatives. A new 

portal infrastructure must be acquired and fully operational, with all applications 

transitioned before November 2008. The contracts for the existing portals 

(registered user portal, employee user portal, and public user portal/IRS.gov) 

expired in May 2006 and sole-source extensions have been approved, with the 

provision that the current portals will be replaced by November 2008. The IRS 

portals support Underreporter initiatives in the Examination and Criminal 

Investigations programs; and Underpayment initiatives in Collection; Modernized 

E-file; and other E-Government, E-services, and user fee initiatives. The current 

portals, designed in the late 1990s and implemented in 2000 and 2001, are 

outdated; capacity is limited; and 90 percent of the hardware components and 

70 percent of software products supporting the current portals have reached or 

exceeded their useful life. 

Funds for CSP cover the costs of program/contract management; design and 

engineering for the new portal environment; planning and testing of new portalrelated application projects and modification of existing projects (E-services, 

E-file, Integrated Financial System, Internet Refund/Fact of Filing, etc.) to run on 

the new portals; new portal security mechanisms for access control, intrusion 

detection, identity management, auditing; and acquisition of new portal 

development, test and production environments. 

The benefits accruing from delivery and implementation of BSM projects provide 

value to taxpayers, the business community, and government. Many of these 

benefits contribute to operational improvements and efficiencies within the IRS. 

IRS - 28
The program combines best practices and expertise in business solutions and 

internal management from IRS, business, and technology sectors to develop a 

world-class tax administration system. The BSM program has made sustained 

progress in realizing substantial segments of the modernization vision. 

The IRS will work to allocate BSM staffing costs for the FY 2009 President’s 

 Budget. 

Enforcement Initiatives 

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 

+$41,022,000 / +258 FTE

This initiative funds research studies of reporting compliance for new segments of 

taxpayers (such as partnerships, corporations, other business entities, exempt 

organizations, and government entities), and updates existing estimates of reporting 

compliance (individual taxpayers and S-corporations). This initiative establishes a base of 

operating division examiners for various reporting compliance studies, based on the 

needed expertise for the study. Unlike in the past, these examiners will conduct an 

annual study of compliance among 1040 filers based on a smaller sample size than the 

2001 National Research Program study. This will provide some fresh compliance data 

each year, and by combining samples over several years will provide a regular update to 

the larger sample size needed to keep IRS’ targeting systems and compliance estimates 

up to date. 

The data captured during the studies will enable the IRS to develop strategies to combat 

specific areas of non-compliance and improve voluntary compliance. Efforts under this 

initiative will significantly help improve the allocation of resources by providing data that 

will allow the IRS to target audits toward taxpayers who are least compliant with the tax 

law. This initiative will increase enforcement revenue and also help improve voluntary 

compliance. Moreover, the initiative will enable IRS to undertake reporting compliance 

studies in the tax-exempt sector, which is responsible for about one-quarter of overall 

employment. This initiative benefits taxpayers by increasing the fairness of the tax 

system and significantly improving workload selection formulas that reduce the burden 

of unnecessary taxpayer contacts. Ultimately, these efforts will provide benchmarks 

against which the IRS can evaluate the effectiveness of programs designed to improve 

compliance and will allow the IRS to better leverage enforcement resources. 

Improve Compliance Among Small Business and Self-Employed Taxpayers 

+$73,165,000 / +485 FTE

This initiative will improve compliance among Small Business and SelfEmployed (SB/SE) taxpayers in the elements of reporting, filing, and payment 

compliance. This request will produce $144 million in additional annual 

enforcement revenue, once the new hires reach full potential in FY 2010, by increasing 

IRS - 29
audits of high-risk tax returns, collecting unpaid taxes from filed and unfiled tax returns, 

and investigating, and where appropriate, prosecuting, persons who have evaded taxes. 

For Tax Year 2001, the gross tax gap is estimated to be $345 billion (net $290 billion), 

16 percent of the $2.1 trillion in total tax liability. Of that amount, 75 percent, or 

$259 billion, is attributable to SB/SE taxpayers. Underreporting accounts for 82 percent 

of the total tax gap, with the remainder almost evenly divided between non-filing (eight 

percent) and underpaying (ten percent). 

High-risk areas of under-reporting include abusive tax schemes, flow-through income, 

and high-income individuals. Approximately 98 percent of all flow-through filings 

(S-corporations, partnerships, and trusts) are SB/SE taxpayers. All flow-through filings 

increased from 9.1 million in Tax Year 2000 to nearly 9.4 million in Tax Year 2003, and 

are expected to reach 10.4 million by Tax Year 2006 – a 14 percent increase since Tax 

Year 2000. The IRS projects them to increase by 20 percent by Tax Year 2012. 

Increasing examinations of and improving reporting for these filings is a critical 

component of addressing the tax gap. 

Revenue Agents will continue to focus on Abusive Tax Avoidance Transactions 

(ATAT), structured transactions, and corporate and high-income examinations involving 

flow-through entities (i.e., trusts, partnerships, S-corporations). With this funding in 

FY 2008, 207 field examination staff will examine an additional 3,100 individual returns 

and 430 additional business returns, generating approximately $26.4 million. The IRS 

anticipates that an additional 5,400 business returns and 36,500 individual returns will be 

examined through FY 2012. 

Collection activities will increase both the number of high-risk unpaid assessment 

accounts settled and their involvement in the collection of taxes due from abusive trusts. 

Field Collection staff (149 Revenue Officers will produce an estimated 23,000 additional 

tax delinquent accounts (TDA) in FY 2008, and approximately 113,000 through 

FY 2012. For the non-filers, these Revenue Officers will produce an estimated 5,300 tax 

delinquency investigations (TDI) in FY 2008 and approximately 24,000 through 

FY 2012. 

Detecting and investigating money laundering activity is an important part of tax 

compliance for the IRS. This initiative provides $5.4 million to strengthen enforcement 

activities of the anti-money laundering provisions of Bank Secrecy Act (P.L. No. 92-508) 

(BSA) and the USA PATRIOT Act (P. L. No. 107-56). Frequently, money-laundering 

violations are the only possible means to detect tax evaders. Fraud/BSA resources (33 

RAs), dedicated to the BSA program, will conduct approximately 390 additional Title 

31 cases in FY 2008, with an additional 2,900 cases examined through FY 2012. 

Approximately 252 additional Section 8300 cases (i.e., examination of an entity’s records 

to determine whether or not they have properly filed the Form 8300 for receipt of cash in 

excess of $10,000 in one transaction), will be examined in FY 2008, with an 

additional 1200 cases examined through FY 2012. 

IRS - 30
This initiative also provides key resources needed to support the increased case workload 

generated from this initiative: 

• Appeals (24 FTE and $3.2 million) to process additional cases generated from 

increased examination program and collection program staffing. 

• Taxpayer Advocate Service (31 FTE and $2.4 million) to support both examination 

and collection functions to ensure that the IRS follows appropriate procedures 

without creating unnecessary burden or compromising taxpayer rights. 

• Counsel (18 FTE and $2.7 million) to provide legal advice and assistance in litigating 

the increased number of cases as well as support additional tax shelter litigation, 

published tax shelter guidance, and small businesses’ need for tax reform related 

work. 

The return-on-investment (ROI) for this initiative is expected to be 2.5 once the new hires 

reach full potential in FY 2010 (see chart below.) 

R educe T ax Gap A mo ng Small B usiness

and Self-Emplo yed T axpayers

Costs, Revenues Collected, and Returned on Investment

(Dollars in M illions)

$57.2 $57.2 $63.0

$95.7

$144.0

$73.2

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

FY 2008 FY 2009 FY 2010

Costs Revenue

0.9 t o 1

1.7 t o 1

2.5 t o 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

In addition, this initiative will yield: 

• Greater coverage of high-risk, SB/SE examination and collection cases; 

• Strengthened integrity of the tax system; 

• Improved reporting, payment, and filing compliance from the small business 

community; and 

• Mitigation of the adverse impact of employee attrition on achieving Strategic Human 

Capital Goals. 

IRS - 31
This initiative will also yield the following benefits to taxpayers: 

• Enable taxpayer accounts to be resolved more efficiently and timely, reducing 

accumulated penalties and interest on unpaid assessments; 

• Improve customer satisfaction by holding high-risk taxpayers accountable for tax 

law compliance and assuring Americans that more taxpayers are paying their fair 

share; and 

• Improve voluntary compliance as taxpayers perceive increased fairness in the tax 

system. Taxpayers appreciate the value of enforcement. Some 86 percent of taxpayers 

surveyed by the Oversight Board answered that it was “not at all” acceptable to cheat 

on one’s taxes. 

Implement Legislative Proposals to Improve Compliance 

+$23,045,000 / 0 FTE

While the IRS continues to address compliance problems by improving customer service 

and using traditional methods of enforcement, the FY 2008 President’s Budget includes 

several legislative proposals that would yield $29 billion over ten years from improved 

compliance. These proposals would expand information reporting, improve compliance 

by businesses, strengthen tax administration, and expand penalties (see Receipts in the 

Analytical Perspectives volume of the 2008 President’s Budget). This enforcement 

initiative includes funding for purchasing software and making modifications to the IRS’ 

IT systems necessary to implement these legislative proposals. The Budget includes 

sixteen proposals but the explanation below focuses only on the proposals where 

implementation of funding is needed in FY 2008. 

Payment Card Reporting: 

Underreported business income among members of the SB/SE community accounts for a 

significant portion of the individual income tax gap. Businesses often receive payments 

for goods or services via a consumer’s payment card, but subsequently fail to report the 

income for transactions on the business’ federal income tax return. These underreported 

transactions add up to be significant contributors to the tax gap. 

This proposal will address this portion of the tax gap by providing the IRS with an 

additional means of cross-referencing the income reported by businesses with their gross 

receipts. Under this proposal, the IRS would require payment card processors to annually 

report total reimbursements paid to businesses for goods and services. The reported 

amount would then be compared to gross receipts reported by taxpayers on their federal 

returns. A significant difference in the dollar values of the reimbursements by payment 

card companies and the gross receipts reported by businesses would be a red flag that 

income was possibly being underreported. 

IRS - 32
The IRS anticipates that this proposal will help reduce the tax gap in two ways. First, 

businesses that might otherwise be inclined to underreport their income might reconsider, 

knowing the IRS has a means to validate the gross income reported on their federal tax 

returns. Second, businesses that continue to abrogate their responsibilities as taxpayers 

would be more easily identified, so that appropriate enforcement action could be taken. 

The IRS anticipates receiving approximately 125 million information return documents 

from credit and debit card processors per year, associated with approximately five million 

SB/SE taxpayers. Revenue Agents in the field could then follow up with delinquent 

taxpayers in the course of standard enforcement operations. 

Government Payment: 

One of the most high-profile components of the tax gap relates to the failure of some 

government vendors and contractors to meet their tax filing and payment obligations. 

Obviously, it is a major concern any time an entity does business with the government, 

receives payment from the government, and yet fails to pay taxes due to the government. 

Under present law, the federal government has broad authority to levy federal payments 

made to vendors of goods and services. The proposal would authorize the 

implementation of regulations requiring information reporting and backup withholding 

on all non-wage payments by federal, state, and local governments to procure property 

and services. 

As part of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), enacted 

on May 17, 2006, Congress enacted a provision requiring three percent withholding on 

certain government vendor payments. This provision is broader than the 

Administration’s proposal in that it requires information reporting and immediate 

withholding on government payments, rather than information reporting and backup 

withholding. The TIPRA provision applies only to payments made after December 31, 

2010, whereas the Administration’s proposal would be effective for payments made on or 

after January 1, 2008. 

If the Administration’s proposal, the IRS anticipates receiving an additional 89 to 177 

million information returns as a result of the new reporting requirements. The costs 

associated with implementation of this program are for reprogramming affected 

information technology systems. Once these initial costs have been incurred, subsequent 

costs will decrease as processing, transcription, and matching activities will occur largely 

within existing workgroups. 

Information Reporting on Payments to Corporations: 

Underreporting of income where there is little or no information reporting contributes to 

approximately 53.9 percent of the underreporting portion of the tax gap. Under current 

law, businesses are not required to issue Forms 1099 for services provided by 

corporations. Although the reporting requirements for corporations could be expanded 

by changing the regulations, Treasury recommends it be changed legislatively. 

IRS - 33
Implementation of this proposal will increase the number of Forms 1099 filed. Voluntary 

compliance is expected to increase for corporate reporting of 1099 amounts. The IRS 

would require additional resources to implement matching programs to address the 

increased volume of Forms 1099. 

Basis Reporting on Security Sales: 

GAO estimates that 36 percent of individual taxpayers misreported their securities capital 

gains or losses in 2001. The estimated capital gains tax gap is $11 billion dollars. This 

amount will be significantly reduced by requiring financial institutions to: 

• report the adjusted cost basis of securities sold and the nature of the sale (short-term 

or long-term) to the IRS, and 

• exchange information to enable other financial institutions to meet adjusted cost basis 

reporting requirements for clients that transfer securities to a successor financial 

institution. 

In those instances where a broker does not have sufficient information to compute the 

adjusted cost basis, the taxpayer will be responsible for reporting the sale. 

Expanded Broker Information Reporting:

Sales of property and collectibles done via auction brokers and consignment sellers 

represent a portion of the tax gap. A broker who is an auctioneer or operates a 

consignment business, whether electronic or at a physical retail location, would be 

required to make an information return showing customer name, address, and Taxpayer 

Identification Number, as well as gross proceeds from the sale of tangible personal 

property. The requirement would apply only with respect to a customer for whom the 

broker has handled 100 or more separate transactions generating at least $5,000 in gross 

proceeds in a year. There would be an exception from the proposed requirement (and the 

sale would not be taken into account for the 100 transactions/$5,000 gross proceeds test) 

if the sale is required to be reported by other information return requirements (such as 

payment card sales the gross proceeds of which would be reported through the payment 

card payment system). 

Increase Information Return Penalties: 

The IRS currently asserts a penalty for failure to file a correct information return. The 

current penalty amount of $50 (or $100 for intentional disregard) provides little incentive 

to increase compliance. This proposal, will enhance compliance in this area by 

increasing the penalty amount and eliminate the cap to increase the cost of doing business 

for perpetual offenders. The penalty will be increased to $150/$250 for each unfilled 

return. 

During the 2005 Tax Year, 53,821 payers received a Proposed Penalty Notice for failure 

to timely and accurately provide Forms 1099. While penalties are not considered a 

revenue source since they are inversely related to compliance, placing a monetary price 

on non-compliance is expected to result in significant revenue, enhanced voluntary 

compliance and a diminishing penalty rate over time. 

IRS - 34
Provide IRS with Access to NDNH Database

The Department of Health and Human Services maintains the National Directory of New 

Hires (NDNH) which contains newly hired employee data, quarterly wage data from state 

and federal employment security agencies, and unemployment benefit data. Currently, 

the IRS may obtain NDNH data only for administering the Earned Income Tax Credit and 

verifying employment reported on a return. 

Employment data, used by the IRS to administer a wide range of tax provisions, is 

currently obtained on a state by state basis, which is both time consuming and costly. 

This legislative proposal would amend the Social Security Act to allow the IRS access to 

the NDNH for general tax administration, including data matching, verification of 

taxpayer claims, preparation of substitute returns for non-compliant taxpayers, and 

identification of levy sources. Expanded IRS access to NDNH data will increase 

productivity and enhance compliance. 

Increase Compliance for Large Multinational Businesses

+$26,200,000 / +158 FTE

This initiative will increase examination coverage for large, complex business returns; 

foreign residents; and smaller corporations with significant international activity. The 

initiative addresses risks arising from the rapid increase in globalization, and the related 

increase in foreign business activity and multi-national transactions where the potential 

for non-compliance is significant in the reporting of transactions that occur across 

differing tax jurisdictions. Additionally, flow-through filings and the use of special 

purpose entities, for both non-tax and tax-related reasons, continue to increase. 

Additional compliance resources will increase coverage for these areas of risk and reduce 

corporate and individual underreporting. An increase in examination coverage and IRS 

presence has a positive impact on overall compliance levels. With this initiative, coverage 

for large corporate and flow-through returns will increase to 8.2 percent in FY 2008 from 

a level of 7.9 percent without the initiative. 

Impact of Enforcement Initiative and Partial Reinvestment of Efficiencies 

Corporate > $10M and Flow-Throughs

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

20,000

2007 2008 2009 2010 2011

Fiscal Year

Closed Returns

Revised

Baseline (4917

FTE)

Revised initiative

(4909 FTE)

Audit Coverage Rate

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

2007 2008 2009 2010 2011

Fiscal Year

Audit Coverage

Revised Baseline

(4917 FTE)

Revised initiative

(4909 FTE)

IRS - 35
There are multiple issues, patterns, and indicators of risk for these complex flow-through 

enterprises and multi-national taxpayers: 

• Flow-through filings (Form 1120S, U.S. Income Tax Return for an S-corporation, and 

Form 1065, U.S. Return of Partnership Income) have increased 40 percent, from 

about 77,800 filings in 2000 to 109,300 in 2004. 

• Flow-through returns now comprise approximately 63 percent of the Large and 

Midsize Business return population. 

• Flow-through challenges for tax administration include savings in federal tax without 

economic substance to transactions; artificially-inflated bases to disguise real gains; 

basis shifting between related entities for tax advantages, contrary to valid accounting 

and tax practices; structured financial transactions within complex enterprises, 

including the use of Special Purpose Entities; transfer of high-value/low-basis assets 

in partnerships; aggressive interpretation of business purpose; and transfer pricing. 

• Globalization is increasing. 

• U.S. multi-national overseas profits are significantly higher than profits posted by 

U.S. companies at home. 

• Sixty percent of world trade is transacted between different arms of multi-nationals. 

• Low- and no-tax jurisdiction countries are home to 58 percent of the foreign profits of 

U.S. multi-nationals. 

• From 1999 to 2004, the amount of Foreign Tax Credit (FTC) claimed increased 

31 percent to $45 billion. The largest returns account for over 93 percent of the total 

FTC claimed for the years 1999-2004. 

• The number and value of cross-border mergers and acquisitions are growing. In 

2005, 11,000 deals were set up with a value of $1.2 billion. 

• The tax issues arising from businesses operating world-wide include Transfer Pricing; 

Foreign Tax Credit; Worthless Stock Deduction; Avoidance of Subpart F Income; 

Valuation Issues; Transfer of Property (tangible and intangible) and income streams; 

Potential Tax Shelters; and Dual Consolidated Losses. 

This initiative includes resources to establish a physical presence and focal point for tax 

treaty and U.S. tax administration in Asia. Outsourcing and growth of Asian businesses 

and markets have resulted in: 

• Significant increases in U.S. corporate business activity and investment in China, 

which requires greater interaction with Chinese tax officials with the administration 

of the U.S.-China Income Tax Treaty. 

• Increased activity on potential double-taxation matters, exchange of information 

activities, and tax treaty interpretation issues with China. 

• Increased American expatriate population and U.S.-owned business/corporate entities 

in China, resulting in greater local demand for IRS taxpayer service and assistance. 

• The Beijing post will serve as the Asia regional office for all IRS activities and will 

support treaty administration with other significant economic partners, e.g., Japan and 

Korea. With the closure of the Tokyo and Singapore posts, Beijing will be the only 

IRS office in Asia. 

IRS - 36
• A Chinese presence will help deter non-compliance among this growing expatriate 

population and address the concern by GAO of a high non-filing rate by U.S. citizens 

living abroad. 

• Chinese multinational businesses and Chinese outsourcing are both growing. The 

post will also provide tax guidance for Chinese citizens that work temporarily in the 

U.S. (Non-resident Alien Taxpayers). 

In addition to the 4 FTE and related funds to establish a Beijing post, this initiative 

includes 50 FTE to close 330 additional smaller corporate returns with international 

activity and 1,571 additional individual returns as well as 14 FTE for the IRS Counsel 

attorneys to advise revenue agents on complicated issues of tax law and accounting 

principles in the context of flow-through enterprises. The initiative also addresses GAO 

and Treasury Inspector General for Tax Administration (TIGTA) concerns about 

unacceptably high non-compliance by partnerships and S-corporations. 

Increase Compliance for

Large M ultinational Businesses

Costs, Revenues Collected, and Returned on Investment

(Dollars in M illions)

$22.7 $22.7

$31.2

$43.6

$73.6

$26.2

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

FY 2008 FY 2009 FY 2010

Costs Revenue

1.2 t o 1

1.9 t o 1

3.2 t o 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

Expand Document Matching in Existing Sites 

+$27,958,000 / +214 FTE

This initiative increases coverage within the IRS Automated Underreporter (AUR) 

program to address the tax gap by minimizing revenue loss through increased document 

matching of individual taxpayer account information. These resources will increase 

enforcement revenue collected by approximately $208 million annually, once the new 

hires reach full potential in FY 2010. 

About 6.9 million Small Business Self-Employed (SB/SE) taxpayers may currently 

misreport their income based on third party information returns. Of those, the SB/SE 

AUR program processes approximately 2.1 million taxpayer cases, leaving an 

unaddressed gap of 4.8 million taxpayers. The objective of the AUR program is to 

minimize revenue loss through document matching of small business and self-employed 

taxpayer account information. The IRS commitment to maintaining a robust AUR 

IRS - 37
program is demonstrated by a commitment to increasing enforcement results and is 

reflected in targets for the long-term goals and corresponding performance targets. 

The additional resources will increase the number of AUR closures from 2.05 million in 

FY 2007 to 2.64 million in FY 2010. The AUR program has one of the highest returns 

on investment ratios of all compliance programs. By 2010, the return on investment, as 

shown below, is expected to reach 8.5:1. 

Expand D ocument M at ching in Exist ing Sit es

C ost s, R evenues C ollect ed , and R et urn on Invest ment 

( Dollars in M illions)

$25 $25

$94

$166

$208

$28

$0

$50

$100

$150

$200

$250

FY 2008 FY 2009 FY 2010

Costs Revenue

3.4 t o 1

6.8 t o 1

8.5 to 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

This funding for this initiative will maximize coverage in the three existing sites 

(Brookhaven, Philadelphia, and Ogden) and establish a new, centralized small business 

and self-employed AUR toll-free operation, using available space at an existing AUR 

site. Establishment of an operation designed exclusively to handle the SB/SE AUR tollfree traffic will enable significant coverage expansion in the three existing sites and, 

ultimately, generate productivity savings in the designated call site. Current technology 

allows for the routing of calls to a single site. In addition, start-up costs are reduced 

because equipment currently available at the three existing sites will be used to establish 

a new toll-free operation. 

This initiative links the IRS compliance resources to clearly defined, measurable, resultsoriented annual performance outcomes. It further addresses widespread concerns 

regarding the erosion of the IRS’ enforcement presence and the continued growth in noncompliance expressed by TIGTA, GAO, Congress, and the media. By decreasing the 

AUR tax gap, this initiative will serve to improve the long-term Voluntary Compliance 

Rate metric and increase the programmatic long-term goal of AUR Coverage. 

Establish New Document Matching – Kansas City 

+$23,453,000 / +208 FTE

This funding for this initiative will establish a new Automated Underreporter (AUR) site 

in existing IRS space in Kansas City. The AUR program minimizes revenue loss through 

IRS - 38
document matching of individual taxpayer account information. The AUR program has 

one of the highest return on investment ratios of all compliance programs. The number of 

individual taxpayers who may annually misreport their income is about 5.1 million based 

on third party information returns. The AUR program currently processes about 2.3 

million taxpayer cases. 

One-time start up costs include designing space alterations, new work stations, furniture, 

infrastructure changes, computer equipment, initial training and travel costs, and 

relocation expenses. The on-going operational costs to process daily and weekly AUR 

computer runs and support weekly maintenance of the AUR system also are included. 

 

Establish N ew D o cument M atching - Kansas C ity

Costs, Revenues Collected, and Returned on Investment

(Dollars in M illions)

$19 $19

$83

$146

$183

$24

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

FY 2008 FY 2009 FY 2010

Costs Revenue

3.5 t o 1

7.8 t o 1

9.8 t o 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

The establishment of this new AUR site will result in $183 million in additional 

enforcement revenue annually, once the new hires reach full potential in FY 2010. 

This initiative links IRS compliance resources to clearly defined, measurable, resultsoriented annual performance outcomes. It addresses the erosion of the IRS’ enforcement 

presence and the continued growth in non-compliance expressed by TIGTA, GAO, 

Congress, and the media. The initiative will also help decrease the tax gap, increase 

voluntary compliance, and reduce the number of taxpayers who underreport income in 

future tax years. 

Increase Individual Filing Compliance 

+$6,544,000 / +61 FTE

This initiative will help address voluntary compliance. The Automated Substitute for 

Return Refund Hold Program (ASFR Refund Hold) minimizes revenue loss by holding 

the current-year refunds of taxpayers who are delinquent in filing individual income tax 

returns and are expected to owe additional taxes and addresses both payment and filing 

compliance for the IRS. This program will enable the IRS to review any unfiled returns 

during the previous five years. The current-year held refund is applied or released once 

IRS - 39
delinquent returns are filed or assessed. This initiative will expand the program to 

include delinquent-year refunds. 

Approximately 42 million individual prior-year returns were delinquent for tax years 

2000 to 2004. In FY 2006, the ASFR Refund Hold program is projected to work 

approximately 242,000 current-year Refund Holds. ASFR Refund Hold is a key 

enforcement tool to address filing compliance. 

Increase Individual Filing Compliance

Costs, Revenues Collected, and Returned on Investment

(Dollars in Millions)

$6 $6

$37

$66

$82

$7

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

FY 2008 FY 2009 FY 2010

Costs Revenue

5.7 to 1

11.3 to 1

14.2 to 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

This initiative will result in securing 90,000 delinquent returns in FY 2008 and produce 

$82 million of additional enforcement revenue annually, once new hires reach full 

potential in FY 2010. 

Increase Tax-Exempt Entity Compliance

+$15,000,000 / +109 FTE

The legitimate tax expenditure related to the tax-exempt provisions of the Internal 

Revenue Code is estimated at $238 billion in 2008. Because of the special benefits 

afforded tax-exempt organizations, employee pension plans, and other entities with 

special tax status, these provisions may attract fraud and abuse. Thus, it is critical to 

ensure that tax-exempt entities are legitimate when they are established, maintain 

compliance throughout their operation, and are not misused by third parties for tax 

avoidance or other unintended purposes. 

This initiative will promote compliance with applicable tax laws and regulations in the 

tax-exempt and governmental arena through a comprehensive program of up-front 

compliance activities and enhanced downstream enforcement. The determination 

process, through which tax-exempt organizations and employee retirement plans first 

seek recognition of their exempt or qualified status from IRS, may be the only formal 

compliance interaction many entities have with the IRS. As such, it provides IRS a 

valuable opportunity to ensure that the applicant's proposed design and operations are 

consistent with the applicable tax law. It further provides an opportunity to detect and 

IRS - 40
address emerging abusive behaviors before they can spread within the sector. Additional 

resources will strengthen this critical program to address the growing number of requests 

for determination. 

Downstream, this initiative will provide resources to expand enforcement programs 

aimed at tax exempt and government entities and make them more effective. Increasing 

enforcement staffing will restore coverage of the tax-exempt community, which has 

declined due to unprecedented growth in the sector and the emergence of complex 

abusive tax issues. From FY 1995 to FY 2005, the number of exempt organizations grew 

40 percent. At the same time, concerns about credit counseling agencies, excess 

executive compensation and other compliance issues related to exempt organizations are 

coming to the fore. This initiative will expand the IRS’ examination capacity to pursue 

critical compliance initiatives such as these, while also using innovative approaches to 

reverse the decline in enforcement presence in the exempt sector. An expanded Exempt 

Organizations Compliance Unit will broaden coverage, using efficient techniques to 

address limited compliance issues among tax-exempt organizations. Meanwhile, 

additional IRS staffing will meet the growing demand for self-correction in the pension 

community, resolving, through self-audits, many defects that might not otherwise have 

been identified and at a lower cost than traditional examination. 

Together, these steps will further the IRS strategic objective to deter abuse within taxexempt and governmental entities and misuse of such entities by third parties for tax 

avoidance or other unintended purposes. This initiative will increase tax exempt and 

government entity compliance contacts by 1,700 (6 percent) and employee plan/exempt 

organization (EP/EO) determinations closures by over 9,000 (8 percent) by FY 2010. In 

addition, this investment will increase performance by improving the timeliness of 

Determination and Voluntary Compliance programs. 

This initiative directly supports IRS’ Strategic Goal to enhance enforcement of the tax 

law, with the objective to deter abuse within tax-exempt and governmental entities, and 

misuse of such by third parties for tax avoidance. Additional staffing for Determination 

and Voluntary Compliance requests will also improve taxpayer service. 

Increase Criminal Tax Investigations

+$10,000,000 / +37 FTE

This initiative will provide funding to aggressively attack abusive tax schemes, corporate 

fraud, non-filers, employment tax fraud, as well as tax and other financial crimes 

identified through Bank Secrecy Act (BSA)-related examinations and case development 

efforts, which includes an emphasis on the fraud referral program. During the past 

decade, criminals capitalizing on advancements in technology and the globalization of the 

economy have contrived some of the most sophisticated tax evasion schemes in history. 

The continued threat non-compliance poses to the integrity of the American tax system is 

evidenced by the latest net tax gap estimate of $290 billion. Criminal Investigations (CI) 

robust pursuit of tax violators and the resulting publicity, foster deterrence, enhance 

voluntary compliance and reduce the tax gap. 

IRS - 41
CI is working closely with the SB/SE and LMSB operating divisions to combat abusive 

schemes through the use of parallel proceedings. This approach is particularly useful 

when dealing with tax shelters sold by financial service corporations to high net-worth 

individuals and corporations. Only a comprehensive approach can successfully defeat 

these schemes, which sometimes involve thousands of clients and billions in revenue. 

CI pursuit of tax violators over the past five years resulted in an increase in the length of 

prison sentences imposed in tax related investigations (averaging 19 to 22 months) and 

the substantial media coverage of these cases, evidenced by CI’s high publicity rates (the 

percentage of sentenced cases that have received media coverage: 67.9 percent in 

FY 2002 to 82.5 percent in FY 2006). 

Abusive tax avoidance transactions present formidable compliance challenges. The 

complex layering of schemes, the use of tax haven jurisdictions, off-shore based financial 

activities, and the increased sophistication of promoters have required CI to devote more 

investigative resources to this program area. Further, the increase in Internet-based tax 

schemes poses new challenges. 

The overall success of CI’s abusive scheme work is reflected in the stiff prison sentences 

imposed during the past five years averaging 28 to 47 months and the high publicity rate 

90.9 percent in FY 2006. Compared to the average over the past five years, CI forwarded 

4.9 percent more prosecution recommendations in FY 2006 (103 vs. 98) and had 

16.7 percent more convictions on abusive tax scheme cases (67 vs. 57). 

A report by the U.S. Senate Permanent Subcommittee on Investigations released in 

February 2005, entitled The Role of Professional Firms in the U.S. Tax Shelter Industry, 

recommended that Congress appropriate additional funds to enable the IRS to hire more 

enforcement personnel to stop the promotion of potentially abusive and illegal tax 

shelters by lawyers, accountants, and other financial professionals. 

Following the collapse of some of the nation’s largest publicly held corporations due to 

the widespread fraud and executive malfeasance, President Bush authorized the 

formation of a Department of Justice corporate fraud task force. CI has a particularly 

important role in this program area. Some of the most crucial corporate fraud related 

convictions obtained to date were for tax offenses. In FY 2006, the importance of CI’s 

role can be measured by the substantial prison sentences imposed (49 months) and the 

97.2 percent publicity rate. 

CI’s effort to combat non-filers remains at an all-time high. In partnership with the 

operating divisions, CI pursues high income, non-filers across a broad spectrum of 

professions. The results of CI’s work have been impressive, with sentences in non-filer 

cases among the most severe imposed for tax offenses. In FY 2006, non-filer initiations 

and indictments rose 9.5 percent and 12.3 percent, respectively, compared to the averages 

over the past five years. During the past five years, average prison sentences associated 

IRS - 42
with non-filer cases ranged from 34 to 49 months; and more than 80 percent of sentenced 

investigations received publicity. These cases will clearly remain a high investigative 

priority. 

CI remains committed to the fraud referral program, which continues to result in quality 

criminal investigations. Since FY 2004, CI has received 13.7 percent more fraud 

referrals (603 vs. 530) and the acceptance rate rose from 58 percent to 71.8 percent. In 

FY 2006, approximately 10.1 percent of the fraud referrals received involved an abusive 

scheme, 5.0 percent of the referrals involved employment taxes and 1.3 percent involved 

corporate fraud. 

 

Since Financial Crimes Enforcement Network (FinCEN) published regulations requiring 

non-bank, money services businesses (MSB) to comply with the same BSA record 

keeping and reporting requirements as financial institutions, more than 90,000 MSBs 

were identified. SB/SE, which has regulatory authority over MSBs, is placing greater 

attention on examining these entities. Their BSA examinations will result in increased 

criminal referrals. 

The chart below shows the impact of implementing the initiative on criminal 

investigations convictions for all CI activities. Research suggests that tax convictions 

have a significant positive impact on voluntary compliance. 

Convictions

2060

2080

2100

2120

2140

2160

2180

FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13

w /o Initiative w ith Initiative

 

Taxpayer Services Initiatives 

Research Effect of Service on Taxpayer Compliance

+$5,000,000 / +8 FTE

This initiative provides funding to enhance understanding of the role of taxpayer service 

on compliance by undertaking new research on the service needs of taxpayers. The effect 

of service on taxpayer compliance will be examined by focusing on four areas: 

1. Meeting Taxpayer Needs by Providing the Right Channel of Communication – 

Classifying the types of services taxpayers seek from various options (internet, walkin sites, toll-free hotline), preferences among these options, and the costs of providing 

IRS - 43
the services. The goal is to determine the most productive communication channels 

for the IRS and taxpayer. 

2. Better Understanding Taxpayer Burden – Update the taxpayer burden survey to 

 provide revised estimates of the compliance burden incurred by individual income 

taxpayers. Continue the development of a post-filing model to allow for the 

evaluation of proposals designed to reduce taxpayer burden, improve taxpayer 

service, and further the understanding of the relationship between service and 

compliance. 

3. Understanding Taxpayer Needs through the Errors They Make – Improve taxpayer 

service and increase voluntary compliance by identifying why taxpayers make errors 

and the relationships between errors and unclear notices and publications. Further 

research will assess the effect of proposed changes to remedy the errors. This will 

channel resources more efficiently to areas with the greatest need and reduce IRS 

burden by increasing the accuracy of returns by taxpayers who strive to be compliant. 

4. Research on the Impact of Service on Overall Levels of Voluntary Compliance –

Develop models of how taxpayer services affect voluntary compliance levels and 

measure the impact of IRS activities relating to taxpayer service on the level of 

voluntary compliance. This research will attempt to quantify the relationship between 

services provided and overall compliance. In addition to providing enhanced service 

to taxpayers, the results of the study will be instrumental in reducing the tax gap by 

increasing voluntary compliance. 

Expand Volunteer Income Tax Assistance

+$5,000,000 / +46 FTE

This initiative supports the IRS goal of improving taxpayer service. It funds additional 

resources to expand IRS volunteer return preparation, outreach and education, and 

provide financial literacy training. These services are offered to low-income, elderly, 

Limited English Proficient (LEP), and disabled taxpayers. The IRS currently partners 

with more than 60 national organizations representing financial institutions, educational 

institutions, tribal governments, community, and volunteer organizations to provide these 

services. At the local level, the IRS has formed over 290 coalitions representing 

thousands of partners supporting the Volunteer Income Tax Assistance (VITA)/Tax 

Counseling for the Elderly (TCE) effort. The additional FTE will support the IRS’ 

growing number of partners and growing taxpayer demand for these services. This 

initiative also will enable the IRS to increase its presence and training support 

opportunities for its volunteer partners. 

The Volunteer Return Preparation Program – Quality Improvement Process (VRPP-QIP) 

will continue to be a focal point in implementing this initiative. The IRS has 

implemented several enhanced processes and is working toward continued improvement 

of the accuracy of tax returns at the volunteer preparation sites. This IRS investment 

provides partners with tax law and software training, marketing materials, educational 

IRS - 44
products, research data for optimal site placement and effectiveness, supplies, technology 

support (software, computers and printers); and the necessary products, procedures and 

technical expertise for effective site operations. 

These resources will also enhance and expand the following specific initiatives to 

improve taxpayer service coverage to IRS customers: 

• Rural Strategy – The IRS has a multi-year proposal currently under development to 

expand services to rural populations in seven states that have some of the largest 

numbers of low-income taxpayers. These resources will enable the IRS to accelerate 

this rural strategy and form a coalition of foundations with a rural emphasis to further 

enable IRS to expand services to these underserved rural areas. 

• Disability Initiative – The IRS is expanding its partnering efforts with organizations 

that serve people with disabilities to ensure that this segment of the population is 

educated on the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and 

other unique benefits in the tax code. This includes increasing access to and 

utilization of free tax preparation services for persons with disabilities. 

• Native American Initiative – The IRS is continuing its partnering efforts to provide 

additional services to low-income Native, rural communities. These resources will 

assist the IRS in expanding the VITA program to Indian reservations. 

This initiative will enable the IRS to expand its outreach and education programs and 

improve the quality of the Volunteer Return Preparation Program (VRPP). This initiative 

provides the resources needed to achieve its 60 percent quality rate for VRPP in FY 2008. 

This funding will provide the additional training presence and on site support most 

requested by IRS partners and needed to improve the quality of return preparation at 

VITA sites. 

Such investment is consistent with the priorities identified in both the IRS Strategic Plan 

and the Taxpayer Assistance Blueprint. It supports increased taxpayer value 

(significantly improved awareness, access) and business value (cost efficiency) gained 

through partner-based service delivery. The IRS has already realized many of these 

benefits; however, improving the quality of the assistance is critical to sustaining the 

viability of this powerful business model. 

Implement Taxpayer Assistance Blueprint

+$10,000,000 / 0 FTE

In response to a Congressional directive, the IRS conducted a comprehensive review of 

its current portfolio of taxpayer service to create a Taxpayer Assistance Blueprint (TAB). 

The TAB outlines a five-year strategic plan to implement specific, research-based service 

initiatives. Based on the findings of the TAB study, the funding for this initiative will 

implement telephone service and Web site electronic interaction enhancements. 

IRS - 45
Continued investments in automated services and processes offer significant 

opportunities for the IRS to improve the efficiency and effectiveness of its service 

provided to taxpayers. The following information details the benefits of investing in this 

initiative. 

Telephone Service Enhancements: 

Contact Analytics ($3.5M) – Contact Analytics (CA) provides Commercial-off-the-Shelf 

(COTS) tools for evaluating contact center recordings for the purpose of identifying 

improvements. This initiative will expand the IRS’ capability to record, store, and 

analyze information received during a taxpayer telephone contact. Large segments of 

recorded messages can be selected as a group, reviewed and compared using userspecified search criteria. The analytic tools will provide the capability to drill down to 

individual recordings to hear selected conversations. 

CA will provide the broad and accurate data required to perform business process 

reengineering, as well as information needed to gain better insight into service 

preferences. CA improves the ability to measure call accuracy, timeliness, and 

professionalism--leading to process improvements and cost savings. It also will improve 

the ability to identify and respond to problems--leading to more accurate, clearer 

responses to taxpayers. Employee satisfaction will increase through improved work 

processes that allow assistors to handle more complex calls with fewer transfers. Such 

advancements will support the IRS in capturing more and better data around the service 

experience, which will result in improved understanding of service levels and potential 

enhancements. 

Estimated Wait Time ($375K) –According to the Customer Contact Council, recent 

research shows that customers rate estimated wait time as one of the top five most 

important technologies when rating Contact Centers; customers who had been exposed to 

estimated wait technology were virtually all satisfied with its features. The estimated wait 

time (EWT) enhancement will reduce taxpayer burden and increase customer satisfaction 

by informing taxpayers about their expected wait time in queue. 

Web site Interaction Enhancements: 

Expanded Portfolio of Tax Law Decision Support Tools ($5.699M) – Website 

enhancements are designed to maximize the value of IRS.gov to taxpayers and other 

external stakeholders, making the Website the first choice for obtaining the information 

and services required to comply with tax obligations. 

This enhancement will enable users to conduct key word and natural language queries 

and to get answers to tax law questions through the Frequently Asked Questions (FAQs) 

database accessed on IRS.gov. Users will be able to access standard reports, searches, 

and “Top Ten” FAQ lists. An analytics console will allow in-depth analysis of reports. 

IRS - 46
Spanish “Where’s My Refund?” ($426K) – This enhancement adds the refund status 

feature to the Spanish web page on IRS.gov, enabling the Spanish-speaking community 

to receive the same level of customer service on the web as available on the English web 

page. 

IRS - 47
Operating Levels Table 

Internal Revenue Service 

Appropriation Title: Internal Revenue Service FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 95,386 93,036 (1,318) 91,718 0 91,718 92,118

Object Classification:

11.1 Full-Time Permanent Positions............................ $5,310,233 $5,380,296 $5,314,842 $5,310,649 $5,574,665

11.3 Other than Full-Time Permanent Positions........

($65,454) ($4,193)

. 433,414 427,129 415,289 103 415,392 412,796

11.5 Other Personnel Compensation.........................

(11,840)

. 246,491 248,226 245,097 288 245,385 259,835

11.8 Special Personal Services Payments................. 16,753 16,863 0 16,863 0 16,863 17,499

11.9 Personnel Compensation (Total)................... $6,006,891 $6,072,514 $5,992,091 $5,988,289 $6,264,795

12.0 Personnel Benefits................................................ 1,620,275 1,653,086 1,641,932 1,641,819 1,712,785

13.0 Benefits to Former Personnel.............................. 67,401 62,001 54,048 131 54,179 61,623

21.0 Travel.....................................................................

(3,129)

($80,423) ($3,802)

(11,154) (113)

(7,953)

. 210,113 214,075 200,216 781 200,997 226,387

22.0 Transportation of Things......................................

(13,859)

. 26,371 27,309 0 27,309 1 27,310 28,481

23.1 Rental Payments to GSA...................................... 680,865 640,193 0 640,193 0 640,193 665,737

23.2 Rent Payments to Others...................................... 351 375 0 375 0 375 388

23.3 Communications, Utilities, & Misc........................ 367,907 366,213 358,662 1 358,663 380,022

24.0 Printing and Reproduction...................................

(7,551)

. 67,187 65,926 0 65,926 128 66,054 67,549

25.1 Advisory & Assistance Services........................... 141,597 61,049 56,789 1,529 58,318 60,143

25.2 Other Services....................................................... 641,014 620,120 608,494 607,096 707,829

25.3 Purchase of Goods/Serv. from Govt. Accts......

(4,260)

(11,626) (1,398)

... 83,494 84,247 82,988 2,141 85,129 87,374

25.4 Operation & Maintenance of Facilities................

(1,259)

. 188,951 179,710 179,159 0 179,159 182,810

25.5 Research & Development Contracts..................

(551)

. 7,469 7,272 0 7,272 0 7,272 8,177

25.6 Medical Care......................................................... 10,005 10,005 0 10,005 0 10,005 10,245

25.7 Operation & Maintenance of Equipment............. 100,296 88,543 78,154 78,003 78,912

25.8 Subsistence & Support of Persons.....................

(10,389) (151)

. 5,090 4,732 0 4,732 143 4,875 5,130

26.0 Supplies and Materials......................................... 64,415 56,873 56,624 54,634 59,168

31.0 Equipment.............................................................

(249) (1,990)

. 266,981 302,541 298,342 2,598 300,940 410,961

32.0 Lands and Structures........................................... 0 58,056 0 58,056 0 58,056 59,449

33.0 Investments & Loans............................................

(4,199)

. 000 0 0 00

41.0 Grants, Subsidies.................................................. 11,944 12,195 0 12,195 0 12,195 12,569

42.0 Insurance Claims & Indemn................................. 1,275 988 0 988 1 989 1,033

43.0 Interest and Dividends................................. 000 0 0 00

44.0 Refunds.................................................................. 000 0 0 00

91.0 Unvouchered.............................................. 3,814 3,814 0 3,814 0 3,814 3,932

Total Budget Authority....................................... $10,573,706 $10,591,837 $10,438,364 $0 $10,438,364 $11,095,499

Budget Activities:

Pre-Filing Taxpayer Assistance and Education.........

($153,473)

... $2,142,042 $2,079,151 $2,059,151 $2,046,908 $2,103,089

Enforcement ...................................................

($20,000) ($12,243)

... 4,708,441 4,797,126 4,708,405 4,660,572 4,925,498

Operations Support..........................................

(88,721) (47,833)

... 3,461,205 3,488,404 3,459,152 60,076 3,519,228 3,769,587

Business Systems Modernization........................

(29,252)

... 242,010 212,310 196,810 0 196,810 282,090

Health Insurance Tax Credit Administration............

(15,500)

... 20,008 14,846 0 14,846 0 14,846 15,235

Total Budget Authority....................................... $10,573,706 $10,591,837 $10,438,364 $0 $10,438,364 $11,095,499

Table 2.2

Dollars in Thousands

($153,473)

IRS - 48
2B – Appropriations Language and Explanation of Changes 

TITLE II – DEPARTMENT OF THE TREASURY 

INTERNAL REVENUE SERVICE 

Taxpayer Services 

For necessary expenses of the Internal Revenue Service to provide taxpayer services, 

including pre-filing taxpayer assistance and education, filing and account services, 

taxpayer advocacy services, and services as authorized by 5 U.S.C. 3109, at such rates as 

may be determined by the Commissioner, $2,103,089,000, of which up to $4,100,000 

shall be for the Tax Counseling for the Elderly Program, and of which $8,000,000 shall 

be for low-income taxpayer clinic grants. 

Enforcement 

(including Transfer of Funds) 

For necessary expenses of the Internal Revenue Service to determine and collect owed 

taxes, to provide legal and litigation support, to conduct criminal investigations, to 

enforce criminal statutes related to violations of internal revenue laws and other 

financial crimes, to purchase (for police-type use, not to exceed 850) and hire of 

passenger motor vehicles (31 U.S.C. 1343(b)), and services as authorized by 5 U.S.C. 

3109, at such rates as may be determined by the Commissioner, $4,925,498,000, of which 

not less than $57,252,000 shall be for the Interagency Crime and Drug Enforcement 

program: Provided, That up to $10,000,000 may be transferred as necessary from this 

account to Internal Revenue Service, "Operations Support" solely for the purposes of the 

Interagency Crime and Drug Enforcement program: Provided further, That this transfer 

authority shall be in addition to any other transfer authority provided in this Act.

IRS - 49
Health Insurance Tax Credit Administration 

For expenses necessary to implement the health insurance tax credit included in the 

Trade Act of 2002 (Public Law 107-210), $15,235,000. 

Operations Support 

For necessary expenses of the Internal Revenue Service to support taxpayer services and 

enforcement programs, including rent payments; facilities services; printing; postage; 

physical security; headquarters and other IRS-wide administration activities; research 

and statistics of income; telecommunications; information technology development, 

enhancement, operations, maintenance, and security; the hire of passenger motor 

vehicles (31 U.S.C. 1343(b)); and services as authorized by 5 U.S.C. 3109, at such rates 

as may be determined by the Commissioner; $3,769,587,000 of which $75,000,000 shall 

remain available until September 30, 2009, for information technology support; of which 

not to exceed $1,000,000 shall remain available until September 30, 2010, for research; 

of which not to exceed $1,600,000 shall be for the Internal Revenue Service Oversight 

Board; and of which not to exceed $25,000 shall be for official reception and 

representation. 

Business Systems Modernization 

For necessary expenses of the Internal Revenue Service's business systems modernization 

program, $282,090,000, to remain available until September 30, 2010, for the capital 

asset acquisition of information technology systems, including management and related 

contractual costs of said acquisitions, including related Internal Revenue Service labor 

costs, and contractual costs associated with operations authorized by 5 U.S.C. 3109: 

Provided, That, with the exception of labor costs, none of these funds may be obligated 

until the Internal Revenue Service submits to the Committees on Appropriations, a plan 

for expenditure that: (1) meets the capital planning and investment control review 

requirements established by the Office of Management and Budget, including Circular 

A-11; (2) complies with the Internal Revenue Service's enterprise architecture, including 

the modernization blueprint; (3) conforms with the Internal Revenue Service's enterprise 

life cycle methodology; (4) is approved by the Internal Revenue Service, the Department 

of the Treasury, and the Office of Management and Budget; (5) has been reviewed by the 

Government Accountability Office; and (6) complies with the acquisition rules, 

requirements, guidelines, and systems acquisition management practices of the Federal 

Government. 

IRS - 50
ADMINISTRATIVE PROVISIONS—INTERNAL REVENUE SERVICE 

(INCLUDING TRANSFERS OF FUND) 

 Sec. 201. Not to exceed 5 percent of any appropriation made available in this Act to the 

Internal Revenue Service or not to exceed 3 percent of appropriations under the heading 

"Enforcement'' may be transferred to any other Internal Revenue Service appropriation 

upon the advance notification of the Committees on Appropriations. 

 Sec. 202. The Internal Revenue Service shall maintain a training program to ensure 

that Internal Revenue Service employees are trained in taxpayers' rights, in dealing 

courteously with taxpayers, and in cross-cultural relations. 

 Sec. 203. The Internal Revenue Service shall institute and enforce policies and 

procedures that will safeguard the confidentiality of taxpayer information. 

 Sec. 204. Of the funds made available by this Act to the Internal Revenue Service, not 

less than $6,787,950,000 shall be available only for tax enforcement and related support 

activities funded in Internal Revenue Service, "Enforcement" and "Operations Support." 

In addition, of the funds made available by this Act to the Internal Revenue Service, and 

subject to the same terms and conditions, an additional $440,264,000 shall be available 

for tax enforcement and related support activities. 

 Sec. 205. Section 9503(a) of title 5, United States Code, is amended by striking the 

clause “for a period of 10 years after the date of enactment of this section” and replacing 

it with “before July 23, 2013”. 

 Sec. 206. Sections 9504(a) and (b), and 9505(a) of title 5, United States Code, are 

amended by striking the clause “For a period of 10 years after the date of enactment” 

each place it occurs, and replacing it with “Before July 23, 2013”. 

 Sec. 207. Section 9502(a) of title 5, United States Code, is further amended by striking 

“Office of Management and Budget” and replacing it with “Office of Personnel 

Management”. 

IRS - 51
2C – Legislative Proposals 

The IRS needs to find ways to fairly and effectively administer the tax law while 

minimizing burden on taxpayers. Tax laws are changed each year and the changes are 

aimed at simplifying the tax code, improving compliance and reducing the cost of 

administering the tax laws. The IRS works extensively with stakeholders to move closer 

to meeting the demands of the customers and eliminating barriers that prevent taxpayers 

from meeting their tax obligations. The President’s Budget includes the main categories 

of legislative proposals below. When implemented, it is estimated that these proposals 

will generate approximately $29 billion over the next ten years: 

• Expanding Information Reporting 

Compliance with the tax laws is highest when payments are subject to information 

reporting to the IRS. Specific information reporting proposals would: 

1. Require information reporting on payments to corporations; 

2. Require basis reporting on security sales; 

3. Expand broker information reporting; 

4. Require information reporting on merchant payment card reimbursements; 

5. Require a certified taxpayer identification number (TIN) from non-employee 

service providers; 

6. Require increased information reporting for certain government payments for 

property and services; and 

7. Increase information return penalties. 

• Improve Compliance by Businesses 

Improving compliance by businesses of all sizes is important. Specific proposals to 

improve compliance by businesses would: 

1. Require electronic filing by certain large businesses; 

2. Implement standards clarifying when employee leasing companies can be held 

liable for their clients’ Federal employment taxes; and 

3. Amend collection due process procedures applicable to employment tax 

liabilities. 

• Strengthen Tax Administration

The IRS has taken a number of steps under existing law to improve compliance. 

These efforts would be enhanced by specific tax administration proposals that 

would: 

1. Expand IRS access to information in the National Directory of New Hires 

 database; 

2. Permit the IRS to disclose to prison officials return information about tax 

 violations; and 

3. Make repeated failure to file a tax return a felony. 

IRS - 52
• Expand Penalties

 Penalties play an important role in discouraging intentional non-compliance. 

Specific proposals to expand penalties would: 

1. Expand preparer penalties; 

2. Impose a penalty on failure to comply with electronic filing requirements; and 

3. Create an erroneous refund claim penalty. 

• Other Miscellaneous Proposals 

The Administration has four proposals relating to IRS administrative reforms. 

1. Modify employee infractions subject to mandatory termination and permit a 

broader range of available penalties. This will strengthen taxpayer privacy 

while reducing employee anxiety resulting from unduly harsh discipline or 

unfounded allegations. 

2. Allow the IRS to terminate installment agreements when taxpayers fail to make 

timely tax deposits and file tax returns on current liabilities. 

3. Eliminate the requirement that the IRS Chief Counsel provide an opinion for 

any accepted offer-in-compromise of unpaid tax (including interest and 

penalties) equal to or exceeding $50,000. This proposal requires that the 

Secretary of the Treasury establish standards to determine when an opinion is 

appropriate. 

4. Modify the way that Financial Management Services (FMS) recovers its 

transaction fees for processing the IRS’ levies by permitting FMS to add the fee 

to the liability being recovered, thereby shifting the cost of collection to the 

delinquent taxpayer. The offset amount would be included as part of the 15-

percent limit on continuous levies against income. 

IRS - 53
Taxpayer Services 
Section 3 – Budget and Performance Plan 

Taxpayer Services (TS) 

Appropriation Description 

The Taxpayer Services appropriation provides funding for taxpayer service activities and 

programs, including forms and publications; processing tax returns and related 

documents; filing and account services; taxpayer advocacy services; and assisting 

taxpayers to understand their tax obligations, correctly file their returns, and pay taxes 

due timely. 

The Taxpayer Services budget request for FY 2008 is $2,103,089,000 in direct 

appropriations and 30,160 FTE. This is an increase of $56,181,000 or 2.7 percent, and a 

decrease of 437 FTE, over the FY 2007 Continuing Resolution (CR) Rate of 

$2,046,908,000 and 30,597 FTE. 

Appropriations Detail Table 

Taxpayer Services 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Pre-Filing Taxpayer Assistance and Education 6,206 $577,425 5,461 $559,249 6,047 $575,694 5,990 $556,693 6,031 $578,078 0.68% 3.84%

Filing and Account Services 25,844 1,564,617 25,925 1,568,209 24,844 1,503,457 24,607 1,490,215 24,129 1,525,011 -1.94% 2.33%

Subtotal New Appropriated Resources 32,050 $2,142,042 31,386 $2,127,458 30,891 $2,079,151 30,597 $2,046,908 30,160 $2,103,089 -1.43% 2.74%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 767 $51,069 997 $41,474 331 $26,824 331 $26,824 339 $27,414 2.42% 2.20%

50% Carryover 10,655

Mandatory Appropriations - User Fees 168,000 168,000 108,000 -35.71%

Available multi-year/no-year funds 13,236 3,429 15,866 15,866 6,866 -56.73%

Transfers In/Out

Subtotal Other Resources 767 $64,305 997 $55,558 331 $210,690 331 $210,690 339 $142,280 2.42% -32.47%

Total Resources Available for Obligation 32,817 $2,206,347 32,383 $2,183,016 31,222 $2,289,841 30,928 $2,257,598 30,499 $2,245,369 -1.39% -0.54%

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2006 FY 2008

Table 3.1

IRS - 54
Budget Adjustment Table 

Taxpayer Services 

FTE Amount

FY 2007 President's Budget 30,891 $2,079,151

CR-rate Adjustment (330) (20,000)

(12,243)

(527) ($23,407)

(527)

($5,968)

(5,968)

FY 2007 CR-rate 30,561 $2,059,151

Interappropriation Transfer Corrections to Budget Restructure 36

FY 2007 Operating Plan at CR-rate 30,597 $2,046,908

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $0

Base Adjustment

Maintaining Current Levels (MCLs) $71,500

Pay Annualization 10,190

Pay Inflation Adjustment 58,424

Non-Pay Inflation Adjustment 2,886

Efficiency Savings

Subtotal, Changes to Base $48,093

FY 2008 Base 30,070 $2,095,001

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings

Program Reinvestments: 0 $5,968

Increase Efficiency Through Submission Processing Site Consolidations 5,968

Program Increases:

Enforcement Initiatives 44 $4,235

Improve Compliance Among Small Business and Self-Employed Taxpayers 31 2,437

Increase Compliance for Large Multinational Businesses 4 1,055

Establish New Document Matching - Kansas City 3 248

Increase Individual Filing Compliance 6 495

Taxpayer Service Initiative 46 $3,853

Expand Volunteer Income Tax Assistance 46 3,853

Subtotal, FY 2008 Program Changes 90 $8,088

Total, FY 2008 President's Budget Request 30,160 $2,103,089

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Taxpayer Services

IRS - 55
Operating Levels Table 

Taxpayer Services 

Appropriation Title: Taxpayer Services FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 32,050 30,891 (330)

($2,143)

(11,647) (1)

(111)

($13,790)

(3,971) (981)

(15)

30,561 36 30,597 30,160

Object Classification:

11.1 Full-Time Permanent Positions............................ $1,117,586 $1,112,080 $1,109,937 $1,626 $1,111,563 $1,152,553

11.3 Other than Full-Time Permanent Positions......... 316,349 321,755 310,108 310,107 303,897

11.5 Other Personnel Compensation.......................... 76,951 76,480 0 76,480 76,369 78,525

11.8 Special Personal Services Payments................. 0 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $1,510,886 $1,510,315 $1,496,525 $1,514 $1,498,039 $1,534,975

12.0 Personnel Benefits................................................ 431,056 431,083 427,112 426,131 435,843

13.0 Benefits to Former Personnel.............................. 839 3,046 0 3,046 131 3,177 9,119

21.0 Travel...................................................................... 27,611 27,573 27,558 2 27,560 28,720

22.0 Transportation of Things....................................... 4,403 4,294 0 4,294 0 4,294 4,445

23.1 Rental Payments to GSA...................................... 0 0 0 0 0 0 0

23.2 Rent Payments to Others...................................... 0 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc........................ 3,817 4,862 0 4,862 0 4,862 4,982

24.0 Printing and Reproduction.................................... 7,773 7,898 0 7,898 35 7,933 8,124

25.1 Advisory & Assistance Services........................... 7,778 3,298 0 3,298 2,432 2,490

25.2 Other Services....................................................... 96,568 39,532 37,008 35,623 36,470

25.3 Purchase of Goods/Serv. from Govt. Accts......

(866)

(2,524) (1,385)

... 10,931 10,931 0 10,931 10,602 11,029

25.4 Operation & Maintenance of Facilities................

(329)

. 91 91 0 91 0 91 93

25.5 Research & Development Contracts................... 0 0 0 0 0 0 0

25.6 Medical Care......................................................... 0 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 8,945 8,945 0 8,945 652 667

25.8 Subsistence & Support of Persons.....................

(8,293)

. 1,467 1,418 0 1,418 9 1,427 1,475

26.0 Supplies and Materials......................................... 15,361 11,813 11,564 9,404 11,827

31.0 Equipment.............................................................. 2,556 2,158 549 2,707 80 2,787 567

32.0 Lands and Structures........................................... 0 0 0 0 0 0 0

33.0 Investments & Loans............................................

(249) (2,160)

. 00000 00

41.0 Grants, Subsidies.................................................. 11,939 11,866 0 11,866 0 11,866 12,232

42.0 Insurance Claims & Indemn................................. 21 28 0 28 0 28 31

43.0 Interest and Dividends................................. 00000 00

44.0 Refunds.................................................................. 0 0 0 0 0 0 0

91.0 Unvouchered.............................................. 00000 00

Total Budget Authority....................................... $2,142,042 $2,079,151 $2,059,151 $2,046,908 $2,103,089

Budget Activities:

Pre-filing Taxpayer Assistance & Education............

($20,000) ($12,243)

... $577,425 $575,694 $571,472 $556,693 $578,078

Filing & Account Services....................................

($4,222) ($14,779)

... 1,564,617 1,503,457 1,487,679 2,536 1,490,215 1,525,011

Total Budget Authority....................................... $2,142,042 $2,079,151 $2,059,151 $2,046,908 $2,103,089

Table 2.2

Dollars in Thousands

(15,778)

($20,000) ($12,243)

IRS - 56
TS Budget Activity: Pre-Filing Taxpayer Assistance and Education 

3A - Description 

Pre-Filing Taxpayer Assistance and Education ($578,078,000 in direct appropriation, 

$1,059,000 from reimbursable programs, and $76,000,000 from user fees) 

This budget activity funds services to assist with tax return filing, including interpretation 

of the tax laws, media, and publications. This includes the following program activities: 

 

• Filing Services Management administers pre-filing, taxpayer assistance, and 

education programs; 

• Taxpayer Communication and Education researches customer needs, prepares tax 

forms and publications; develops and manages educational programs; establishes 

partnerships with stakeholder groups; and disseminates tax information to taxpayers 

and the general public through a variety of media, including publications and 

mailings, web sites, broadcasting, and advertising; 

• Media and Publications develops understandable notices, produces forms and 

publications for printed and electronic tax materials, and supplies media production 

services to taxpayers; 

• Taxpayer Advocacy provides advocate services to taxpayers for the purpose of 

preventing future problems by identifying the underlying causes of taxpayer problems 

and participating in the development of systematic and/or procedural remedies; 

• Account Management & Assistance – Field Assistance provides face-to-face 

assistance, education, and compliance services to taxpayers. It includes return 

preparation, answering tax questions, resolving account and notice inquiries, and 

supplying forms and publications to taxpayers; 

• Taxpayer Advocate Case Processing ensures that taxpayers have an advocate to 

present their interests within the IRS to resolve taxpayers’ problems through prompt 

identification, referral, and settlement; and 

• National Distribution Center receives and processes orders for IRS forms and 

publications received from individual taxpayers, tax practitioners, and IRS tax return 

preparation partners. 

IRS - 57
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Pre-Filing Taxpayer Assistance and Education Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $565,841 $577,425 $556,693 $578,078

Offsetting Collections - Reimbursable 1,170 1,573 1,037 1,059

Mandatory Appropriations - User Fees 0 0 76,000 76,000

Total Operating Level $567,011 $578,998 $557,730 $579,137

Human Resources

Appropriated FTE 6,586 6,206 5,990 6,031

Other FTE 14 23 10

Total FTE (direct and reimbursable) 6,600 6,229 6,000 6,042

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 75.0% 80.0% 92.0% 85.2% 92.0%

Actual 76.0% 91.4% 83.0% 

Met Y Y N 

Target N/A 80.0% 85.0% 79.6% 86.0%

Actual 76.0% 80.0% 61.2%

Met Y N

Target N/A Baseline 45.7% 48.6% 51.4%

Actual 46.4% 42.5% 46.8%

Met Y

Target Baseline 80.0% 80.0% 75%-85% 75%-85%

Actual 80.0% 80.0% *

Met Y Y

Table 3.2.1 

Timeliness of Critical Filing Season 

Tax Products to the Public (Ot)

Dollars in Thousands

*Data to estimate eligibility rate is not available at this time.

Percent of Eligible Taxpayers Who 

File for EITC (Oe)

Key: Oe - Outcome Measure, Ot - Output/Workload Measure, L - Long Term Goal

Timeliness of Critical Other Tax 

Products to the Public (Ot)

Taxpayer Self Assistance Rate (Oe) 

(L)

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

11

IRS - 58
Description of Performance 

Improved service options for taxpayers and simplifying the tax process are key objectives 

under the IRS strategic goal to improve taxpayer service. Helping the public to 

understand its tax reporting and payment obligations remains a vital part of maintaining 

public confidence in administering the tax laws. The IRS continues to expand its 

outreach by relying on partner organizations such as state taxing authorities and a cadre 

of volunteer groups, such as Volunteer Income Tax Assistance (VITA), to serve taxpayer 

needs. In FY 2006, the 69,000 volunteers filed approximately 2.3 million returns, 

a seven percent increase over FY 2005. 

In FY 2006, the IRS delivered the first phase of the Taxpayer Assistance Blueprint 

(TAB), a comprehensive study that reviewed the IRS’ current taxpayer service options 

provided to taxpayers and identified areas for improvements, including expanded 

taxpayer education and awareness, optimized use of partner services, increased selfservice options, and expanded training and support tools for taxpayers. Phase II includes 

additional research and establishes the framework to develop short and long-term 

outcome goals and metrics for measuring the IRS’ progress on service improvements for 

taxpayers. 

The IRS also played a significant role in outreach and telephone assistance efforts to 

support disaster response due to the hurricanes that occurred along the gulf coast in 

August and September of 2005. The IRS assisted the Federal Emergency Management 

Agency (FEMA) by manning telephone sites to answer 948,814 disaster related 

questions. Also, a substantial number of taxpayers were contacted by the IRS and 

educated in tax related matters such as claiming property and personal losses, applying 

for filing extensions, and requesting extensions of time to pay on existing tax liabilities 

due to financial hardship. In addition, emergency tax relief bills were enacted that 

required over 230 changes to 78 tax products. Despite passage late in the tax year, 83 

percent of the critical filing season tax products and over 61.2 percent of other tax 

products were delivered to the public on time. 

The IRS continues efforts to simplify its tax forms and publications making them more 

user-friendly with the ultimate goal of providing all of its published products in electronic 

format. The FY 2006 taxpayer self-assistance rate was 46.8 percent, which exceeded the 

target of 45.7 percent. This success can be attributed primarily to the high increase in use 

of the “Where’s My Refund?” website feature, which was up 11.8 percent for the 2006 

filing season, and the addition of the Earned Income Tax Computation (EITC) tool to the 

website. 

In FY 2007 and FY 2008, the IRS will continue to simplify tax forms and publications to 

make them more user friendly for use on computer-based systems with the eventual goal 

of providing all published products in an electronic format, which should ensure that all 

critical filing season and other critical tax products are available by established deadlines. 

In addition, efforts to increase electronic filing will continue, with new forms and 

schedules added to the business electronic portfolio, leveraging partner organizations 

IRS - 59
such as state taxing authorities, and increasing use of volunteers to better serve taxpayer 

needs. 

TS Budget Activity: Filing and Account Services 

3A – Description 

Filing and Account Services ($1,525,011,000 in direct appropriation, $26,355,000 from 

reimbursable programs, and $32,000,000 from user fees) 

 

This budget activity funds programs that provide filing and account services to taxpayers, 

process paper and electronically submitted tax returns, issue refunds, and maintain 

taxpayer accounts. This includes the following program activities: 

• Filing and Account Services Management administers filing and account services 

programs; 

• Submission Processing processes paper and electronically-submitted tax returns and 

supplemental documents, accounts for tax revenues, and issues refunds and tax 

notices; 

• Account Management and Assistance – Electronic Correspondence Assistance 

provides education and compliance services to taxpayers through telephone, 

correspondence, and electronic means and to resolve account and notice inquiries, 

either electronically or by telephone; 

• Electronic Tax Administration markets and administers electronic tax administration 

products and services; and 

• Files Most Efficient Organization stores the administrative files and the most recent 

tax returns in-process that are most likely to be requested for research by various IRS 

organizations until they are forwarded to the federal records centers. 

IRS - 60
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Filing and Account Services Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $1,579,145 $1,564,617 $1,490,215 $1,525,011

Offsetting Collections - Reimbursable 36,813 49,496 25,787 26,355

Mandatory Appropriations - User Fees 0 0 92,000 32,000

Total Operating Level $1,615,958 $1,614,113 $1,516,002 $1,551,366

Human Resources

Appropriated FTE 26,892 25,844 24,607 24,129

Other FTE 453 744 321 328

Total FTE (direct and reimbursable) 27,345 26,588 24,928 24,457

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 45.0% 51.0% 55.0% 57.0% 61.6%

Actual 46.5% 51.1% 54.1%

Met Y Y N 

Target 19.6% 17.0% 18.6% 19.5% 21.2%

Actual 17.4% 17.8% 16.6%

Met N Y N

Target 85.0% 82.0% 90.0% 91.0% 91.2%

Actual 80.0% 89.0% 90.9%

Met N Y Y

Target 89.0% 89.8% 92.0% 93.3% 93.4%

Actual 89.0% 91.5% 93.2%

Met Y Y Y

Target N/A 7,261 7,477 7,702 7,880

Actual 8,015 7,585 7,414

Met Y N

Target 83.0% 82.0% 82.0% 78.0% 81.0%

Actual 87.3% 82.6% 82.0%

Met Y Y Y

Target 98.4% 98.4% 99.2% 99.2% 99.2%

Actual 98.3% 99.2% 99.3%

Met N Y Y

Percent Individual Returns 

Processed Electronically (Oe) (L)

Percent of Business Returns 

Processed Electronically (Oe) (L)

Customer Accuracy - Tax Law 

Phones (Oe)

Customer Accuracy - Accounts 

(Phones) (Oe)

Table 3.2.2

Dollars in Thousands

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Customer Contacts Resolved per 

Staff year (E)

Customer Service Representative 

(CSR) Level of Service (Oe)

Refund Timeliness - Individual 

(paper) 

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

IRS - 61
Description of Performance 

The IRS delivered a successful 2006 filing season in the midst of a very challenging year. 

Despite natural disasters that affected a large number of taxpayers and required an 

unprecedented response, the IRS processed more than 134.7 million total individual 

returns compared to 128.6 million last year, and issued more than 100 million refunds 

totaling $277 billion compared to 97.1 million refunds totaling $205.1 billion. For the 

second consecutive year, more than half, 72.8 million individual returns, were filed 

electronically, a 6.6 percent increase from FY 2005. The most significant increase in 

electronic filing came from home computer filing, which increased by 18.5 percent to 

more than 20.2 million returns. The IRS processed more than 7.7 million business 

returns electronically, a seven percent increase from last year. With an increase in both 

individual and business return filings, the IRS remains on track to have more than half of 

all returns filed electronically. 

A key objective of the IRS’ Taxpayer Service strategic is to increase electronic services 

and improve the ease of taxpayer access. Benefits of improved electronic services were 

demonstrated during the 2006 filing season. The IRS received five percent fewer 

automated calls and eight percent fewer walk-in contacts. The decline in the number of 

customers seeking face-to-face assistance in the Taxpayer Assistance Centers reflects 

taxpayers’ preference to pursue self-assisted options for receiving service. 

Studies initiated by the IRS Oversight Board and others have demonstrated taxpayer 

satisfaction with electronic access to IRS for filing tax and information returns, securing 

forms, instructions and answers including the most frequently asked question, “Where’s 

My Refund?”. Research conducted during Phase II of the TAB will identify the key 

drivers of taxpayer preference for self-assisted versus assisted customer service. 

The IRS continues to emphasize direct service to taxpayers. The Customer Service 

Representative Level of Service was 82 percent. Refund timeliness was at 99.3 percent, 

also ahead of target and prior year performance. 

The IRS and its customers place a high value on accuracy. Accuracy is one of the 

reasons cited by taxpayers who prefer electronic filing. The importance the IRS places 

on accuracy is demonstrated by its performance in Customer Accuracy – Tax Law 

Phones at 90.9 percent and Customer Accuracy – Accounts (Phones) at 93.2 percent, both 

above the FY 2005 levels. 

The IRS developed processes and procedures for administering telecommunications 

excise tax refunds (TETR) to more than 150 million taxpayers in FY 2007. To do this, 

the IRS modified all individual and business tax return forms to include TETR 

information; created a new form to be used by individuals who want to request a refund 

but who have no other tax filing requirement; and drafted a new form to be used by 

taxpayers who choose to request refunds based on their actual payments rather than use a 

standard amount set by the IRS. The IRS also launched an outreach campaign to external 

stakeholder groups, programmed IRS systems to accept form changes, developed TETRIRS - 62
related internal procedures, and trained employees who will interact with taxpayers on 

the phone and at Taxpayer Assistance Centers. In addition, the IRS developed a 

methodology that can be used by businesses and non-profits to estimate their TETR 

claims. 

In FY 2007 and FY 2008, the IRS will continue to research and evaluate information 

regarding taxpayer service needs, priorities, and preferences in order to improve delivery 

services that support taxpayer preferable approaches for obtaining information or 

services. The IRS will seek opportunities to invest in technology, process improvement, 

and training to achieve consistent repeatable quality service with reduced costs. 

IRS - 63
Enforcement 
Enforcement (ENF) 

Appropriation Description 

The Enforcement appropriation funds the examination of tax returns, both domestic and 

international; administrative and judicial settlement of taxpayer appeals of examination 

findings; technical rulings; monitoring of employee pension plans; determination of 

qualifications of organizations seeking tax-exempt status; examination of tax returns of 

exempt organizations; enforcement of statutes relating to detection and investigation of 

criminal violations of the internal revenue laws; identification of under reporting of tax 

obligations; and the securing of unfiled tax returns and collecting unpaid accounts. 

The enforcement budget request for FY 2008 is $4,925,498,000 in direct appropriations 

and 48,667 FTE. This is an increase of $264,926,000 or 5.7 percent, and 834 FTE or 

1.7 percent, over the FY 2007 Continuing Resolution (CR) rate of $4,660,572,000 and 

47,833 FTE. 

Appropriation Detail Table 

Enforcement 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Investigations 4,510 $579,555 4,500 $599,841 4,328 $591,090 4,348 $579,883 4,347 $602,872 -0.02% 3.96%

Exam and Collections 43,045 3,919,275 42,637 3,925,839 43,258 4,054,760 42,264 3,932,599 43,060 4,165,233 1.88% 5.92%

Regulatory 1,979 209,611 1,302 150,115 1,283 151,276 1,221 148,090 1,260 157,393 3.19% 6.28%

Subtotal New Appropriated Resources 49,534 $4,708,441 48,439 $4,675,795 48,869 $4,797,126 47,833 $4,660,572 48,667 $4,925,498 1.74% 5.68%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 376 $86,041 122 $44,106 191 $48,291 191 $48,291 194 $49,353 1.57% 2.20%

50% Carryover 10,054

Mandatory Appropriations - User Fees 0

Available multi-year/no-year funds 2,289 1,119 2,286 2,286 1,146 -49.87%

Transfers In/Out 37

Subtotal Other Resources 376 $88,330 122 $55,316 191 $50,577 191 $50,577 194 $50,499 1.57% -0.15%

Total Resources Available for Obligation 49,910 $4,796,771 48,561 $4,731,111 49,060 $4,847,703 48,024 $4,711,149 48,861 $4,975,997 1.74% 5.62%

FY 2006

Table 3.1

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2008

IRS - 64
Budget Adjustment Table 

Enforcement 

FTE Amount

FY 2007 President's Budget 48,869 $4,797,126

CR-rate Adjustment (988) (88,721)

(48) (47,833)

(620) ($60,166)

(620)

FY 2007 CR-rate 47,881 $4,708,405

Interappropriation Transfer Corrections to Budget Restructure

FY 2007 Operating Plan at CR-rate 47,833 $4,660,572

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $0

Base Adjustment 0

Maintaining Current Levels (MCLs) $162,373

Pay Annualization 0 23,083

Pay Inflation Adjustment 0 131,573

Non-Pay Inflation Adjustment 0 7,717

Efficiency Savings

Subtotal, Changes to Base $102,207

FY 2008 Base 47,213 $4,762,779

Program Changes:

Program Increases:

Enforcement Initiatives 1,454 $162,719

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 237 29,054

Improve Compliance Among Small Business and Self-Employed Taxpayers 454 55,480

Increase Compliance for Large Multinational Businesses 151 19,916

Expand Document Matching in Existing Sites 208 18,536

Establish New Document Matching - Kansas City 203 15,669

Increase Individual Filing Compliance 55 3,806

Increase Tax-Exempt Entity Compliance 109 11,794

Increase Criminal Tax Investigations 37 8,464

Subtotal, FY 2008 Program Changes 1,454 $162,719

Total, FY 2008 President's Budget Request 48,667 $4,925,498

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Enforcement

IRS - 65
Operating Levels Table 

Enforcement 

Appropriation Title: Enforcement FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 49,534 48,869 (988) (48)

($50,373) ($7,246)

(193)

(3,112)

($53,678) ($6,751)

(4,134)

(13,837)

(38,921)

47,881 47,833 48,667

Object Classification:

11.1 Full-Time Permanent Positions............................ $3,201,250 $3,265,184 $3,214,811 $3,207,565 $3,382,441

11.3 Other than Full-Time Permanent Positions......... 106,545 94,051 93,858 96 93,954 97,309

11.5 Other Personnel Compensation.......................... 139,605 140,302 137,190 399 137,589 145,646

11.8 Special Personal Services Payments................. 16,753 16,863 0 16,863 0 16,863 17,499

11.9 Personnel Compensation (Total)................... $3,464,153 $3,516,400 $3,462,722 $3,455,971 $3,642,895

12.0 Personnel Benefits................................................ 874,868 910,198 906,064 539 906,603 952,840

13.0 Benefits to Former Personnel.............................. 4,525 0 0 0 0 0 0

21.0 Travel...................................................................... 151,456 153,124 139,287 620 139,907 163,019

22.0 Transportation of Things....................................... 4,042 4,002 0 4,002 1 4,003 4,566

23.1 Rental Payments to GSA...................................... 0 0 0 0 0 0 0

23.2 Rent Payments to Others...................................... 342 370 0 370 0 370 383

23.3 Communications, Utilities, & Misc........................ 44,687 44,858 0 44,858 5,937 6,642

24.0 Printing and Reproduction.................................... 6,559 5,297 0 5,297 93 5,390 5,442

25.1 Advisory & Assistance Services........................... 21,680 28,137 23,877 20,877 21,394

25.2 Other Services....................................................... 74,577 73,750 68,197 65,394 66,944

25.3 Purchase of Goods/Serv. from Govt. Accts......

(4,260) (3,000)

(5,553) (2,803)

... 14,949 12,963 11,704 2,470 14,174 14,537

25.4 Operation & Maintenance of Facilities................

(1,259)

. 507 145 0 145 0 145 1,045

25.5 Research & Development Contracts................... 2,847 2,908 0 2,908 0 2,908 2,908

25.6 Medical Care......................................................... 0 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 6,755 6,766 3,966 3,815 3,947

25.8 Subsistence & Support of Persons.....................

(2,800) (151)

. 3,043 3,043 0 3,043 134 3,177 3,376

26.0 Supplies and Materials......................................... 22,172 23,801 0 23,801 23,731 24,611

31.0 Equipment.............................................................. 6,790 6,848 3,648 5 3,653 6,279

32.0 Lands and Structures........................................... 0 0 0 0 0 0 0

33.0 Investments & Loans............................................

(70)

(3,200)

. 00000 00

41.0 Grants, Subsidies.................................................. 5 329 0 329 0 329 337

42.0 Insurance Claims & Indemn................................. 670 373 0 373 1 374 401

43.0 Interest and Dividends................................. 00000 00

44.0 Refunds.................................................................. 0 0 0 0 0 0 0

91.0 Unvouchered.............................................. 3,814 3,814 0 3,814 0 3,814 3,932

Total Budget Authority....................................... $4,708,441 $4,797,126 $4,708,405 $4,660,572 $4,925,498

Budget Activities:

Investigations...................................................

($88,721) ($47,833)

... $579,555 $591,090 $579,980 $579,883 $602,872

Exam and Collections .......................................

($11,110) ($97)

... 3,919,275 4,054,760 3,978,292 3,932,599 4,165,233

Regulatory ......................................................

(76,468) (45,693)

... 209,611 151,276 150,133 148,090 157,393

Total Budget Authority....................................... $4,708,441 $4,797,126 $4,708,405 $4,660,572 $4,925,498

Table 2.2

Dollars in Thousands

(1,143) (2,043)

($88,721) ($47,833)

IRS - 66
ENF Budget Activity: Investigations 

3A – Description 

Investigations ($602,872,000 in direct appropriation and $37,716,000 reimbursable 

programs) 

This budget activity funds the Criminal Investigations programs that explore potential 

criminal violations of the internal revenue tax laws, enforce criminal statutes relating to 

these violations, and recommend prosecution as warranted. This includes the following 

program activities: 

• Criminal Investigations supports the enforcement of criminal statutes relating to 

violations of internal revenue laws and other financial crimes. It investigates cases of 

suspected intent to defraud involving both legal and illegal sources of income and 

recommends prosecution as warranted. This activity also includes the investigation 

and prosecution of tax and money laundering violations associated with narcotics 

organizations; and 

• General Management and Administration supports the unit headquarters management 

activities of strategic planning, communications, finance, human resources for 

criminal Investigations activities. 

IRS - 67
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Investigations Strategic Objective F4A & F3A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $504,075 $579,555 $579,883 $602,872

Offsetting Collections - Reimbursable 90,834 74,842 36,905 37,716

Total Operating Level $594,909 $654,397 $616,788 $640,588

Human Resources

Appropriated FTE 4,190 4,510 4,348 4,347

Other FTE 383 325 86 87

Total FTE (direct and reimbursable) 4,573 4,835 4,434 4,434

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 3,400 3,895 3,945 4,000 4,025

Actual 4,387 4,104 4,157

Met Y Y Y

Target N/A 2,048 2,260 2,069 2,135

Actual 2,008 2,151 2,019

Met Y N

Target N/A 92.0% 92.0% 92.0% 92.0%

Actual 91.2% 91.2% 91.5%

Met N N

Target N/A 332,194 339,565 314,008 314,560

Actual 362,849 295,316 328,750

Met Y Y

Key: E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Number of Convictions (Ot) (L)

Conviction Rate (E) (L)

Conviction Efficiency Rate ($) (E) (L)

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

Criminal Investigations Completed 

(Ot) (L)

Table 3.2.3

Dollars in Thousands

IRS - 68
Description of Performance 

Enforcement of criminal statutes is an integral component of the IRS’ efforts to enhance 

voluntary compliance and enforce the tax laws. In FY 2006, abusive tax schemes and 

shelters remained a high investigative priority due to their egregious activities in areas of 

corporate fraud and tax avoidance of high-income individuals. Among the most effective 

tools available to combat abusive tax schemes was the use of parallel proceedings that 

enabled the IRS to enjoin promoters of abusive schemes from further activity while the 

criminal investigation proceeds. These initiatives focused on the thousands of individuals 

known to maintain offshore bank accounts while operating domestic businesses. 

Investigative priorities focused on Corporate Fraud, Abusive Tax Schemes, Refund 

Crimes, Non-Filers, Employment Tax, and Terrorist Financing. Performance levels 

remained high in FY 2006: 

• The referral acceptance rate (i.e., the ratio of internal referrals within the IRS received 

to the number of those cases that are accepted by CI) of 71.8 percent exceeded the 

five year high achieved in FY 2005 and total number of referrals accepted (445) was 

higher than last year; 

• Number of convictions was 2,019, falling short of the 2,260 target; 

• Conviction rate was 91.5 percent, higher than FY 2005 and within 99 percent of 

FY 2006 target; and 

• Cost of a conviction (Conviction Efficiency rate) was $328,750, almost $11,000 less 

than the FY 2006 target. 

In FY 2007 and continuing in FY 2008, the IRS will focus its investigative resources on 

legal source tax investigations by partnering with other law enforcement agencies to 

develop significant tax and other financial investigations. The IRS will also pursue 

investigations involving illegal source tax and other financial crimes, including money 

laundering, that adversely affect tax administration and combat fraudulent and financial 

crime schemes identified through improved case development efforts and bank secrecy 

investigations. 

ENF Budget Activity: Exam and Collections 

3A – Description 

Exam and Collections ($4,165,233,000 in direct appropriation and $11,637,000 from 

reimbursable programs) 

This budget activity funds programs that enforce the tax laws and compliance through 

examination and collection programs that ensure proper payment and tax reporting. The 

IRS - 69
budget activity also supports appeals and litigation activities associated with exam and 

collection. This includes the following program activities:

• Compliance Services Management supports management associated with compliance 

program activities; 

• Payment Compliance – Correspondence Collection supports the IRS’ centralized 

collection activities via correspondence in the Compliance Services Collection 

Operation. It initiates contact and collects delinquent taxpayer liabilities through 

written notices and other means; 

• Automated Collections and Support supports the IRS’ centralized Automated 

Collection System (ACS). This program initiates contact and collects delinquent 

taxpayer liabilities through automated means; 

• Payment Compliance – Field Collection conducts field investigations and collection 

efforts associated with delinquent taxpayer and business entity liabilities, including 

direct taxpayer contact and outreach programs to protect the government’s interest in 

delinquent tax liability situations; 

• Tax Reporting Compliance – Document Matching executes the Automated 

Underreporter (AUR), Combined Annual Wage Reporting (CAWR), Federal 

Unemployment Tax Act (FUTA), and other Document Matching Programs; 

• Tax Reporting Compliance – Electronic/Correspondence Exam operates the service 

centers’ examination function, which initiates correspondence with taxpayers related 

to tax issues arising from claims on tax returns; 

• Tax Reporting Compliance – Field Exam determines taxpayers’ correct income levels 

and corresponding tax liabilities. This activity also applies the tax law to specific 

taxpayers in the form of determination letters, advance pricing agreements, and other 

determinations; 

• Appeals oversees an administrative review process that provides a channel for 

impartial case settlement before a case is docketed in a court of law; 

• Litigation represents the IRS in litigation and provides all other legal support for the 

IRS, including interpretation of the tax law; 

• Specialty Programs examines federal tax returns of businesses and individuals 

responsible for the filing and payment of employment, excise, estate and gift taxes. 

International exam programs involving U.S. citizens residing abroad, non-resident 

aliens, expatriates and other examinations involving other international issues (e.g., 

Foreign Tax Credit, Foreign Earned Income Exclusion) also are centrally managed in 

this functional area; 

• Specialty Programs – Collection supports international field collection efforts 

associated with delinquent taxpayer and business entity liabilities from U.S. citizens 

residing abroad, non-resident aliens, expatriates, and those involving other 

international issues (e.g. Foreign Tax Credit, Foreign Earned Income Exclusion); and 

• Communications & Liaison coordinates local government and liaison relationships; 

handle congressional, state, and national stakeholder relationships and issues; 

coordinate crosscutting issues including managing audits and legislative 

implementation; handle national media contacts and local media relationships; and 

ensure Servicewide compliance with Disclosure and Privacy laws. 

IRS - 70
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Exam and Collections Strategic Objective F4A & F3A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $3,721,495 $3,919,275 $3,932,599 $4,165,233

Offsetting Collections - Reimbursable 13,287 10,948 11,386 11,637

Mandatory Appropriations - User Fees 6,000 0 0 0

Total Operating Level $3,734,782 $3,930,223 $3,943,985 $4,176,870

Human Resources

Appropriated FTE 43,160 43,045 42,264 43,060

Other FTE 56 47 105 107

Total FTE (direct and reimbursable) 43,216 43,092 42,369 43,167

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 0.9% 0.9% 1.0% 1.0%

Actual 0.8% 0.9% 1.0%

Met Y Y

Target N/A N/A Baseline 87.0% 87.0%

Actual 85.9%

Met

Target N/A N/A Baseline 89.0% 89.0%

Actual 88.2%

Met

Target 80.0% 78.0% 80.0% 88.0% 90.0%

Actual 74.0% 77.0% 85.0%

MetN N Y

Target N/A N/A 92.0% 97.0% 97.0%

Actual 87.0% 89.0% 96.0%

Met Y

Target 7.1% 7.5% 8.2% 8.2%

Actual 7.5% 7.8% 7.3%

Met Y N

Target N/A N/A 1,759 1,932 1,808

Actual 1,514 1,701 1,832

Met Y

Target N/A 2.5% 2.3% 2.5% 2.7%

Actual 1.9% 2.2% 2.4%

Met N Y

Target N/A N/A 121 136 136

Actual N/A 121 128

Met Y

Examination Coverage - Individual 

(Oe) (L)

Field Exam Embedded Quality (Oe) 

(L)

Office Exam Embedded Quality (Oe) 

(L)

Examination Quality (LMSB) - 

Industry (Oe) (L)

Table 3.2.4

Dollars in Thousands

Examination Efficiency - Individual (E) 

(L)

Examination Quality (LMSB) - 

Coordinated Industry (Oe) (L)

Examination Coverage - Business 

(Corps. > $10M) (Oe) (L)

AUR Efficiency (E) (L)

AUR Coverage (Oe) (L)

IRS - 71
Exam and Collections Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 57.0% 52.0% 54.0% 54.0%

Actual 53.0% 54.0%

Met N Y

Target N/A N/A 1,650 1,723 1,751

Actual 1,514 1,677

Met Y

Target N/A N/A Baseline 86.0% 86.0%

Actual 84.2%

Met

Target Baseline 88.0% 88.0% 91.0% 92.0%

Actual 87.8% 88.5% 91.0%

Met Y Y Y

Collection Coverage - Units (Oe) (L)

Table 3.2.4 (Continued)

Collection Efficiency - Units (E) (L)

Field Collection Embedded Quality 

(Oe) (L)

Automated Collection System (ACS) 

Accuracy 

Key: Oe - Outcome Measure and E - Efficiency Measure and L - Long Term Goal

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, the 

implementation of the new tax legislation, and improvements resulting from program efficiencies.

Description of Performance 

The IRS’ examination and collection programs are the primary contributors to the IRS’ 

strategic objective aimed at discouraging and deterring non-compliance by key 

contributors to the tax gap, particularly corporations, high-income individuals, and 

domestic and off-shore tax entities. 

The IRS continues to enforce the law across all sectors, but is focusing on corrosive 

activities of corporations, high income taxpayers, and other major violators of the tax 

code. These efforts are having a positive impact on collecting additional tax revenue. 

Enforcement revenue from all sources reached a record level of $48.7 billion in FY 2006. 

Targeting high-risk taxpayers improves IRS efficiency, reduces the burden on compliant 

taxpayers, and concentrates enforcement presence where it is most needed. 

For FY 2006, the IRS met or exceeded 83 percent of its enforcement performance targets. 

Focusing more on limited scope examinations and productivity enhancements including 

improved analytics, workload identification, and selection systems that targeted high-risk 

cases resulted in: 

• 7 percent increase in individual audits; 

• 18 percent increase in high income audits; 

• 8 percent increase in small-business audits; 

• 10 percent increase in automated underreporter closures; 

• 15 percent increase in collection case closures; and, 

• 9 percent increase in revenue received from collection activities. 

IRS - 72
The IRS continued its efforts in streamlining and improving its examination process, 

resulting in shortened cycle time for large corporate audits. The time from assigning a 

large corporate return to a revenue agent until the final closing decreased more than 18 

percent. The improvements to the examination process ultimately increased inventory 

turnover and closures. 

The IRS also met its examination coverage - individual, efficiency and embedded quality 

annual targets. Improvements in inventory management, decreases in cycle time, and 

focused issue training all contributed to improved productivity. Improved quality 

controls measuring critical elements of the examination, a reinforced focus on case 

quality to drive improvement efforts, and the delivery of business results for the third 

consecutive year all led to improved performance in FY 2006. The IRS will continue to 

reengineer its examination and collection procedures to reduce time, increase yield, and 

expand coverage. The IRS plans to build on its FY 2006 enforcement initiatives with 

emphasis on early identification of tax liabilities through increased audits and focused 

collection activities. 

In FY 2008, the IRS will focus its resources on targeting compliance of reporting, filing, 

payment, and other major contributors to the tax gap. Resources will be used to: 

• Increase the overall percentage of high-risk tax returns examined, such as 

multinational corporations, and collect a greater amount of unpaid taxes from filed 

and un-filed tax returns timely; 

• Expand the Automated Underreporter (AUR) program to target the estimated 5.1 

million taxpayers who may annually appear to misreport income based on third party 

information reporting. A new AUR site combined with expanded toll-free telephone 

service will improve the capability to reach more non-compliant taxpayers; and 

• Enhance the analysis of tax information and results of compliance research studies to 

better define and quantify the tax gap. Targeting high-risk taxpayers will improve 

IRS efficiency and reduce the burden on compliant taxpayers. It will also increase 

and focus the enforcement presence where it is most needed. 

ENF Budget Activity: Regulatory 

3A – Description 

Regulatory ($157,393,000 in direct appropriations) 

This budget activity funds the development and print of published guidance materials; 

interpretation of and guidance on tax laws; general legal services, rules and agreements, 

enforcement of regulatory rules, laws and approved business practices; supporting 

taxpayers in the areas of pre-filing agreements, determination letters, and advance pricing 

agreements and the Office of Professional responsibility. This includes the following 

program activities: 

• Tax Law Interpretation and Guidance interprets the tax law through published 

guidance, technical advice, and other technical legal services; 

IRS - 73
• General Legal Services provides advice to the IRS on non-tax legal issues, including 

procurement, personnel, labor relations, equal employment opportunity, fiscal law, 

tort claims and damages, ethics and conflict of interest; 

• Rulings and Agreements applies the tax law to specific taxpayers in the form of prefiling agreements, determination letters, advance pricing agreements, and other prefiling determinations and advice; 

• Fraud/Bank Secrecy Act enforces the anti-money laundering provisions of the Bank 

Secrecy Act (BSA) of 1970, and the USA PATRIOT Act of 2001. It examines nonbank financial institutions for compliance with these laws, annually receives and 

processes more than 15 million financial reports, and manages a centralized database 

of that information for the Financial Crimes Enforcement Network (FinCEN). The 

Fraud program follows the “money trail” to support the criminal investigation of 

tax evasion operations. Fraud Technical Advisors and Revenue Agents provide 

investigative leads and referrals to federal, state and local law enforcement agencies; 

and 

• Office of Professional Responsibility identifies, communicates, and enforces Treasury 

Circular 230 standards of competence, integrity, and conduct of those who represent 

taxpayers before the IRS, such as attorneys, certified public accountants (CPAs), 

enrolled agents, enrolled actuaries and appraisers, and other professionals. 

3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Regulatory Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $172,022 $209,611 $148,090 $157,393

Offsetting Collections - Reimbursable 187 251 0 0

Total Operating Level $172,209 $209,862 $148,090 $157,393

Human Resources

Appropriated FTE 1,605 1,979 1,221 1,260

Other FTE 2400

Total FTE (direct and reimbursable) 1,607 1,983 1,221 1,260

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 141,000 131,700 112,400 118,200 109,500

Actual 143,877 126,481 108,462

Met Y N N

Key: Ot - Output/Workload Measure

Table 3.2.5

TEGE Determination Case Closures 

(Ot)

Dollars in Thousands

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

IRS - 74
Description of Performance 

Due to major changes in certain filing processes, the IRS did not meet its FY 2006 plan 

for Tax Exempt and Government Entities (TE/GE) Determination Cases Closed. The 

implementation of a staggered amendment filing process for employee plans significantly 

changed the inventory mix. Over 40 percent of the 25,000 receipts were prototype plans 

that required more extensive review. These cases will not close until FY 2007, resulting 

in the closure of 3,600 fewer cases than originally planned. Additionally, recent 

increases in user fees for employee plan determinations resulted in a slight decrease in 

determination applications and ultimately 1,500 fewer projected closures. 

To stabilize the flow of determination receipts and mitigate the significant swings in 

workload experienced prior to FY 2006, the IRS will continue its roll-out of the staggered 

amendment process. The IRS also plans to test and pilot (with external partners) a new 

interactive software application for preparing determination applications designed to 

improve the quality of determination requests and establish the foundation for future 

electronic filing of these applications. 

Implementation and on-going use of alternative enforcement strategies through “Issue 

Management Teams” and Settlement Initiatives have rapidly identified abusive promoters 

and participants. Special attention to develop preparer penalty cases over the past several 

years continues in FY 2006, using Program Action Cases, Electronic Return Originator 

and EITC Due Diligence Visits, criminal investigations, and injunctions. To date, the 

IRS has more than 500 open return preparer investigations, a substantial increase over the 

same period last year. 

The IRS faces a wide variety of non-tax legal issues. In support of the IRS’ regulatory 

activities, proposed changes to Treasury Circular 230 (Regulations Governing Practice 

Before the Internal Revenue Service) were published in FY 2006. The changes were 

designed to address weaknesses in the current regulatory scheme to ensure that tax 

professionals are adhering to standards and following the law, a key objective to success 

in enforcing the tax laws. Highlights of the proposed changes include rules implementing 

new authority to impose a monetary penalties, opening the IRS enforcement proceedings 

to public scrutiny, limiting contingent fees in the federal tax arena, allowing expedited 

proceedings for egregious tax non-compliance, and eliminating un-enrolled return 

preparers to “limited practice” before the agency. 

In FY 2006, the IRS also developed a strategy to enhance its coordination and 

effectiveness of return preparer enforcement efforts and maximize resources and 

coverage of non-compliant preparers. The strategy includes an annual cross-functional 

meeting to discuss and evaluate the coming year’s preparer inventory with focus on 

identifying cases warranting attention from the prior year’s due diligence visits. 

IRS - 75
In FY 2006, General Legal Services (GLS) litigated cases involving practitioner 

questionable tax transactions, successfully defended an award protest for private debt 

collection services, negotiated a Memorandum of Understanding offering online tax 

return preparation and filing services, and drafted informant agreements concerning the 

recovery of taxes due. 

In FY 2007 and beyond, the IRS will continue to promote compliance with tax laws and 

regulations in the tax-exempt and government arena. The IRS’ FY 2007 initiative to 

bolster critical activities, such as determinations and voluntary compliance agreements, 

will continue in FY 2008. This initiative will maintain the integrity of the tax base and 

ensure charitable and retirement contributions serve the public purposes for which 

exemptions were created. In addition, the IRS will focus on the Office of Professional 

Responsibility disciplinary matters and continued activity to revamp automated systems 

to modernize and enhance compliance activities. 

IRS - 76
Operations Support 
Operations Support (OS) 

Appropriation Description 

The Operations Support appropriation provides funding for overall planning, direction, 

and support for the IRS, including shared service support related to facilities services, 

rent payments, printing, postage, and security. This appropriation also funds 

headquarters’ policy and management activities such as corporate support for strategic 

planning, communications and liaison, finance, human resources, Equal Employment 

Opportunity (EEO) and diversity; research and statistics of income; and necessary 

expenses for information systems and telecommunication support, including 

development, security and maintenance of IRS’ information systems. 

The Operations Support budget request for FY 2008 is $3,769,587,000 in direct 

appropriations and 12,957 FTE. This is an increase of $250,359,000 or 7.1 percent, and 3 

FTE, over the FY 2007 Continuing Resolution (CR) Rate of $3,519,228,000 and 12,954 

FTE. 

Appropriation Detail Table 

Operations Support 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Infrastructure 0 $864,403 0 $837,320 0 $873,146 0 $873,146 0 $908,095 0.00% 4.00%

Shared Services and Support 7,047 1,176,202 5,605 1,154,616 6,693 1,129,617 6,705 1,163,846 6,693 1,223,351 -0.18% 5.11%

Information Services 6,421 1,420,600 5,960 1,446,449 6,249 1,485,641 6,249 1,482,236 6,264 1,638,141 0.24% 10.52%

Subtotal New Appropriated Resources 13,468 $3,461,205 11,565 $3,438,385 12,942 $3,488,404 12,954 $3,519,228 12,957 $3,769,587 0.02% 7.11%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 207 $21,710 10 $4,277 160 $50,608 160 $50,608 163 $56,731 1.88% 12.10%

50% Carryover 2,709

Mandatory Appropriations - User Fees 19,000 19,000 74,000 74,000 72,000 -2.70%

Available multi-year/no-year funds 37,704 37,076 28,018 28,018 4,333

Transfers In/Out

Subtotal Other Resources 207 $78,414 10 $63,062 160 $152,626 160 $152,626 163 $133,064 1.88% -12.82%

Total Resources Available for Obligation 13,675 $3,539,619 11,575 $3,501,447 13,102 $3,641,030 13,114 $3,671,854 13,120 $3,902,651 0.05% 6.29%

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2006 FY 2008

Table 3.1

IRS - 77
Budget Adjustment Table 

Operations Support 

FTE Amount

FY 2007 President's Budget 12,942 $3,488,404

CR-rate Adjustment 0 (29,252)

(37) ($36,408)

(37)

($511)

(511)

FY 2007 CR-rate 12,942 $3,459,152

Interappropriation Transfer Corrections to Budget Restructure 12 60,076

FY 2007 Operating Plan at CR-rate 12,954 $3,519,228

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $5,687

Base Adjustment 0 5,687

Maintaining Current Levels (MCLs) $104,500

Pay Annualization 0 6,970

Pay Inflation Adjustment 0 41,532

Non-Pay Inflation Adjustment 0 55,998

Efficiency Savings

Subtotal, Changes to Base $73,779

FY 2008 Base 12,917 $3,593,007

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings 0

Program Reinvestments: 0 $511

Increase Efficiency Through Submission Processing Site Consolidations 0 511

Program Increases:

Infrastructure Initiatives 0 $81,000

Upgrade Critical IT Infrastructure 0 60,000

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastru 0 21,000

Enforcement Initiatives 32 $79,433

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 21 11,968

Improve Compliance Among Small Business and Self-Employed Taxpayers 0 15,248

Implement Legislative Proposals to Improve Compliance 0 23,045

Increase Compliance for Large Multinational Businesses 3 5,229

Expand Document Matching in Existing Sites 6 9,422

Establish New Document Matching - Kansas City 2 7,536

Increase Individual Filing Compliance 0 2,243

Increase Tax-Exempt Entity Compliance 0 3,206

Increase Criminal Tax Investigations 0 1,536

Taxpayer Service Initiatives 8 $16,147

Research Effect of Service on Taxpayer Compliance 8 5,000

Expand Volunteer Income Tax Assistance 0 1,147

Implement Taxpayer Assistance Blueprint 0 10,000

Subtotal, FY 2008 Program Changes 40 $176,580

Total, FY 2008 President's Budget Request 12,957 $3,769,587

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Operations Support

IRS - 78
Operating Levels Table 

Operations Support 

Appropriation Title: Operations Support FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 13,468 12,942 0 12,942 12 12,954 12,957

Object Classification:

11.1 Full-Time Permanent Positions............................ $955,187 $966,762 ($65)

(17)

($82)

(422)

(7,953)

(7)

(7,551)

$966,697 $1,427 $968,124 $1,002,389

11.3 Other than Full-Time Permanent Positions......... 10,074 10,876 0 10,876 8 10,884 11,120

11.5 Other Personnel Compensation.......................... 29,287 30,796 30,779 0 30,779 34,983

11.8 Special Personal Services Payments................. 0 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $994,548 $1,008,434 $1,008,352 $1,435 $1,009,787 $1,048,492

12.0 Personnel Benefits................................................ 304,231 301,675 301,253 329 301,582 313,697

13.0 Benefits to Former Personnel.............................. 62,037 58,955 51,002 0 51,002 52,504

21.0 Travel...................................................................... 30,717 33,047 33,040 159 33,199 34,313

22.0 Transportation of Things....................................... 17,926 19,013 0 19,013 0 19,013 19,470

23.1 Rental Payments to GSA...................................... 680,674 640,000 0 640,000 0 640,000 665,539

23.2 Rent Payments to Others...................................... 9 5 0 5 0 5 5

23.3 Communications, Utilities, & Misc........................ 319,403 316,493 308,942 38,922 347,864 368,398

24.0 Printing and Reproduction.................................... 52,855 52,731 0 52,731 0 52,731 53,983

25.1 Advisory & Assistance Services........................... 112,139 29,614 0 29,614 5,395 35,009 36,259

25.2 Other Services....................................................... 305,314 377,220 373,671 2,790 376,461 420,211

25.3 Purchase of Goods/Serv. from Govt. Accts......

(3,549)

... 57,614 60,353 0 60,353 0 60,353 61,808

25.4 Operation & Maintenance of Facilities................. 188,353 179,474 178,923 0 178,923 181,672

25.5 Research & Development Contracts................... 4,622 4,364 0 4,364 0 4,364 5,269

25.6 Medical Care......................................................... 10,005 10,005 0 10,005 0 10,005 10,245

25.7 Operation & Maintenance of Equipment............. 78,896 67,132 59,543 8,293 67,836 67,203

25.8 Subsistence & Support of Persons.....................

(551)

(7,589)

. 580 271 0 271 0 271 279

26.0 Supplies and Materials......................................... 26,875 21,252 0 21,252 240 21,492 22,723

31.0 Equipment.............................................................. 213,823 249,723 248,175 2,513 250,688 347,467

32.0 Lands and Structures........................................... 0 58,056 0 58,056 0 58,056 59,449

33.0 Investments & Loans............................................

(1,548)

. 00000 00

41.0 Grants, Subsidies.................................................. 0 0 0 0 0 0 0

42.0 Insurance Claims & Indemn................................. 584 587 0 587 0 587 601

43.0 Interest and Dividends................................. 00000 00

44.0 Refunds.................................................................. 0 0 0 0 0 0 0

91.0 Unvouchered.............................................. 00000 00

Total Budget Authority....................................... $3,461,205 $3,488,404 $3,459,152 $60,076 $3,519,228 $3,769,587

Budget Activities:

Infrastructure ...................................................

($29,252)

... $864,403 $873,146 $0 $873,146 $0 $873,146 $908,095

Shared Services & Support .................................... 1,176,202 1,129,617 1,120,621 43,225 1,163,846 1,223,351

Information Services ..........................................

($8,996)

... 1,420,600 1,485,641 1,465,385 16,851 1,482,236 1,638,141

Total Budget Authority....................................... $3,461,205 $3,488,404 $3,459,152 $60,076 $3,519,228 $3,769,587

Table 2.2

Dollars in Thousands

($20,256)

($29,252)

IRS - 79
OS Budget Activity: Infrastructure 

3A - Description 

Infrastructure ($908,095,000 in direct appropriation) 

This budget activity funds administrative services related to space and housing, rent and 

space alterations, building services, maintenance, guard services, and non-automated data 

processing equipment. This includes the following program activities: 

• Building Delegation oversees and manages the IRS's GSA-delegated buildings, 

including cleaning, maintenance, utilities, protections, administrative, recurring and 

one-time repair costs; 

• Rent provides resources for all of the IRS’ rent needs; and 

• Space and Housing / Non-ADP Equipment provides management of all IRS building 

services, maintenance, space alterations, guard services, custodial overtime, utility 

services needs, and Non-ADP equipment. 

3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Infrastructure Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $757,908 $864,403 $873,146 $908,095

Offsetting Collections - Reimbursable 287 385 0 0

Total Operating Level $758,195 $864,788 $873,146 $908,095

Human Resources

Appropriated FTE 0 0 0 0

Other FTE 4 6 0 0

Total FTE (direct and reimbursable) 4 6 0 0

Includes Strategic Objective F4A

Measure FY 2005 FY 2006 FY 2007 FY 2008

Target

Actual

Met

There are no externally reported 

performance measures associated 

with this activity

Table 3.2.6

Dollars in Thousands

IRS - 80
Description of Performance 

The IRS continued to emphasize identification and implementation of cost savings within 

its infrastructure, in particular, rent costs. The IRS decreased rent costs in FY 2006 by 

over 2 percent from FY 2005 to $608 million. This was accomplished by identifying and 

completing 110 space reduction projects releasing a cumulative total of 878,000 square 

feet. These projects have annualized savings of $19.6 million. As a result of the flooding 

at the IRS Headquarter building, three projects (57,000 square feet) were maintained to 

house displaced employees. 

In FY 2007 and beyond, the IRS will continue to work to identify and implement rent 

reduction initiatives and leasing plans to minimize costs. These savings are critical for 

covering unfunded costs such as new mandates, budget rescissions, and pay raises. 

OS Budget Activity: Shared Services and Support 

3A – Description 

Shared Services and Support ($1,223,351,000 in direct appropriation, $50,990,000 from 

reimbursable programs, and $10,000,000 from user fees) 

This budget activity funds policy and management and IRS-wide support for research 

strategic planning, communications and liaison, finance, human resources, and equal 

employment opportunity and diversity services and programs. It also funds printing and 

postage, business systems planning, security, corporate training, legal services, 

procurement, and specific employee benefits programs. This includes the following 

program activities: 

• National Headquarters Management & Administration directs the management 

activities of strategic planning, communications and liaison, finance, human 

resources, EEO and diversity, and business systems planning and embedded training. 

This activity sets policies and goals, provides leadership and direction for the Internal 

Revenue Service, and builds partner relationships with key stakeholders (e.g., 

Congress, OMB, etc.). It provides policy guidance for conducting IRS planning and 

budgeting strategies, conducting analysis of programs and investments to support 

strategic decision-making, and developing and managing the human resources. Also, 

it includes official reception and representation expenses; 

• Facilities Services provides services and supplies required to manage IRS facilities; 

• Procurement supports the procurement function of the IRS; 

• EEO Field Operations plans and manages the IRS EEO and Diversity Program; 

• Customer Support plans and manages financial services, including relocation, travel, 

imprest fund, purchase cards, corporate express, and employee clearances; 

• Treasury Complaint Centers plans and manages the Treasury Complaint Centers; 

• Shared Support provides resources for shared cross-functional support such as 

copiers, postage meters, shredders, courier services, and P. O. Boxes; 

IRS - 81
• Printing and Postage provides operating divisions with printing and postage, 

including shipping of taxpayer and internal use materials; 

• Security protects employees, facilities and assets, and the confidentiality of taxpayer 

information; 

• Shared Services (excluding Space and Housing and Rent) provide addition services 

such as Public Transit Subsidy and Career Counselor Contract; 

• Communications & Liaison coordinates local government and liaison relationships; 

handles congressional, state, and national stakeholder relationships and issues; 

coordinates cross-cutting issues including managing audits and legislative 

implementation; handles national media contacts and local media relationships; and 

ensures Servicewide compliance with Disclosure and Privacy laws; 

• Security Services ensures that the IRS has effective security policies and programs in 

place to safeguard taxpayer records, employees, facilities, business processes, 

systems and other resources. It includes operation of the Computer Systems Incident 

Response Center (CSIRC) and Situation Awareness and Management Centers 

(SAMC), coordination of Service-wide disaster recovery and business continuity 

planning, security training and awareness, and sensitive system certification and 

accreditation coordination with Treasury on the Federal Critical Infrastructure 

Protection Program; 

• Research provides resources for researching annual income, financial, and tax data 

from tax returns filed by individuals, corporations, and tax-exempt organizations; 

• Statistics of Income provides resources for market-based research to identify 

compliance issues; for conducting tests of treatments to address non-compliance; and 

for the implementation of successful treatments of taxpayer non-compliant behavior; 

and 

• Benefit Payments provides resources to fund Workmen’s Compensation benefits and 

Unemployment Compensation payments. 

IRS - 82
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Shared Services and Support Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $1,211,877 $1,176,202 $1,163,846 $1,223,351

Offsetting Collections - Reimbursable 10,216 13,844 44,990 50,990

Mandatory Appropriations - User Fees 0 0 20,000 10,000

Total Operating Level $1,222,093 $1,190,046 $1,208,836 $1,274,341

Human Resources

Appropriated FTE 7,084 7,047 6,705 6,693

Other FTE 101 171 140 143

Total FTE (direct and reimbursable) 7,185 7,218 6,845 6,836

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target

Actual

Met

Table 3.2.7

There are no externally reported 

performance measures associated 

with this activity.

Dollars in Thousands

Description of Performance 

The IRS continues to provide shared services to all IRS programs through various 

support programs including: facilities, management and administration of human 

resources, research, procurement, and security.

In FY 2006, the IRS introduced its Human Capital Strategic Implementation Plan. The 

plan links achievement of Treasury’s Human Capital (HC) Strategic Goals, the IRS’ 

Strategic Goals, and the IRS’ HC Strategic Goals outlined in the HC Strategic Plan 

(2005-2009). The plan also establishes measures to monitor performance against HC 

objectives, processes, and projects to ensure the IRS builds and maintains a workforce 

that can carry out its mission. 

The IRS remains committed to increasing employee engagement and employee 

satisfaction. The IRS’ Employee Engagement Surveys measure the percentage of IRS 

employees who feel they are in the right job, managed well, and are productive. In 

FY 2006, the IRS addressed Employee Engagement through programs that promote 

IRS - 83
employee development and continuity such as safety and security, training, succession 

planning and workplace conflict prevention. The IRS employee engagement score, as 

measured by the grand mean on Gallup’s survey, increased from 3.80 in 2005 to 3.82 in 

2006. 

Ninety-six percent of IRS systems are compliant, with 33 percent certified under the new 

more stringent National Institutes of Standards and Technology (NIST) standards. The 

IRS efforts in 2004 and 2005 were focused on security certification and accreditation of 

the network and infrastructure systems, which were achieved at the end of FY 2005. Our 

priority in FY 2006 was updating the security certification and accreditation of IRS 

business applications to comply with new process guidance issued by the Office of 

Management and Budget (OMB) and NIST. The remaining systems will be updated in 

FY 2007 and FY 2008. 

The IRS achieved Personal Identity Verification (PIV I) compliance by October 2005, as 

mandated by Homeland Security Presidential Directive 12 (HSPD-12). The IRS now 

leads the Treasury HSPD-12 Program to adopt an enterprise solution for PIV II through 

the implementation of new Federal identification cards. PIV I compliance focused on 

implementing standard processes for common identity proofing, registration and issuance 

that incorporate security and privacy requirements. The Treasury HSPD-12 enterprise 

solution, PIV II, focuses on government-wide uniformity and the issuance of new 

identification cards that are interoperable across the federal government. The IRS will 

continue to work collaboratively with other agencies to manage security costs as it 

addresses increased security requirements at government facilities nationwide. 

Research enables the IRS to develop strategies to combat specific areas of 

noncompliance, improve voluntary compliance, allocate resources more effectively, and 

reduce the tax gap. 

The National Research Program (NRP) demonstrates the importance of comprehensive 

compliance data. As part of the NRP, the IRS reviewed approximately 46,000 randomly 

sampled individual income tax returns from tax year 2001 – the first comprehensive 

compliance study for individual income tax returns since 1988. Returns for which 

reported information could not be independently verified were audited. An NRP 

reporting compliance study of 5,000 S corporation tax returns filed in 2003 and 2004 is 

currently underway. Data from the NRP reporting compliance study have been used to 

estimate the individual income tax component of the tax gap and to identify sources of 

noncompliance. Accurate NRP data provide a critical benchmark for determining the 

sources of noncompliance and for measuring changes in compliance rates over time. The 

IRS is also using the findings from the NRP to target examinations and other compliance 

activities better, thus increasing the dollar-per-case yield and reducing “no change” audits 

of compliant taxpayers. Innovations in audit techniques to reduce taxpayer burden, 

pioneered during the 2001 NRP, have been adopted in regular operational audits. In 

addition, Statistics of Income (SOI) gathered, analyzed, and published information, which 

was used internally as well as by a variety of federal agencies and other interested parties. 

IRS - 84
This information is used to analyze tax policy, project tax revenues, and to estimate the 

impact of tax law changes on tax collections. 

In FY 2007 and FY 2008, the IRS will implement new research projects in the following 

areas: update and initiate new NRP reporting compliance studies, examine the linkages 

between taxpayer service and compliance, and develop new tools to uncover patterns of 

noncompliance. 

OS Budget Activity: Information Services 

3A – Description 

Information Services ($1,638,141,000 in direct appropriation, $5,741,000 from 

reimbursable programs, and $62,000,000 from user fees) 

 

This budget activity funds staffing, equipment, and related costs to manage, maintain, and 

operate the information systems critical to the support of tax administration programs. 

The IRS’ business programs rely on these systems to process tax and information returns, 

account for tax revenues collected, send bills for taxes owed, issue refunds, assist in the 

selection of tax returns for audit, and provide telecommunications services for all 

business activities including the public’s toll-free access to tax information. These 

systems are located in a variety of sites, including the Martinsburg, Tennessee, and 

Detroit Computing Centers, Service Centers, and in other field office operations. Staffing 

funded by this activity develop and maintain the millions of lines of programming code 

supporting all aspects of tax-processing, as well as operate and administer the hardware 

infrastructure of mainframes, minicomputers, personal computers, networks, and a 

variety of management information systems. This includes the following program 

activities: 

• Tier B provides support to single owner, small to medium-sized investment projects 

using core data to support specialized functions; 

• Information Technology Services (ITS) Management provides support to the 

immediate office of the Associate CIO, ITS, and provides executive direction for the 

ITS organization and its divisions: Infrastructure, Architecture & Engineering; 

Business Systems Development; Enterprise Operations; Enterprise Networks; End 

User Equipment & Services; Web Services; and Electronic Tax Administration. This 

program also includes and funds the MITS Competitive Sourcing Office; 

• MITS Executive Oversight provides support to the immediate office of the Chief 

Information Officer, as well as the direct reports for EEO and Diversity, and the 

Director, Stakeholder Management (including Communications Services and 

Program Oversight). The program provides executive direction for the MITS 

organization, enabling MITS to be a customer-focused supplier of information 

technology solutions that are responsive to customer business priorities and 

effectively meet functional and operational needs; 

IRS - 85
• Business Systems Development performs the analysis, design, development, testing, 

and implementation of approximately 85,000 application programs supporting critical 

tax processing, management information reporting, and financial and management 

support systems for the IRS. This program activity also supports external trading 

partner data exchanges with federal government agencies, state and local 

governments, and other third party entities. The program controls application source 

code and deploys applications to the production environment; 

• Enterprise Operations designs, develops, and maintains information technology that 

supports critical tax processing, management information reporting, and financial and 

management support systems for the IRS. The program supports data exchanges with 

external organizations, such as other federal government agencies, state and local 

governments, and external entities (e.g., employers, banks, etc.) and includes a 

comprehensive disaster recovery capability to ensure continued operations in the 

agency in the event of a major interruption of service; 

• Enterprise Network provides telecommunications service delivery to all customer 

segments, including management of day-to-day operations and executing routine 

modifications to the telecommunications infrastructure and applications. It addresses 

all phases of engineering, acquisition, implementation and operation of 

telecommunications systems and services, including voice, video and data 

communications; 

• Enterprise Services plans and manages service and delivery methods used across the 

MITS organization, including demand analysis, enterprise architecture, configuration 

management, project reporting, enterprise life cycle management, release 

management, systems engineering, dashboard reporting and internal management; 

• Web Services implements applications and technologies for IRS employees; 

• End User Equipment and Services maintains the IRS’ automated business processes 

at headquarters and field sites, including technical systems support and applications 

software support to end users, maintaining legacy operations, local and corporate 

systems administration activities, email and domain user account maintenance, 

network and systems monitoring administration, asset management activities, and 

support and maintenance of the voice and data infrastructure at the Territory Offices; 

• Infrastructure Architecture & Engineering provides the systems architecture, 

sequencing plans, release management, and high-level engineered designs supporting 

information systems applications, software development tools, and infrastructure 

products necessary to build and evolve enterprise-wide business solutions; 

• MITS Management provides the management and oversight of investments in 

information technology, human capital investment, and other MITS operational 

priorities; 

• Information Technology Operational Security oversees FISMA reporting, including 

preparing for, conducting, and reporting Certification and Accreditation of systems 

using FIPS 199 and NIST 800-37; and self-assessments and annual testing of controls 

based on NIST 800-53; 

IRS - 86
• Information Technology Operational Security oversees FISMA reporting, including 

preparing for, conducting, and reporting NIST 800-26 self-assessments and annual 

testing of controls; 

• Information Technology Security Training provides training for FISMA reporting 

purposes; and 

• Information Technology Homeland Security Presidential Directive-12 oversees the 

use of Personal Identify Verification (PIV) technology for physical access to 

federally-controlled facilities and logical access to information systems for all federal 

employees and contractors who require long-term access. 

3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Information Services Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $1,485,802 $1,420,600 $1,482,236 $1,638,141

Offsetting Collections - Reimbursable 4,098 7,481 5,618 5,741

Mandatory Appropriations - User Fees 113,000 19,000 54,000 62,000

Total Operating Level $1,489,900 $1,428,081 $1,487,854 $1,643,882

Human Resources

Appropriated FTE 6,901 6,421 6,249 6,264

Other FTE 4 30 20 20

Total FTE (direct and reimbursable) 6,905 6,451 6,269 6,284

Includes Strategic Objective F4A

Measure FY 2005 FY 2006 FY 2007 FY 2008

Target

Actual

Met

There are no externally reported 

performance measures associated 

with this activity.

Dollars in Thousands

Table 3.2.8

IRS - 87
Description of Performance 

In FY 2007 and FY 2008, the IRS will continue to provide new technology solutions and 

improve work processes. In addition, the IRS will enhance efficiencies in tax 

administration operations by delivering modernized information systems to front-line IRS 

programs. 

Information technology solutions are the most effective and efficient means of increasing 

the number of IRS contacts with taxpayers by increasing the volume of transactions, and 

offers a greater variety of faster alternatives to file and pay their tax obligations. 

Information technology solutions also enhance the IRS’ ability to identify noncompliance and to combat tax avoidance schemes that contribute to the tax gap. 

The IRS’ FY 2008 Budget provides base funding to develop and continue projects 

selected for the FY 2007 and 2008 investment portfolio. The FY 2008 selected projects 

fall into five major categories as described below: 

• Decision Analytics (DA) - In FY 2008, the IRS is investing in several strategic IT 

projects to enhance compliance and customer service through the development of 

better case selection tools. Technologies being pursued in FY 2008 include 

predictive model development, data mining and data marts/data warehouse 

technologies. 

• Case Creation: Electronically build issue and assign workload - Many current 

production environment (CPE) systems rely, in part, on manual (paper) processes to 

build, assign and track cases. In FY 2008, these investments target near or mid-term 

enhancements to CPE systems and enable the migration from manual processes to 

electronic processes. Enabling technologies being pursued in FY 2008 include 

document imaging and document management and research of third party data 

sources. 

• Case Processing - These IT investments significantly augment and may, over time, 

replace CPE systems that bring new tools to improve customer service and/or 

increase casework. Other FY 2008 projects provide automation for discrete manual 

tasks that are very time consuming by leveraging available electronic data to prepopulate templates and perform preliminary analytics and centralize the availability 

of critical customer contact information. 

IRS - 88
• E-Filing/Self-Service - In FY 2008, these investments will expand the taxpayer’s 

ability to electronically interact with the IRS, whether filing or for self-service 

capabilities. Other projects anticipated in FY 2008 will expand electronic filing 

services that are central to the IRS’ overall e-file strategy. 

In addition, in FY 2008, the IRS will continue to develop and test the automated 

Correspondence Imaging System and improve FISMA compliance. Maintaining the 

infrastructure, modernizing our information systems and developing better tools will 

allow the IRS to operate more efficiently with improved productivity. 

IRS - 89
Business Systems 

Modernization 
Business Systems Modernization (BSM) 

Appropriation Description 

The Business Systems Modernization (BSM) appropriation provides resources for the 

planning and capital asset acquisition of information technology to modernize the IRS’ 

business systems. The program combines best practices and expertise in business 

solutions and internal management from IRS, business, and technology to develop a 

world-class tax administration system that fulfills the revenue collection requirements of 

the United States as well as taxpayers’ needs and expectations. 

The Business Systems Modernization budget request for FY 2008 is $282,090,000 in 

direct appropriations and 317 FTE. This is an increase of $85,280,000 or 43.3 percent, 

and no change in FTE, over the FY 2007 Continuing Resolution (CR) rate of 

$196,810,000 and 317 FTE. 

Appropriation Detail Table 

Business Systems Modernization 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Business Systems Modernization 317 $242,010 317 $158,702 317 $212,310 317 $196,810 317 $282,090 0.00% 43.33%

Subtotal New Appropriated Resources 317 $242,010 317 $158,702 317 $212,310 317 $196,810 317 $282,090 0.00% 43.33%

Other Resources:

Recoveries $4,361

Offsetting Collections - Reimbursable

Available multi-year/no-year funds $115,777 101,433 $97,112 $97,112 $136,790

Transfers In/Out

Subtotal Other Resources 0 $115,777 0 $105,794 0 $97,112 0 $97,112 0 $136,790 0.00% 40.86%

Total Resources Available for Obligation 317 $357,787 317 $264,496 317 $309,422 317 $293,922 317 $418,880 0.00% 42.51%

Obligations Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2006 FY 2008

Table 3.1

IRS - 90
Budget Adjustment Table 

Business Systems Modernization 

FTE Amount

FY 2007 President's Budget 317 $212,310

CR-rate Adjustment 0 (15,500)

FY 2007 CR-rate 317 $196,810

Interappropriation Transfer Corrections to Budget Restructure 0 $0

FY 2007 Operating Plan at CR-rate 317 $196,810

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $21,886

Base Adjustment 0 21,886

Maintaining Current Levels (MCLs) $1,245

Pay Annualization 0 226

Pay Inflation Adjustment 0 1,019

Non-Pay Inflation Adjustment 0 $0

Subtotal, Changes to Base 0 $23,131

FY 2008 Base 317 $219,941

Program Changes:

Program Increases: 0 $62,149

Fund Business Systems Modernization 0 62,149

Subtotal, FY 2008 Program Changes 0 $62,149

Total, FY 2008 President's Budget Request 317 $282,090

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Business Systems Modernization

IRS - 91
Operating Levels Table 

Business Systems Modernization 

Appropriation Title: Business Systems 

Modernization FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 317 317 317 317 317

Object Classification:

11.1 Full-Time Permanent Positions............................ $33,969 $33,968 ($12,873)

($12,873)

(2,627)

$21,095 $21,095 $34,896

11.3 Other than Full-Time Permanent Positions......... 446 447 0 447 447 470

11.5 Other Personnel Compensation.......................... 626 625 0 625 625 658

11.8 Special Personal Services Payments................. 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $35,041 $35,040 $22,167 $0 $22,167 $36,024

12.0 Personnel Benefits................................................ 9,772 9,772 7,145 7,145 10,034

13.0 Benefits to Former Personnel.............................. 0 0 0 0 0 0

21.0 Travel...................................................................... 187 187 0 187 187 187

22.0 Transportation of Things....................................... 0 0 0 0 0 0

23.1 Rental Payments to GSA...................................... 0 0 0 0 0 0

23.2 Rent Payments to Others...................................... 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc........................ 0 0 0 0 0 0

24.0 Printing and Reproduction.................................... 0000 0 0

25.1 Advisory & Assistance Services........................... 0 0 0 0 0 0

25.2 Other Services....................................................... 147,498 117,799 0 117,799 117,799 172,102

25.3 Purchase of Goods/Serv. from Govt. Accts......... 0000 0 0

25.4 Operation & Maintenance of Facilities................. 0000 0 0

25.5 Research & Development Contracts................... 0 0 0 0 0 0

25.6 Medical Care......................................................... 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 5,700 5,700 0 5,700 5,700 7,095

25.8 Subsistence & Support of Persons...................... 0000 0 0

26.0 Supplies and Materials......................................... 0 0 0 0 0 0

31.0 Equipment.............................................................. 43,812 43,812 0 43,812 43,812 56,648

32.0 Lands and Structures........................................... 0 0 0 0 0 0

33.0 Investments & Loans............................................. 0000 0 0

41.0 Grants, Subsidies.................................................. 0 0 0 0 0 0

42.0 Insurance Claims & Indemn................................. 0 0 0 0 0 0

43.0 Interest and Dividends................................. 0000 0 0

44.0 Refunds.................................................................. 0 0 0 0 0 0

91.0 Unvouchered.............................................. 0000 0 0

Total Budget Authority....................................... $242,010 $212,310 $196,810 $0 $196,810 $282,090

Budget Activities:

IT Investments $242,010 $212,310 $196,810 $196,810 $282,090

Total Budget Authority....................................... $242,010 $212,310 $196,810 $0 $196,810 $282,090

Table 2.2

Dollars in Thousands

($15,500)

($15,500)

($15,500)

IRS - 92
BSM Budget Activity: Business Systems Modernization 

3A – Description 

Business Systems Modernization ($282,090,000 in direct appropriation) 

This budget activity funds the planning and capital asset acquisition of information 

technology to modernize the IRS’ business systems, including related contractual costs. 

The program combines best practices and expertise in business solutions and internal 

management from the IRS, business, and technology to develop a world-class tax 

administration system that fulfills the revenue collection requirements of the United 

States as well as taxpayers’ needs and expectations. The IRS’ BSM program is required 

to submit for approval an annual expenditure plan that justifies the projects for which 

resources are requested. 

BSM management provides executive direction over the program. The BSM program 

develops the vision and strategy, manages the release of projects, and provides enterprise 

architecture support. The program ensures that all the integrated components of both 

technical and business modernization will provide a total business solution. This 

program will meet the needs of both taxpayers and internal users by providing business 

processes, enabled by information technology, that permit timely and accurate delivery of 

tax account and other tax-related information while ensuring security and privacy. The 

BSM program is responsible for the acquisition management activities of all the 

modernization projects and provides the direct interface to the PRIME Integrated Product 

Teams. 

BSM projects are developed and funded on a useable-segment basis—each request for 

funding for each project covers an identifiable portion of the project’s development. As 

projects are completed and have demonstrated successful operation, they leave the BSM 

fold and their operational costs are funded from the Operations Support account. BSM 

funding by project is shown in the chart below. 

Project Activities

FY 2006 

Budget

FY 2007 

Budget

FY 2008 

President's 

Budget

Customer Account 

Data Engine 

Release content master plan which includes a mid-year release to add 

new functionality and January release adding tax law changes

60,000 58,500 58,500

Modernized e-File Complete forms 1041 and 990T and development of form 1040

27,881 20,000 55,802

Accounts 

Management 

Services

Provides a Common User Interface for access and update of taxpayer 

accounts managed by CADE Systems and IMF/CFOL/IDRS

21,518 0 28,983

Filing & Payment 

Compliance 6,984 3,500

Common Services Initiate work on cross-domain prioritization and sharing projects known 

as Common Services Project for Portal Upgrade 0 0 16,000

Core Infrastructure 44,610 43,500 39,150

 Architecture, Integration & Management 30,124 39,500 35,100

5,893 2,310 2,310

Total Capital Investments $197,010 $167,310 $235,845

BSM Labor 45,000 45,000 46,245

Total BSM Program Request $242,010 $212,310 $282,090

NOTE: The IRS will work to allocate BSM staffing costs to the projects for the FY 2009 President's Budget.

FY 2008 BSM Project Activities

(Dollars in Thousands)

Management Reserve

IRS - 93
3B – Budget and Performance Plan

Budget and Performance by Budget Activities 

Business Systems Modernization Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

Enacted1 Enacted CR-rate Budget

Financial Resources

Appropriated Resources $203,360 $242,010 $196,810 $282,090

Offsetting Collections - Reimbursable

Total Operating Level $203,360 $242,010 $196,810 $282,090

Human Resources

Appropriated FTE 0 317 317 317

Other FTE

Total FTE (direct and reimbursable) 0 317 317 317 1

 FY 2005 Enacted excludes Salaries and Expenses.

Includes Strategic Objective F4A

Measure

BSM Project Cost Variance by Release/Subrelease (E)

FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 10% 10% 10%

Actual -46%

Met N

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 32%

Met N

Target N/A 10% 10% 10%

Actual -53%

Met N

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 15%

Met N

MeF R4 MS3 (Modernized e-file)

CADE R 1.3.2 FS06 (Customer 

Account Data Engine)

CADE R 2.1 MS4 (Customer 

Account Data Engine)

F&PC R1.2 MS4a (Filing and 

Account Payment Compliance)

MeF R3.2 MS4 (Modernized e-file)

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing 

Resolution, the implementation of the new tax legislation, and improvements resulting from program efficiencies.

Table 3.2.9 

F&PC R1.2 MS3 (Filing and 

Account Payment Compliance)

Dollars in Thousands

IRS - 94
Business Systems Modernization Includes Strategic Objective F4A

Measure

BSM Project Schedule Variance by Release/Subrelease (E)

FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 6%

Met Y

Target N/A 10% 10% 10%

Actual -2%

Met Y

Target N/A 10% 10% 10%

Actual 59%

Met N

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 7%

Met Y

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing 

Resolution, the implementation of the new tax legislation, and improvements resulting from program efficiencies.

MeF R4 MS3 (Modernized e-file)

CADE R 1.3.2 FS06 (Customer 

Account Data Engine)

CADE R 2.1 MS4 (Customer 

Account Data Engine)

F&PC R1.2 MS3 (Filing and 

Account Payment Compliance)

F&PC R1.2 MS4a (Filing and 

Account Payment Compliance)

MeF R3.2 MS4 (Modernized e-file)

Table 3.2.9 (Continued)

Description of Performance 

Core IT systems investments support services to both taxpayers and other government 

agencies and enforcement by providing the IRS frontline employees with the basic tools 

necessary to perform their jobs. A modernized and secure infrastructure will enhance the 

speed, security, and functionality necessary to keep pace with an automated economy. 

The IRS must keep pace with the growing demand and volume of electronic submission, 

payment, and refund transactions for tax remittances and offer taxpayers a variety of 

faster alternatives for satisfying tax obligations. These efforts will continue to place 

greater demand on the IRS to provide a modernized and secure IT infrastructure. 

Furthermore, a successful modernization program is critical to supporting long-term tax 

administration operations. Successful program delivery by the IRS during the past two 

years demonstrates that the IRS’ BSM program has established a foundation of 

disciplined program management processes and controls. The IRS executed BSM 

projects with a degree of sustained success not seen since program inception. This 

accomplishment is especially noteworthy in that the program achieved this while 

transitioning from a contractor-led program to an IRS-led program. 

The IRS has developed an IT Modernization Vision and Strategy (MV&S) for its IT 

systems for 2008 that align with and support the IRS Strategic Plan. Through the MV&S 

process, the IRS developed a plan showing how the IRS can effectively meet IT 

modernization goals in an incremental approach that provides near-term value. The plan 

IRS - 95
focuses on delivery of four major tax administration systems – Customer Account Data 

Engine (CADE), Account Management Services (AMS), Modernized e-File (MeF), and 

Filing & Payment Compliance (F&PC) – addressing the IRS’ strategic business priorities. 

The plan also capitalizes on IT infrastructure initiatives and smaller IT project initiatives 

to support a unified approach in continued improvement to program operations. 

Throughout FY 2006, the IRS modernization efforts continued to focus on its four core 

tax administration systems designed to provide more sophisticated tools to taxpayers and 

the IRS employees. The following highlights the IRS’ efforts in FY 2006 in advancing 

these core systems: 

• Introduced new CADE capabilities for the 2006 filing season. CADE supports 

faster refunds to taxpayers, issuing direct deposit refunds between one and seven 

days faster, and paper refunds four to thirteen days faster than refunds generated by 

the legacy system. CADE posted over 7.3 million returns – more than a 400 

percent increase over the previous year, and issued 7 million taxpayer refunds 

exceeding $3.4 billion. CADE improved taxpayer service by allowing access to 

account information up to seven days sooner, increasing the likelihood of single 

telephone call resolution, faster issue detection, and more timely account settlement. 

CADE is expected to post between 25 and 30 million returns in 2007. 

• Began the development of Account Management Services (AMS), a project that 

will enable real-time access to taxpayer account information, to support much faster 

resolution of taxpayer issues by IRS customer service representatives. AMS, in 

conjunction with CADE, will finally enable the IRS to break the weekly update 

system paradigm that has existed since the 1960s, enabling the IRS to begin to 

provide settlement of all account information by end-of-day, similar to what one 

expects from major private-sector financial institutions. The first release of AMS is 

due the summer of 2007 to support real-time address change capability in CADE 

and enable faster notice processing for a number of math-error notices. 

• Implemented Release 3.2 of its Modernized e-File (MeF) project, which enabled the 

filing of both federal and state returns concurrently for corporations (Forms 1120 

and 1120-S) and tax-exempt organizations (Form 990). In 2006, the MeF platform 

supported an e-filing mandate for certain large corporations and tax-exempt entities. 

Tax returns for large corporations typically include hundreds, or even thousands, of 

pages. Receiving the data electronically improves the accuracy of the tax return, 

reduces the volume of paper tax returns submitted to IRS Service Centers, and 

accelerates the examination process by having all tax return data available 

electronically. Electronic capture of return information enables the IRS to quickly 

deliver the data to analysts and agents for compliance risk assessment and action. 

In 2006, MeF accepted over 550,000 corporate returns. The IRS is expanding the 

MeF taxpayer base in 2007 to include Partnership Income tax returns (Form 1065), 

eventually enabling nearly 2.7 million small business and self-employed taxpayers 

to benefit from electronic filing. The IRS is in the planning stage to migrate the 

1040 individual tax return to the Modernized e-File platform. The development and 

IRS - 96
implementation of MeF 1040 capability will be completed by January 2011, with 

initial planned deployment for January 2009. 

• Completed the first release of the F&PC strategy. F&PC functionality analyzes tax 

collection cases and separates cases that require direct IRS involvement from those 

that can be handled by Private Collection Agencies (PCAs). The introduction of 

PCAs is expected to:

o Assist the IRS by addressing the volume of delinquent taxpayers that exceeds the 

IRS’ capacity to work, approximately 250,000 cases per year; and 

o Help eliminate backlogs in the large number of outstanding tax liabilities, which 

have grown by 118 percent over the last 12 years, increasing tax revenue and 

reducing the tax gap. 

Tax administration in the 21st century requires improved IRS information technology. 

For FY 2007 and FY 2008, the IRS is committed to continuing to make improvements in 

technology, including: 

• Replacing antiquated core account management systems and technology; 

• Expanding and enhancing compliance activities through early detection, better 

case selection, and better case management; 

• Delivering effective customer service, including expanded e-file systems and web 

services at reduced cost; and 

• Investing in infrastructure necessary to perform operations more efficiently, thus 

freeing up resources for enforcement and taxpayer service programs. 

IRS - 97
Health Insurance Tax 

Credit Administration 
Health Insurance Tax Credit Administration (HITCA) 

Appropriation Description 

The Health Insurance Tax Credit Administration (HITCA) appropriation provides 

funding for contractor support to develop and administer the advance payment option for 

the health insurance tax credit included in Public Law 107-210, the Trade Act of 2002. 

The IRS administers specific components of this credit: enrollment, payment and 

compliance. The Department of Labor, state workforce agencies, and the Pension 

Benefits Guaranty Corporation are responsible for determining potentially eligible Health 

Care Tax Credit (HCTC) taxpayers. 

The HITCA budget request for FY 2008 is $15,235,000 in direct appropriations and 17 

FTE. This is an increase of $389,000 or 2.6 percent, and no change in FTE, over the 

FY 2007 Continuing Resolution (CR) rate of $14,846,000 and 17 FTE. 

Appropriation Detail Table 

Health Insurance Tax Credit Administration 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Health Insurance Tax Credit Administration 17 $20,008 10 $19,993 17 $14,846 17 $14,846 17 $15,235 0.00% 2.62%

Subtotal New Appropriated Resources 17 $20,008 10 $19,993 17 $14,846 17 $14,846 17 $15,235 0.00% 2.62%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable

Available multi-year/no-year funds

Transfers In/Out

Subtotal Other Resources 0 $0 0 $0 0 $0 0 $0 0 $0 0.00% 0.00%

Total Resources Available for Obligation 17 $20,008 10 $19,993 17 $14,846 17 $14,846 17 $15,235 0.00% 2.62%

FY 2006

Table 3.1

Obligations Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2008

IRS - 98
Budget Adjustment Table 

Health Insurance Tax Credit Administration 

FTE Amount

FY 2007 President's Budget 17 $14,846

CR-rate Adjustment 0 $

FY 2007 CR-rate 17 $14,846

Interappropriation Transfer Corrections to Budget Restructure

FY 2007 Operating Plan at CR-rate 17 $14,846

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $0

Base Adjustment 0 $

Maintaining Current Levels (MCLs) $389

Pay Annualization 0 15

Pay Inflation Adjustment 0 82

Non-Pay Inflation Adjustment 0 292

Subtotal, Changes to Base 0 $389

 FY 2008 Base 17 $15,235

Program Changes:

Subtotal, FY 2008 Program Changes 0 $0

Total, FY 2008 President's Budget Request 17 $15,235

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Health Insurance Tax Credit Administration

0

0

IRS - 99
Operating Levels Table 

Health Insurance Tax Credit Administration 

Appropriation Title: Health Insurance Tax Credit 

Administration FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 17 17 17 17 17

Object Classification:

11.1 Full-Time Permanent Positions............................ $2,241 $2,302 $0 $2,302 $2,302 $2,386

11.3 Other than Full-Time Permanent Positions......... 0 0 0 0 0 0

11.5 Other Personnel Compensation.......................... 22 23 0 23 23 23

11.8 Special Personal Services Payments................. 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $2,263 $2,325 $0 $2,325 $0 $2,325 $2,409

12.0 Personnel Benefits................................................ 348 358 0 358 358 371

13.0 Benefits to Former Personnel.............................. 0 0 0 0 0 0

21.0 Travel...................................................................... 142 144 0 144 144 148

22.0 Transportation of Things....................................... 0 0 0 0 0 0

23.1 Rental Payments to GSA...................................... 191 193 0 193 193 198

23.2 Rent Payments to Others...................................... 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc........................ 0 0 0 0 0 0

24.0 Printing and Reproduction.................................... 0000 0 0

25.1 Advisory & Assistance Services........................... 0 0 0 0 0 0

25.2 Other Services....................................................... 17,057 11,819 0 11,819 11,819 12,102

25.3 Purchase of Goods/Serv. from Govt. Accts......... 0000 0 0

25.4 Operation & Maintenance of Facilities................. 0000 0 0

25.5 Research & Development Contracts................... 0 0 0 0 0 0

25.6 Medical Care......................................................... 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 0 0 0 0 0 0

25.8 Subsistence & Support of Persons...................... 0000 0 0

26.0 Supplies and Materials......................................... 7 7 0 7 7 7

31.0 Equipment.............................................................. 0 0 0 0 0 0

32.0 Lands and Structures........................................... 0 0 0 0 0 0

33.0 Investments & Loans............................................. 0000 0 0

41.0 Grants, Subsidies.................................................. 0 0 0 0 0 0

42.0 Insurance Claims & Indemn................................. 0 0 0 0 0 0

43.0 Interest and Dividends................................. 0000 0 0

44.0 Refunds.................................................................. 0 0 0 0 0 0

91.0 Unvouchered.............................................. 0000 0 0

Total Budget Authority....................................... $20,008 $14,846 $0 $14,846 $0 $14,846 $15,235

Budget Activities:

Health Insurance Tax Credit Administration............... $20,008 $14,846 $0 $14,846 $14,846 $15,235

Total Budget Authority....................................... $20,008 $14,846 $0 $14,846 $0 $14,846 $15,235

Table 2.2

Dollars in Thousands

IRS - 100
HITCA Budget Activity: Health Insurance Tax Credit Administration 

3A - Description 

Health Insurance Tax Credit Administration ($15,235,000 in direct appropriation) 

The HITCA budget activity funds costs to administer a refundable tax credit for health 

insurance to qualified individuals. 

The Trade Adjustment Assistance Reform Act of 2002 created a tax credit for the 

purchase of certain types of health insurance coverage for eligible taxpayers. The credit 

was created to help displaced workers and retirees who have lost their jobs due to trade 

with countries who participate in the North American Free Trade Agreement. The credit 

pays for 65 percent of the health insurance premiums for eligible workers. The IRS’ 

responsibility relating to HCTC is to ensure participating eligible taxpayers receive the 

credit to which they are entitled. 

The Act required the IRS to develop and operate a system to provide an advance, 

refundable tax credit for certain individuals who receive a trade readjustment allowance 

or benefit from the Pension Benefit Guaranty Corporation. This activity maintains the 

administrative and direct support for the HITCA Program Office and the staff charged 

with administering the program for the Service. 

IRS - 101
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Health Insurance Tax Credit Administration Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $34,562 $20,008 $14,846 $15,235

Offsetting Collections - Reimbursable

Total Operating Level $34,562 $20,008 $14,846 $15,235

Human Resources

Appropriated FTE 17 17 17 1

Other FTE

Total FTE (direct and reimbursable) 17 17 17 17

Includes Strategic Objective F4A

Measure FY 2005 FY 2006 FY 2007 FY 2008

Target N/A Baseline $14.25 $13.97

Actual N/A $12.95 

Met N/A

Target Baseline 99 97 97

Actual 106 99

Met Y

Table 3.2.10

Sign-up Time

Cost per Taxpayer Served

Dollars in Thousands

7

Description of Performance 

The IRS administers specific components of this credit: enrollment, payment and 

compliance. The Department of Labor, state workforce agencies, and the Pension 

Benefits Guaranty Corporation are responsible for determining potentially eligible HCTC 

taxpayers. 

In FY 2005, the IRS implemented a new HCTC service delivery model that saved 

approximately $20 million. In FY 2006, the IRS continues to implement new business 

processes to identify, prevent, and recover erroneous payments. 

For FY 2007 and continuing in FY 2008, the IRS will maintain a balanced approach to 

administering the credit -- encouraging eligible taxpayers to comply and seeking to 

improve compliance through research that will guide future HCTC operation changes. 

IRS - 102
Supporting Material 
Section 4 – Supporting Materials 

4A – Human Capital Strategy Description 

The IRS’ approximate 104,000 employees represent approximately 81 percent of the 

Department of the Treasury’s total employee population. The IRS workforce is diverse in 

multiple dimensions, including job series, demographic mix, and geographic distribution. 

The IRS has a large seasonal workforce that accounts for as much as 23 percent of the 

IRS’ employee population during peak workload seasons. Between 76 and 77 percent of 

the IRS annual budget is dedicated to financing the IRS’ “human capital.” To ensure that 

strategic management of its human capital resources is aligned with the IRS mission, the 

four human capital strategic goals were established to help focus the use of these 

resources: 

Goal 1: Continually Assess and Shape the Workforce to Efficiently Accomplish the 

Service’s Mission 

Goal 2: Increase Employee Proficiency and Engagement to Enhance Tax Law 

Compliance 

Goal 3: Leverage Human Capital Technology to Reduce Burden 

Goal 4: Enable Quick and Agile Management Action to Achieve Business Goals. 

In FY 2006, the IRS published its first Human Capital Strategic Plan (HCSP) for 

FY 2005 - 2009 and the Human Capital Strategic Implementation Plan (HCSIP) for 

FY 2006-2007. These Plans focus on these strategic goals and address IRS workforce 

challenges. 

In terms of critical workforce challenges, the IRS and continues to make headway in the 

area of leadership succession. Over 60 percent of IRS’ current executive cadre will be 

eligible to retire within the next five years – half are eligible to retire by the end of 2009. 

The anticipated loss poses obvious concerns about IRS leadership continuity and clearly 

supports the need for aggressive leadership succession planning. 

Leadership Retirement Eligibility through FY 2011 

Optional Retirement Eligibility 

 OnBoards 

2006 

+Prior 2007 2008 2009 2010 2011 TOTAL 

Management Type 

Department Managers 374 35 31 21 17 17 24 145 

Executives 280 83 14 23 18 19 9 166 

Front-line Managers 6371 1028 310 368 351 324 285 2666 

Senior Managers 1534 342 119 137 109 98 93 898 

TOTAL 8559 1488 474 549 495 458 411 3875 

Based on National Finance Center data. Run date 11/28/06

IRS - 103
To address this challenge, the IRS has established an overarching Leadership Succession 

Program that focuses on the recruitment, development and retention of an enterprise-wide 

talent pool of highly skilled leaders across the organization to effectively and efficiently 

support tax administration. 

In addition to leadership attrition, the IRS continues to focus on the attrition rates of its 

overall workforce. The following table is based on data from the TreasNet database and 

shows the number and percent of the current permanent employee population that will be 

eligible to retire through 2009. 

Number 

Eligible 2007 

Percent 

Eligible 2007 

Number 

Eligible 2008 

Percent 

Eligible 2008 

Number 

Eligible 2009 

Percent 

Eligible 2009 

22,490 22.59% 26,747 26.87% 31,250 31.39% 

Based on minimum eligibility for Optional Retirement. 

To mitigate the anticipated loss of talent and ensure continued workforce competency, 

the IRS is using the following strategies to maintain the optimum skill/competency level 

of its workforce: 

1. Selecting Mission Critical Occupation (MCO) new hires with increased 

education/experience; 

2. Established a FY 2007 IRS-wide Retention Plan to retain employees who possess 

mission critical skills and competencies; 

3. Expanded use of competency assessment tools to include additional MCO and 

target technical knowledge; 

4. Developed and implemented the Leadership Succession Plan redesign to complete 

succession management strategies and increase workforce management readiness; 

and 

5. Provided quality continued professional education, e-learning and other training 

to sustain and/or increase the proficiency of the current workforce. 

IRS - 104
Human Resources Table 

Table 4.1

Changes in Full Time Equivalents

Direct and Reimbursable

FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 94,282 92,846 93,718

Increases:

Reason #1: Adjusted to enacted level1 3,158 3,683

Reason #2: Program Reinvestment 805 11

Reason #3: Program Increase 1,672 1,584

Reason #4: Transfer of ICDE from Justice 329

Reason #5: Increase in reimbursable work 112 14

Reason #6:

Subtotal, Increases 6,076 3,694 1,598

Decreases:

Reason #1: Base Adjustment (2230) (937)

(605)

(1018)

(1424) (1184)

(3659)

(1318)

(461)

(7512) (2822) (2502)

Reason #2: Rescission

Reason #3: Operating Plan FTE Adjustment

Reason #4: Program Cost Savings & Efficiencies

Reason #5: Adjusted to operating level/under 

Reason #6: CR-rate Adjustment

Reason #7: Decrease in reimbursable work

Subtotal, Decreases

Year-end Actual/Estimated FTEs 92,846 93,718 92,814

Net Change from prior year SOY to budget year EOY

1 FY 2005 enacted level was 97,440 and FY 2006 enacted level was 96,529.

IRS - 105
4B – Information Technology Strategy 

In the spring of 2006, the IRS unveiled a comprehensive vision for IRS future operations 

beyond 2006. The Modernization Vision & Strategy (MV&S) establishes a plan that 

drives investment decisions, addressing the priorities for modernizing front-line tax 

administration and establish technical capabilities provided by the infrastructure and 

security. The MV&S reflects the priorities of the organization across all IRS business 

units and is coordinated with Treasury’s overall Enterprise Architecture. It serves as a 

guide for where investments should be focused. This strategy allows IRS to develop 

defined, strategically prioritized, costs and a ranked list of proposed IRS modernization 

projects (investments) for a given year. Whenever possible, the MV&S approach 

leverages existing systems and, as necessary, the program will include new development 

to optimize capacity, manage program costs, and deliver functionality in smaller and 

more frequent releases. The IRS expects this approach to deliver business value sooner 

and at lower risk. 

The IRS has 31 investments that are defined as major because they meet one or more of 

the criteria set by OMB in Circular A-11 for a major investment: (1) requires special 

management attention because of the investment’s importance to the mission or function 

of the IRS; (2) is for financial management purposes and obligates more than $500,000 

annually; (3) has significant program or policy implications; (4) has high executive 

visibility; (5) has high development, operating, or maintenance costs; or (5) is defined as 

a “major” by the Treasury or IRS’ capital planning and investment control process. An 

Exhibit 300 has been submitted as part of the FY 2008 Congressional Budget Submission 

for each of these 31 investments. 

The IRS Business Systems Modernization (BSM) program has delivered significant 

benefits, and particularly in recent years, the program has demonstrated a consistent 

record of success – replacing major segments of antiquated systems with modernized 

capabilities. 

Following two consecutive successful years in FY 2004 and FY 2005, the IRS 

modernization effort in FY 2006 continued to sustain a track record of successful 

implementation of modernized capabilities and remains positioned to continue this 

success in FY 2007. A key success factor has been focusing more directly on managing 

contractor performance and leveraging IRS resources. This approach is integrated into 

the Modernization Vision and Strategy (MV&S) efforts, in which a key feature is to 

leverage the existing production environment. This enables greater cost effectiveness and 

speeds delivery of IRS modernization. 

IRS - 106
BSM Major Information Technology (IT) activities address internal and external 

priorities through a balanced investment portfolio fully aligned with core IRS strategic 

priorities: 

• Taxpayer Service + Enforcement = Compliance 

• Modernization of IRS technology 

The BSM Program has successfully implemented all projects delivered in the second half 

of FY 2005 and the first half of FY 2006 – attaining nearly all cost and schedule 

milestones as planned while delivering desired business benefits and functionality. 

During the summer of FY 2005, the IRS coordinated the development of a revised 

performance methodology with Treasury Inspector General for Tax Administration 

(TIGTA) and General Accountability Office (GAO). For the first time, the BSM 

Expenditure Plan introduces a performance measurement methodology based on greater 

control, visibility, and consistent treatment of baseline and variance calculations. 

In FY 2006, BSM continued to stabilize and institutionalize program management 

improvements. BSM continues to deliver projects with attention to cost and schedule 

targets and to providing benefits to taxpayers. On a program-wide basis, for four projects 

in progress (i.e., results represent current performance for projects exiting milestone 3 for 

F&PC, MeF and CADE), all four have met both cost and schedule targets. 

As BSM program management capabilities have continued to mature, the ability to more 

consistently establish and manage reasonable cost and schedule baselines has similarly 

improved. BSM has expanded its financial and schedule management capabilities to 

include finer levels of granularity and controls than previously available in past 

Expenditure Plans. 

Some specific examples of success over the past few fiscal years include the following: 

Customer Account Data Engine: 

• Supports faster refunds to taxpayers than is possible with legacy systems. CADE 

allows direct deposit refunds to be issued between one and seven days faster and 

paper refunds to be issued four to 13 days faster than refunds generated by the legacy 

system.

• During the 2006 Filing Season, CADE posted more than 7.3 million returns – a nearly 

fourfold increase over the previous year and issued more than $3.4 billion in refunds 

to nearly 7 million taxpayers; 

• Improves taxpayer service by allowing IRS customer service representatives access to 

current information up to seven days sooner, increasing the likelihood of single 

telephone call resolution; and

• Faster issue detection and more timely account settlement. 

IRS - 107
e-Service:

• Taxpayer and third party transcript request processing cycle time is reduced from 

15+ days to minutes; 

• To date e-Services has processed more than 1,276,000 requests for transcripts via the 

Registered User Portal and more than 7.4 million via the Employee User Portal since 

launch to employees and Telephone Routing Interactive System on May 16, 2005; 

• Disclosure Authorization cycle is reduced from 26 days to same day;

• Electronic Account Resolution cycle time reduced by up to two weeks, eliminating 

delay between initial contact and issue resolution; and 

• Prior to e-Services, 70 million, five percent, of the 1.4 billion Form 1099 documents 

could not be attached to specific taxpayer accounts due to Taxpayer Identification 

Number (TIN) matching errors. The IRS estimated that unreported income due to 

non-filing or invalid TINs accounts for $42 billion in income that cannot be taxed, 

which equates to roughly $93 million per year in tax underpayment. e-Services 

reduces this error rate to less than one percent (approximately $10 million), enabling 

recovery of much of this underpayment. 

Filing and Payment Compliance: 

• Provides a government/industry partnership enabling private collection agencies to 

assist the IRS by addressing the volume of delinquent taxpayers that exceeds the IRS’ 

capacity to work. Between now and 2017, this partnership will result in 

approximately 2.6 million delinquent cases receiving treatment that would otherwise 

have gone unworked; 

• Reduces backlogs in outstanding tax liabilities, which have grown by 118% over the 

last 12 years; 

• Improves overall economic outcomes by reducing the large number of unresolved 

cases (by approximately 250,000 cases/year), which undermine the fairness of the tax 

system. Reduction of unresolved cases also improves the prevailing attitudes of 

compliant taxpayers toward their tax obligation, reducing adverse effects associated 

with the current volume of unresolved cases; and 

• Improves financial performance by generating an estimated gross revenue of $2.8 

billion through 2017 and reducing taxpayer burden. 

Modernized e-File: 

• Major productivity and service efficiency gains helping taxpayer service and 

enforcement: 

o Taxpayer Service – IRS employees have all original documents available online 

and in real time. This capability eliminates back-end re-keying, data entry and 

enables responsive taxpayer support. Prior to MeF, only a limited subset of these 

documents was available – requiring retrieval of source documents – a time 

consuming process, which could take several weeks;

o Enforcement – Online abilities and 100 percent data access improves the ability of 

revenue agents to perform compliance and enforcement activities in a timely and 

accurate manner. Corporate returns can now be reviewed in a matter of days or 

weeks as opposed to previous 18 month-long cycle times. 

IRS - 108
• More than $34 million in savings to taxpayers in reduced tax preparation fees, 

postage, and storage; 

• Fully compatible with industry standard architectures, consistent with long term 

technology trends, and aligned with IRS third party partners who are also 

standardizing on Extensible Markup Language (XML)-based technologies. This 

capability reduces industry burden, greatly simplifies exchanging data in a secure 

fashion, and reduces the costs incurred by taxpayers and IRS business partners to do 

business with the IRS; and 

• Error rate is reduced to four percent, which compares favorably to the error rate of 

18 percent for returns processed in paper-based systems; and MeF processed Form 

7004 (filing extension for corporations), Form 1120 as well as Form 990PF 

(information return for private foundations) at higher than expected volumes – twice 

the anticipated number of return receipts over projections, while still achieving 

performance goals – a significant reduction in burden and time for corporate and taxexempt taxpayer.

IRS - 109
Summary of IT Resources Table IT Investments Portfolio Information Technology Investments (from Exhibit 53) (in $ Millions) Major IT Investments 1 Program Alignment Operating Plan Obligations Operating Plan % Change from FY 05 Obligations to FY 06 President's Budget % Change from FY 06 to FY 07 President's Budget % Change from FY 07 to FY 08 Account Management Services Program (AMS) - Major Modernization 0.0 0.0 8.5 8.5% 21.0 147.1% 33.6 60.0% Appeals Automation Environment (AAE) Exam/Collections 12.4 9.4 13.1 39.4% 14.8 13.0% 15.3 3.4% Automated Collection System (ACS) - Major Tax Collection 0.0 0.0 0.0 0.0% 4.8 0.0% 5.0 4.0% Business Masterfile (BMF) Submission Processing 11.9 11.7 14.2 21.4% 12.3 -13.4% 12.7 3.3% CEAS - Major Taxpayer Service 0.0 0.0 0.0 0.0% 7.5 0.0% 7.6 1.3% CEAS - Major Taxpayer Service 0.0 0.0 0.0 0.0% 5.4 0.0% 5.4 0.0% CEAS - Major Taxpayer Service 0.0 0.0 0.0 0.0% 2.1 0.0% 2.2 4.8% Correspondence Imaging System (CIS) - Release 2 - Major Tax Collection 0.0 0.0 0.0 0.0% 10.3 0.0% 10.6 2.9% Counsel Automated Systems Environment (CASE) Exam/Collections 26.3 25.8 27.0 4.7% 28.5 5.6% 29.2 2.5% Criminal Investigation Management Information System (CIMIS) - Major Criminal Investigations 0.0 0.0 0.0 0.0% 2.6 0.0% 2.6 0.0% Criminal Investigation Management (CIMIS) Criminal Investigations 0.0 0.0 0.0 0.0% 0.0 0.0% 0.0 0.0% Criminal Investigation Management (CIMIS) Criminal Investigations 0.0 0.0 0.0 0.0% 2.6 0.0% 2.6 0.0% Customer Account Data Engine (CADE) Submission Processing/Tax Collection 98.9 98.9 118.6 19.9% 120.4 1.6% 72.4 -39.9% Customer Account Data Engine (CADE) Same as above 92.6 92.6 104.7 13.0% 110.9 6.0% 62.6 -43.6% Customer Account Data Engine (CADE) Same as above 5.2 5.2 2.3 -55.8% 2.2 -4.3% 2.3 4.5% Customer Account Data Engine (CADE) Same as above 1.1 1.1 11.6 954.5% 7.3 -37.1% 7.5 2.7% Electronic Federal Tax Payment System (EFTPS) - Major Tax Collection 0.0 0.0 0.0 0.0% 69.9 0.0% 69.9 0.0%

 Electronic Federal Tax Payment System (EFTPS) Tax Collection 0.0 0.0 0.0 0.0% 2.1 0.0% 2.2 4.8%

 Electronic Federal Tax Payment System (EFTPS) Tax Collection 0.0 0.0 0.0 0.0% 67.8 0.0% 67.7 -0.1%

Electronic Fraud Detection System (EFDS) Tax Collection 11.9 11.9 11.1 -7.0% 11.3 2.1% 11.6 2.5%

 Electronic Fraud Detection System (EFDS) Tax Collection 8.0 8.0 7.5 -5.9% 7.8 3.6% 8.0 2.6%

 Electronic Fraud Detection System (EFDS)

Earned Income Tax Credit 3.9 3.9 3.5 -9.4% 3.5 -1.0% 3.6 2.4%

Electronic Management System (EMS)

IRS Submission Processing 10.6 10.8 9.8 -9.3% 8.9 -9.2% 9.1 2.2%

Enterprise Data Warehouse (EDW) Exam/Collections 7.6 7.6 7.0 -8.6% 7.0 0.0% 7.3 5.0%

e-Services Examinations 41.8 41.8 14.2 -66.0% 14.1 -0.7% 14.4 2.1%

 e-Services Examinations 36.9 36.9 0.0 -100.0% 0.0 0.0% 0.0 0.0%

 e-Services Examinations 4.9 4.9 14.2 189.8% 14.1 -0.7% 14.4 2.1%

Examination Desktop Support System (EDSS) - Release 2 - Major Examinations 3.6 3.6 7.0 94.4% 4.8 -31.4% 5.0 3.1%

Excise Files Information Retrieval System (ExFIRS) - Major Exam/Collections 0.0 0.0 0.0 0.0% 6.5 0.0% 6.6 1.5%

Excise Tax e-File & Compliance (ETEC) Major Submission Processing 0.0 0.0 0.0 0.0% 13.6 0.0% 2.3 -83.1%

Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.2 0.2 32.5 16150.0% 19.3 -40.6% 1.5 -92.2%

 Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.0 0.0 28.1 0.0% 19.3 -31.3% 0.0 -100.0%

 Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.2 0.2 0.2 0.0% 0.0 -100.0% 0.0 0.0%

 Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.0 0.0 4.2 0.0% 0.0 -100.0% 1.5 0.0%

Financial Management Information System (FMIS) Tax Collection 4.5 4.5 2.5 -44.4% 5.9 136.0% 6.0 1.7%

Individual Master File (IMF) Submission Processing 11.9 10.1 12.7 25.7% 12.6 -0.8% 13.0 3.2%

Information Returns Processing (IRP) Submission Processing 6.9 7.3 7.4 1.4% 7.6 2.7% 7.9 3.9%

Integrated Collection System (ICS) Tax Collection 7.7 9.3 8.9 -4.3% 8.9 0.0% 9.2 3.4%

Integrated Customer Communications Environment (ICCE) Taxpayer Service 14.2 14.2 17.2 21.1% 17.0 -1.3% 17.9 5.4%

Integrated Data Retrieval Systems (IDRS) Tax Collection 16.7 16.7 17.9 7.2% 17.6 -1.7% 18.3 4.0%

Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 12.8 12.8 22.0 71.9% 16.6 -24.5% 17.0 2.4%

 Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 9.4 9.4 18.4 95.7% 12.9 -29.9% 14.8 14.7%

Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 0.0 0.0 0.0 0.0% 0.0 0.0% 0.0 0.0%

Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 3.4 3.4 3.6 5.9% 3.7 2.8% 2.2 -40.5%

Integrated Submission and Remittance Processing System (ISRP) Submission Processing 12.4 13.7 18.0 31.3% 16.6 -7.7% 17.0 2.2%

Interim Revenue Accounting Control System (IRACS) Treasury-Financial 1.8 1.8 0.7 -61.1% 0.8 14.3% 0.8 0.0%

Modernized e-File (MeF) Submission Processing 69.2 69.2 69.9 1.0% 61.5 -12.0% 79.6 29.4%

 Modernized e-File (MeF) Submission Processing 61.0 61.0 57.4 -5.8% 48.2 -16.0% 61.4 27.4%

 Modernized e-File (MeF) Submission Processing 6.4 6.4 11.7 81.5% 12.0 2.7% 12.3 2.6%

 Modernized e-File (MeF) Submission Processing 0.0 0.0 0.0 0.0% 0.5 0.0% 5.2 940.0%

 Modernized e-File (MeF) Submission Processing 1.8 1.8 0.8 -54.7% 0.8 -3.5% 0.7 -12.5%

Service Center Recognition/Image Processing System (SCRIPS) Submission Processing 17.4 17.4 16.0 -8.1% 17.0 6.0% 17.4 2.5%

Tax Return Database (TRDB) Submission Processing 4.6 4.6 6.9 50.0% 4.8 -30.4% 5.0 4.0%

Travel Reimbursement and Accountin Treasury ) g System (TRAS -Financial 1.8 1.8 1.5 -16.7% 1.4 -6.7% 1.5 7.1%

IRS EA Investment 0.0 0.0 4.2 0.0% 4.4 4.8% 4.7 5.8%

Total 407.1 405.1 468.6 15.7% 570.2 21.7% 531.8 -6.7%

FY 2007 FY 2008 FY 2005 FY 2006

IRS - 110
Summary of IT Resources Table Major IT Investments 1 Program Alignment Operating Plan Obligations Operating Plan % Change from FY 05 Obligations to FY 06 President's Budget % Change from FY 06 to FY 07 President's Budget % Change from FY 07 to FY 08 Infrastructure Investments IRS Consolidated Infrastructure (Infrastructure) 312.4 312.4 238.4 -23.7% 323.0 35.5% 380.3 17.7% IRS Consolidated Infrastructure (Infrastructure) 312.4 312.4 238.4 -23.7% 323.0 35.5% 346.5 7.3% IRS Consolidated Infrastructure (Infrastructure) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 33.8 0.0% IRS Consolidated Infrastructure (Common Services) 0.0 0.0 8.8 0.0% 0.0 -100.0% 16.0 0.0% IRS Consolidated Infrastructure (ICommon Services)-Web Portal 0.0 0.0 8.8 0.0% 0.0 -100.0% 16.0 0.0% IRS Consolidated Infrastructure (Office Automation) 326.2 326.3 349.2 7.0% 259.9 -25.6% 300.3 15.5% IRS Consolidated Infrastructure (Office Automation) 326.2 326.3 349.2 7.0% 259.9 -25.6% 300.3 15.5% IRS Consolidated Infrastructure (Office Automation) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 0.0 0.0% IRS Consolidated Infrastructure (Security) 57.0 57.0 51.1 -10.4% 51.1 0.0% 77.3 51.3% IRS Consolidated Infrastructure (Security) 57.0 57.0 51.1 -10.4% 51.1 0.0% 72.9 42.7% IRS Consolidated Infrastructure (Security) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 4.4 0.0% IRS Consolidated Infrastructure (Telecommunications) 288.5 288.5 245.5 -14.9% 213.3 -13.1% 258.4 21.1% IRS Consolidated Infrastructure (Telecommunications) 288.5 288.5 245.5 -14.9% 213.3 -13.1% 256.4 20.2% IRS Consolidated Infrastructure (Telecom) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 1.0 0.0% IRS Consolidated Infrastructure (Telecom) - EITC 0.0 0.0 0.0 0.0% 0.0 0.0% 1.0 0.0% Total 984.1 984.2 893.0 -9.3% 847.3 -5.1% 1032.3 21.8%

Total Major Investments 1391.2 1389.3 1361.6 -2.0% 1417.5 4.1% 1564.1 10.3%

Non-Major IT InvestmentsProgram and Management Support Programs 170.5 167.5 185.5 10.7% 214.9 15.8% 236.2 9.9%

Information Technology Non-Major Systems/Programs 185.1 190.9 196.7 3.0% 98.1 -50.1% 101.6 3.6%Improvement Project Systems (FY 07 and 08 based on MV&S) 49.3 49.3 56.7 15.0% 45.4 -19.9% 46.6 2.6%Tier B Infrastructure 0.0 0.0 2.6 0.0% 7.3 182.6% 7.4 1.4%

Security Audit and Analysis System 0.0 0.0 6.6 0.0% 10.8 63.6% 11.0 1.4%

BSM Architecture & Integration 0.0 0.0 0.0 0.0% 27.6 0.0% 62.7 127.2%BSM Management Reserve 5.8 5.8 13.0 124.1% 2.3 -82.3% 2.3 0.0%

Total 410.7 413.5 461.1 11.5% 406.4 -11.9% 467.8 15.1%

Total IT Investments 1,801.9 1,802.8 1,822.7 1.1% 1,823.9 0.1% 2,031.9 11.4%

1 Ma

IT Investments Portfolio

Information Technology Investments (from Exhibit 53) (in $ Millions)

jor IT projects include funding for the IRS’ staffing associated with direct management of Business Systems Modernization projects.

FY 2005 FY 2006 FY 2007 FY 2008

IRS - 111
Program Assessment Rating Tool (PART) Evaluation Table 

The IRS continues to provide full support and attention to the PART process and 

recommendations. The following are examples of how the IRS uses the PART process to 

make improvements: 

• The Taxpayer Advocate Service (TAS) established teams charged with creating an 

application that will capture time spent on cases while in the system (Phase I) as well 

as the development of a front end application to allow capture of time spent on a case 

outside of the system (Phase II). The System Acceptability Testing (SAT) of Phase I 

was completed in mid-June and has been followed by a separate stress test to ensure 

the timekeeping component does not negatively impact Taxpayer Advocate 

Management Information System (TAMIS) response times. The Request for 

Information Services (RIS) has been submitted and TAS expects to have Phase 2 

implemented before the close of 2007. 

• The PART program improvements for the Earned Income Tax Program (EITC) 

program provide for the increased monitoring of the EITC examination and closure 

programs. These improvements support the President’s Management Agenda (PMA) 

initiative for “Eliminating Improper Payments” and also provide a potential means to 

narrow the tax gap. In FY 2006, the IRS launched the second phase of its EITC 

return preparer strategy with emphasis on tracking and research. The IRS plans to 

further expand the program to include client audits of preparers penalized in FY 2005 

for Reverse Preparer Action Case treatment. 

• In May 2006, the IRS implemented its new Criminal Investigation (CI) information 

management system in compliance with a PART recommendation from FY 2005. 

This information management system will enhance program effectiveness by 

providing more timely information on investigative trends and issues that will 

increase casework accuracy. 

IRS - 112
PART Tax Collection 

PART Name: Tax Collection

Year PARTed: FY 2002

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Reviewing the effectiveness of the revised collection performance measures of 

workload coverage and efficiency. Information from these measures will be used in the 

development of the 2008 budget.

2. IRS has been working to make management improvements in the last several years, 

including implementing good output measures. However, its financial management 

systems do not provide the information needed to make effective day to day management 

decisions.

3. IRS has a strong planning process closely linked to its budget process. IRS is currently

developing improved collection outcome measures and goals.

1. Implementing new tools in 2007 to segment collection workload according to risk to 

ensure IRS takes the right action to secure delinquent taxes.

2. Implementing legislation - including strong taxpayer rights protections - allowing IRS to 

hire private collection agents to help secure delinquent tax debt (full implementation by 

January 2008).

Table 4.3

PART Evaluation

This program collects tax debts from citizens and businesses. Agents contact taxpayers 

through notices, phone calls and personal visits to secure payments. If necessary, 

collection agents can use liens, levies or seizures, or refer delinquent taxpayers for 

criminal prosecution. 

1. IRS collection of unpaid taxes yields substantial revenue ($18 billion in 2001). However, 

IRS does not work enough collection cases with its current resources, work processes 

and technology to ensure fair tax enforcement. Each year billions of dollars of unpaid 

taxes goes uncollected.

IRS - 113
PART Earned Income Tax Credit 

PART Name: Earned Income Tax Credit

Year PARTed: FY 2002

Rating: Ineffective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Identifying paid tax return preparers with EITC error rates and using education and 

enforcement procedures to improve their performance.

2. IRS has a strong planning process closely linked to its budget process, but it has not 

yet used outcome information for this program to set performance targets that allow it to 

demonstrate results. 

3. IRS has made numerous management improvements in recent years. However, its 

financial management systems do not provide the information needed to make effective 

day to day management decisions.

1. Conducting 500,000 examinations of EITC returns per year based on enhanced case 

selection systems.

2. Preventing $270 million in incorrect refunds in 2006 by detecting and correcting errors 

during return processing. 

Table 4.3

PART Evaluation

This program administers the earned income tax credit (EITC) which rewards work and lifts 

families out of poverty. The program seeks to maximize participation of eligible taxpayers 

and reduce payments to ineligible taxpayers.

1. The program has failed to reduce EITC erroneous payments to acceptable levels. 

While IRS prevents roughly $1 billion in erroneous EITC payments per year, 27 to 32 

percent of all EITC payments were still made in error for 1999. The magnitude of this error 

rate is the reason for the rating of “ineffective”. 

IRS - 114
PART Submission Processing 

PART Name: Submission Processing

Year PARTed: FY 2003

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Using a single cost based efficiency measure by 2008 (cost per return processed). 

2. Every return converted from paper to electronic filing saves the IRS $2.15 in 

processing costs. More importantly, electronically filed returns have a less than one 

percent error rate compared to five percent for paper filed returns, saving taxpayers time 

and money. Finally, according to the annual American Customer Satisfaction Results 

report electronic filers have high satisfaction rates.

3. Based on IRS’ recently completed tax gap study, approximately 13 percent of refund 

dollars (excluding earned income tax credit refunds) are paid in error. With current third 

party reporting and technology, IRS is unable to identify and prevent these errors during 

processing.

1. Seeking legislative changes to promote electronic filing, including greater authority to 

require electronically-filed returns.

2. Setting goals by 2007 for reduced taxpayer filing burden resulting from the time and 

expense of preparing and filing their returns. 

Table 4.3

PART Evaluation

This program processes 224 million tax returns and one and a half billion information 

returns (such as bank reports on taxpayer’s interest income) each year and issues 109 

million refunds. In 2005, more than half of individual tax returns were submitted 

electronically.

1. More Americans are electronically filing their taxes. Electronic filing is growing more 

than 10 percent per year. However, this growth is not sufficient for IRS to meet the 

legislative goal of 80 percent electronic filing by 2007. Congress has not yet acted on the 

Administration’s proposals to accelerate the increase in electronic filing.

IRS - 115
PART Taxpayer Service 

PART Name: Taxpayer Service

Year PARTed: FY 2004

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Researching the impact of taxpayer service programs on voluntary compliance and 

reporting findings by 2007.

2. IRS continues to have trouble with the accuracy of answers. In 2004, IRS estimates only 

80 percent of tax law calls were answered accurately (improved to 89 percent in 2005). 

Accuracy is a significant challenge given the complexity of the tax code.

3. IRS has developed a strong set of balanced measures (quality, customer satisfaction 

and results) to understand its taxpayer service performance. During the assessment IRS 

added an efficiency measure (customer contacts per staff year) for this program.

1. Converting to cost based efficiency measures for the 2007 budget (e.g., cost per call 

answered) and adding efficiency measures for service processes for management. 

(Delayed until 2008)

2. Improving the accuracy of tax law telephone information provided to taxpayers to 90 

percent accuracy by 2010. 

This program reduces taxpayer burden by providing assistance on tax law and account 

issues in a professional and courteous manner. In 2005 the IRS answered 59 million calls, 

served 6.6 million taxpayers in walk-in offices, and had almost 116 million downloads from 

its forms, instructions and publications web site.

Table 4.3

PART Evaluation

1. IRS has significantly improved taxpayer service and maintained high levels of customer 

satisfaction in recent years. In 2001 IRS was able to answer only 62 percent of taxpayer 

calls. In 2005, IRS had improved this to 83 percent with a 94 percent customer satisfaction 

rate.

IRS - 116
PART Taxpayer Advocate Service 

PART Name: Taxpayer Advocate Service

Year PARTed: FY 2004

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Improving case quality to 91.5 percent by 2006, 93 percent by 2009, and 95 percent by 

2014. 

2. Taxpayer hardship cases caused by flaws in IRS' business processes have declined 

from 217,081 in 2001 to 129,382 in 2004 as the Advocate has worked with IRS program 

managers to improve processes. 

3. During the assessment, the program set goals and developed an efficiency measure. 

These include achieving a 100 percent closure-to-receipts ratio through 2010, 95 percent 

case quality score by 2009, and 4.53 (out of 5) customer satisfaction score by 2009. 

Efficiency is measured by counting the reduction in the quantity of taxpayer problems 

resulting from flaws in IRS' business processes.

1. Developing a unit cost measure for its casework by 2006 (delayed to 2007). 

2. Exploring other means to measure its effectiveness in solving systemic problems 

leading to taxpayer hardship. IRS will report its findings in 2006 for possible inclusion in its 

FY 2008 Budget. 

Table 4.3

PART Evaluation

This program helps taxpayers solve tax problems when normal IRS systems have failed to 

treat them fairly. It serves as an independent advocate within the IRS for individuals and 

proposes solutions to systemic problems. 

1. The quality of the Advocate's case work on behalf of taxpayers has improved from 71 

percent with quality standards in 2001 to 90.5 percent in 2004. 

IRS - 117
PART Criminal Investigations 

PART Name: Criminal Investigations

Year PARTed: FY 2005

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Table 4.3

PART Evaluation

This program ensures taxpayers comply with their tax obligations by investigating possible 

criminal violations of the tax code. Conviction of tax cheaters deters tax evasion among 

the general public and helps reassure taxpayers that the system is fair.

1. The tax gap, the difference for a given year between taxes legally owed and taxes 

actually paid, for 2001 (latest available figure) is estimated to be between $312 and $353 

billion. Criminal Investigation is one of the major IRS programs intended to minimize this 

revenue loss.

3. Developing methods to improve case prioritization in 2006 to ensure that cases yield 

the greatest impact on compliance.

2. Research suggests that higher levels of criminal sentences lead to higher tax 

compliance. IRS has succeeded in raising convictions in recent years. They rose from 

1,926 in 2002 to 2,215 in 2005. However, they remain low by historical standards (in 1996 

convictions totaled 2,915).

3. IRS has set long term goals and efficiency measures. However, it has difficulty 

measuring compliance in a timely manner due to the complexity and expense involved 

and in holding employees accountable for performance due to legal restrictions.

1. Exploring methods for measuring the impact of criminal investigations on tax 

compliance. IRS will report on its progress by the end of 2006. 

2. Implementing a new information management system in 2006 to enhance investigative 

case tracking and improve efficiency. 

IRS - 118
PART Examinations 

PART Name: Examinations

Year PARTed: FY 2005

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Introducing cost based efficiency measures by 2008 (e.g., enforcement 

revenue/program budget).

2. After dropping substantially in the late 1990s, IRS’ audit rates have begun to rise and 

will continue to increase, largely through productivity growth. IRS’ audit rate has grown 

from a low of 1.49 percent (i.e., less than two returns in one hundred audited) in 2001 to 

3.09 percent in 2005.

3. IRS has set long tern goals and efficiency measures. However, it has difficulty 

measuring compliance in a timely manner due to the complexity and expense involved 

and in holding employees accountable for performance due to legal restrictions. It also 

needs cost based efficiency measures.

1. Researching tax compliance of S-corporations (a popular business form where profits 

are taxed only once passed through to the owners) based on a statistically valid sample of 

the filing population.

2. Improving tools for selecting the most productive audit cases by 2007 using the 

detailed compliance information gathered in the recent individual tax gap study. 

Table 4.3

PART Evaluation

This program ensures that citizens pay the correct tax by auditing returns at a high risk for 

non-compliance. Audits help ensure individuals comply with their tax obligations, deter tax

evasion among the general public, and help reassure taxpayers that the system is fair.

1. The tax gap, the difference for a given year between taxes legally owed and taxes 

actually paid, for 2001 (latest available figure) is estimated to be between $312 and $353 

billion. Examination is one of the major IRS programs intended to minimize this revenue 

loss.

IRS - 119
PART Retirement Savings Regulatory Program 

PART Name: Retirement Savings Regulatory Program

Year PARTed: FY 2006

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Table 4.3

PART Evaluation

This program ensures that tax breaks provided to encourage retirement savings are only 

allowed for retirement plans that follow minimum standards. The law requires that plans 

follow participation, funding and vesting standards and provide some protection for the 

surviving spouse of the plan participants.

1. The Internal Revenue Service cooperates with the Department of Labor and the 

Pension Benefit Guarantee Corporation to protect retirement investors and to ensure that 

retirement related tax brakes are used for the intended purposes. Tax breaks to 

retirement plans to encourage savings total more than $100 billion per year.

3. IRS will improve efficiency, processing timeliness and case targeting through a new 

information management system and other inventory selection tools implemented in 2007. 

2. Preliminary data from the program's compliance study shows that retirement plans are 

in compliance with legal standards 80 percent of the time. The IRS is working to improve 

this level by increasing enforcement efforts and improving targeting. This compliance 

study is a critical element in this effort because it gives the IRS better information on the 

sources of non-compliance.

3. IRS has had trouble processing requests for regulatory approval from retirement plans 

in a timely manner (less than 120 days). It is working to improve its performance in this 

area by implementing a new staggered schedule for retirement plan renewal requests and 

improving productivity.

1. IRS will introduce cost based efficiency measures by 2008.

2. IRS will work to nearly double enforcement efforts by 2011 in order to improve 

retirement compliance to 82 percent. 

IRS - 120
PART Health Care Tax Credit Administration 

PART Name: Health Care Tax Credit Administration

Year PARTed: FY 2006

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. IRS will continue to focus on administrative changes to lower program cost and improve

taxpayer service.

2. This credit has low participation. This can be attributed to the time it takes for other 

agencies to identify potentially eligible workers and for the Internal Revenue Service to 

enroll them. Another likely cause is the affordability of coverage to potential recipients. It 

is also possible that many of those identified as potentially eligible may ultimately not 

quality.

3. The IRS successfully implemented this unique tax credit in 2003. This required the 

creation of a new process outside of the normal tax filing system in a short timeframe. 

Since that time, in response to the low take up, the IRS has successfully reduced the cost 

of administering the credit by 50 percent.

1. IRS will work with other participating federal agencies to develop long term goals by 

2011 that capture the program's success to providing access to the tax credit to potential 

beneficiaries.

2. IRS will work with partner federal agencies to find ways to improve access to the tax 

credit for eligible workers.

Table 4.3

PART Evaluation

This program administers the Health Insurance Tax Credit which helps displaced workers 

and retirees afford health insurance. It is intended to benefit workers who have lost their 

jobs due to trade with countries which participate in free trade agreements (e.g., the North 

America Free Trade Agreement).

1. The program's measures do not adequately capture the program's success in 

providing access to the credit to potential beneficiaries.

IRS - 121
IRS Performance Measures Summary Table and Data Dictionary Link 

FY 2003 FY 2004 FY 2005 FY 2006 

Planned FY 2006 Actual FY 2007 

Planned1

FY 2008 

Planned

Customer Service Representative (CSR) Level of Service Oe, L 80.1% 87.3% 82.6% 82.0% 82.0% 78.0% 81.0%

Customer Contacts Resolved per Staff Year E 8,318 8,015 7,585 7,477 7,414 7,702 7,880

Percent of Eligible Taxpayers Who File for EITC Oe N/A 80.0% 80.0% 80.0% * 80.0% 80.0%

Customer Accuracy - Tax Law Phones Oe 82.0% 80.0% 89.0% 90.0% 90.9% 91.0% 91.2%

Customer Accuracy - Accounts (Phones) Oe 88.2% 89.3% 91.5% 92.0% 93.2% 93.3% 93.4%

Timeliness of Critical Filing Season Tax Products to the Public Ot N/A 76.0% 91.4% 92.0% 83.0% 85.2% 92.0%

Timeliness of Critical Other Tax Products to the Public Ot N/A 76.0% 80.0% 85.0% 61.2% 79.6% 86.0%

Percent Individual Returns Processed Electronically Oe, L 40.0% 46.5% 51.1% 55.0% 54.1% 57.0% 61.6%

Percent of Business Returns Processed Electronically Oe, L N/A 17.4% 17.8% 18.6% 16.6% 19.5% 21.2%

Refund Timeliness - Individual (paper) Oe 98.8% 98.3% 99.2% 99.2% 99.3% 99.2% 99.2%

Taxpayer Self Assistance Rate E, L 51.0% 46.4% 42.5% 45.7% 46.8% 48.6% 51.4%

Examination Coverage - Individual Oe, L N/A 0.8% 0.9% 0.9% 1.0% 1.0% 1.0%

Field Exam Embedded Quality Oe, L N/A N/A N/A Baseline 85.9% 87.0% 87.0%

Office Exam Embedded Quality Oe, L N/A N/A N/A Baseline 88.2% 89.0% 89.0%

Examination Quality - Industry Oe, L 74.0% 74.0% 77.0% 80.0% 85.0% 88.0% 90.0%

Examination Quality - Coordinated Industry Oe, L 89.0% 87.0% 89.0% 92.0% 96.0% 97.0% 97.0%

Examination Coverage - Business Oe, L N/A 7.5% 7.8% 7.5% 7.3% 8.2% 8.2%

Examination Efficiency - Individual E, L N/A N/A 121 121 128 136 136

Automated Underreporter Efficiency E, L N/A 1,514 1,701 1,759 1,832 1,932 1,808

Automated Underreporter Coverage E, L N/A 1.90% 2.2% 2.3% 2.4% 2.5% 2.7%

Collection Coverage - units Oe, L N/A N/A 53.0% 52.0% 54.0% 54.0% 54.0%

Collection Efficiency - units E, L N/A N/A 1,514 1,650 1,677 1,723 1,751

Field Collection Embedded Quality Oe, L N/A N/A N/A Baseline 84.2% 86.0% 86.0%

Automated Collection System Accuracy Oe N/A 87.8% 88.5% 88.0% 91.0% 91.0% 92.0%

Criminal Investigations Completed Ot, L 3,766 4,387 4,104 3,945 4,157 4,000 4,025

Number of Convictions Ot, L N/A 2,008 2,151 2,260 2,019 2,069 2,135

Conviction Rate E, L N/A 91.2% 91.2% 92.0% 91.5% 92.0% 92.0%

Conviction Efficiency Rate($) E, L N/A 362,849 295,316 339,565 328,750 314,008 314,560

TEGE Determination Case Closures Ot 171,812 143,877 126,481 112,400 108,462 118,200 109,500

BSM Project Cost Variance by Release/Subrelease E N/A N/A N/A Baseline ** 10.0% 10.0%

BSM Project Schedule Variance by Release/Subrelease E N/A N/A N/A Baseline ** 10.0% 10.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure and L - Long-Term Goal

g p g g j g p g

and improvements resulting from program efficiencies.

Performance Measures

* Data to estimate the eligibility rate will be available late in FY 2007..

FY 2008 IRS Performance Measures Summary Table

** Cost and Schedule variance is based on +/- 10% and is reported on several project releases/subreleases.

IRS - 122
Data Dictionary Link for Performance Measures: 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-par/

Part_IV_Appendices.pdf

IRS - 123
Internal Revenue Service 

Mission Statement 

Provide America’s taxpayers top-quality service by helping them understand and meet 

their tax responsibilities and by applying the tax law with integrity and fairness to all. 

Program Summary by Appropriations Account 

FY 2006 FY 2007 FY 2007

Appropriation Enacted

President's 

Budget* CR-rate*

President's 

Budget*

 $ Change 

over CR-rate

% Change 

over CR-rate

Taxpayer Services $2,142,042 $2,079,151 $2,046,908 $2,103,089 $56,181 2.74%

Enforcement 4,708,441 4,797,126 4,660,572 4,925,498 $264,926 5.68%

Operations Support 3,461,205 3,488,404 3,519,228 3,769,587 $250,359 7.11%

Business Systems Modernization 242,010 212,310 196,810 282,090 $85,280 43.33%

Health Insurance Tax Credit Administration 20,008 14,846 14,846 15,235 $389 2.62%

Total Appropriated Resources $10,573,706 $10,591,837 $10,438,364 $11,095,499 $657,135 6.30%

*

The FY 2007 budget is supplemented by $242 million in users fees (includes $135 million in new user fees) and the FY 2008 budget is supplemented by $180 million in user fees.

HITCA). In addition, FY 2007 CR-rate includes proposed interappropriation transfers.

Table 1.1

FY 2008

NOTE: Throughout this document FY 2006 and prior years have been presented in the new budget structure for comparability across fiscal years. This differs from the President's Budget 

Appendix which presents FY 2006 as it was executed. The FY 2006 enacted level excludes rescission of unobligated balances ($29 million from Taxpayer Services and $9 million from

Dollars in Thousands

FY 2008 Priorities 

In 2008 the IRS will focus its efforts on implementing Treasury’s tax compliance 

improvement strategy (see http://www.treasury.gov/press/releases/hp111.htm). This 

includes the following priorities: 

• Maintain balance between taxpayer service and enforcement 

• Improving tax compliance by: 

o Increasing front-line enforcement resources to improve tax compliance 

o Increasing voluntary compliance through improved taxpayer service options 

and enhanced research 

o Implementing legislative and regulatory changes 

• Invest in technology to reverse infrastructure deterioration, accelerate modernization, 

and improve the productivity of existing resources
Section 1 – Purpose ........................................................................................................... 4

1A – Description of Bureau Vision and Priorities...................................................... 4 

Summary Budget Adjustment Table (Taxpayer Service/Enforcement) ..................... 8 

1B – Program History and Future Outlook............................................................... 10 

Section 2 – Budget Adjustments & Appropriations Language .................................. 18

Program Summary by Appropriations Account and Budget Activity...................... 18 

Appropriation Detail Table....................................................................................... 19 

Summary Budget Adjustment Table......................................................................... 20 

2A – Budget Decreases and Increases Description (IRS)......................................... 21 

Increased e-File Savings ....................................................................................... 22 

Increase Efficiency through Submission Processing Site Consolidations............ 23 

Upgrade Critical IT Infrastructure ........................................................................ 24 

Enhance Computer Security Incident Response Center (CSIRC) and Network 

Infrastructure Security .......................................................................................... 25 

Fund Business Systems Modernization ................................................................ 26 

Improve Compliance Estimates, Measures, and Detection of Non-Compliance.. 29 

Improve Compliance Among Small Business and Self-Employed Taxpayers .... 29 

Implement Legislative Proposals to Improve Compliance................................... 32 

Increase Compliance for Large Multinational Businesses.................................... 35 

Establish New Document Matching – Kansas City.............................................. 38 

Increase Individual Filing Compliance................................................................. 39 

Increase Tax-Exempt Entity Compliance ............................................................. 40 

Increase Criminal Tax Investigations ................................................................... 41 

Research Effect of Service on Taxpayer Compliance .......................................... 43 

Expand Volunteer Income Tax Assistance........................................................... 44 

Implement Taxpayer Assistance Blueprint........................................................... 45 

Operating Levels Table............................................................................................. 48 

2B – Appropriations Language and Explanation of Changes................................... 49 

2C – Legislative Proposals........................................................................................ 52 

Section 3 – Budget and Performance Plan ................................................................... 54

Taxpayer Services (TS)........................................................................................... 54 

Appropriation Description ................................................................................ 54 

Appropriations Detail Table ............................................................................. 54 

Budget Adjustment Table ................................................................................. 55 

Operating Levels Table..................................................................................... 56 

TS Budget Activity: Pre-Filing Taxpayer Assistance and Education..................... 57 

3A - Description................................................................................................ 57 

3B – Budget and Performance Plan.................................................................. 58 

TS Budget Activity: Filing and Account Services.................................................... 60 

3A – Description............................................................................................... 60 

3B – Budget and Performance Plan.................................................................. 61 

IRS - 1
Enforcement (ENF)................................................................................................. 64 

Appropriation Description ................................................................................ 64 

Appropriation Detail Table............................................................................... 64 

Budget Adjustment Table ................................................................................. 65 

Operating Levels Table..................................................................................... 66 

ENF Budget Activity: Investigations........................................................................ 67 

3A – Description............................................................................................... 67 

3B – Budget and Performance Plan.................................................................. 68 

ENF Budget Activity: Exam and Collections........................................................... 69 

3A – Description............................................................................................... 69 

3B – Budget and Performance Plan.................................................................. 71 

ENF Budget Activity: Regulatory ............................................................................ 73 

3A – Description............................................................................................... 73 

3B – Budget and Performance Plan.................................................................. 74 

Operations Support (OS) ....................................................................................... 77 

Appropriation Description ................................................................................ 77 

Appropriation Detail Table............................................................................... 77 

Budget Adjustment Table ................................................................................. 78 

Operating Levels Table..................................................................................... 79 

OS Budget Activity: Infrastructure .......................................................................... 80 

3A - Description................................................................................................ 80 

3B – Budget and Performance Plan.................................................................. 80 

OS Budget Activity: Shared Services and Support .................................................. 81 

3A – Description............................................................................................... 81 

3B – Budget and Performance Plan.................................................................. 83 

OS Budget Activity: Information Services............................................................... 85 

3A – Description............................................................................................... 85 

3B – Budget and Performance Plan.................................................................. 87 

Business Systems Modernization (BSM) .............................................................. 90 

Appropriation Description ................................................................................ 90 

Appropriation Detail Table............................................................................... 90 

Budget Adjustment Table ................................................................................. 91 

Operating Levels Table..................................................................................... 92 

BSM Budget Activity: Business Systems Modernization ......................................... 93 

3A – Description............................................................................................... 93 

Health Insurance Tax Credit Administration (HITCA)..................................... 98 

Appropriation Description ................................................................................ 98 

Appropriation Detail Table............................................................................... 98 

Budget Adjustment Table ................................................................................. 99 

Operating Levels Table................................................................................... 100 

HITCA Budget Activity: Health Insurance Tax Credit Administration ................ 101 

3A - Description.............................................................................................. 101 

3B – Budget and Performance Plan................................................................ 102 

IRS - 2
Section 4 – Supporting Materials ................................................................................ 103

4A – Human Capital Strategy Description ............................................................. 103 

Human Resources Table ......................................................................................... 105 

4B – Information Technology Strategy .................................................................. 106 

Summary of IT Resources Table ............................................................................ 110 

Program Assessment Rating Tool (PART) Evaluation Table ................................ 112 

IRS Performance Measures Summary Table and Data Dictionary Link................ 122 

IRS - 3
Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

The Internal Revenue Service (IRS) administers America’s tax laws and collects revenue 

to fund most government operations and public services as well as implements Treasury’s 

tax compliance improvement strategy. The IRS taxpayer service programs provide 

assistance to millions of taxpayers to help them understand and meet their tax obligations. 

The IRS enforcement programs are aimed at deterring taxpayers inclined to evade their 

responsibilities while vigorously pursuing those who violate tax laws. 

The President’s Budget request for FY 2008 supports the IRS’ five-year strategic plan. 

This plan underscores the IRS commitment to provide quality service to taxpayers while 

enforcing America’s tax laws in a balanced manner. The IRS strategic plan goals are: 

• Improve Taxpayer Service – Help people understand their tax obligations and 

making it easier for them to participate in the tax system; 

• Enhance Enforcement of the Tax Law – Ensure taxpayers meet their tax 

obligations, so that when Americans pay their taxes, they can be confident their 

neighbors and competitors are also doing the same; and 

• Modernize the IRS through its People, Processes and Technology – 

Strategically manage resources, associated business processes and technology 

systems to effectively and efficiently meet service and enforcement strategic 

goals. 

In support of these goals, the FY 2008 Budget priorities follow the guiding principle of 

Service plus Enforcement equals Compliance and sustain the IRS’ objectives: 

• Modernize information systems and business processes to maximize resources 

and improve service and enforcement; 

• Enhance research to better allocate resources to IRS programs; 

• Discourage and deter non-compliance with emphasis on corrosive activity by 

corporations, high-income taxpayers and abusive domestic and off-shore tax 

entities; 

• Deter abuse within the tax-exempt community; and 

• Simplify the tax process and improve service options for the taxpaying public. 

Reducing the Tax Gap 

The IRS collects 95 percent of the revenues that fund the United States Government. The 

FY 2008 Budget request will accelerate deficit reduction by improving tax compliance to 

strengthen the Federal Government’s ability to collect more of these legally-owed taxes. 

IRS - 4
The tax gap is the difference between the amount of tax imposed on taxpayers for a given 

year and the amount that is paid voluntarily and timely. The IRS’ latest estimate shows 

that the overall gross tax gap for Tax Year 2001 was about $345 billion. 

Tax Year 2001 Federal Tax Gap

(Dollars in Billions)

Actual Amounts 

Updated Estimates

Dependent on Older Estimates

Status of the Estimates

Estimates in Bold Boxes 

Have Been Updated

Based on Detailed

TY01 NRP Results

Nonfiling*

27

Underpayment

33

Estate & Excise

Taxes

4

Corporation

Income Tax

30

Large 

Corporations

25

Small 

Corporations

5

Underreporting

285

Individual

Income Tax

197

Underreported

Business

Income

109

Underreported

Non-Business

Income

56

Overstated

Adjustments,

Deductions,

Exemptions, and 

Credits

32

Employment

Tax

54

FICA & 

Unemployment

Taxes

15 

Self-Employment

Tax

39

FICA & 

Unemployment

Taxes

15 

Self-Employment

Tax

39

Gross Tax Gap:345

(Noncompliance Rate : NCR = 16.3%)

*Updated using Census tabulations

This estimate, however, does not take into account taxes that were paid voluntarily but 

paid late, or recoveries from the IRS enforcement activities. Taking these factors into 

account, the “net tax gap” was an estimated $290 billion. 

The tax gap is comprised of three sources of taxpayer noncompliance: 

• Underreporting (not reporting one’s full tax liability even when the return is filed on 

time), 82 percent of the tax gap; 

• Underpayment (not paying by the due date the full amount of tax reported on a timely 

return), 10 percent of the tax gap; and 

• Non-filing (not filing required returns or not filing on time), eight percent of the tax 

gap. 

Increased resources for the IRS’ exam and collection programs yield direct measurable 

results. Once the new staff proposed in this request are trained and become more 

experienced, the enforcement revenue generated each year will be $699 million. 

However, this estimate excludes the likely larger revenue impact from the deterrence 

value of these and other IRS enforcement programs (e.g., criminal investigations). It also 

excludes the impact of taxpayer services on voluntary compliance. 

IRS - 5
The IRS cannot currently measure either the impact of deterrence or service, but they are 

positive. The complexity of the nation’s current tax system is a significant reason for the 

tax gap, and even sophisticated taxpayers make honest mistakes on their tax returns. 

Accordingly, helping taxpayers understand their obligations under the tax law is a critical 

part of improving voluntary compliance. To this end, the IRS remains committed to a 

balanced program assisting taxpayers in both understanding the tax law and remitting the 

proper amount of tax. 

It is the need to improve tax compliance that drives much of what the IRS does. IRS 

enforcement activities, such as examination and collection, directly target tax gap 

elements, while IRS taxpayer services provide the information and tools taxpayers need 

to calculate and understand their tax obligations; collect, process, and store filed forms; 

and collect and process tax receipt and refunds owed timely. This budget request sets 

forth the funding, policy and tax law changes need to implement Treasury’s tax 

compliance plan and make progress in improving tax compliance. 

Taxpayer Service and Enforcement Programs 

The FY 2008 President’s Budget request accelerates deficit reduction by strengthening 

the IRS’ ability to administer taxpayer service and increase enforcement and collection of 

federal unpaid tax liabilities. IRS programs and supporting functions appropriated in the 

three operating accounts - taxpayer service, enforcement and operations support – are 

strategically aligned with either taxpayer service or tax law enforcement activities. 

Enforcement Program: The IRS continues its emphasis on tax law enforcement, 

increasing collection of delinquent tax debt from $34 billion in 2002 to $49 billion in 

2006, an increase of 44 percent. Since 2003, federal government receipts have also 

increase by over $600 billion with revenue growth greatest in the areas of corporate taxes 

and high-income individual taxes. In FY 2008, the President’s Budget increases funding 

for enforcement to $7,228.2 million. This includes $291.3 million for new enforcement 

initiatives and $225.7 million in inflationary cost increases offset by efficiencies savings 

of $82.2 million. As in 2006 and 2007, the Administration proposes to include these 

enforcement increases as a Budget Enforcement Act program integrity cap adjustment 

(see chapter 15, Budget Reform Proposals in the Analytical Perspectives volume of the 

2008 Budget). IRS Enforcement resources are funded in the Enforcement and Operations 

Support appropriations accounts. 

Taxpayer Service Program: Helping the public understand its tax reporting and payment 

obligations is a cornerstone of taxpayer compliance. In FY 2008, the President’s Budget 

increases funding for taxpayer service to $3,570.0 million. This includes $56.1 million 

for new service initiatives and $112.7 million in inflationary cost increases offset by 

efficiency savings of $37.7 million. IRS Taxpayer Service resources are funded in the 

Taxpayer Service and Operations Support appropriation accounts. 

IRS - 6
FY 2007

CR-rate

Taxpayer Services $3,498.4 $3,438.7 $3,570.0 3.8%

Direct Appropriation $2,142.0 $2,046.9 $2,103.1

Operations Support $1,356.4 $1,391.8 $1,466.9

Enforcement $6,813.2 $6,788.0 $7,228.2 6.5%

Direct Appropriation $4,708.4 $4,660.6 $4,925.5

Operations Support $2,104.8 $2,127.4 $2,302.7

Total Taxpayer Services and Enforcement $10,311.6 $10,226.7 $10,798.2 5.6%

Taxpayer Service and Enforcement Programs

(Dollars in Millions)

Programs

% Change 

FY 2007 to 

FY 2008

FY 2006

Enacted

FY 2008 

President's 

Budget

FY 2008 President’s Budget Request 

The FY 2008 President’s Budget request for the IRS is $11,095.5 million, 6.3 percent 

above the FY 2007 Continuing Resolution (CR) level. The funding request for taxpayer 

service programs is $3,570.0 million; for enforcement programs is $7,228.2 million; for 

Business Systems Modernization (BSM) is $282.1 million; and for Health Insurance Tax 

Credit Administration is $15.2 million. The IRS total increase for FY 2008 of 

$657.1 million, which includes $27.6 million for a technical adjustment to the FY 2007 

base due to the CR; $340.0 million for maintaining current levels offset by $120.0 million 

in efficiency savings; and a net program increase of $409.5 million to enhance the IRS’ 

infrastructure and modernization, enforcement, and taxpayer service programs that focus 

on reducing the tax gap. By 2010, these FY 2008 investments will increase annual 

enforcement revenue by $699 million. In addition, it is estimated that the tax compliance 

improvement legislative proposals will generate approximately $29 billion over the next 

ten years. 

The IRS program initiatives focus on implementation of Treasury’s tax compliance 

improvement strategy and the most significant needs for FY 2008: 

• Improve IRS information technology infrastructure ($81.0 million and $62.1 million 

for the BSM program) to strengthen both taxpayer service and enforcement programs; 

• Expand enforcement activities targeted at improving compliance ($246.4 million); 

and 

• Enhance taxpayer service ($20 million) by continuing its efforts to increase and 

improve the delivery of services offered to taxpayers by expanding its research and 

implementing new technology (e.g., Spanish “Where’s My Refund?” and an 

estimated calling wait time feature). 

IRS - 7
Summary Budget Adjustment Table (Taxpayer Service/Enforcement) 

Taxpayer Service Program Summary Budget Adjustment Table 

(includes both direct costs in the Taxpayer Services appropriation 

 and indirect costs in the Operations Support appropriation) 

FTE Amount

FY 2007 President's Budget 35,931 $3,456,333

CR-rate Adjustment (330) (39,711)

(541) ($37,727)

(541)

($6,479)

(6,479)

FY 2007 CR-rate 35,601 $3,416,622

Interappropriation Transfer Corrections to Budget Restructure 43 22,136

FY 2007 Operating Plan at CR-rate 35,644 $3,438,758

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $193

Base Adjustment 193

Maintaining Current Levels (MCLs) $112,681

Pay Annualization 12,881

Pay Inflation Adjustment 74,475

Non-Pay Inflation Adjustment 25,325

Efficiency Savings

Subtotal, Changes to Base $75,147

FY 2008 Base 35,103 $3,513,905

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings

Program Reinvestments: 0 $6,479

Increase Efficiency through Submission Processing Site Consolidations 6,479

Program Increases:

Infrastructure Initiatives 0 $30,948

Upgrade Critical IT Infrastructure 24,477

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastructure Security 6,471

Enforcement Initiatives 44 $5,107

Improve Compliance Among Small Business and Self-Employed Taxpayers 31 3,309

Increase Compliance for Large Multinational Businesses 4 1,055

Expand Document Matching in Existing Sites 3 248

Increase Individual Filing Compliance 6 495

Taxpayer Service Initiatives 54 $20,000

Research Effect of Service on Taxpayer Compliance 8 5,000

Expand Volunteer Income Tax Assistance 46 5,000

Implement Taxpayer Assistance Blueprint 0 10,000

Subtotal, FY 2008 Program Changes 98 $56,055

Total, FY 2008 President's Budget Request 35,201 $3,569,960

Program: Taxpayer Service

Table 2.1

FY 2008 Budget Highlights

Dollars in Thousands

IRS - 8
Enforcement Program Summary Budget Adjustment Table 

(includes both direct costs in the Enforcement appropriation 

and indirect costs in the Operations Support appropriation) 

FTE Amount

FY 2007 President's Budget 56,771 $6,908,348

CR-rate Adjustment (988) (98,262)

(43) (22,136)

(643) ($82,254)

(643)

FY 2007 CR-rate 55,783 $6,810,086

Interappropriation Transfer Corrections to Budget Restructure

FY 2007 Operating Plan at CR-rate 55,740 $6,787,950

Changes to Base:

 Technical Adjustments to FY 2007 Base due to CR 0 $5,494

Base Adjustment 0 5,494

 Maintaining Current Levels (MCLs) $225,692

Pay Annualization 0 27,362

Pay Inflation Adjustment 0 157,054

Non-Pay Inflation Adjustment 0 41,276

 Efficiency Savings

Subtotal, Changes to Base $148,932

FY 2008 Base 55,097 $6,936,882

Program Changes:

Program Increases:

Infrastructure Initiatives 0 $50,052

Upgrade Critical IT Infrastructure 0 35,523

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastructure 0 14,529

Enforcement Initiatives 1,486 $241,280

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 258 41,022

Improve Compliance Among Small Business and Self-Employed Taxpayers 454 69,856

Implement Legislative Proposals to Improve Compliance 0 23,045

Increase Compliance for Large Multinational Businesses 154 25,145

Expand Document Matching in Existing Sites 214 27,958

Establish New Document Matching - Kansas City 205 23,205

Increase Individual Filing Compliance 55 6,049

Increase Tax-Exempt Entity Compliance 109 15,000

Increase Criminal Tax Investigations 37 10,000

Subtotal, FY 2008 Program Changes 1,486 $291,332

Total, FY 2008 President's Budget Request 56,583 $7,228,214

Program: Enforcement

Table 2.1

FY 2008 Budget Highlights

Dollars in Thousands

IRS - 9
1B – Program History and Future Outlook 

The IRS helps taxpayers understand and comply with federal income tax laws. Each 

year, IRS employees make millions of contacts with American taxpayers and businesses. 

These contacts encourage and facilitate self-sufficiency for taxpayers in meeting their tax 

obligations. The IRS also enforces the tax laws to ensure that non-compliant taxpayers 

pay their fair share. To improve voluntary tax compliance, the IRS must meet taxpayer 

expectations, respond quickly to technological and demographic changes and, provide the 

proper balance of service and enforcement. 

Strategic Goal I: Improve Taxpayer Service 

The IRS serves a constituency of more than 135 million individual tax filers. During the 

2006 filing season, the IRS issued more than 100 million refunds totaling over $277 

billion. In addition, the IRS processed another 46.9 million returns for partnerships, 

corporations, employment taxes and exempt organizations. Providing quality taxpayer 

service, and continuing to improve that service, remains a strategic priority for the IRS. 

The IRS allocates its resources among its service, education and outreach programs to 

ensure taxpayers understand their obligations and voluntarily pay their taxes. 

Assisting the public in meeting its tax obligations is the cornerstone of taxpayer 

compliance and is vital for maintaining public confidence in the tax system. Over the 

past several years, the IRS has made significant progress in improving customer service 

to the taxpayers: 

• The overall American Customer Satisfaction Index (ACSI) score for all individual tax 

filers increased 27 percent, from 51 in 1999 to 65 in 2006. This is the largest increase 

of all federal agencies surveyed by the ACSI during this period. Program 

improvements contributing to an increase in customer satisfaction rates were 

implemented as a result of a Program Assessment Rating Tool (PART) assessment 

conducted for the Taxpayer Service program in FY 2004. Improvements included the 

launch of an improved, interactive telephone Probe and Response Guide for the 2005 

filing season, and the implementation of a process using recorded call transcripts to 

create test call scenarios for training and certifying Customer Service 

Representatives. 

• In FY 2006, the IRS level of service reached rates of 90.9 and 93.2 percent for tax 

law and account accuracy, respectively, and toll-free level of service was maintained 

at 82 percent. 

• Nearly 14,000 large corporate taxpayers subject to the electronic filing mandate 

e-filed their returns successfully. The largest corporate taxpayers transmitted their 

returns without delay or backlog. The IRS processed this volume of very complex 

returns and accepted and acknowledged receipt within its 24-hour turnaround 

standard. 

IRS - 10
• IRS.gov is one of the most heavily visited sites on the internet. In FY 2006, the 

number of visits increased 9.8 percent and the number of pages viewed increased over 

three percent. 

• The IRS delivered another successful filing season in 2006 with 134.7 million total 

individual returns received compared to 128.6 million in 2005. For the second year in 

a row, more than half (72.8 million) of all individual returns were filed electronically, 

representing a 6.6 percent increase over FY 2005. The most striking change is the 

18.5 percent (22.2 million) increase in electronic filing from home computers. 

The mix of taxpayer services demanded by the public appears to be changing. Toll-free 

calls and visits to Taxpayer Assistance Centers (TACs) have declined. In FY 2006, the 

IRS completed more than 24.3 million automated calls compared to 25.7 million in 

FY 2005, and answered 32.7 million assistor calls compared to 33.4 million in FY 2005. 

The IRS also achieved the FY 2006 82 percent level of service goal, with an accuracy 

rate of 91 percent for tax law questions. The accuracy of responses to tax law questions 

at the TACs increased to 83 percent, compared to 75 percent in FY 2005. Waiting time 

at the TACs was minimized with more than eight out of ten customers being served in 

30 minutes or less. 

The TACs experienced an eight percent reduction in walk-in contacts due to the overall 

decline in the number of customers seeking face-to-face assistance. The reduced demand 

for these services can be attributed, in part, to increased usage of the newly redesigned, 

award-winning web site. The redesigned website enhances taxpayers’ ability to find 

desired content through improved search and navigation functions. In addition, the IRS 

offered a set of web-based business products for practitioners and other third parties. IRS 

e-Services such as the Internet-Employer Identification Number service and Transcript 

Delivery service experienced significant usage. Overall customer satisfaction with the 

award-winning IRS.gov website increased five percentage points based on the ACSI and 

use continued to grow. More than 1.3 billion web pages were viewed on IRS.gov and 

over 24 million taxpayers used the web application “Where’s My Refund?” to check the 

status of their refunds. 

In FY 2006, the IRS delivered the first phase of the Taxpayer Assistance Blueprint 

(TAB), a comprehensive study that reviewed current taxpayer service options and 

identified areas for improvements, including expanded taxpayer education and 

awareness, optimized use of partner services, increased self-service options, and 

expanded training and support tools for taxpayers. The Phase II report, which will be 

delivered in FY 2007, includes additional research and establishes the framework to 

develop short and long-term outcome goals and metrics for measuring the IRS’ progress 

on service improvements for taxpayers. 

In FY 2007 and FY 2008, the IRS will continue with its efforts to increase and improve 

the services offered to taxpayers, primarily focusing on those outside of the traditional 

telephone access. The IRS will increase self-service applications, continue to ensure web 

navigation is user-friendly, and also improve the quality and accuracy of its telephone 

responses. The IRS will expand its research and evaluate information regarding taxpayer 

IRS - 11
service needs, priorities, and preferences in order to improve delivery services. The IRS 

will also invest more in technology, process improvements, and training to achieve 

consistent and repeatable service with reduced costs. 

Strategic Goal II: Enhance Enforcement of the Tax Law 

A smoothly functioning tax administration system inspires confidence among taxpayers. 

Voluntary compliance with tax laws increases if all taxpayers believe that their neighbors 

are paying their fair share. 

Over the past decade, the IRS has improved its enforcement programs’ performance by 

streamlining and implementing centralized work processes. This resulted in improved 

workload selection techniques, increased managerial involvement in casework, and 

initiatives that reduce cycle time. As a result, in FY 2006, the IRS: 

• Collected more than $2.4 trillion dollars in tax revenue, including $48.7 billion 

through IRS enforcement activities; 

• Audited more than 1.2 million taxpayers, a seven percent increase from FY 2005, 

including an 18 percent increase in audits of high-income taxpayers (those earning 

$100,000 or more); 

• Increased small business audits (assets < $10 million) by eight percent and automated 

underreporter closures by 10 percent; 

• Closed 15 percent more collection cases and collected nine percent more from 

delinquent accounts in FY 2006 compared to FY 2005; and 

• Increased the fraud referral acceptance rate (i.e., the ratio of internal referrals within 

the IRS received to the number of those cases that are accepted by CI) to 71.8 percent 

exceeding the five year high achieved in FY 2005 of 68.8 percent and the total 

number of referrals accepted (445) was also higher than in FY 2005. 

• Increased the use of substitute for return authority by 66 percent (substitute for return 

authority allows the IRS to file a tax return for an individual or business when it does 

not file a required return). Examiners prepared and filed 665,000 returns for 

individuals and 182,000 returns for businesses classified as non-filers. 

The IRS also exceeded prior-year levels for coverage, efficiency and examination quality 

annual performance targets. In FY 2006, collection coverage increased to 54 percent, 

individual examination coverage improved while business examination coverage 

remained above seven percent, and automated underreporter efficiency increased almost 

eight percent to 1,832 cases. In addition, examination quality for industry and 

coordinated industry cases increased to 85 percent and 96 percent, respectively. 

Improvements in inventory management, decreases in cycle time, and enhanced training 

all contributed to improved productivity. Improved quality controls measuring critical 

elements of the examination, a reinforced focus on case quality to drive improvement 

efforts, and the delivery of business results, led to improved performance for the third 

consecutive year. 

IRS - 12
In FY 2007 and FY 2008, the IRS will continue to reengineer its examination and 

collection procedures to reduce time, increase yield, and expand coverage. As part of its 

regular examination program, the IRS is expanding the use of cost-efficient audit 

techniques. By increasing its use of reliable third-party data to verify information 

reported by taxpayers, the IRS can better target its audit resources. The IRS is expanding 

its efforts to shift to agency-wide strategies, which maximize efficiency by better aligning 

problems (such as non-filers and other areas of noncompliance) and their solutions within 

the organization. The IRS is committed to improving the efficiency of its audit process, 

measured by audit change rates and other appropriate benchmarks. 

However, efficiency gains in existing programs alone will not significantly reduce the tax 

gap. Some of the initiatives, including new legislative proposals, such as providing the 

IRS with access to more third-party data and simplifying the tax code, will also help 

make compliance activities more effective. 

Strategic Goal III: Modernize the IRS through its People, Processes and Technology 

Additional funding for information technology (IT) infrastructure and Business Systems 

Modernization (BSM) is the highest funding priority for FY 2008. The IRS cannot 

significantly improve compliance through its service and enforcement programs without 

a robust IT infrastructure. IT infrastructure investments support services to both 

taxpayers and other government agencies and enforcement by providing IRS frontline 

employees with the basic tools necessary to perform their jobs. A modernized and secure 

infrastructure will enhance the speed, security, and functionality necessary to keep pace 

with an automated economy. The IRS must keep pace with the growing demand and 

volume of electronic submission, payment, and refund transactions for tax remittances 

and offer taxpayers a variety of faster alternatives for satisfying their tax obligations. 

These efforts will continue to place greater demand on the IRS to provide a modernized 

and secure IT infrastructure. 

Furthermore, a successful modernization program is critical to supporting long-term tax 

administration operations. Successful BSM program delivery during the past two years 

demonstrates that the IRS has established a foundation of disciplined program 

management processes and controls. The IRS managed BSM projects with a degree of 

sustained success not seen since program inception. This accomplishment is especially 

noteworthy because the program achieved this while transitioning from a contractor-led 

program to an IRS-led program. 

The IRS also developed an IT Modernization Vision and Strategy (MV&S) for its IT 

systems for 2008 that align with and support the IRS Strategic Plan. Through the MV&S 

process, the IRS developed a plan showing how the IRS can effectively meet IT 

modernization goals in an incremental approach that provides near-term value. The plan 

focuses on delivery of four major tax administration systems - Customer Account Data 

Engine, Account Management Services, Modernized e-File, and Filing & Payment 

Compliance - addressing the IRS' strategic business priorities. The plan also capitalizes 

IRS - 13
on IT infrastructure initiatives and smaller IT project initiatives to support a unified 

approach in continued improvement to program operations. 

Throughout FY 2006, IRS modernization efforts continued to focus on its four core tax 

administration systems designed to provide more sophisticated tools to taxpayers and the 

IRS employees. The following highlights the IRS’ efforts in FY 2006 in advancing these 

core systems: 

• Introduced new Customer Account Data Engine (CADE) capabilities for the 2006 

filing season. CADE supports faster refunds to taxpayers, issuing direct deposit 

refunds between one and seven days faster, and paper refunds four to thirteen days 

faster than refunds generated by the legacy system. CADE posted over 7.3 million 

returns – more than a 400 percent increase over the previous year, and issued 7 

million refunds totaling in excess of $3.4 billion. CADE improved taxpayer service 

by allowing access to account information up to seven days sooner, increasing the 

likelihood of single telephone call resolution, faster issue detection, and more 

timely account settlement. CADE is expected to post between 25 and 30 million 

returns in 2007. 

• Began the development of Account Management Services (AMS), a project that 

will enable real-time access to taxpayer account information, to support much faster 

resolution of taxpayer issues by IRS customer service representatives. AMS, in 

conjunction with CADE, will enable the IRS to break the weekly update system 

paradigm that has existed since the 1960s, enabling the IRS to begin to provide 

settlement of all account information by end-of-day, similar to what one expects 

from major private-sector financial institutions. The first release of AMS is due the 

summer of 2007 to support real-time address change capability in CADE and 

enable faster notice processing for a number of math-error notices. 

• Implemented Release 3.2 of its Modernized e-File (MeF) project, which enabled the 

filing of both federal and state returns concurrently for corporations (Forms 1120 

and 1120-S) and tax-exempt organizations (Form 990). In 2006, the MeF platform 

supported an e-filing mandate for certain large corporations and tax-exempt entities. 

Tax returns for large corporations typically include hundreds, or even thousands, of 

pages. Receiving the data electronically improves the accuracy of the tax return, 

reduces the volume of paper tax returns submitted to IRS Service Centers, and 

accelerates the examination process by having all tax return data available 

electronically. Electronic capture of return information enables the IRS to quickly 

deliver the data to analysts and agents for compliance risk assessment and action. 

In 2006, MeF accepted over 550,000 corporate returns. The IRS is expanding the 

MeF taxpayer base in 2007 to include Partnership Income tax returns (Form 1065), 

eventually enabling nearly 2.7 million small business and self-employed taxpayers 

to benefit from electronic filing. The IRS is in the planning stage to migrate the 

1040 individual tax return to the Modernized e-File platform. The development and 

implementation of MeF 1040 capability will be complete in January of 2011 with 

initial planned deployment for January, 2009. 

IRS - 14
• Completed the first release of the Filing & Payment Compliance (F&PC) strategy. 

F&PC functionality analyzes tax collection cases and separates cases that require 

direct IRS involvement from those that can be handled by Private Collection 

Agencies (PCAs). The introduction of PCAs is expected to:

o Assist the IRS by addressing the volume of delinquent taxpayers that exceeds the 

 IRS’ capacity to work, approximately 250,000 cases per year; 

o Help eliminate backlogs in the large number of outstanding tax liabilities, which 

 have grown by 118 percent over the last 12 years, increasing tax revenue and 

 reducing the tax gap; and, 

Tax administration in the 21st century requires improved IRS information technology. 

For FY 2007 and FY 2008, the IRS is committed to continuing to make improvements in 

technology, including: 

• Replacing antiquated core legacy account management systems and technology 

with the Customer Account Data Engine (CADE); 

• Expanding and enhancing compliance activities through early detection, better 

case selection, and better case management; 

• Delivering effective customer service, including expanded e-file systems and web 

services at reduced cost; and, 

• Investing in infrastructure necessary to perform operations more efficiently, thus 

freeing up resources for enforcement and taxpayer service programs. 

Supporting the President's Management Agenda 

The FY 2008 Budget request for the IRS reflects the Department of the Treasury's 

commitment to further the objectives of the President's Management Agenda (PMA). In 

June 2006, the IRS developed an implementation plan for Budget-Performance 

Integration (BPI) that identifies the actions necessary to formulate and execute fullycosted performance and the means to determine the marginal cost of performance, 

consistent with the BPI requirements of the PMA. As part of this process, the IRS will 

initiate its plan to improve budget and performance integration using cost accounting 

pilots that focus on the interrelationship between financial data contained in the 

Integrated Financial System (IFS) and performance information (e.g., submission 

processing volume data) stored in IRS legacy systems. The cost pilots will facilitate: 

• Standardization of cost methodologies for determining and applying direct and 

indirect costs associated with performance measures; 

• Identification of additional system interfaces needed to support managerial cost 

accounting; 

• Development of a methodology for linking cost data and agency-level outcomes and 

outputs for the budget formulation and reporting process; and 

• Development of an IRS cost accounting policy. 

IRS - 15
FY 2008 Challenges 

The IRS seeks efficiencies in delivering taxpayer service and bolstering its enforcement 

efforts to improve compliance with the tax laws and, ultimately, increase tax revenue. 

Using the internet as a means of providing taxpayers access to tax information and 

services is one approach to achieving greater efficiencies. The use of private collection 

agencies to collect uncontested tax debt is another. In FY 2007 and beyond, the IRS will 

continue to seek alternative, cost-effective ways of improving taxpayer service and 

enforcement. The following discussion identifies some of the most significant internal 

and external challenges for the IRS. 

• Business Systems Modernization (BSM): The BSM program remains on the GAO 

high-risk list and also continues to be tracked as a declared "material weakness" 

because of the national significance of the program and the expectation that recent 

program improvements must be sustained over a longer period, given the extensive 

scope and time horizon of the program. During FY 2007, the IRS will continue to 

strengthen the management processes developed as part of its corrective action plan 

to address material weaknesses and will strive to sustain improvements relating to the 

efficient and effective delivery of the IRS’ IT systems. 

• Information Technology Modernization Vision and Strategy (MV&S): This 

governance and planning process for IRS IT leverages the IRS strategic plan and 

associated business plans to drive IT investment decisions, address the priorities around 

modernizing front-line tax administration, and enable technical capabilities provided 

by the infrastructure and security. The MV&S approach will leverage existing 

systems (where possible) and new development (where necessary) to optimize 

capacity, manage program costs, leverage common IT services across business 

domains, and deliver business value in smaller and more frequently fielded 

incremental releases. The MV&S will address the business priorities for the next five 

years, with particular emphasis on informing and guiding the definition of investment 

priorities for FY 2007 through FY 2009 across all investment tiers. Using the 

MV&S approach, the IRS enterprise IT solutions demonstrate alignment with the 

Treasury Enterprise Architecture. 

• Implement Treasury’s Tax Compliance Improvement Plan: Maximizing tax 

compliance is at the heart of the IRS emphasis on enforcement. The IRS will continue 

to improve enforcement by targeting its casework and enforcement activities to deliver 

results more effectively. The IRS will continue to analyze tax information and data 

from compliance research studies to better define and quantify the tax gap. The IRS 

will use the results of these efforts to improve its ability to counter the methods and 

means of those taxpayers who fail to report or pay what they owe. The IRS is 

focusing on discouraging and deterring non-compliance with an emphasis on corrosive 

activity by corporations, high-income individual taxpayers, and other contributors to the 

tax gap. 

• Abusive Tax Shelters: Identifying and dismantling Abusive Tax Avoidance 

Transactions (ATAT) remain a challenge and a high enforcement priority for the IRS. 

These transactions are corrosive to the equity and the fairness of the tax law for all 

taxpayers. Vigorous enforcement of the criminal provisions of the tax code, coupled 

IRS - 16
with appropriate civil sanctions, materially contributes to maintaining voluntary 

compliance and public confidence in the fairness of the tax system. Tax shelter 

promoters continue to modify schemes, making it difficult to detect patterns and 

identify participants on a timely basis. Recent trends indicate that the tax shelter 

population will continue to expand to small to mid-size corporations where the issues 

will be more difficult to identify and examine. Large corporate taxpayers are 

increasingly engaging in structured transactions. These structured transactions 

involve highly complex fact patterns and large dollar issues. Promoters of tax 

shelters are migrating from the large accounting firms to other firms and businesses 

that specialize in tax shelters. These promoters are less compliant for registration and 

less stable in their business operations, making it more difficult to pursue them for 

information and for penalties. 

• Taxpayer Assistance Blueprint (TAB): The IRS remains committed to taxpayer 

service and completed Phase I of the TAB in April 2006. Phase I describes the needs 

and preferences of taxpayers, including information on how taxpayers access the IRS 

services, what services they prefer, and whether the IRS meets their needs. The 

IRS expects to complete Phase II of the project in FY 2007, and will use the results to 

better focus its taxpayer services based on taxpayer needs, preferences, and 

demands. The research resulting from the TAB will enable the IRS to help taxpayers 

to better understand the tax law and, in return, remit the proper amount of tax. 

• The Complexity of the Tax Code: The complexity of the tax code is the most 

significant problem facing taxpayers and the IRS alike. The tax code contains well 

over a million words, addressing taxpayer provisions such as the alternative minimum 

tax and the earned income tax credit. Business taxpayers must contend with a 

multitude of rules that cover the depreciation of equipment; numerous and overlapping 

filing requirements for employment taxes; and vague standards that govern the 

classification of workers as either employees or independent contractors. The IRS must 

explain the Code in a way that taxpayers can understand. 

• Achieving 80 Percent e-Filing: For the 2006 filing season the IRS received 72.8 

million electronically-filed returns, a 6.6 percent increase over the previous year. 

Report language accompanying the FY 2007 Transportation, Treasury, the Judiciary, 

Housing and Urban Development Appropriation acknowledges that most experts 

realize that the IRS will not meet the original goal of 80 percent e-filing by 2007. The 

Appropriators, therefore, direct the IRS to develop a detailed plan by June 2007 on 

how to reach the 80 percent e-filing goal. 

IRS - 17
Section 2 – Budget Adjustments & Appropriations Language 

The Internal Revenue Service (IRS) budget request for FY 2008 is $11,095,499,000 in 

direct appropriations and 92,118 FTE. This is an increase of $657,135,000 or 6.3 

percent, and 400 FTE, over the FY 2007 Continuing Resolution (CR) rate of 

$10,438,364,000 and 91,718 FTE. The CR rate includes proposed interappropriation 

transfer corrections to budget restructure from Taxpayer Service ($12,243,000) and 

Enforcement ($47,833,000) to Operations Support ($60,076,000). 

Program Summary by Appropriations Account and Budget Activity 

Internal Revenue Service 

FY 2006 FY 2007 FY 2007

Appropriation Enacted

President's 

Budget CR-rate

President's 

Budget

 $ Change 

over CR-rate

% Change 

over CR-rate

Taxpayer Services $2,142,042 $2,079,151 $2,046,908 $2,103,089 $56,181 2.74%

 Pre-filing Taxpayer Assistance and Education 577,425 575,694 556,693 578,078 21,385 3.84%

 Filing and Account Services 1,564,617 1,503,457 1,490,215 1,525,011 34,796 2.33%

Enforcement 4,708,441 4,797,126 4,660,572 4,925,498 264,926 5.68%

 Investigations 579,555 591,090 579,883 602,872 22,989 3.96%

 Exam and Collections 3,919,275 4,054,760 3,932,599 4,165,233 232,634 5.92%

 Regulatory 209,611 151,276 148,090 157,393 9,303 6.28%

Operations Support 3,461,205 3,488,404 3,519,228 3,769,587 250,359 7.11%

 Infrastructure 864,403 873,146 873,146 908,095 34,949 4.00%

 Shared Services and Support 1,176,202 1,129,617 1,163,846 1,223,351 59,505 5.11%

 Information Services 1,420,600 1,485,641 1,482,236 1,638,141 155,905 10.52%

Business Systems Modernization 242,010 212,310 196,810 282,090 85,280 43.33%

Health Insurance Tax Credit Administration 20,008 14,846 14,846 15,235 389 2.62%

Total Appropriated Resources $10,573,706 $10,591,837 $10,438,364 $11,095,499 $657,135 6.30%

Dollars in Thousands

Table 1.1

FY 2008

IRS - 18
Appropriation Detail Table 

Internal Revenue Service 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Taxpayer Services 32,050 $2,142,042 31,386 $2,127,458 30,891 $2,079,151 30,597 $2,046,908 30,160 $2,103,089 -1.43% 2.74%

Enforcement 49,534 4,708,441 48,439 4,675,795 48,869 4,797,126 47,833 4,660,572 48,667 4,925,498 1.74% 5.68%

Operations Support 13,468 3,461,205 11,565 3,438,385 12,942 3,488,404 12,954 3,519,228 12,957 3,769,587 0.02% 7.11%

Business Systems Modernization 317 242,010 317 158,702 317 212,310 317 196,810 317 282,090 0.00% 43.33%

Health Insurance Tax Credit Administration 17 20,008 10 19,993 17 14,846 17 14,846 17 15,235 0.00% 2.62%

Subtotal New Appropriated Resources 95,386 $10,573,706 91,717 $10,420,333 93,036 $10,591,837 91,718 $10,438,364 92,118 $11,095,499 0.44% 6.30%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 1,350 $158,820 1,129 $89,857 682 $125,723 682 $125,723 696 $133,498 2.05% 6.18%

50% Carryover 23,418

Mandatory Appropriations - User Fees 19,000 19,000 242,000 242,000 180,000 -25.62%

Available multi-year/no-year funds 169,006 143,057 143,282 143,282 149,135 4.08%

Transfers In/Out 37

Subtotal Other Resources 1,350 $346,826 1,129 $275,369 682 $511,005 682 $511,005 696 $462,633 2.05% -9.47%

Total Resources Available for Obligation 96,736 $10,920,532 92,846 $10,695,702 93,718 $11,102,842 92,400 $10,949,369 92,814 $11,558,132 0.45% 5.56%

FY 2006

Table 3.1

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2008

IRS - 19
Summary Budget Adjustment Table 

Internal Revenue Service 

FTE Amount

FY 2007 President's Budget 93,036 $10,591,837

CR-rate Adjustment (1,318) (153,473)

(1,184) ($119,981)

(1,184)

($6,479)

(6,479)

FY 2007 CR-rate 91,718 $10,438,364

Interappropriation Transfer Corrections to Budget Restructure 0 0

FY 2007 Operating Plan at CR-rate 91,718 $10,438,364

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $27,573

Base Adjustment 0 27,573

Maintaining Current Levels (MCLs) $340,007

Pay Annualization 0 40,484

Pay Inflation Adjustment 0 232,630

Non-Pay Inflation Adjustment 0 $66,893

Efficiency Savings

Subtotal, Changes to Base $247,599

FY 2008 Base 90,534 $10,685,963

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings 0

Program Reinvestments: 0 $6,479

Increase Efficiency through Submission Processing Site Consolidations 6,479

Program Increases:

Infrastructure Initiatives 0 $143,149

Upgrade Critical IT Infrastructure 0 60,000

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastru 0 21,000

Fund Business Systems Modernization 0 62,149

Enforcement Initiatives 1,530 $246,387

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 258 41,022

Improve Compliance Among Small Business and Self-Employed Taxpayers 485 73,165

Implement Legislative Proposals to Improve Compliance 0 23,045

Increase Compliance for Large Multinational Businesses 158 26,200

Expand Document Matching in Existing Sites 214 27,958

Establish New Document Matching - Kansas City 208 23,453

Increase Individual Filing Compliance 61 6,544

Increase Tax-Exempt Entity Compliance 109 15,000

Increase Criminal Tax Investigations 37 10,000

Taxpayer Service Initiatives 54 $20,000

Research Effect of Service on Taxpayer Compliance 8 5,000

Expand Volunteer Income Tax Assistance 46 5,000

Implement Taxpayer Assistance Blueprint 0 10,000

Subtotal, FY 2008 Program Changes 1,584 $409,536

Total, FY 2008 President's Budget Request 92,118 $11,095,499

Appropriation: Internal Revenue Service

Table 2.1

FY 2008 Budget Highlights

Dollars in Thousands

IRS - 20
2A – Budget Decreases and Increases Description (IRS) 

Total Changes to Base +247,599,000 / -1,184 FTE 

Technical Adjustments to FY 2007 Base Due to CR 

+$27,573,000 / 0 FTE

An increase of $27.6 million is included as a technical adjustment to the FY 2007 base. 

This adjustment restores $21.9 million for BSM labor and projects and $5.7 for Operations 

Support infrastructure. 

Maintaining Current Levels (MCLs)

+$340,007,000 / 0 FTE 

Funds are requested for the FY 2008 costs of the annualization of the FY 2007 federal 

pay raise in FY 2008; the proposed FY 2008 federal pay raise; and other labor-related 

benefits; and non-labor related items such as contracts, travel, supplies, equipment, 

postage, and GSA rent. 

Efficiency Savings

 -$119,981,000 / -1,184 FTE

The IRS has identified organizational changes designed to increase operating efficiencies 

and reduce costs for FY 2008. 

In the enforcement programs, the IRS will realize a savings of $82.3 million and 643 FTE 

as a result of efficiency improvements. Savings will be achieved through enhancement of 

technology and support structure improvements such as deployment of the Electronic 

Installment Agreements (e-IA) system and expansion of the auto-generated notice 

initiative; streamlining and centralizing work process such as consolidating the number of 

Criminal Investigation Lead Development Centers from five to two, and expanding and 

improving implementation of the Fast Track Settlement (FTS) process (resolution of 

disputes during the examination phase rather than waiting for the appeal phase); and 

implementation of new work tools such as improved audit selection formulas. In 

addition, the completion of initial training programs by both examination and collection 

FY 2006 enforcement hires will increase efficiency by transitioning them and their 

trainers to full-time front-line activities. 

In the taxpayer service program, the IRS will realize a savings of $37.7 million and 541 

FTE. Increases in electronic filing will continue to have a significant impact on the 

Submission Processing Centers as individual paper return volumes decrease. The IRS 

will continue to achieve savings as the processing of paper returns is consolidated into 

fewer Submission Processing Centers. Additional savings will be gained through the 

implementation of technological improvements such as automating the issuance of 

Employer Identification Numbers and implementation of the Taxpayer Assistance 

Blueprint study recommendations. 

IRS - 21
Total FY 2008 Program Changes +$409,536,000 / +1,584 FTE 

Program Decreases/Savings -$6,479,000 / 0 FTE 

Increased e-File Savings

- $6,479,000 / 0 FTE 

This reduction is a result of savings from a projected decrease in FY 2008 of 

4.2 million (3.7 million individual and 0.5 million business) paper returns filed. Starting 

in FY 2007 and continuing through FY 2008, the IRS will ramp down the Philadelphia 

Submission Processing Center, generating savings of $6.5 million. The savings will be 

reinvested under the Increase Efficiency through Submission Processing Site 

Consolidations initiative to fund anticipated severance pay costs in FY 2008. 

The following table shows the actual and projected percent of returns processed 

electronically for FY 2004 – FY 2010 for individual and business returns. 

Measure FY 2004 

Actual 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Plan 

FY 2008 

Estimate 

FY 2009 

Estimate 

FY 2010 

Estimate 

Percent of 

Individual 

Returns 

Processed 

Electronically 

46.5 51.1 55.0 57.0 61.6 64.5 67.0 

Percent of 

Business 

Returns 

Processed 

Electronically 

17.4 17.8 17.8 19.5 21.2 23.6 25.2 

The IRS continues to strive to meet the established goal of 80 percent of all tax returns to 

be filed electronically. While the IRS has implemented several technological advances, 

such as modernizing the 1040 e-File system, projections show that the 80 percent e-File 

goal will not be met in FY 2007. As the IRS moves toward its strategic goal to improve 

taxpayer service by expanding options for electronic filing, payments, and 

communications, additional improvements in technology will be used to increase e-File 

marketing strategies to meet this goal in the future. However, without additional 

mandates to file electronically, such as the one recently imposed for corporations, the 

IRS’ ability to meet the electronic filing goal will remain a challenge. The Budget 

includes a proposal to expand the IRS’ authority to require electronic filing by 

corporations (see the Receipts chapter on the Analytical Perspectives volume of the 

Budget for legislative proposals). 

IRS - 22
Program Reinvestments +$6,479,000/ 0 FTE 

Increase Efficiency through Submission Processing Site Consolidations

+$6,479,000 / 0 FTE

This initiative provides $6.0 million to fund severance pay for employees separating as a 

result of ramp down of the Philadelphia Processing Center and $0.5 million for shared 

support service related costs. However, the IRS will maintain a large staff of service and 

enforcement personnel in Philadelphia. 

Increased electronic filing will continue to have a significant impact on Submission 

Processing Centers as individual paper return volumes decline. Individual paper returns 

are expected to decrease by 4.2 million in FY 2008. As a result, the IRS will continue its 

initiative to consolidate the processing of individual paper returns into fewer Submission 

Processing sites. The Philadelphia Submission Processing Center is undergoing a ramp 

down in FY 2007 and FY 2008. The total costs for severance pay associated with the 

Philadelphia ramp down totals $8,174,774. However, the estimated severance pay 

amount needed in FY 2008 is $5,967,585. This initiative is a direct reinvestment of the 

Increased e-File Savings initiative. 

The total severance pay costs for the Philadelphia Processing Center ramp down are 

broken down by position type and projected on-rolls numbers in the following table: 

Work As of Oct. Placed Estimated 

Schedule 2002 Internally Severence

Analysts PERM 29 29 9 20 $876,940

Cash Clerks PERM 41 29 0 29 $403,897

SEAS 106 62 0 62 $86,575

Clerks PERM 203 108 60 48 $482,775

SEAS 702 315 120 195 $264,892

Data Transcribers PERM 43 22 2 20 $272,104

SEAS 1,198 402 0 402 $501,007

Department Mgr. PERM 14 14 0 14 $691,957

SEAS 1 1 0 1 $0

Front-line Mgr. PERM 64 51 14 37 $998,004

SEAS 22 14 0 14 $129,993

Other PERM 19 15 2 13 $101,566

SEAS 20 17 0 17 $37,085

Secretaries PERM 40 36 20 16 $361,843

Senior Mgr. PERM 10 10 0 10 $1,172,422

Tax Examiners PERM 263 212 164 48 $1,070,281

SEAS 944 677 205 472 $723,433

3,719 2,014 596 1,418 $8,174,774

726 526 271 255 $6,431,789

2,993 1,488 325 1,163 $1,742,985

3,719 2,014 596 1,418 $8,174,774

By Oct. 2006 Remaining

TOTAL

TOTAL

Permanent Employees

Seasonal Employees

Employee Category

IRS - 23
The remaining $511,000 for FY 2008 is for Agency-Wide Shared Services (AWSS) costs 

in Philadelphia and Andover, as follows: 

• Philadelphia - $125,000 for redistribution and disbursement of existing furniture and 

equipment and $285,000 for dismantling and removing double-deck shelving 

systems. 

• Andover – $101,000 for redistribution/disbursement of existing furniture and 

equipment. 

This initiative supports the IRS’ operational priority to optimize and implement planned 

Submission Processing strategies, including the downsizing of paper operations to meet 

customer increases in electronic submissions and cost efficient opportunities in working 

the remaining paper workload. Returns processing efficiency will be improved. The 

workforce will be aligned to new priorities and technologies. The ramp down and 

consolidation of the Philadelphia Submission Processing sites will not impact taxpayers. 

Program Increases +$409,536,000 / +1,584 FTE 

Infrastructure Initiatives 

Upgrade Critical IT Infrastructure 

+$60,000,000 / 0 FTE

This initiative requests $60 million to reduce the backlog of IRS information technology 

(IT) equipment that has exceeded its life cycle. This initiative will provide the resources 

needed to keep IRS IT and telecommunications equipment operable and to current 

business standards. Failure to replace the IRS’ IT infrastructure will lead to increased 

maintenance costs and will increase the risk of disrupting business operations. Currently, 

critical business systems are operating on aged and outdated hardware, with the backlog 

of aged infrastructure increasing every year. Without an effective infrastructure, the risk 

to tax administration is significant. The question facing the IRS is not “if mission-critical 

components of the infrastructure will break,” but “what will break, when, and how 

significant will the impact be on tax administration?” 

The IRS faces a significant challenge with an aged and ineffective IT infrastructure. Two 

key challenges are: (1) a backlog of aged inventory, and (2) continued aging of the 

existing inventory. 

 

To address the growth in aged inventory, the IRS has committed to reserve another 

$135 million from its base budget for infrastructure replacement over the next three 

years. In FY 2006, the IRS identified efficiencies in the base IT budget that permitted the 

permanent reallocation of $45 million into the infrastructure base. The IRS plans to 

augment this funding with additional reallocations of $45 million in both FY 2007 and 

2008. By FY 2008, the IRS plans to have established a base budget for infrastructure 

IRS - 24
replacement equal to $180 million, which will mitigate the impact of rapid growth in 

aged inventory, but will not address the backlog of aged infrastructure. 

Planned expenditures in FY 2008 include, but are not limited to, the following: 

• Replacing Aged Computers – A significant component of this initiative includes aged 

infrastructure of employee workstations (e.g., desktop and laptop computers). The 

IRS estimates that over 50% of the laptop computers supporting Compliance 

employees are overage and need replacement. This overage equipment results in (1) 

increased down time; (2) reduced capability to communicate effectively; and (3) 

delays in retrieval of taxpayer data that is vital to daily compliance/enforcement 

activities. 

• Automated Call Distributor (ACD) Hardware – ACD hardware routes incoming and 

outgoing telephone calls to taxpayer assistance agents, operating as the electronic 

heart of the IRS call centers. Failed hardware could result in incoming taxpayer calls 

being routed improperly or dropped. 

• Prioritized Mission Critical Servers – Critical tax processing applications and 

solutions are currently operating on aged servers, with this problem worsening by 

2008. Failed hardware has recently resulted in permanent loss of business data as 

well as work stoppage of fundamental business processes. 

• WAN/LAN Routers and Switches – Routers and switches support not only IRS 

personal computer and laptops, but the data communication between systems. Failed 

WAN/LAN hardware can lead to poor application performance or communication 

shutdown, causing taxpayer information not being routed to the next step, or agents 

not being able to retrieve tax records in a timely manner. 

Enhance Computer Security Incident Response Center (CSIRC) and Network 

Infrastructure Security 

+$21,000,000 / 0 FTE

This initiative provides $13.1 million to fund enhancements for the Computer Security 

Incident Response Center (CSIRC). This will enable the IRS to keep pace with the everchanging security threat environment through increased detection and analysis capability, 

improved forensics, and the capacity to identify and respond to potential intrusions before 

they occur. 

The number of vulnerabilities (software flaw or configuration weakness) are rapidly 

increasing each year. These security vulnerabilities expose enterprise systems and 

processes to unnecessary risk of potential intrusions or unauthorized access, 

compromise/disclosure of sensitive taxpayer data, and/or disruption of service and 

process availability. Potential impacts include: 

• The disclosure of taxpayer data or disruption of electronic filing initiatives could have 

a crippling effect on the IRS mission and the taxpayers. 

IRS - 25
• Cyber-security breach could have a significant adverse impact on the IRS’ 

enforcement activities. A major incident could result in a significant disruption to 

enforcement efforts, costing numerous days of recovery efforts and inability to detect 

and protect IRS systems from cyber worms, such as the Sasser worm outbreak in 

2004, which resulted in a direct IRS business loss of more than $50 million. 

This initiative will mitigate these by employing additional security safeguards, using 

defense-in-depth, best-of-breed security technologies. This funding will establish a 

foundation to preemptively mitigate such risk in Modernization Project Support, Voice 

Over Internet Protocol, E-Filing, E-Commerce, adherence to the E-Gov initiative, the 

President's Management Agenda, Virtual Office, maintaining distinct network 

environments, TIGTA/OMB audits/recommendations, and support to FISMA 

compliance. 

In addition, this initiative includes $7.9 million to enhance network infrastructure 

security. These funds will provide the IRS capability to perform continuous monitoring 

of the security of operational systems, using security tools, tactics, techniques and 

procedures to perform network security compliance monitoring of all IT assets on the 

network. This will ensure all systems have the latest security patches and are in 

compliance with security configuration control requirements. 

Fund Business Systems Modernization

+$62,149,000 / 0 FTE

This initiative requests an additional $62.1 million to continue the development and 

deployment of the IRS modernization program in line with the Modernization Vision and 

Strategy (MV&S) recommendations. This increase will result in a total budget request 

for BSM of $282.1 million in FY 2008, and will allow the IRS to make progress on the 

following modernization projects: 

Customer Account Data Engine (CADE) 

• The IRS requests $58.5 million for CADE. CADE is IRS’ lynchpin 

modernization project replacing the antiquated master file. These master files are 

based on flat files with weekly updates achieved by batch processing of a 

sequential file repository. As a result, it takes the IRS two weeks to update 

taxpayer tax accounts. This performance compares poorly to the real-time 

updates provided by all other financial institutions. The delay in updating data 

allows data inconsistencies to develop among the various applications in use 

across the IRS. 

 

The master file system, based on 1960s architecture, uses programming language 

no longer taught or used elsewhere. That, coupled with the lack of system 

documentation, puts continued maintenance and updating of the master files at 

risk. Other downsides to the current master file system include high maintenance 

and operational costs, difficulty implementing policy or tax law changes, and 

IRS - 26
incompatibility with private industry and other government agencies’ systems, 

which limits IRS’ ability to partner with other parties and prevents electronic data 

exchanges. CADE will solve these problems. The IRS is developing CADE in 

stages and expects to be able to retire the Individual Master File in 2012. When 

fully operational, the CADE database will house tax information for more than 

200 million individual and business taxpayers’ returns. In FY 2008, 

$58.5 million will continue work on the CADE release content master plan. 

Account Management Services (AMS) 

• IRS is requesting $28.983 million for the Account Management Services Project 

(AMS). The initiative provides a Common User Interface for access and update 

of taxpayer accounts managed by CADE and the Individual Master File, 

Corporate Files on Line, and the Integrated Data Retrieval System. It will provide 

an enterprise-enabled inventory workflow capability (including referrals, assign, 

review, and audit) across operating divisions. Specific capabilities include the 

access and update of both legacy and CADE account information, account 

monitoring, management of activity history (Case History), and the generation of 

notices. AMS will provide immediate access to integrated account data, which 

improves the ability to resolve account inquiries with minimal taxpayer 

interaction and facilitates the taxpayer’s ability to self assist or self correct. AMS 

will allow IRS staff to create new accounts online at the request of a taxpayer. 

Also, it will assess taxpayers’ account status, trigger actions, and generate notices 

or letters based on selected queries.

A Schematic Showing Where CADE and AMS fit in the Taxpayer Data Flow 

Returns, 

Payments

Correspondenc

e

Post, Settle

Accounts Integrated Data 

Retrieval System

Capture 

Data

From Paper

Weekly

Daily Daily

Daily/

On Demand

Weekly Weekly

Customer Service Systems

Collection Systems

Master

Files

Taxpayer (Telephone & Correspondence)

Revenue

Accounting

Financial

Reporting

Treasury, GAO

Submissions Processing

Paper

Active Accounts

Taxpayer Account (10%)

Processing

(Computing Center)

Electronic 

Returns, Payments

Correspondence

Electronic 

Receipt of

Submissions

Validate &

Perfect

Data

Examination Systems

Corporate Files

On-Line

IDRS Database with 

replicated & new data

Daily

Daily/Weekly &

On Demand

Daily/

On Demand

Workflow, Work Management, Case Management, Pending 

Updates Customer Communications

Customer Account Data Engine

(CADE)

Account 

Management Services

• Post Transactions (tax 

assessments, payments, 

interest, penalty, 

extensions, bankruptcy, 

address changes, etc.

• Issue Refunds

• Identify Account Issues

• Generate Notices

• Financial balance and 

controls

• On-Line tools to view and 

update taxpayer data 

(adjustments, transfer 

money, apply credits, and 

do other updates to taxpayer 

accounts)

• Record activity history

• Monitor Account for follow 

up activity

• Compose and print notices

• Generate Notices

Taxpayers

Taxpayer 

Accounts

Tax 

Returns

Case / 

Activity

History

CADE applications 

update and maintain 

complete, timely and 

accurate information 

about the taxpayer, their 

accounts, and tax 

returns. This information 

is available for on 

demand access and 

update.

IRS - 27
Modernized e-File 

• In FY 2008, the IRS is requesting $55.802 million to fund the development of the 

1040 on the Modernized e-File (MeF) platform. The development and 

implementation of the MeF 1040 will take two years. MeF is the future of 

electronic filing. It provides a single XML-based standard for filing electronic tax 

returns. Standardizing the formats/structures for all filings will allow transmitters 

to submit multiple return types (such as 1120 and 941s) in the same transmission, 

something that restrains e-file growth currently. Tax return data will be stored in 

XML format in a modernized Tax Return Database with web-based access, 

allowing all viewers of the data to use their internet browser to view the entire tax 

return online, and it will look just like the paper document. 

Common Services Projects 

• The IRS is requesting $16 million for the introduction of the Common Services 

Projects (CSP), providing funding for new portals, which are technology 

platforms that meet many IRS business needs through web-based front-ends and 

provide secure access to data, applications, and services. 

 

The portals are mission-critical components of the enterprise infrastructure 

required to support key business processes and compliance initiatives. A new 

portal infrastructure must be acquired and fully operational, with all applications 

transitioned before November 2008. The contracts for the existing portals 

(registered user portal, employee user portal, and public user portal/IRS.gov) 

expired in May 2006 and sole-source extensions have been approved, with the 

provision that the current portals will be replaced by November 2008. The IRS 

portals support Underreporter initiatives in the Examination and Criminal 

Investigations programs; and Underpayment initiatives in Collection; Modernized 

E-file; and other E-Government, E-services, and user fee initiatives. The current 

portals, designed in the late 1990s and implemented in 2000 and 2001, are 

outdated; capacity is limited; and 90 percent of the hardware components and 

70 percent of software products supporting the current portals have reached or 

exceeded their useful life. 

Funds for CSP cover the costs of program/contract management; design and 

engineering for the new portal environment; planning and testing of new portalrelated application projects and modification of existing projects (E-services, 

E-file, Integrated Financial System, Internet Refund/Fact of Filing, etc.) to run on 

the new portals; new portal security mechanisms for access control, intrusion 

detection, identity management, auditing; and acquisition of new portal 

development, test and production environments. 

The benefits accruing from delivery and implementation of BSM projects provide 

value to taxpayers, the business community, and government. Many of these 

benefits contribute to operational improvements and efficiencies within the IRS. 

IRS - 28
The program combines best practices and expertise in business solutions and 

internal management from IRS, business, and technology sectors to develop a 

world-class tax administration system. The BSM program has made sustained 

progress in realizing substantial segments of the modernization vision. 

The IRS will work to allocate BSM staffing costs for the FY 2009 President’s 

 Budget. 

Enforcement Initiatives 

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 

+$41,022,000 / +258 FTE

This initiative funds research studies of reporting compliance for new segments of 

taxpayers (such as partnerships, corporations, other business entities, exempt 

organizations, and government entities), and updates existing estimates of reporting 

compliance (individual taxpayers and S-corporations). This initiative establishes a base of 

operating division examiners for various reporting compliance studies, based on the 

needed expertise for the study. Unlike in the past, these examiners will conduct an 

annual study of compliance among 1040 filers based on a smaller sample size than the 

2001 National Research Program study. This will provide some fresh compliance data 

each year, and by combining samples over several years will provide a regular update to 

the larger sample size needed to keep IRS’ targeting systems and compliance estimates 

up to date. 

The data captured during the studies will enable the IRS to develop strategies to combat 

specific areas of non-compliance and improve voluntary compliance. Efforts under this 

initiative will significantly help improve the allocation of resources by providing data that 

will allow the IRS to target audits toward taxpayers who are least compliant with the tax 

law. This initiative will increase enforcement revenue and also help improve voluntary 

compliance. Moreover, the initiative will enable IRS to undertake reporting compliance 

studies in the tax-exempt sector, which is responsible for about one-quarter of overall 

employment. This initiative benefits taxpayers by increasing the fairness of the tax 

system and significantly improving workload selection formulas that reduce the burden 

of unnecessary taxpayer contacts. Ultimately, these efforts will provide benchmarks 

against which the IRS can evaluate the effectiveness of programs designed to improve 

compliance and will allow the IRS to better leverage enforcement resources. 

Improve Compliance Among Small Business and Self-Employed Taxpayers 

+$73,165,000 / +485 FTE

This initiative will improve compliance among Small Business and SelfEmployed (SB/SE) taxpayers in the elements of reporting, filing, and payment 

compliance. This request will produce $144 million in additional annual 

enforcement revenue, once the new hires reach full potential in FY 2010, by increasing 

IRS - 29
audits of high-risk tax returns, collecting unpaid taxes from filed and unfiled tax returns, 

and investigating, and where appropriate, prosecuting, persons who have evaded taxes. 

For Tax Year 2001, the gross tax gap is estimated to be $345 billion (net $290 billion), 

16 percent of the $2.1 trillion in total tax liability. Of that amount, 75 percent, or 

$259 billion, is attributable to SB/SE taxpayers. Underreporting accounts for 82 percent 

of the total tax gap, with the remainder almost evenly divided between non-filing (eight 

percent) and underpaying (ten percent). 

High-risk areas of under-reporting include abusive tax schemes, flow-through income, 

and high-income individuals. Approximately 98 percent of all flow-through filings 

(S-corporations, partnerships, and trusts) are SB/SE taxpayers. All flow-through filings 

increased from 9.1 million in Tax Year 2000 to nearly 9.4 million in Tax Year 2003, and 

are expected to reach 10.4 million by Tax Year 2006 – a 14 percent increase since Tax 

Year 2000. The IRS projects them to increase by 20 percent by Tax Year 2012. 

Increasing examinations of and improving reporting for these filings is a critical 

component of addressing the tax gap. 

Revenue Agents will continue to focus on Abusive Tax Avoidance Transactions 

(ATAT), structured transactions, and corporate and high-income examinations involving 

flow-through entities (i.e., trusts, partnerships, S-corporations). With this funding in 

FY 2008, 207 field examination staff will examine an additional 3,100 individual returns 

and 430 additional business returns, generating approximately $26.4 million. The IRS 

anticipates that an additional 5,400 business returns and 36,500 individual returns will be 

examined through FY 2012. 

Collection activities will increase both the number of high-risk unpaid assessment 

accounts settled and their involvement in the collection of taxes due from abusive trusts. 

Field Collection staff (149 Revenue Officers will produce an estimated 23,000 additional 

tax delinquent accounts (TDA) in FY 2008, and approximately 113,000 through 

FY 2012. For the non-filers, these Revenue Officers will produce an estimated 5,300 tax 

delinquency investigations (TDI) in FY 2008 and approximately 24,000 through 

FY 2012. 

Detecting and investigating money laundering activity is an important part of tax 

compliance for the IRS. This initiative provides $5.4 million to strengthen enforcement 

activities of the anti-money laundering provisions of Bank Secrecy Act (P.L. No. 92-508) 

(BSA) and the USA PATRIOT Act (P. L. No. 107-56). Frequently, money-laundering 

violations are the only possible means to detect tax evaders. Fraud/BSA resources (33 

RAs), dedicated to the BSA program, will conduct approximately 390 additional Title 

31 cases in FY 2008, with an additional 2,900 cases examined through FY 2012. 

Approximately 252 additional Section 8300 cases (i.e., examination of an entity’s records 

to determine whether or not they have properly filed the Form 8300 for receipt of cash in 

excess of $10,000 in one transaction), will be examined in FY 2008, with an 

additional 1200 cases examined through FY 2012. 

IRS - 30
This initiative also provides key resources needed to support the increased case workload 

generated from this initiative: 

• Appeals (24 FTE and $3.2 million) to process additional cases generated from 

increased examination program and collection program staffing. 

• Taxpayer Advocate Service (31 FTE and $2.4 million) to support both examination 

and collection functions to ensure that the IRS follows appropriate procedures 

without creating unnecessary burden or compromising taxpayer rights. 

• Counsel (18 FTE and $2.7 million) to provide legal advice and assistance in litigating 

the increased number of cases as well as support additional tax shelter litigation, 

published tax shelter guidance, and small businesses’ need for tax reform related 

work. 

The return-on-investment (ROI) for this initiative is expected to be 2.5 once the new hires 

reach full potential in FY 2010 (see chart below.) 

R educe T ax Gap A mo ng Small B usiness

and Self-Emplo yed T axpayers

Costs, Revenues Collected, and Returned on Investment

(Dollars in M illions)

$57.2 $57.2 $63.0

$95.7

$144.0

$73.2

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

FY 2008 FY 2009 FY 2010

Costs Revenue

0.9 t o 1

1.7 t o 1

2.5 t o 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

In addition, this initiative will yield: 

• Greater coverage of high-risk, SB/SE examination and collection cases; 

• Strengthened integrity of the tax system; 

• Improved reporting, payment, and filing compliance from the small business 

community; and 

• Mitigation of the adverse impact of employee attrition on achieving Strategic Human 

Capital Goals. 

IRS - 31
This initiative will also yield the following benefits to taxpayers: 

• Enable taxpayer accounts to be resolved more efficiently and timely, reducing 

accumulated penalties and interest on unpaid assessments; 

• Improve customer satisfaction by holding high-risk taxpayers accountable for tax 

law compliance and assuring Americans that more taxpayers are paying their fair 

share; and 

• Improve voluntary compliance as taxpayers perceive increased fairness in the tax 

system. Taxpayers appreciate the value of enforcement. Some 86 percent of taxpayers 

surveyed by the Oversight Board answered that it was “not at all” acceptable to cheat 

on one’s taxes. 

Implement Legislative Proposals to Improve Compliance 

+$23,045,000 / 0 FTE

While the IRS continues to address compliance problems by improving customer service 

and using traditional methods of enforcement, the FY 2008 President’s Budget includes 

several legislative proposals that would yield $29 billion over ten years from improved 

compliance. These proposals would expand information reporting, improve compliance 

by businesses, strengthen tax administration, and expand penalties (see Receipts in the 

Analytical Perspectives volume of the 2008 President’s Budget). This enforcement 

initiative includes funding for purchasing software and making modifications to the IRS’ 

IT systems necessary to implement these legislative proposals. The Budget includes 

sixteen proposals but the explanation below focuses only on the proposals where 

implementation of funding is needed in FY 2008. 

Payment Card Reporting: 

Underreported business income among members of the SB/SE community accounts for a 

significant portion of the individual income tax gap. Businesses often receive payments 

for goods or services via a consumer’s payment card, but subsequently fail to report the 

income for transactions on the business’ federal income tax return. These underreported 

transactions add up to be significant contributors to the tax gap. 

This proposal will address this portion of the tax gap by providing the IRS with an 

additional means of cross-referencing the income reported by businesses with their gross 

receipts. Under this proposal, the IRS would require payment card processors to annually 

report total reimbursements paid to businesses for goods and services. The reported 

amount would then be compared to gross receipts reported by taxpayers on their federal 

returns. A significant difference in the dollar values of the reimbursements by payment 

card companies and the gross receipts reported by businesses would be a red flag that 

income was possibly being underreported. 

IRS - 32
The IRS anticipates that this proposal will help reduce the tax gap in two ways. First, 

businesses that might otherwise be inclined to underreport their income might reconsider, 

knowing the IRS has a means to validate the gross income reported on their federal tax 

returns. Second, businesses that continue to abrogate their responsibilities as taxpayers 

would be more easily identified, so that appropriate enforcement action could be taken. 

The IRS anticipates receiving approximately 125 million information return documents 

from credit and debit card processors per year, associated with approximately five million 

SB/SE taxpayers. Revenue Agents in the field could then follow up with delinquent 

taxpayers in the course of standard enforcement operations. 

Government Payment: 

One of the most high-profile components of the tax gap relates to the failure of some 

government vendors and contractors to meet their tax filing and payment obligations. 

Obviously, it is a major concern any time an entity does business with the government, 

receives payment from the government, and yet fails to pay taxes due to the government. 

Under present law, the federal government has broad authority to levy federal payments 

made to vendors of goods and services. The proposal would authorize the 

implementation of regulations requiring information reporting and backup withholding 

on all non-wage payments by federal, state, and local governments to procure property 

and services. 

As part of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), enacted 

on May 17, 2006, Congress enacted a provision requiring three percent withholding on 

certain government vendor payments. This provision is broader than the 

Administration’s proposal in that it requires information reporting and immediate 

withholding on government payments, rather than information reporting and backup 

withholding. The TIPRA provision applies only to payments made after December 31, 

2010, whereas the Administration’s proposal would be effective for payments made on or 

after January 1, 2008. 

If the Administration’s proposal, the IRS anticipates receiving an additional 89 to 177 

million information returns as a result of the new reporting requirements. The costs 

associated with implementation of this program are for reprogramming affected 

information technology systems. Once these initial costs have been incurred, subsequent 

costs will decrease as processing, transcription, and matching activities will occur largely 

within existing workgroups. 

Information Reporting on Payments to Corporations: 

Underreporting of income where there is little or no information reporting contributes to 

approximately 53.9 percent of the underreporting portion of the tax gap. Under current 

law, businesses are not required to issue Forms 1099 for services provided by 

corporations. Although the reporting requirements for corporations could be expanded 

by changing the regulations, Treasury recommends it be changed legislatively. 

IRS - 33
Implementation of this proposal will increase the number of Forms 1099 filed. Voluntary 

compliance is expected to increase for corporate reporting of 1099 amounts. The IRS 

would require additional resources to implement matching programs to address the 

increased volume of Forms 1099. 

Basis Reporting on Security Sales: 

GAO estimates that 36 percent of individual taxpayers misreported their securities capital 

gains or losses in 2001. The estimated capital gains tax gap is $11 billion dollars. This 

amount will be significantly reduced by requiring financial institutions to: 

• report the adjusted cost basis of securities sold and the nature of the sale (short-term 

or long-term) to the IRS, and 

• exchange information to enable other financial institutions to meet adjusted cost basis 

reporting requirements for clients that transfer securities to a successor financial 

institution. 

In those instances where a broker does not have sufficient information to compute the 

adjusted cost basis, the taxpayer will be responsible for reporting the sale. 

Expanded Broker Information Reporting:

Sales of property and collectibles done via auction brokers and consignment sellers 

represent a portion of the tax gap. A broker who is an auctioneer or operates a 

consignment business, whether electronic or at a physical retail location, would be 

required to make an information return showing customer name, address, and Taxpayer 

Identification Number, as well as gross proceeds from the sale of tangible personal 

property. The requirement would apply only with respect to a customer for whom the 

broker has handled 100 or more separate transactions generating at least $5,000 in gross 

proceeds in a year. There would be an exception from the proposed requirement (and the 

sale would not be taken into account for the 100 transactions/$5,000 gross proceeds test) 

if the sale is required to be reported by other information return requirements (such as 

payment card sales the gross proceeds of which would be reported through the payment 

card payment system). 

Increase Information Return Penalties: 

The IRS currently asserts a penalty for failure to file a correct information return. The 

current penalty amount of $50 (or $100 for intentional disregard) provides little incentive 

to increase compliance. This proposal, will enhance compliance in this area by 

increasing the penalty amount and eliminate the cap to increase the cost of doing business 

for perpetual offenders. The penalty will be increased to $150/$250 for each unfilled 

return. 

During the 2005 Tax Year, 53,821 payers received a Proposed Penalty Notice for failure 

to timely and accurately provide Forms 1099. While penalties are not considered a 

revenue source since they are inversely related to compliance, placing a monetary price 

on non-compliance is expected to result in significant revenue, enhanced voluntary 

compliance and a diminishing penalty rate over time. 

IRS - 34
Provide IRS with Access to NDNH Database

The Department of Health and Human Services maintains the National Directory of New 

Hires (NDNH) which contains newly hired employee data, quarterly wage data from state 

and federal employment security agencies, and unemployment benefit data. Currently, 

the IRS may obtain NDNH data only for administering the Earned Income Tax Credit and 

verifying employment reported on a return. 

Employment data, used by the IRS to administer a wide range of tax provisions, is 

currently obtained on a state by state basis, which is both time consuming and costly. 

This legislative proposal would amend the Social Security Act to allow the IRS access to 

the NDNH for general tax administration, including data matching, verification of 

taxpayer claims, preparation of substitute returns for non-compliant taxpayers, and 

identification of levy sources. Expanded IRS access to NDNH data will increase 

productivity and enhance compliance. 

Increase Compliance for Large Multinational Businesses

+$26,200,000 / +158 FTE

This initiative will increase examination coverage for large, complex business returns; 

foreign residents; and smaller corporations with significant international activity. The 

initiative addresses risks arising from the rapid increase in globalization, and the related 

increase in foreign business activity and multi-national transactions where the potential 

for non-compliance is significant in the reporting of transactions that occur across 

differing tax jurisdictions. Additionally, flow-through filings and the use of special 

purpose entities, for both non-tax and tax-related reasons, continue to increase. 

Additional compliance resources will increase coverage for these areas of risk and reduce 

corporate and individual underreporting. An increase in examination coverage and IRS 

presence has a positive impact on overall compliance levels. With this initiative, coverage 

for large corporate and flow-through returns will increase to 8.2 percent in FY 2008 from 

a level of 7.9 percent without the initiative. 

Impact of Enforcement Initiative and Partial Reinvestment of Efficiencies 

Corporate > $10M and Flow-Throughs

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

20,000

2007 2008 2009 2010 2011

Fiscal Year

Closed Returns

Revised

Baseline (4917

FTE)

Revised initiative

(4909 FTE)

Audit Coverage Rate

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

2007 2008 2009 2010 2011

Fiscal Year

Audit Coverage

Revised Baseline

(4917 FTE)

Revised initiative

(4909 FTE)

IRS - 35
There are multiple issues, patterns, and indicators of risk for these complex flow-through 

enterprises and multi-national taxpayers: 

• Flow-through filings (Form 1120S, U.S. Income Tax Return for an S-corporation, and 

Form 1065, U.S. Return of Partnership Income) have increased 40 percent, from 

about 77,800 filings in 2000 to 109,300 in 2004. 

• Flow-through returns now comprise approximately 63 percent of the Large and 

Midsize Business return population. 

• Flow-through challenges for tax administration include savings in federal tax without 

economic substance to transactions; artificially-inflated bases to disguise real gains; 

basis shifting between related entities for tax advantages, contrary to valid accounting 

and tax practices; structured financial transactions within complex enterprises, 

including the use of Special Purpose Entities; transfer of high-value/low-basis assets 

in partnerships; aggressive interpretation of business purpose; and transfer pricing. 

• Globalization is increasing. 

• U.S. multi-national overseas profits are significantly higher than profits posted by 

U.S. companies at home. 

• Sixty percent of world trade is transacted between different arms of multi-nationals. 

• Low- and no-tax jurisdiction countries are home to 58 percent of the foreign profits of 

U.S. multi-nationals. 

• From 1999 to 2004, the amount of Foreign Tax Credit (FTC) claimed increased 

31 percent to $45 billion. The largest returns account for over 93 percent of the total 

FTC claimed for the years 1999-2004. 

• The number and value of cross-border mergers and acquisitions are growing. In 

2005, 11,000 deals were set up with a value of $1.2 billion. 

• The tax issues arising from businesses operating world-wide include Transfer Pricing; 

Foreign Tax Credit; Worthless Stock Deduction; Avoidance of Subpart F Income; 

Valuation Issues; Transfer of Property (tangible and intangible) and income streams; 

Potential Tax Shelters; and Dual Consolidated Losses. 

This initiative includes resources to establish a physical presence and focal point for tax 

treaty and U.S. tax administration in Asia. Outsourcing and growth of Asian businesses 

and markets have resulted in: 

• Significant increases in U.S. corporate business activity and investment in China, 

which requires greater interaction with Chinese tax officials with the administration 

of the U.S.-China Income Tax Treaty. 

• Increased activity on potential double-taxation matters, exchange of information 

activities, and tax treaty interpretation issues with China. 

• Increased American expatriate population and U.S.-owned business/corporate entities 

in China, resulting in greater local demand for IRS taxpayer service and assistance. 

• The Beijing post will serve as the Asia regional office for all IRS activities and will 

support treaty administration with other significant economic partners, e.g., Japan and 

Korea. With the closure of the Tokyo and Singapore posts, Beijing will be the only 

IRS office in Asia. 

IRS - 36
• A Chinese presence will help deter non-compliance among this growing expatriate 

population and address the concern by GAO of a high non-filing rate by U.S. citizens 

living abroad. 

• Chinese multinational businesses and Chinese outsourcing are both growing. The 

post will also provide tax guidance for Chinese citizens that work temporarily in the 

U.S. (Non-resident Alien Taxpayers). 

In addition to the 4 FTE and related funds to establish a Beijing post, this initiative 

includes 50 FTE to close 330 additional smaller corporate returns with international 

activity and 1,571 additional individual returns as well as 14 FTE for the IRS Counsel 

attorneys to advise revenue agents on complicated issues of tax law and accounting 

principles in the context of flow-through enterprises. The initiative also addresses GAO 

and Treasury Inspector General for Tax Administration (TIGTA) concerns about 

unacceptably high non-compliance by partnerships and S-corporations. 

Increase Compliance for

Large M ultinational Businesses

Costs, Revenues Collected, and Returned on Investment

(Dollars in M illions)

$22.7 $22.7

$31.2

$43.6

$73.6

$26.2

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

FY 2008 FY 2009 FY 2010

Costs Revenue

1.2 t o 1

1.9 t o 1

3.2 t o 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

Expand Document Matching in Existing Sites 

+$27,958,000 / +214 FTE

This initiative increases coverage within the IRS Automated Underreporter (AUR) 

program to address the tax gap by minimizing revenue loss through increased document 

matching of individual taxpayer account information. These resources will increase 

enforcement revenue collected by approximately $208 million annually, once the new 

hires reach full potential in FY 2010. 

About 6.9 million Small Business Self-Employed (SB/SE) taxpayers may currently 

misreport their income based on third party information returns. Of those, the SB/SE 

AUR program processes approximately 2.1 million taxpayer cases, leaving an 

unaddressed gap of 4.8 million taxpayers. The objective of the AUR program is to 

minimize revenue loss through document matching of small business and self-employed 

taxpayer account information. The IRS commitment to maintaining a robust AUR 

IRS - 37
program is demonstrated by a commitment to increasing enforcement results and is 

reflected in targets for the long-term goals and corresponding performance targets. 

The additional resources will increase the number of AUR closures from 2.05 million in 

FY 2007 to 2.64 million in FY 2010. The AUR program has one of the highest returns 

on investment ratios of all compliance programs. By 2010, the return on investment, as 

shown below, is expected to reach 8.5:1. 

Expand D ocument M at ching in Exist ing Sit es

C ost s, R evenues C ollect ed , and R et urn on Invest ment 

( Dollars in M illions)

$25 $25

$94

$166

$208

$28

$0

$50

$100

$150

$200

$250

FY 2008 FY 2009 FY 2010

Costs Revenue

3.4 t o 1

6.8 t o 1

8.5 to 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

This funding for this initiative will maximize coverage in the three existing sites 

(Brookhaven, Philadelphia, and Ogden) and establish a new, centralized small business 

and self-employed AUR toll-free operation, using available space at an existing AUR 

site. Establishment of an operation designed exclusively to handle the SB/SE AUR tollfree traffic will enable significant coverage expansion in the three existing sites and, 

ultimately, generate productivity savings in the designated call site. Current technology 

allows for the routing of calls to a single site. In addition, start-up costs are reduced 

because equipment currently available at the three existing sites will be used to establish 

a new toll-free operation. 

This initiative links the IRS compliance resources to clearly defined, measurable, resultsoriented annual performance outcomes. It further addresses widespread concerns 

regarding the erosion of the IRS’ enforcement presence and the continued growth in noncompliance expressed by TIGTA, GAO, Congress, and the media. By decreasing the 

AUR tax gap, this initiative will serve to improve the long-term Voluntary Compliance 

Rate metric and increase the programmatic long-term goal of AUR Coverage. 

Establish New Document Matching – Kansas City 

+$23,453,000 / +208 FTE

This funding for this initiative will establish a new Automated Underreporter (AUR) site 

in existing IRS space in Kansas City. The AUR program minimizes revenue loss through 

IRS - 38
document matching of individual taxpayer account information. The AUR program has 

one of the highest return on investment ratios of all compliance programs. The number of 

individual taxpayers who may annually misreport their income is about 5.1 million based 

on third party information returns. The AUR program currently processes about 2.3 

million taxpayer cases. 

One-time start up costs include designing space alterations, new work stations, furniture, 

infrastructure changes, computer equipment, initial training and travel costs, and 

relocation expenses. The on-going operational costs to process daily and weekly AUR 

computer runs and support weekly maintenance of the AUR system also are included. 

 

Establish N ew D o cument M atching - Kansas C ity

Costs, Revenues Collected, and Returned on Investment

(Dollars in M illions)

$19 $19

$83

$146

$183

$24

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

FY 2008 FY 2009 FY 2010

Costs Revenue

3.5 t o 1

7.8 t o 1

9.8 t o 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

The establishment of this new AUR site will result in $183 million in additional 

enforcement revenue annually, once the new hires reach full potential in FY 2010. 

This initiative links IRS compliance resources to clearly defined, measurable, resultsoriented annual performance outcomes. It addresses the erosion of the IRS’ enforcement 

presence and the continued growth in non-compliance expressed by TIGTA, GAO, 

Congress, and the media. The initiative will also help decrease the tax gap, increase 

voluntary compliance, and reduce the number of taxpayers who underreport income in 

future tax years. 

Increase Individual Filing Compliance 

+$6,544,000 / +61 FTE

This initiative will help address voluntary compliance. The Automated Substitute for 

Return Refund Hold Program (ASFR Refund Hold) minimizes revenue loss by holding 

the current-year refunds of taxpayers who are delinquent in filing individual income tax 

returns and are expected to owe additional taxes and addresses both payment and filing 

compliance for the IRS. This program will enable the IRS to review any unfiled returns 

during the previous five years. The current-year held refund is applied or released once 

IRS - 39
delinquent returns are filed or assessed. This initiative will expand the program to 

include delinquent-year refunds. 

Approximately 42 million individual prior-year returns were delinquent for tax years 

2000 to 2004. In FY 2006, the ASFR Refund Hold program is projected to work 

approximately 242,000 current-year Refund Holds. ASFR Refund Hold is a key 

enforcement tool to address filing compliance. 

Increase Individual Filing Compliance

Costs, Revenues Collected, and Returned on Investment

(Dollars in Millions)

$6 $6

$37

$66

$82

$7

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

FY 2008 FY 2009 FY 2010

Costs Revenue

5.7 to 1

11.3 to 1

14.2 to 1

NOTE: The initiative will improve voluntary compliance by providing a more 

effective deterrent. The chart depicts only direct enforcement revenue. 

This initiative will result in securing 90,000 delinquent returns in FY 2008 and produce 

$82 million of additional enforcement revenue annually, once new hires reach full 

potential in FY 2010. 

Increase Tax-Exempt Entity Compliance

+$15,000,000 / +109 FTE

The legitimate tax expenditure related to the tax-exempt provisions of the Internal 

Revenue Code is estimated at $238 billion in 2008. Because of the special benefits 

afforded tax-exempt organizations, employee pension plans, and other entities with 

special tax status, these provisions may attract fraud and abuse. Thus, it is critical to 

ensure that tax-exempt entities are legitimate when they are established, maintain 

compliance throughout their operation, and are not misused by third parties for tax 

avoidance or other unintended purposes. 

This initiative will promote compliance with applicable tax laws and regulations in the 

tax-exempt and governmental arena through a comprehensive program of up-front 

compliance activities and enhanced downstream enforcement. The determination 

process, through which tax-exempt organizations and employee retirement plans first 

seek recognition of their exempt or qualified status from IRS, may be the only formal 

compliance interaction many entities have with the IRS. As such, it provides IRS a 

valuable opportunity to ensure that the applicant's proposed design and operations are 

consistent with the applicable tax law. It further provides an opportunity to detect and 

IRS - 40
address emerging abusive behaviors before they can spread within the sector. Additional 

resources will strengthen this critical program to address the growing number of requests 

for determination. 

Downstream, this initiative will provide resources to expand enforcement programs 

aimed at tax exempt and government entities and make them more effective. Increasing 

enforcement staffing will restore coverage of the tax-exempt community, which has 

declined due to unprecedented growth in the sector and the emergence of complex 

abusive tax issues. From FY 1995 to FY 2005, the number of exempt organizations grew 

40 percent. At the same time, concerns about credit counseling agencies, excess 

executive compensation and other compliance issues related to exempt organizations are 

coming to the fore. This initiative will expand the IRS’ examination capacity to pursue 

critical compliance initiatives such as these, while also using innovative approaches to 

reverse the decline in enforcement presence in the exempt sector. An expanded Exempt 

Organizations Compliance Unit will broaden coverage, using efficient techniques to 

address limited compliance issues among tax-exempt organizations. Meanwhile, 

additional IRS staffing will meet the growing demand for self-correction in the pension 

community, resolving, through self-audits, many defects that might not otherwise have 

been identified and at a lower cost than traditional examination. 

Together, these steps will further the IRS strategic objective to deter abuse within taxexempt and governmental entities and misuse of such entities by third parties for tax 

avoidance or other unintended purposes. This initiative will increase tax exempt and 

government entity compliance contacts by 1,700 (6 percent) and employee plan/exempt 

organization (EP/EO) determinations closures by over 9,000 (8 percent) by FY 2010. In 

addition, this investment will increase performance by improving the timeliness of 

Determination and Voluntary Compliance programs. 

This initiative directly supports IRS’ Strategic Goal to enhance enforcement of the tax 

law, with the objective to deter abuse within tax-exempt and governmental entities, and 

misuse of such by third parties for tax avoidance. Additional staffing for Determination 

and Voluntary Compliance requests will also improve taxpayer service. 

Increase Criminal Tax Investigations

+$10,000,000 / +37 FTE

This initiative will provide funding to aggressively attack abusive tax schemes, corporate 

fraud, non-filers, employment tax fraud, as well as tax and other financial crimes 

identified through Bank Secrecy Act (BSA)-related examinations and case development 

efforts, which includes an emphasis on the fraud referral program. During the past 

decade, criminals capitalizing on advancements in technology and the globalization of the 

economy have contrived some of the most sophisticated tax evasion schemes in history. 

The continued threat non-compliance poses to the integrity of the American tax system is 

evidenced by the latest net tax gap estimate of $290 billion. Criminal Investigations (CI) 

robust pursuit of tax violators and the resulting publicity, foster deterrence, enhance 

voluntary compliance and reduce the tax gap. 

IRS - 41
CI is working closely with the SB/SE and LMSB operating divisions to combat abusive 

schemes through the use of parallel proceedings. This approach is particularly useful 

when dealing with tax shelters sold by financial service corporations to high net-worth 

individuals and corporations. Only a comprehensive approach can successfully defeat 

these schemes, which sometimes involve thousands of clients and billions in revenue. 

CI pursuit of tax violators over the past five years resulted in an increase in the length of 

prison sentences imposed in tax related investigations (averaging 19 to 22 months) and 

the substantial media coverage of these cases, evidenced by CI’s high publicity rates (the 

percentage of sentenced cases that have received media coverage: 67.9 percent in 

FY 2002 to 82.5 percent in FY 2006). 

Abusive tax avoidance transactions present formidable compliance challenges. The 

complex layering of schemes, the use of tax haven jurisdictions, off-shore based financial 

activities, and the increased sophistication of promoters have required CI to devote more 

investigative resources to this program area. Further, the increase in Internet-based tax 

schemes poses new challenges. 

The overall success of CI’s abusive scheme work is reflected in the stiff prison sentences 

imposed during the past five years averaging 28 to 47 months and the high publicity rate 

90.9 percent in FY 2006. Compared to the average over the past five years, CI forwarded 

4.9 percent more prosecution recommendations in FY 2006 (103 vs. 98) and had 

16.7 percent more convictions on abusive tax scheme cases (67 vs. 57). 

A report by the U.S. Senate Permanent Subcommittee on Investigations released in 

February 2005, entitled The Role of Professional Firms in the U.S. Tax Shelter Industry, 

recommended that Congress appropriate additional funds to enable the IRS to hire more 

enforcement personnel to stop the promotion of potentially abusive and illegal tax 

shelters by lawyers, accountants, and other financial professionals. 

Following the collapse of some of the nation’s largest publicly held corporations due to 

the widespread fraud and executive malfeasance, President Bush authorized the 

formation of a Department of Justice corporate fraud task force. CI has a particularly 

important role in this program area. Some of the most crucial corporate fraud related 

convictions obtained to date were for tax offenses. In FY 2006, the importance of CI’s 

role can be measured by the substantial prison sentences imposed (49 months) and the 

97.2 percent publicity rate. 

CI’s effort to combat non-filers remains at an all-time high. In partnership with the 

operating divisions, CI pursues high income, non-filers across a broad spectrum of 

professions. The results of CI’s work have been impressive, with sentences in non-filer 

cases among the most severe imposed for tax offenses. In FY 2006, non-filer initiations 

and indictments rose 9.5 percent and 12.3 percent, respectively, compared to the averages 

over the past five years. During the past five years, average prison sentences associated 

IRS - 42
with non-filer cases ranged from 34 to 49 months; and more than 80 percent of sentenced 

investigations received publicity. These cases will clearly remain a high investigative 

priority. 

CI remains committed to the fraud referral program, which continues to result in quality 

criminal investigations. Since FY 2004, CI has received 13.7 percent more fraud 

referrals (603 vs. 530) and the acceptance rate rose from 58 percent to 71.8 percent. In 

FY 2006, approximately 10.1 percent of the fraud referrals received involved an abusive 

scheme, 5.0 percent of the referrals involved employment taxes and 1.3 percent involved 

corporate fraud. 

 

Since Financial Crimes Enforcement Network (FinCEN) published regulations requiring 

non-bank, money services businesses (MSB) to comply with the same BSA record 

keeping and reporting requirements as financial institutions, more than 90,000 MSBs 

were identified. SB/SE, which has regulatory authority over MSBs, is placing greater 

attention on examining these entities. Their BSA examinations will result in increased 

criminal referrals. 

The chart below shows the impact of implementing the initiative on criminal 

investigations convictions for all CI activities. Research suggests that tax convictions 

have a significant positive impact on voluntary compliance. 

Convictions

2060

2080

2100

2120

2140

2160

2180

FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13

w /o Initiative w ith Initiative

 

Taxpayer Services Initiatives 

Research Effect of Service on Taxpayer Compliance

+$5,000,000 / +8 FTE

This initiative provides funding to enhance understanding of the role of taxpayer service 

on compliance by undertaking new research on the service needs of taxpayers. The effect 

of service on taxpayer compliance will be examined by focusing on four areas: 

1. Meeting Taxpayer Needs by Providing the Right Channel of Communication – 

Classifying the types of services taxpayers seek from various options (internet, walkin sites, toll-free hotline), preferences among these options, and the costs of providing 

IRS - 43
the services. The goal is to determine the most productive communication channels 

for the IRS and taxpayer. 

2. Better Understanding Taxpayer Burden – Update the taxpayer burden survey to 

 provide revised estimates of the compliance burden incurred by individual income 

taxpayers. Continue the development of a post-filing model to allow for the 

evaluation of proposals designed to reduce taxpayer burden, improve taxpayer 

service, and further the understanding of the relationship between service and 

compliance. 

3. Understanding Taxpayer Needs through the Errors They Make – Improve taxpayer 

service and increase voluntary compliance by identifying why taxpayers make errors 

and the relationships between errors and unclear notices and publications. Further 

research will assess the effect of proposed changes to remedy the errors. This will 

channel resources more efficiently to areas with the greatest need and reduce IRS 

burden by increasing the accuracy of returns by taxpayers who strive to be compliant. 

4. Research on the Impact of Service on Overall Levels of Voluntary Compliance –

Develop models of how taxpayer services affect voluntary compliance levels and 

measure the impact of IRS activities relating to taxpayer service on the level of 

voluntary compliance. This research will attempt to quantify the relationship between 

services provided and overall compliance. In addition to providing enhanced service 

to taxpayers, the results of the study will be instrumental in reducing the tax gap by 

increasing voluntary compliance. 

Expand Volunteer Income Tax Assistance

+$5,000,000 / +46 FTE

This initiative supports the IRS goal of improving taxpayer service. It funds additional 

resources to expand IRS volunteer return preparation, outreach and education, and 

provide financial literacy training. These services are offered to low-income, elderly, 

Limited English Proficient (LEP), and disabled taxpayers. The IRS currently partners 

with more than 60 national organizations representing financial institutions, educational 

institutions, tribal governments, community, and volunteer organizations to provide these 

services. At the local level, the IRS has formed over 290 coalitions representing 

thousands of partners supporting the Volunteer Income Tax Assistance (VITA)/Tax 

Counseling for the Elderly (TCE) effort. The additional FTE will support the IRS’ 

growing number of partners and growing taxpayer demand for these services. This 

initiative also will enable the IRS to increase its presence and training support 

opportunities for its volunteer partners. 

The Volunteer Return Preparation Program – Quality Improvement Process (VRPP-QIP) 

will continue to be a focal point in implementing this initiative. The IRS has 

implemented several enhanced processes and is working toward continued improvement 

of the accuracy of tax returns at the volunteer preparation sites. This IRS investment 

provides partners with tax law and software training, marketing materials, educational 

IRS - 44
products, research data for optimal site placement and effectiveness, supplies, technology 

support (software, computers and printers); and the necessary products, procedures and 

technical expertise for effective site operations. 

These resources will also enhance and expand the following specific initiatives to 

improve taxpayer service coverage to IRS customers: 

• Rural Strategy – The IRS has a multi-year proposal currently under development to 

expand services to rural populations in seven states that have some of the largest 

numbers of low-income taxpayers. These resources will enable the IRS to accelerate 

this rural strategy and form a coalition of foundations with a rural emphasis to further 

enable IRS to expand services to these underserved rural areas. 

• Disability Initiative – The IRS is expanding its partnering efforts with organizations 

that serve people with disabilities to ensure that this segment of the population is 

educated on the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and 

other unique benefits in the tax code. This includes increasing access to and 

utilization of free tax preparation services for persons with disabilities. 

• Native American Initiative – The IRS is continuing its partnering efforts to provide 

additional services to low-income Native, rural communities. These resources will 

assist the IRS in expanding the VITA program to Indian reservations. 

This initiative will enable the IRS to expand its outreach and education programs and 

improve the quality of the Volunteer Return Preparation Program (VRPP). This initiative 

provides the resources needed to achieve its 60 percent quality rate for VRPP in FY 2008. 

This funding will provide the additional training presence and on site support most 

requested by IRS partners and needed to improve the quality of return preparation at 

VITA sites. 

Such investment is consistent with the priorities identified in both the IRS Strategic Plan 

and the Taxpayer Assistance Blueprint. It supports increased taxpayer value 

(significantly improved awareness, access) and business value (cost efficiency) gained 

through partner-based service delivery. The IRS has already realized many of these 

benefits; however, improving the quality of the assistance is critical to sustaining the 

viability of this powerful business model. 

Implement Taxpayer Assistance Blueprint

+$10,000,000 / 0 FTE

In response to a Congressional directive, the IRS conducted a comprehensive review of 

its current portfolio of taxpayer service to create a Taxpayer Assistance Blueprint (TAB). 

The TAB outlines a five-year strategic plan to implement specific, research-based service 

initiatives. Based on the findings of the TAB study, the funding for this initiative will 

implement telephone service and Web site electronic interaction enhancements. 

IRS - 45
Continued investments in automated services and processes offer significant 

opportunities for the IRS to improve the efficiency and effectiveness of its service 

provided to taxpayers. The following information details the benefits of investing in this 

initiative. 

Telephone Service Enhancements: 

Contact Analytics ($3.5M) – Contact Analytics (CA) provides Commercial-off-the-Shelf 

(COTS) tools for evaluating contact center recordings for the purpose of identifying 

improvements. This initiative will expand the IRS’ capability to record, store, and 

analyze information received during a taxpayer telephone contact. Large segments of 

recorded messages can be selected as a group, reviewed and compared using userspecified search criteria. The analytic tools will provide the capability to drill down to 

individual recordings to hear selected conversations. 

CA will provide the broad and accurate data required to perform business process 

reengineering, as well as information needed to gain better insight into service 

preferences. CA improves the ability to measure call accuracy, timeliness, and 

professionalism--leading to process improvements and cost savings. It also will improve 

the ability to identify and respond to problems--leading to more accurate, clearer 

responses to taxpayers. Employee satisfaction will increase through improved work 

processes that allow assistors to handle more complex calls with fewer transfers. Such 

advancements will support the IRS in capturing more and better data around the service 

experience, which will result in improved understanding of service levels and potential 

enhancements. 

Estimated Wait Time ($375K) –According to the Customer Contact Council, recent 

research shows that customers rate estimated wait time as one of the top five most 

important technologies when rating Contact Centers; customers who had been exposed to 

estimated wait technology were virtually all satisfied with its features. The estimated wait 

time (EWT) enhancement will reduce taxpayer burden and increase customer satisfaction 

by informing taxpayers about their expected wait time in queue. 

Web site Interaction Enhancements: 

Expanded Portfolio of Tax Law Decision Support Tools ($5.699M) – Website 

enhancements are designed to maximize the value of IRS.gov to taxpayers and other 

external stakeholders, making the Website the first choice for obtaining the information 

and services required to comply with tax obligations. 

This enhancement will enable users to conduct key word and natural language queries 

and to get answers to tax law questions through the Frequently Asked Questions (FAQs) 

database accessed on IRS.gov. Users will be able to access standard reports, searches, 

and “Top Ten” FAQ lists. An analytics console will allow in-depth analysis of reports. 

IRS - 46
Spanish “Where’s My Refund?” ($426K) – This enhancement adds the refund status 

feature to the Spanish web page on IRS.gov, enabling the Spanish-speaking community 

to receive the same level of customer service on the web as available on the English web 

page. 

IRS - 47
Operating Levels Table 

Internal Revenue Service 

Appropriation Title: Internal Revenue Service FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 95,386 93,036 (1,318) 91,718 0 91,718 92,118

Object Classification:

11.1 Full-Time Permanent Positions............................ $5,310,233 $5,380,296 $5,314,842 $5,310,649 $5,574,665

11.3 Other than Full-Time Permanent Positions........

($65,454) ($4,193)

. 433,414 427,129 415,289 103 415,392 412,796

11.5 Other Personnel Compensation.........................

(11,840)

. 246,491 248,226 245,097 288 245,385 259,835

11.8 Special Personal Services Payments................. 16,753 16,863 0 16,863 0 16,863 17,499

11.9 Personnel Compensation (Total)................... $6,006,891 $6,072,514 $5,992,091 $5,988,289 $6,264,795

12.0 Personnel Benefits................................................ 1,620,275 1,653,086 1,641,932 1,641,819 1,712,785

13.0 Benefits to Former Personnel.............................. 67,401 62,001 54,048 131 54,179 61,623

21.0 Travel.....................................................................

(3,129)

($80,423) ($3,802)

(11,154) (113)

(7,953)

. 210,113 214,075 200,216 781 200,997 226,387

22.0 Transportation of Things......................................

(13,859)

. 26,371 27,309 0 27,309 1 27,310 28,481

23.1 Rental Payments to GSA...................................... 680,865 640,193 0 640,193 0 640,193 665,737

23.2 Rent Payments to Others...................................... 351 375 0 375 0 375 388

23.3 Communications, Utilities, & Misc........................ 367,907 366,213 358,662 1 358,663 380,022

24.0 Printing and Reproduction...................................

(7,551)

. 67,187 65,926 0 65,926 128 66,054 67,549

25.1 Advisory & Assistance Services........................... 141,597 61,049 56,789 1,529 58,318 60,143

25.2 Other Services....................................................... 641,014 620,120 608,494 607,096 707,829

25.3 Purchase of Goods/Serv. from Govt. Accts......

(4,260)

(11,626) (1,398)

... 83,494 84,247 82,988 2,141 85,129 87,374

25.4 Operation & Maintenance of Facilities................

(1,259)

. 188,951 179,710 179,159 0 179,159 182,810

25.5 Research & Development Contracts..................

(551)

. 7,469 7,272 0 7,272 0 7,272 8,177

25.6 Medical Care......................................................... 10,005 10,005 0 10,005 0 10,005 10,245

25.7 Operation & Maintenance of Equipment............. 100,296 88,543 78,154 78,003 78,912

25.8 Subsistence & Support of Persons.....................

(10,389) (151)

. 5,090 4,732 0 4,732 143 4,875 5,130

26.0 Supplies and Materials......................................... 64,415 56,873 56,624 54,634 59,168

31.0 Equipment.............................................................

(249) (1,990)

. 266,981 302,541 298,342 2,598 300,940 410,961

32.0 Lands and Structures........................................... 0 58,056 0 58,056 0 58,056 59,449

33.0 Investments & Loans............................................

(4,199)

. 000 0 0 00

41.0 Grants, Subsidies.................................................. 11,944 12,195 0 12,195 0 12,195 12,569

42.0 Insurance Claims & Indemn................................. 1,275 988 0 988 1 989 1,033

43.0 Interest and Dividends................................. 000 0 0 00

44.0 Refunds.................................................................. 000 0 0 00

91.0 Unvouchered.............................................. 3,814 3,814 0 3,814 0 3,814 3,932

Total Budget Authority....................................... $10,573,706 $10,591,837 $10,438,364 $0 $10,438,364 $11,095,499

Budget Activities:

Pre-Filing Taxpayer Assistance and Education.........

($153,473)

... $2,142,042 $2,079,151 $2,059,151 $2,046,908 $2,103,089

Enforcement ...................................................

($20,000) ($12,243)

... 4,708,441 4,797,126 4,708,405 4,660,572 4,925,498

Operations Support..........................................

(88,721) (47,833)

... 3,461,205 3,488,404 3,459,152 60,076 3,519,228 3,769,587

Business Systems Modernization........................

(29,252)

... 242,010 212,310 196,810 0 196,810 282,090

Health Insurance Tax Credit Administration............

(15,500)

... 20,008 14,846 0 14,846 0 14,846 15,235

Total Budget Authority....................................... $10,573,706 $10,591,837 $10,438,364 $0 $10,438,364 $11,095,499

Table 2.2

Dollars in Thousands

($153,473)

IRS - 48
2B – Appropriations Language and Explanation of Changes 

TITLE II – DEPARTMENT OF THE TREASURY 

INTERNAL REVENUE SERVICE 

Taxpayer Services 

For necessary expenses of the Internal Revenue Service to provide taxpayer services, 

including pre-filing taxpayer assistance and education, filing and account services, 

taxpayer advocacy services, and services as authorized by 5 U.S.C. 3109, at such rates as 

may be determined by the Commissioner, $2,103,089,000, of which up to $4,100,000 

shall be for the Tax Counseling for the Elderly Program, and of which $8,000,000 shall 

be for low-income taxpayer clinic grants. 

Enforcement 

(including Transfer of Funds) 

For necessary expenses of the Internal Revenue Service to determine and collect owed 

taxes, to provide legal and litigation support, to conduct criminal investigations, to 

enforce criminal statutes related to violations of internal revenue laws and other 

financial crimes, to purchase (for police-type use, not to exceed 850) and hire of 

passenger motor vehicles (31 U.S.C. 1343(b)), and services as authorized by 5 U.S.C. 

3109, at such rates as may be determined by the Commissioner, $4,925,498,000, of which 

not less than $57,252,000 shall be for the Interagency Crime and Drug Enforcement 

program: Provided, That up to $10,000,000 may be transferred as necessary from this 

account to Internal Revenue Service, "Operations Support" solely for the purposes of the 

Interagency Crime and Drug Enforcement program: Provided further, That this transfer 

authority shall be in addition to any other transfer authority provided in this Act.

IRS - 49
Health Insurance Tax Credit Administration 

For expenses necessary to implement the health insurance tax credit included in the 

Trade Act of 2002 (Public Law 107-210), $15,235,000. 

Operations Support 

For necessary expenses of the Internal Revenue Service to support taxpayer services and 

enforcement programs, including rent payments; facilities services; printing; postage; 

physical security; headquarters and other IRS-wide administration activities; research 

and statistics of income; telecommunications; information technology development, 

enhancement, operations, maintenance, and security; the hire of passenger motor 

vehicles (31 U.S.C. 1343(b)); and services as authorized by 5 U.S.C. 3109, at such rates 

as may be determined by the Commissioner; $3,769,587,000 of which $75,000,000 shall 

remain available until September 30, 2009, for information technology support; of which 

not to exceed $1,000,000 shall remain available until September 30, 2010, for research; 

of which not to exceed $1,600,000 shall be for the Internal Revenue Service Oversight 

Board; and of which not to exceed $25,000 shall be for official reception and 

representation. 

Business Systems Modernization 

For necessary expenses of the Internal Revenue Service's business systems modernization 

program, $282,090,000, to remain available until September 30, 2010, for the capital 

asset acquisition of information technology systems, including management and related 

contractual costs of said acquisitions, including related Internal Revenue Service labor 

costs, and contractual costs associated with operations authorized by 5 U.S.C. 3109: 

Provided, That, with the exception of labor costs, none of these funds may be obligated 

until the Internal Revenue Service submits to the Committees on Appropriations, a plan 

for expenditure that: (1) meets the capital planning and investment control review 

requirements established by the Office of Management and Budget, including Circular 

A-11; (2) complies with the Internal Revenue Service's enterprise architecture, including 

the modernization blueprint; (3) conforms with the Internal Revenue Service's enterprise 

life cycle methodology; (4) is approved by the Internal Revenue Service, the Department 

of the Treasury, and the Office of Management and Budget; (5) has been reviewed by the 

Government Accountability Office; and (6) complies with the acquisition rules, 

requirements, guidelines, and systems acquisition management practices of the Federal 

Government. 

IRS - 50
ADMINISTRATIVE PROVISIONS—INTERNAL REVENUE SERVICE 

(INCLUDING TRANSFERS OF FUND) 

 Sec. 201. Not to exceed 5 percent of any appropriation made available in this Act to the 

Internal Revenue Service or not to exceed 3 percent of appropriations under the heading 

"Enforcement'' may be transferred to any other Internal Revenue Service appropriation 

upon the advance notification of the Committees on Appropriations. 

 Sec. 202. The Internal Revenue Service shall maintain a training program to ensure 

that Internal Revenue Service employees are trained in taxpayers' rights, in dealing 

courteously with taxpayers, and in cross-cultural relations. 

 Sec. 203. The Internal Revenue Service shall institute and enforce policies and 

procedures that will safeguard the confidentiality of taxpayer information. 

 Sec. 204. Of the funds made available by this Act to the Internal Revenue Service, not 

less than $6,787,950,000 shall be available only for tax enforcement and related support 

activities funded in Internal Revenue Service, "Enforcement" and "Operations Support." 

In addition, of the funds made available by this Act to the Internal Revenue Service, and 

subject to the same terms and conditions, an additional $440,264,000 shall be available 

for tax enforcement and related support activities. 

 Sec. 205. Section 9503(a) of title 5, United States Code, is amended by striking the 

clause “for a period of 10 years after the date of enactment of this section” and replacing 

it with “before July 23, 2013”. 

 Sec. 206. Sections 9504(a) and (b), and 9505(a) of title 5, United States Code, are 

amended by striking the clause “For a period of 10 years after the date of enactment” 

each place it occurs, and replacing it with “Before July 23, 2013”. 

 Sec. 207. Section 9502(a) of title 5, United States Code, is further amended by striking 

“Office of Management and Budget” and replacing it with “Office of Personnel 

Management”. 

IRS - 51
2C – Legislative Proposals 

The IRS needs to find ways to fairly and effectively administer the tax law while 

minimizing burden on taxpayers. Tax laws are changed each year and the changes are 

aimed at simplifying the tax code, improving compliance and reducing the cost of 

administering the tax laws. The IRS works extensively with stakeholders to move closer 

to meeting the demands of the customers and eliminating barriers that prevent taxpayers 

from meeting their tax obligations. The President’s Budget includes the main categories 

of legislative proposals below. When implemented, it is estimated that these proposals 

will generate approximately $29 billion over the next ten years: 

• Expanding Information Reporting 

Compliance with the tax laws is highest when payments are subject to information 

reporting to the IRS. Specific information reporting proposals would: 

1. Require information reporting on payments to corporations; 

2. Require basis reporting on security sales; 

3. Expand broker information reporting; 

4. Require information reporting on merchant payment card reimbursements; 

5. Require a certified taxpayer identification number (TIN) from non-employee 

service providers; 

6. Require increased information reporting for certain government payments for 

property and services; and 

7. Increase information return penalties. 

• Improve Compliance by Businesses 

Improving compliance by businesses of all sizes is important. Specific proposals to 

improve compliance by businesses would: 

1. Require electronic filing by certain large businesses; 

2. Implement standards clarifying when employee leasing companies can be held 

liable for their clients’ Federal employment taxes; and 

3. Amend collection due process procedures applicable to employment tax 

liabilities. 

• Strengthen Tax Administration

The IRS has taken a number of steps under existing law to improve compliance. 

These efforts would be enhanced by specific tax administration proposals that 

would: 

1. Expand IRS access to information in the National Directory of New Hires 

 database; 

2. Permit the IRS to disclose to prison officials return information about tax 

 violations; and 

3. Make repeated failure to file a tax return a felony. 

IRS - 52
• Expand Penalties

 Penalties play an important role in discouraging intentional non-compliance. 

Specific proposals to expand penalties would: 

1. Expand preparer penalties; 

2. Impose a penalty on failure to comply with electronic filing requirements; and 

3. Create an erroneous refund claim penalty. 

• Other Miscellaneous Proposals 

The Administration has four proposals relating to IRS administrative reforms. 

1. Modify employee infractions subject to mandatory termination and permit a 

broader range of available penalties. This will strengthen taxpayer privacy 

while reducing employee anxiety resulting from unduly harsh discipline or 

unfounded allegations. 

2. Allow the IRS to terminate installment agreements when taxpayers fail to make 

timely tax deposits and file tax returns on current liabilities. 

3. Eliminate the requirement that the IRS Chief Counsel provide an opinion for 

any accepted offer-in-compromise of unpaid tax (including interest and 

penalties) equal to or exceeding $50,000. This proposal requires that the 

Secretary of the Treasury establish standards to determine when an opinion is 

appropriate. 

4. Modify the way that Financial Management Services (FMS) recovers its 

transaction fees for processing the IRS’ levies by permitting FMS to add the fee 

to the liability being recovered, thereby shifting the cost of collection to the 

delinquent taxpayer. The offset amount would be included as part of the 15-

percent limit on continuous levies against income. 

IRS - 53
Taxpayer Services 
Section 3 – Budget and Performance Plan 

Taxpayer Services (TS) 

Appropriation Description 

The Taxpayer Services appropriation provides funding for taxpayer service activities and 

programs, including forms and publications; processing tax returns and related 

documents; filing and account services; taxpayer advocacy services; and assisting 

taxpayers to understand their tax obligations, correctly file their returns, and pay taxes 

due timely. 

The Taxpayer Services budget request for FY 2008 is $2,103,089,000 in direct 

appropriations and 30,160 FTE. This is an increase of $56,181,000 or 2.7 percent, and a 

decrease of 437 FTE, over the FY 2007 Continuing Resolution (CR) Rate of 

$2,046,908,000 and 30,597 FTE. 

Appropriations Detail Table 

Taxpayer Services 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Pre-Filing Taxpayer Assistance and Education 6,206 $577,425 5,461 $559,249 6,047 $575,694 5,990 $556,693 6,031 $578,078 0.68% 3.84%

Filing and Account Services 25,844 1,564,617 25,925 1,568,209 24,844 1,503,457 24,607 1,490,215 24,129 1,525,011 -1.94% 2.33%

Subtotal New Appropriated Resources 32,050 $2,142,042 31,386 $2,127,458 30,891 $2,079,151 30,597 $2,046,908 30,160 $2,103,089 -1.43% 2.74%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 767 $51,069 997 $41,474 331 $26,824 331 $26,824 339 $27,414 2.42% 2.20%

50% Carryover 10,655

Mandatory Appropriations - User Fees 168,000 168,000 108,000 -35.71%

Available multi-year/no-year funds 13,236 3,429 15,866 15,866 6,866 -56.73%

Transfers In/Out

Subtotal Other Resources 767 $64,305 997 $55,558 331 $210,690 331 $210,690 339 $142,280 2.42% -32.47%

Total Resources Available for Obligation 32,817 $2,206,347 32,383 $2,183,016 31,222 $2,289,841 30,928 $2,257,598 30,499 $2,245,369 -1.39% -0.54%

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2006 FY 2008

Table 3.1

IRS - 54
Budget Adjustment Table 

Taxpayer Services 

FTE Amount

FY 2007 President's Budget 30,891 $2,079,151

CR-rate Adjustment (330) (20,000)

(12,243)

(527) ($23,407)

(527)

($5,968)

(5,968)

FY 2007 CR-rate 30,561 $2,059,151

Interappropriation Transfer Corrections to Budget Restructure 36

FY 2007 Operating Plan at CR-rate 30,597 $2,046,908

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $0

Base Adjustment

Maintaining Current Levels (MCLs) $71,500

Pay Annualization 10,190

Pay Inflation Adjustment 58,424

Non-Pay Inflation Adjustment 2,886

Efficiency Savings

Subtotal, Changes to Base $48,093

FY 2008 Base 30,070 $2,095,001

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings

Program Reinvestments: 0 $5,968

Increase Efficiency Through Submission Processing Site Consolidations 5,968

Program Increases:

Enforcement Initiatives 44 $4,235

Improve Compliance Among Small Business and Self-Employed Taxpayers 31 2,437

Increase Compliance for Large Multinational Businesses 4 1,055

Establish New Document Matching - Kansas City 3 248

Increase Individual Filing Compliance 6 495

Taxpayer Service Initiative 46 $3,853

Expand Volunteer Income Tax Assistance 46 3,853

Subtotal, FY 2008 Program Changes 90 $8,088

Total, FY 2008 President's Budget Request 30,160 $2,103,089

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Taxpayer Services

IRS - 55
Operating Levels Table 

Taxpayer Services 

Appropriation Title: Taxpayer Services FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 32,050 30,891 (330)

($2,143)

(11,647) (1)

(111)

($13,790)

(3,971) (981)

(15)

30,561 36 30,597 30,160

Object Classification:

11.1 Full-Time Permanent Positions............................ $1,117,586 $1,112,080 $1,109,937 $1,626 $1,111,563 $1,152,553

11.3 Other than Full-Time Permanent Positions......... 316,349 321,755 310,108 310,107 303,897

11.5 Other Personnel Compensation.......................... 76,951 76,480 0 76,480 76,369 78,525

11.8 Special Personal Services Payments................. 0 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $1,510,886 $1,510,315 $1,496,525 $1,514 $1,498,039 $1,534,975

12.0 Personnel Benefits................................................ 431,056 431,083 427,112 426,131 435,843

13.0 Benefits to Former Personnel.............................. 839 3,046 0 3,046 131 3,177 9,119

21.0 Travel...................................................................... 27,611 27,573 27,558 2 27,560 28,720

22.0 Transportation of Things....................................... 4,403 4,294 0 4,294 0 4,294 4,445

23.1 Rental Payments to GSA...................................... 0 0 0 0 0 0 0

23.2 Rent Payments to Others...................................... 0 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc........................ 3,817 4,862 0 4,862 0 4,862 4,982

24.0 Printing and Reproduction.................................... 7,773 7,898 0 7,898 35 7,933 8,124

25.1 Advisory & Assistance Services........................... 7,778 3,298 0 3,298 2,432 2,490

25.2 Other Services....................................................... 96,568 39,532 37,008 35,623 36,470

25.3 Purchase of Goods/Serv. from Govt. Accts......

(866)

(2,524) (1,385)

... 10,931 10,931 0 10,931 10,602 11,029

25.4 Operation & Maintenance of Facilities................

(329)

. 91 91 0 91 0 91 93

25.5 Research & Development Contracts................... 0 0 0 0 0 0 0

25.6 Medical Care......................................................... 0 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 8,945 8,945 0 8,945 652 667

25.8 Subsistence & Support of Persons.....................

(8,293)

. 1,467 1,418 0 1,418 9 1,427 1,475

26.0 Supplies and Materials......................................... 15,361 11,813 11,564 9,404 11,827

31.0 Equipment.............................................................. 2,556 2,158 549 2,707 80 2,787 567

32.0 Lands and Structures........................................... 0 0 0 0 0 0 0

33.0 Investments & Loans............................................

(249) (2,160)

. 00000 00

41.0 Grants, Subsidies.................................................. 11,939 11,866 0 11,866 0 11,866 12,232

42.0 Insurance Claims & Indemn................................. 21 28 0 28 0 28 31

43.0 Interest and Dividends................................. 00000 00

44.0 Refunds.................................................................. 0 0 0 0 0 0 0

91.0 Unvouchered.............................................. 00000 00

Total Budget Authority....................................... $2,142,042 $2,079,151 $2,059,151 $2,046,908 $2,103,089

Budget Activities:

Pre-filing Taxpayer Assistance & Education............

($20,000) ($12,243)

... $577,425 $575,694 $571,472 $556,693 $578,078

Filing & Account Services....................................

($4,222) ($14,779)

... 1,564,617 1,503,457 1,487,679 2,536 1,490,215 1,525,011

Total Budget Authority....................................... $2,142,042 $2,079,151 $2,059,151 $2,046,908 $2,103,089

Table 2.2

Dollars in Thousands

(15,778)

($20,000) ($12,243)

IRS - 56
TS Budget Activity: Pre-Filing Taxpayer Assistance and Education 

3A - Description 

Pre-Filing Taxpayer Assistance and Education ($578,078,000 in direct appropriation, 

$1,059,000 from reimbursable programs, and $76,000,000 from user fees) 

This budget activity funds services to assist with tax return filing, including interpretation 

of the tax laws, media, and publications. This includes the following program activities: 

 

• Filing Services Management administers pre-filing, taxpayer assistance, and 

education programs; 

• Taxpayer Communication and Education researches customer needs, prepares tax 

forms and publications; develops and manages educational programs; establishes 

partnerships with stakeholder groups; and disseminates tax information to taxpayers 

and the general public through a variety of media, including publications and 

mailings, web sites, broadcasting, and advertising; 

• Media and Publications develops understandable notices, produces forms and 

publications for printed and electronic tax materials, and supplies media production 

services to taxpayers; 

• Taxpayer Advocacy provides advocate services to taxpayers for the purpose of 

preventing future problems by identifying the underlying causes of taxpayer problems 

and participating in the development of systematic and/or procedural remedies; 

• Account Management & Assistance – Field Assistance provides face-to-face 

assistance, education, and compliance services to taxpayers. It includes return 

preparation, answering tax questions, resolving account and notice inquiries, and 

supplying forms and publications to taxpayers; 

• Taxpayer Advocate Case Processing ensures that taxpayers have an advocate to 

present their interests within the IRS to resolve taxpayers’ problems through prompt 

identification, referral, and settlement; and 

• National Distribution Center receives and processes orders for IRS forms and 

publications received from individual taxpayers, tax practitioners, and IRS tax return 

preparation partners. 

IRS - 57
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Pre-Filing Taxpayer Assistance and Education Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $565,841 $577,425 $556,693 $578,078

Offsetting Collections - Reimbursable 1,170 1,573 1,037 1,059

Mandatory Appropriations - User Fees 0 0 76,000 76,000

Total Operating Level $567,011 $578,998 $557,730 $579,137

Human Resources

Appropriated FTE 6,586 6,206 5,990 6,031

Other FTE 14 23 10

Total FTE (direct and reimbursable) 6,600 6,229 6,000 6,042

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 75.0% 80.0% 92.0% 85.2% 92.0%

Actual 76.0% 91.4% 83.0% 

Met Y Y N 

Target N/A 80.0% 85.0% 79.6% 86.0%

Actual 76.0% 80.0% 61.2%

Met Y N

Target N/A Baseline 45.7% 48.6% 51.4%

Actual 46.4% 42.5% 46.8%

Met Y

Target Baseline 80.0% 80.0% 75%-85% 75%-85%

Actual 80.0% 80.0% *

Met Y Y

Table 3.2.1 

Timeliness of Critical Filing Season 

Tax Products to the Public (Ot)

Dollars in Thousands

*Data to estimate eligibility rate is not available at this time.

Percent of Eligible Taxpayers Who 

File for EITC (Oe)

Key: Oe - Outcome Measure, Ot - Output/Workload Measure, L - Long Term Goal

Timeliness of Critical Other Tax 

Products to the Public (Ot)

Taxpayer Self Assistance Rate (Oe) 

(L)

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

11

IRS - 58
Description of Performance 

Improved service options for taxpayers and simplifying the tax process are key objectives 

under the IRS strategic goal to improve taxpayer service. Helping the public to 

understand its tax reporting and payment obligations remains a vital part of maintaining 

public confidence in administering the tax laws. The IRS continues to expand its 

outreach by relying on partner organizations such as state taxing authorities and a cadre 

of volunteer groups, such as Volunteer Income Tax Assistance (VITA), to serve taxpayer 

needs. In FY 2006, the 69,000 volunteers filed approximately 2.3 million returns, 

a seven percent increase over FY 2005. 

In FY 2006, the IRS delivered the first phase of the Taxpayer Assistance Blueprint 

(TAB), a comprehensive study that reviewed the IRS’ current taxpayer service options 

provided to taxpayers and identified areas for improvements, including expanded 

taxpayer education and awareness, optimized use of partner services, increased selfservice options, and expanded training and support tools for taxpayers. Phase II includes 

additional research and establishes the framework to develop short and long-term 

outcome goals and metrics for measuring the IRS’ progress on service improvements for 

taxpayers. 

The IRS also played a significant role in outreach and telephone assistance efforts to 

support disaster response due to the hurricanes that occurred along the gulf coast in 

August and September of 2005. The IRS assisted the Federal Emergency Management 

Agency (FEMA) by manning telephone sites to answer 948,814 disaster related 

questions. Also, a substantial number of taxpayers were contacted by the IRS and 

educated in tax related matters such as claiming property and personal losses, applying 

for filing extensions, and requesting extensions of time to pay on existing tax liabilities 

due to financial hardship. In addition, emergency tax relief bills were enacted that 

required over 230 changes to 78 tax products. Despite passage late in the tax year, 83 

percent of the critical filing season tax products and over 61.2 percent of other tax 

products were delivered to the public on time. 

The IRS continues efforts to simplify its tax forms and publications making them more 

user-friendly with the ultimate goal of providing all of its published products in electronic 

format. The FY 2006 taxpayer self-assistance rate was 46.8 percent, which exceeded the 

target of 45.7 percent. This success can be attributed primarily to the high increase in use 

of the “Where’s My Refund?” website feature, which was up 11.8 percent for the 2006 

filing season, and the addition of the Earned Income Tax Computation (EITC) tool to the 

website. 

In FY 2007 and FY 2008, the IRS will continue to simplify tax forms and publications to 

make them more user friendly for use on computer-based systems with the eventual goal 

of providing all published products in an electronic format, which should ensure that all 

critical filing season and other critical tax products are available by established deadlines. 

In addition, efforts to increase electronic filing will continue, with new forms and 

schedules added to the business electronic portfolio, leveraging partner organizations 

IRS - 59
such as state taxing authorities, and increasing use of volunteers to better serve taxpayer 

needs. 

TS Budget Activity: Filing and Account Services 

3A – Description 

Filing and Account Services ($1,525,011,000 in direct appropriation, $26,355,000 from 

reimbursable programs, and $32,000,000 from user fees) 

 

This budget activity funds programs that provide filing and account services to taxpayers, 

process paper and electronically submitted tax returns, issue refunds, and maintain 

taxpayer accounts. This includes the following program activities: 

• Filing and Account Services Management administers filing and account services 

programs; 

• Submission Processing processes paper and electronically-submitted tax returns and 

supplemental documents, accounts for tax revenues, and issues refunds and tax 

notices; 

• Account Management and Assistance – Electronic Correspondence Assistance 

provides education and compliance services to taxpayers through telephone, 

correspondence, and electronic means and to resolve account and notice inquiries, 

either electronically or by telephone; 

• Electronic Tax Administration markets and administers electronic tax administration 

products and services; and 

• Files Most Efficient Organization stores the administrative files and the most recent 

tax returns in-process that are most likely to be requested for research by various IRS 

organizations until they are forwarded to the federal records centers. 

IRS - 60
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Filing and Account Services Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $1,579,145 $1,564,617 $1,490,215 $1,525,011

Offsetting Collections - Reimbursable 36,813 49,496 25,787 26,355

Mandatory Appropriations - User Fees 0 0 92,000 32,000

Total Operating Level $1,615,958 $1,614,113 $1,516,002 $1,551,366

Human Resources

Appropriated FTE 26,892 25,844 24,607 24,129

Other FTE 453 744 321 328

Total FTE (direct and reimbursable) 27,345 26,588 24,928 24,457

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 45.0% 51.0% 55.0% 57.0% 61.6%

Actual 46.5% 51.1% 54.1%

Met Y Y N 

Target 19.6% 17.0% 18.6% 19.5% 21.2%

Actual 17.4% 17.8% 16.6%

Met N Y N

Target 85.0% 82.0% 90.0% 91.0% 91.2%

Actual 80.0% 89.0% 90.9%

Met N Y Y

Target 89.0% 89.8% 92.0% 93.3% 93.4%

Actual 89.0% 91.5% 93.2%

Met Y Y Y

Target N/A 7,261 7,477 7,702 7,880

Actual 8,015 7,585 7,414

Met Y N

Target 83.0% 82.0% 82.0% 78.0% 81.0%

Actual 87.3% 82.6% 82.0%

Met Y Y Y

Target 98.4% 98.4% 99.2% 99.2% 99.2%

Actual 98.3% 99.2% 99.3%

Met N Y Y

Percent Individual Returns 

Processed Electronically (Oe) (L)

Percent of Business Returns 

Processed Electronically (Oe) (L)

Customer Accuracy - Tax Law 

Phones (Oe)

Customer Accuracy - Accounts 

(Phones) (Oe)

Table 3.2.2

Dollars in Thousands

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Customer Contacts Resolved per 

Staff year (E)

Customer Service Representative 

(CSR) Level of Service (Oe)

Refund Timeliness - Individual 

(paper) 

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

IRS - 61
Description of Performance 

The IRS delivered a successful 2006 filing season in the midst of a very challenging year. 

Despite natural disasters that affected a large number of taxpayers and required an 

unprecedented response, the IRS processed more than 134.7 million total individual 

returns compared to 128.6 million last year, and issued more than 100 million refunds 

totaling $277 billion compared to 97.1 million refunds totaling $205.1 billion. For the 

second consecutive year, more than half, 72.8 million individual returns, were filed 

electronically, a 6.6 percent increase from FY 2005. The most significant increase in 

electronic filing came from home computer filing, which increased by 18.5 percent to 

more than 20.2 million returns. The IRS processed more than 7.7 million business 

returns electronically, a seven percent increase from last year. With an increase in both 

individual and business return filings, the IRS remains on track to have more than half of 

all returns filed electronically. 

A key objective of the IRS’ Taxpayer Service strategic is to increase electronic services 

and improve the ease of taxpayer access. Benefits of improved electronic services were 

demonstrated during the 2006 filing season. The IRS received five percent fewer 

automated calls and eight percent fewer walk-in contacts. The decline in the number of 

customers seeking face-to-face assistance in the Taxpayer Assistance Centers reflects 

taxpayers’ preference to pursue self-assisted options for receiving service. 

Studies initiated by the IRS Oversight Board and others have demonstrated taxpayer 

satisfaction with electronic access to IRS for filing tax and information returns, securing 

forms, instructions and answers including the most frequently asked question, “Where’s 

My Refund?”. Research conducted during Phase II of the TAB will identify the key 

drivers of taxpayer preference for self-assisted versus assisted customer service. 

The IRS continues to emphasize direct service to taxpayers. The Customer Service 

Representative Level of Service was 82 percent. Refund timeliness was at 99.3 percent, 

also ahead of target and prior year performance. 

The IRS and its customers place a high value on accuracy. Accuracy is one of the 

reasons cited by taxpayers who prefer electronic filing. The importance the IRS places 

on accuracy is demonstrated by its performance in Customer Accuracy – Tax Law 

Phones at 90.9 percent and Customer Accuracy – Accounts (Phones) at 93.2 percent, both 

above the FY 2005 levels. 

The IRS developed processes and procedures for administering telecommunications 

excise tax refunds (TETR) to more than 150 million taxpayers in FY 2007. To do this, 

the IRS modified all individual and business tax return forms to include TETR 

information; created a new form to be used by individuals who want to request a refund 

but who have no other tax filing requirement; and drafted a new form to be used by 

taxpayers who choose to request refunds based on their actual payments rather than use a 

standard amount set by the IRS. The IRS also launched an outreach campaign to external 

stakeholder groups, programmed IRS systems to accept form changes, developed TETRIRS - 62
related internal procedures, and trained employees who will interact with taxpayers on 

the phone and at Taxpayer Assistance Centers. In addition, the IRS developed a 

methodology that can be used by businesses and non-profits to estimate their TETR 

claims. 

In FY 2007 and FY 2008, the IRS will continue to research and evaluate information 

regarding taxpayer service needs, priorities, and preferences in order to improve delivery 

services that support taxpayer preferable approaches for obtaining information or 

services. The IRS will seek opportunities to invest in technology, process improvement, 

and training to achieve consistent repeatable quality service with reduced costs. 

IRS - 63
Enforcement 
Enforcement (ENF) 

Appropriation Description 

The Enforcement appropriation funds the examination of tax returns, both domestic and 

international; administrative and judicial settlement of taxpayer appeals of examination 

findings; technical rulings; monitoring of employee pension plans; determination of 

qualifications of organizations seeking tax-exempt status; examination of tax returns of 

exempt organizations; enforcement of statutes relating to detection and investigation of 

criminal violations of the internal revenue laws; identification of under reporting of tax 

obligations; and the securing of unfiled tax returns and collecting unpaid accounts. 

The enforcement budget request for FY 2008 is $4,925,498,000 in direct appropriations 

and 48,667 FTE. This is an increase of $264,926,000 or 5.7 percent, and 834 FTE or 

1.7 percent, over the FY 2007 Continuing Resolution (CR) rate of $4,660,572,000 and 

47,833 FTE. 

Appropriation Detail Table 

Enforcement 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Investigations 4,510 $579,555 4,500 $599,841 4,328 $591,090 4,348 $579,883 4,347 $602,872 -0.02% 3.96%

Exam and Collections 43,045 3,919,275 42,637 3,925,839 43,258 4,054,760 42,264 3,932,599 43,060 4,165,233 1.88% 5.92%

Regulatory 1,979 209,611 1,302 150,115 1,283 151,276 1,221 148,090 1,260 157,393 3.19% 6.28%

Subtotal New Appropriated Resources 49,534 $4,708,441 48,439 $4,675,795 48,869 $4,797,126 47,833 $4,660,572 48,667 $4,925,498 1.74% 5.68%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 376 $86,041 122 $44,106 191 $48,291 191 $48,291 194 $49,353 1.57% 2.20%

50% Carryover 10,054

Mandatory Appropriations - User Fees 0

Available multi-year/no-year funds 2,289 1,119 2,286 2,286 1,146 -49.87%

Transfers In/Out 37

Subtotal Other Resources 376 $88,330 122 $55,316 191 $50,577 191 $50,577 194 $50,499 1.57% -0.15%

Total Resources Available for Obligation 49,910 $4,796,771 48,561 $4,731,111 49,060 $4,847,703 48,024 $4,711,149 48,861 $4,975,997 1.74% 5.62%

FY 2006

Table 3.1

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2008

IRS - 64
Budget Adjustment Table 

Enforcement 

FTE Amount

FY 2007 President's Budget 48,869 $4,797,126

CR-rate Adjustment (988) (88,721)

(48) (47,833)

(620) ($60,166)

(620)

FY 2007 CR-rate 47,881 $4,708,405

Interappropriation Transfer Corrections to Budget Restructure

FY 2007 Operating Plan at CR-rate 47,833 $4,660,572

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $0

Base Adjustment 0

Maintaining Current Levels (MCLs) $162,373

Pay Annualization 0 23,083

Pay Inflation Adjustment 0 131,573

Non-Pay Inflation Adjustment 0 7,717

Efficiency Savings

Subtotal, Changes to Base $102,207

FY 2008 Base 47,213 $4,762,779

Program Changes:

Program Increases:

Enforcement Initiatives 1,454 $162,719

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 237 29,054

Improve Compliance Among Small Business and Self-Employed Taxpayers 454 55,480

Increase Compliance for Large Multinational Businesses 151 19,916

Expand Document Matching in Existing Sites 208 18,536

Establish New Document Matching - Kansas City 203 15,669

Increase Individual Filing Compliance 55 3,806

Increase Tax-Exempt Entity Compliance 109 11,794

Increase Criminal Tax Investigations 37 8,464

Subtotal, FY 2008 Program Changes 1,454 $162,719

Total, FY 2008 President's Budget Request 48,667 $4,925,498

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Enforcement

IRS - 65
Operating Levels Table 

Enforcement 

Appropriation Title: Enforcement FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 49,534 48,869 (988) (48)

($50,373) ($7,246)

(193)

(3,112)

($53,678) ($6,751)

(4,134)

(13,837)

(38,921)

47,881 47,833 48,667

Object Classification:

11.1 Full-Time Permanent Positions............................ $3,201,250 $3,265,184 $3,214,811 $3,207,565 $3,382,441

11.3 Other than Full-Time Permanent Positions......... 106,545 94,051 93,858 96 93,954 97,309

11.5 Other Personnel Compensation.......................... 139,605 140,302 137,190 399 137,589 145,646

11.8 Special Personal Services Payments................. 16,753 16,863 0 16,863 0 16,863 17,499

11.9 Personnel Compensation (Total)................... $3,464,153 $3,516,400 $3,462,722 $3,455,971 $3,642,895

12.0 Personnel Benefits................................................ 874,868 910,198 906,064 539 906,603 952,840

13.0 Benefits to Former Personnel.............................. 4,525 0 0 0 0 0 0

21.0 Travel...................................................................... 151,456 153,124 139,287 620 139,907 163,019

22.0 Transportation of Things....................................... 4,042 4,002 0 4,002 1 4,003 4,566

23.1 Rental Payments to GSA...................................... 0 0 0 0 0 0 0

23.2 Rent Payments to Others...................................... 342 370 0 370 0 370 383

23.3 Communications, Utilities, & Misc........................ 44,687 44,858 0 44,858 5,937 6,642

24.0 Printing and Reproduction.................................... 6,559 5,297 0 5,297 93 5,390 5,442

25.1 Advisory & Assistance Services........................... 21,680 28,137 23,877 20,877 21,394

25.2 Other Services....................................................... 74,577 73,750 68,197 65,394 66,944

25.3 Purchase of Goods/Serv. from Govt. Accts......

(4,260) (3,000)

(5,553) (2,803)

... 14,949 12,963 11,704 2,470 14,174 14,537

25.4 Operation & Maintenance of Facilities................

(1,259)

. 507 145 0 145 0 145 1,045

25.5 Research & Development Contracts................... 2,847 2,908 0 2,908 0 2,908 2,908

25.6 Medical Care......................................................... 0 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 6,755 6,766 3,966 3,815 3,947

25.8 Subsistence & Support of Persons.....................

(2,800) (151)

. 3,043 3,043 0 3,043 134 3,177 3,376

26.0 Supplies and Materials......................................... 22,172 23,801 0 23,801 23,731 24,611

31.0 Equipment.............................................................. 6,790 6,848 3,648 5 3,653 6,279

32.0 Lands and Structures........................................... 0 0 0 0 0 0 0

33.0 Investments & Loans............................................

(70)

(3,200)

. 00000 00

41.0 Grants, Subsidies.................................................. 5 329 0 329 0 329 337

42.0 Insurance Claims & Indemn................................. 670 373 0 373 1 374 401

43.0 Interest and Dividends................................. 00000 00

44.0 Refunds.................................................................. 0 0 0 0 0 0 0

91.0 Unvouchered.............................................. 3,814 3,814 0 3,814 0 3,814 3,932

Total Budget Authority....................................... $4,708,441 $4,797,126 $4,708,405 $4,660,572 $4,925,498

Budget Activities:

Investigations...................................................

($88,721) ($47,833)

... $579,555 $591,090 $579,980 $579,883 $602,872

Exam and Collections .......................................

($11,110) ($97)

... 3,919,275 4,054,760 3,978,292 3,932,599 4,165,233

Regulatory ......................................................

(76,468) (45,693)

... 209,611 151,276 150,133 148,090 157,393

Total Budget Authority....................................... $4,708,441 $4,797,126 $4,708,405 $4,660,572 $4,925,498

Table 2.2

Dollars in Thousands

(1,143) (2,043)

($88,721) ($47,833)

IRS - 66
ENF Budget Activity: Investigations 

3A – Description 

Investigations ($602,872,000 in direct appropriation and $37,716,000 reimbursable 

programs) 

This budget activity funds the Criminal Investigations programs that explore potential 

criminal violations of the internal revenue tax laws, enforce criminal statutes relating to 

these violations, and recommend prosecution as warranted. This includes the following 

program activities: 

• Criminal Investigations supports the enforcement of criminal statutes relating to 

violations of internal revenue laws and other financial crimes. It investigates cases of 

suspected intent to defraud involving both legal and illegal sources of income and 

recommends prosecution as warranted. This activity also includes the investigation 

and prosecution of tax and money laundering violations associated with narcotics 

organizations; and 

• General Management and Administration supports the unit headquarters management 

activities of strategic planning, communications, finance, human resources for 

criminal Investigations activities. 

IRS - 67
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Investigations Strategic Objective F4A & F3A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $504,075 $579,555 $579,883 $602,872

Offsetting Collections - Reimbursable 90,834 74,842 36,905 37,716

Total Operating Level $594,909 $654,397 $616,788 $640,588

Human Resources

Appropriated FTE 4,190 4,510 4,348 4,347

Other FTE 383 325 86 87

Total FTE (direct and reimbursable) 4,573 4,835 4,434 4,434

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 3,400 3,895 3,945 4,000 4,025

Actual 4,387 4,104 4,157

Met Y Y Y

Target N/A 2,048 2,260 2,069 2,135

Actual 2,008 2,151 2,019

Met Y N

Target N/A 92.0% 92.0% 92.0% 92.0%

Actual 91.2% 91.2% 91.5%

Met N N

Target N/A 332,194 339,565 314,008 314,560

Actual 362,849 295,316 328,750

Met Y Y

Key: E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Number of Convictions (Ot) (L)

Conviction Rate (E) (L)

Conviction Efficiency Rate ($) (E) (L)

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

Criminal Investigations Completed 

(Ot) (L)

Table 3.2.3

Dollars in Thousands

IRS - 68
Description of Performance 

Enforcement of criminal statutes is an integral component of the IRS’ efforts to enhance 

voluntary compliance and enforce the tax laws. In FY 2006, abusive tax schemes and 

shelters remained a high investigative priority due to their egregious activities in areas of 

corporate fraud and tax avoidance of high-income individuals. Among the most effective 

tools available to combat abusive tax schemes was the use of parallel proceedings that 

enabled the IRS to enjoin promoters of abusive schemes from further activity while the 

criminal investigation proceeds. These initiatives focused on the thousands of individuals 

known to maintain offshore bank accounts while operating domestic businesses. 

Investigative priorities focused on Corporate Fraud, Abusive Tax Schemes, Refund 

Crimes, Non-Filers, Employment Tax, and Terrorist Financing. Performance levels 

remained high in FY 2006: 

• The referral acceptance rate (i.e., the ratio of internal referrals within the IRS received 

to the number of those cases that are accepted by CI) of 71.8 percent exceeded the 

five year high achieved in FY 2005 and total number of referrals accepted (445) was 

higher than last year; 

• Number of convictions was 2,019, falling short of the 2,260 target; 

• Conviction rate was 91.5 percent, higher than FY 2005 and within 99 percent of 

FY 2006 target; and 

• Cost of a conviction (Conviction Efficiency rate) was $328,750, almost $11,000 less 

than the FY 2006 target. 

In FY 2007 and continuing in FY 2008, the IRS will focus its investigative resources on 

legal source tax investigations by partnering with other law enforcement agencies to 

develop significant tax and other financial investigations. The IRS will also pursue 

investigations involving illegal source tax and other financial crimes, including money 

laundering, that adversely affect tax administration and combat fraudulent and financial 

crime schemes identified through improved case development efforts and bank secrecy 

investigations. 

ENF Budget Activity: Exam and Collections 

3A – Description 

Exam and Collections ($4,165,233,000 in direct appropriation and $11,637,000 from 

reimbursable programs) 

This budget activity funds programs that enforce the tax laws and compliance through 

examination and collection programs that ensure proper payment and tax reporting. The 

IRS - 69
budget activity also supports appeals and litigation activities associated with exam and 

collection. This includes the following program activities:

• Compliance Services Management supports management associated with compliance 

program activities; 

• Payment Compliance – Correspondence Collection supports the IRS’ centralized 

collection activities via correspondence in the Compliance Services Collection 

Operation. It initiates contact and collects delinquent taxpayer liabilities through 

written notices and other means; 

• Automated Collections and Support supports the IRS’ centralized Automated 

Collection System (ACS). This program initiates contact and collects delinquent 

taxpayer liabilities through automated means; 

• Payment Compliance – Field Collection conducts field investigations and collection 

efforts associated with delinquent taxpayer and business entity liabilities, including 

direct taxpayer contact and outreach programs to protect the government’s interest in 

delinquent tax liability situations; 

• Tax Reporting Compliance – Document Matching executes the Automated 

Underreporter (AUR), Combined Annual Wage Reporting (CAWR), Federal 

Unemployment Tax Act (FUTA), and other Document Matching Programs; 

• Tax Reporting Compliance – Electronic/Correspondence Exam operates the service 

centers’ examination function, which initiates correspondence with taxpayers related 

to tax issues arising from claims on tax returns; 

• Tax Reporting Compliance – Field Exam determines taxpayers’ correct income levels 

and corresponding tax liabilities. This activity also applies the tax law to specific 

taxpayers in the form of determination letters, advance pricing agreements, and other 

determinations; 

• Appeals oversees an administrative review process that provides a channel for 

impartial case settlement before a case is docketed in a court of law; 

• Litigation represents the IRS in litigation and provides all other legal support for the 

IRS, including interpretation of the tax law; 

• Specialty Programs examines federal tax returns of businesses and individuals 

responsible for the filing and payment of employment, excise, estate and gift taxes. 

International exam programs involving U.S. citizens residing abroad, non-resident 

aliens, expatriates and other examinations involving other international issues (e.g., 

Foreign Tax Credit, Foreign Earned Income Exclusion) also are centrally managed in 

this functional area; 

• Specialty Programs – Collection supports international field collection efforts 

associated with delinquent taxpayer and business entity liabilities from U.S. citizens 

residing abroad, non-resident aliens, expatriates, and those involving other 

international issues (e.g. Foreign Tax Credit, Foreign Earned Income Exclusion); and 

• Communications & Liaison coordinates local government and liaison relationships; 

handle congressional, state, and national stakeholder relationships and issues; 

coordinate crosscutting issues including managing audits and legislative 

implementation; handle national media contacts and local media relationships; and 

ensure Servicewide compliance with Disclosure and Privacy laws. 

IRS - 70
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Exam and Collections Strategic Objective F4A & F3A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $3,721,495 $3,919,275 $3,932,599 $4,165,233

Offsetting Collections - Reimbursable 13,287 10,948 11,386 11,637

Mandatory Appropriations - User Fees 6,000 0 0 0

Total Operating Level $3,734,782 $3,930,223 $3,943,985 $4,176,870

Human Resources

Appropriated FTE 43,160 43,045 42,264 43,060

Other FTE 56 47 105 107

Total FTE (direct and reimbursable) 43,216 43,092 42,369 43,167

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 0.9% 0.9% 1.0% 1.0%

Actual 0.8% 0.9% 1.0%

Met Y Y

Target N/A N/A Baseline 87.0% 87.0%

Actual 85.9%

Met

Target N/A N/A Baseline 89.0% 89.0%

Actual 88.2%

Met

Target 80.0% 78.0% 80.0% 88.0% 90.0%

Actual 74.0% 77.0% 85.0%

MetN N Y

Target N/A N/A 92.0% 97.0% 97.0%

Actual 87.0% 89.0% 96.0%

Met Y

Target 7.1% 7.5% 8.2% 8.2%

Actual 7.5% 7.8% 7.3%

Met Y N

Target N/A N/A 1,759 1,932 1,808

Actual 1,514 1,701 1,832

Met Y

Target N/A 2.5% 2.3% 2.5% 2.7%

Actual 1.9% 2.2% 2.4%

Met N Y

Target N/A N/A 121 136 136

Actual N/A 121 128

Met Y

Examination Coverage - Individual 

(Oe) (L)

Field Exam Embedded Quality (Oe) 

(L)

Office Exam Embedded Quality (Oe) 

(L)

Examination Quality (LMSB) - 

Industry (Oe) (L)

Table 3.2.4

Dollars in Thousands

Examination Efficiency - Individual (E) 

(L)

Examination Quality (LMSB) - 

Coordinated Industry (Oe) (L)

Examination Coverage - Business 

(Corps. > $10M) (Oe) (L)

AUR Efficiency (E) (L)

AUR Coverage (Oe) (L)

IRS - 71
Exam and Collections Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 57.0% 52.0% 54.0% 54.0%

Actual 53.0% 54.0%

Met N Y

Target N/A N/A 1,650 1,723 1,751

Actual 1,514 1,677

Met Y

Target N/A N/A Baseline 86.0% 86.0%

Actual 84.2%

Met

Target Baseline 88.0% 88.0% 91.0% 92.0%

Actual 87.8% 88.5% 91.0%

Met Y Y Y

Collection Coverage - Units (Oe) (L)

Table 3.2.4 (Continued)

Collection Efficiency - Units (E) (L)

Field Collection Embedded Quality 

(Oe) (L)

Automated Collection System (ACS) 

Accuracy 

Key: Oe - Outcome Measure and E - Efficiency Measure and L - Long Term Goal

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, the 

implementation of the new tax legislation, and improvements resulting from program efficiencies.

Description of Performance 

The IRS’ examination and collection programs are the primary contributors to the IRS’ 

strategic objective aimed at discouraging and deterring non-compliance by key 

contributors to the tax gap, particularly corporations, high-income individuals, and 

domestic and off-shore tax entities. 

The IRS continues to enforce the law across all sectors, but is focusing on corrosive 

activities of corporations, high income taxpayers, and other major violators of the tax 

code. These efforts are having a positive impact on collecting additional tax revenue. 

Enforcement revenue from all sources reached a record level of $48.7 billion in FY 2006. 

Targeting high-risk taxpayers improves IRS efficiency, reduces the burden on compliant 

taxpayers, and concentrates enforcement presence where it is most needed. 

For FY 2006, the IRS met or exceeded 83 percent of its enforcement performance targets. 

Focusing more on limited scope examinations and productivity enhancements including 

improved analytics, workload identification, and selection systems that targeted high-risk 

cases resulted in: 

• 7 percent increase in individual audits; 

• 18 percent increase in high income audits; 

• 8 percent increase in small-business audits; 

• 10 percent increase in automated underreporter closures; 

• 15 percent increase in collection case closures; and, 

• 9 percent increase in revenue received from collection activities. 

IRS - 72
The IRS continued its efforts in streamlining and improving its examination process, 

resulting in shortened cycle time for large corporate audits. The time from assigning a 

large corporate return to a revenue agent until the final closing decreased more than 18 

percent. The improvements to the examination process ultimately increased inventory 

turnover and closures. 

The IRS also met its examination coverage - individual, efficiency and embedded quality 

annual targets. Improvements in inventory management, decreases in cycle time, and 

focused issue training all contributed to improved productivity. Improved quality 

controls measuring critical elements of the examination, a reinforced focus on case 

quality to drive improvement efforts, and the delivery of business results for the third 

consecutive year all led to improved performance in FY 2006. The IRS will continue to 

reengineer its examination and collection procedures to reduce time, increase yield, and 

expand coverage. The IRS plans to build on its FY 2006 enforcement initiatives with 

emphasis on early identification of tax liabilities through increased audits and focused 

collection activities. 

In FY 2008, the IRS will focus its resources on targeting compliance of reporting, filing, 

payment, and other major contributors to the tax gap. Resources will be used to: 

• Increase the overall percentage of high-risk tax returns examined, such as 

multinational corporations, and collect a greater amount of unpaid taxes from filed 

and un-filed tax returns timely; 

• Expand the Automated Underreporter (AUR) program to target the estimated 5.1 

million taxpayers who may annually appear to misreport income based on third party 

information reporting. A new AUR site combined with expanded toll-free telephone 

service will improve the capability to reach more non-compliant taxpayers; and 

• Enhance the analysis of tax information and results of compliance research studies to 

better define and quantify the tax gap. Targeting high-risk taxpayers will improve 

IRS efficiency and reduce the burden on compliant taxpayers. It will also increase 

and focus the enforcement presence where it is most needed. 

ENF Budget Activity: Regulatory 

3A – Description 

Regulatory ($157,393,000 in direct appropriations) 

This budget activity funds the development and print of published guidance materials; 

interpretation of and guidance on tax laws; general legal services, rules and agreements, 

enforcement of regulatory rules, laws and approved business practices; supporting 

taxpayers in the areas of pre-filing agreements, determination letters, and advance pricing 

agreements and the Office of Professional responsibility. This includes the following 

program activities: 

• Tax Law Interpretation and Guidance interprets the tax law through published 

guidance, technical advice, and other technical legal services; 

IRS - 73
• General Legal Services provides advice to the IRS on non-tax legal issues, including 

procurement, personnel, labor relations, equal employment opportunity, fiscal law, 

tort claims and damages, ethics and conflict of interest; 

• Rulings and Agreements applies the tax law to specific taxpayers in the form of prefiling agreements, determination letters, advance pricing agreements, and other prefiling determinations and advice; 

• Fraud/Bank Secrecy Act enforces the anti-money laundering provisions of the Bank 

Secrecy Act (BSA) of 1970, and the USA PATRIOT Act of 2001. It examines nonbank financial institutions for compliance with these laws, annually receives and 

processes more than 15 million financial reports, and manages a centralized database 

of that information for the Financial Crimes Enforcement Network (FinCEN). The 

Fraud program follows the “money trail” to support the criminal investigation of 

tax evasion operations. Fraud Technical Advisors and Revenue Agents provide 

investigative leads and referrals to federal, state and local law enforcement agencies; 

and 

• Office of Professional Responsibility identifies, communicates, and enforces Treasury 

Circular 230 standards of competence, integrity, and conduct of those who represent 

taxpayers before the IRS, such as attorneys, certified public accountants (CPAs), 

enrolled agents, enrolled actuaries and appraisers, and other professionals. 

3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Regulatory Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $172,022 $209,611 $148,090 $157,393

Offsetting Collections - Reimbursable 187 251 0 0

Total Operating Level $172,209 $209,862 $148,090 $157,393

Human Resources

Appropriated FTE 1,605 1,979 1,221 1,260

Other FTE 2400

Total FTE (direct and reimbursable) 1,607 1,983 1,221 1,260

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target 141,000 131,700 112,400 118,200 109,500

Actual 143,877 126,481 108,462

Met Y N N

Key: Ot - Output/Workload Measure

Table 3.2.5

TEGE Determination Case Closures 

(Ot)

Dollars in Thousands

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing Resolution, 

the implementation of the new tax legislation, and improvements resulting from program efficiencies.

IRS - 74
Description of Performance 

Due to major changes in certain filing processes, the IRS did not meet its FY 2006 plan 

for Tax Exempt and Government Entities (TE/GE) Determination Cases Closed. The 

implementation of a staggered amendment filing process for employee plans significantly 

changed the inventory mix. Over 40 percent of the 25,000 receipts were prototype plans 

that required more extensive review. These cases will not close until FY 2007, resulting 

in the closure of 3,600 fewer cases than originally planned. Additionally, recent 

increases in user fees for employee plan determinations resulted in a slight decrease in 

determination applications and ultimately 1,500 fewer projected closures. 

To stabilize the flow of determination receipts and mitigate the significant swings in 

workload experienced prior to FY 2006, the IRS will continue its roll-out of the staggered 

amendment process. The IRS also plans to test and pilot (with external partners) a new 

interactive software application for preparing determination applications designed to 

improve the quality of determination requests and establish the foundation for future 

electronic filing of these applications. 

Implementation and on-going use of alternative enforcement strategies through “Issue 

Management Teams” and Settlement Initiatives have rapidly identified abusive promoters 

and participants. Special attention to develop preparer penalty cases over the past several 

years continues in FY 2006, using Program Action Cases, Electronic Return Originator 

and EITC Due Diligence Visits, criminal investigations, and injunctions. To date, the 

IRS has more than 500 open return preparer investigations, a substantial increase over the 

same period last year. 

The IRS faces a wide variety of non-tax legal issues. In support of the IRS’ regulatory 

activities, proposed changes to Treasury Circular 230 (Regulations Governing Practice 

Before the Internal Revenue Service) were published in FY 2006. The changes were 

designed to address weaknesses in the current regulatory scheme to ensure that tax 

professionals are adhering to standards and following the law, a key objective to success 

in enforcing the tax laws. Highlights of the proposed changes include rules implementing 

new authority to impose a monetary penalties, opening the IRS enforcement proceedings 

to public scrutiny, limiting contingent fees in the federal tax arena, allowing expedited 

proceedings for egregious tax non-compliance, and eliminating un-enrolled return 

preparers to “limited practice” before the agency. 

In FY 2006, the IRS also developed a strategy to enhance its coordination and 

effectiveness of return preparer enforcement efforts and maximize resources and 

coverage of non-compliant preparers. The strategy includes an annual cross-functional 

meeting to discuss and evaluate the coming year’s preparer inventory with focus on 

identifying cases warranting attention from the prior year’s due diligence visits. 

IRS - 75
In FY 2006, General Legal Services (GLS) litigated cases involving practitioner 

questionable tax transactions, successfully defended an award protest for private debt 

collection services, negotiated a Memorandum of Understanding offering online tax 

return preparation and filing services, and drafted informant agreements concerning the 

recovery of taxes due. 

In FY 2007 and beyond, the IRS will continue to promote compliance with tax laws and 

regulations in the tax-exempt and government arena. The IRS’ FY 2007 initiative to 

bolster critical activities, such as determinations and voluntary compliance agreements, 

will continue in FY 2008. This initiative will maintain the integrity of the tax base and 

ensure charitable and retirement contributions serve the public purposes for which 

exemptions were created. In addition, the IRS will focus on the Office of Professional 

Responsibility disciplinary matters and continued activity to revamp automated systems 

to modernize and enhance compliance activities. 

IRS - 76
Operations Support 
Operations Support (OS) 

Appropriation Description 

The Operations Support appropriation provides funding for overall planning, direction, 

and support for the IRS, including shared service support related to facilities services, 

rent payments, printing, postage, and security. This appropriation also funds 

headquarters’ policy and management activities such as corporate support for strategic 

planning, communications and liaison, finance, human resources, Equal Employment 

Opportunity (EEO) and diversity; research and statistics of income; and necessary 

expenses for information systems and telecommunication support, including 

development, security and maintenance of IRS’ information systems. 

The Operations Support budget request for FY 2008 is $3,769,587,000 in direct 

appropriations and 12,957 FTE. This is an increase of $250,359,000 or 7.1 percent, and 3 

FTE, over the FY 2007 Continuing Resolution (CR) Rate of $3,519,228,000 and 12,954 

FTE. 

Appropriation Detail Table 

Operations Support 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Infrastructure 0 $864,403 0 $837,320 0 $873,146 0 $873,146 0 $908,095 0.00% 4.00%

Shared Services and Support 7,047 1,176,202 5,605 1,154,616 6,693 1,129,617 6,705 1,163,846 6,693 1,223,351 -0.18% 5.11%

Information Services 6,421 1,420,600 5,960 1,446,449 6,249 1,485,641 6,249 1,482,236 6,264 1,638,141 0.24% 10.52%

Subtotal New Appropriated Resources 13,468 $3,461,205 11,565 $3,438,385 12,942 $3,488,404 12,954 $3,519,228 12,957 $3,769,587 0.02% 7.11%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 207 $21,710 10 $4,277 160 $50,608 160 $50,608 163 $56,731 1.88% 12.10%

50% Carryover 2,709

Mandatory Appropriations - User Fees 19,000 19,000 74,000 74,000 72,000 -2.70%

Available multi-year/no-year funds 37,704 37,076 28,018 28,018 4,333

Transfers In/Out

Subtotal Other Resources 207 $78,414 10 $63,062 160 $152,626 160 $152,626 163 $133,064 1.88% -12.82%

Total Resources Available for Obligation 13,675 $3,539,619 11,575 $3,501,447 13,102 $3,641,030 13,114 $3,671,854 13,120 $3,902,651 0.05% 6.29%

Obligations President's Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2006 FY 2008

Table 3.1

IRS - 77
Budget Adjustment Table 

Operations Support 

FTE Amount

FY 2007 President's Budget 12,942 $3,488,404

CR-rate Adjustment 0 (29,252)

(37) ($36,408)

(37)

($511)

(511)

FY 2007 CR-rate 12,942 $3,459,152

Interappropriation Transfer Corrections to Budget Restructure 12 60,076

FY 2007 Operating Plan at CR-rate 12,954 $3,519,228

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $5,687

Base Adjustment 0 5,687

Maintaining Current Levels (MCLs) $104,500

Pay Annualization 0 6,970

Pay Inflation Adjustment 0 41,532

Non-Pay Inflation Adjustment 0 55,998

Efficiency Savings

Subtotal, Changes to Base $73,779

FY 2008 Base 12,917 $3,593,007

Program Changes:

Program Decreases/Savings: 0

Increased e-File Savings 0

Program Reinvestments: 0 $511

Increase Efficiency Through Submission Processing Site Consolidations 0 511

Program Increases:

Infrastructure Initiatives 0 $81,000

Upgrade Critical IT Infrastructure 0 60,000

Enhance Computer Security Incident Response Center (CSIRC) and Network Infrastru 0 21,000

Enforcement Initiatives 32 $79,433

Improve Compliance Estimates, Measures, and Detection of Non-Compliance 21 11,968

Improve Compliance Among Small Business and Self-Employed Taxpayers 0 15,248

Implement Legislative Proposals to Improve Compliance 0 23,045

Increase Compliance for Large Multinational Businesses 3 5,229

Expand Document Matching in Existing Sites 6 9,422

Establish New Document Matching - Kansas City 2 7,536

Increase Individual Filing Compliance 0 2,243

Increase Tax-Exempt Entity Compliance 0 3,206

Increase Criminal Tax Investigations 0 1,536

Taxpayer Service Initiatives 8 $16,147

Research Effect of Service on Taxpayer Compliance 8 5,000

Expand Volunteer Income Tax Assistance 0 1,147

Implement Taxpayer Assistance Blueprint 0 10,000

Subtotal, FY 2008 Program Changes 40 $176,580

Total, FY 2008 President's Budget Request 12,957 $3,769,587

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Operations Support

IRS - 78
Operating Levels Table 

Operations Support 

Appropriation Title: Operations Support FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 13,468 12,942 0 12,942 12 12,954 12,957

Object Classification:

11.1 Full-Time Permanent Positions............................ $955,187 $966,762 ($65)

(17)

($82)

(422)

(7,953)

(7)

(7,551)

$966,697 $1,427 $968,124 $1,002,389

11.3 Other than Full-Time Permanent Positions......... 10,074 10,876 0 10,876 8 10,884 11,120

11.5 Other Personnel Compensation.......................... 29,287 30,796 30,779 0 30,779 34,983

11.8 Special Personal Services Payments................. 0 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $994,548 $1,008,434 $1,008,352 $1,435 $1,009,787 $1,048,492

12.0 Personnel Benefits................................................ 304,231 301,675 301,253 329 301,582 313,697

13.0 Benefits to Former Personnel.............................. 62,037 58,955 51,002 0 51,002 52,504

21.0 Travel...................................................................... 30,717 33,047 33,040 159 33,199 34,313

22.0 Transportation of Things....................................... 17,926 19,013 0 19,013 0 19,013 19,470

23.1 Rental Payments to GSA...................................... 680,674 640,000 0 640,000 0 640,000 665,539

23.2 Rent Payments to Others...................................... 9 5 0 5 0 5 5

23.3 Communications, Utilities, & Misc........................ 319,403 316,493 308,942 38,922 347,864 368,398

24.0 Printing and Reproduction.................................... 52,855 52,731 0 52,731 0 52,731 53,983

25.1 Advisory & Assistance Services........................... 112,139 29,614 0 29,614 5,395 35,009 36,259

25.2 Other Services....................................................... 305,314 377,220 373,671 2,790 376,461 420,211

25.3 Purchase of Goods/Serv. from Govt. Accts......

(3,549)

... 57,614 60,353 0 60,353 0 60,353 61,808

25.4 Operation & Maintenance of Facilities................. 188,353 179,474 178,923 0 178,923 181,672

25.5 Research & Development Contracts................... 4,622 4,364 0 4,364 0 4,364 5,269

25.6 Medical Care......................................................... 10,005 10,005 0 10,005 0 10,005 10,245

25.7 Operation & Maintenance of Equipment............. 78,896 67,132 59,543 8,293 67,836 67,203

25.8 Subsistence & Support of Persons.....................

(551)

(7,589)

. 580 271 0 271 0 271 279

26.0 Supplies and Materials......................................... 26,875 21,252 0 21,252 240 21,492 22,723

31.0 Equipment.............................................................. 213,823 249,723 248,175 2,513 250,688 347,467

32.0 Lands and Structures........................................... 0 58,056 0 58,056 0 58,056 59,449

33.0 Investments & Loans............................................

(1,548)

. 00000 00

41.0 Grants, Subsidies.................................................. 0 0 0 0 0 0 0

42.0 Insurance Claims & Indemn................................. 584 587 0 587 0 587 601

43.0 Interest and Dividends................................. 00000 00

44.0 Refunds.................................................................. 0 0 0 0 0 0 0

91.0 Unvouchered.............................................. 00000 00

Total Budget Authority....................................... $3,461,205 $3,488,404 $3,459,152 $60,076 $3,519,228 $3,769,587

Budget Activities:

Infrastructure ...................................................

($29,252)

... $864,403 $873,146 $0 $873,146 $0 $873,146 $908,095

Shared Services & Support .................................... 1,176,202 1,129,617 1,120,621 43,225 1,163,846 1,223,351

Information Services ..........................................

($8,996)

... 1,420,600 1,485,641 1,465,385 16,851 1,482,236 1,638,141

Total Budget Authority....................................... $3,461,205 $3,488,404 $3,459,152 $60,076 $3,519,228 $3,769,587

Table 2.2

Dollars in Thousands

($20,256)

($29,252)

IRS - 79
OS Budget Activity: Infrastructure 

3A - Description 

Infrastructure ($908,095,000 in direct appropriation) 

This budget activity funds administrative services related to space and housing, rent and 

space alterations, building services, maintenance, guard services, and non-automated data 

processing equipment. This includes the following program activities: 

• Building Delegation oversees and manages the IRS's GSA-delegated buildings, 

including cleaning, maintenance, utilities, protections, administrative, recurring and 

one-time repair costs; 

• Rent provides resources for all of the IRS’ rent needs; and 

• Space and Housing / Non-ADP Equipment provides management of all IRS building 

services, maintenance, space alterations, guard services, custodial overtime, utility 

services needs, and Non-ADP equipment. 

3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Infrastructure Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $757,908 $864,403 $873,146 $908,095

Offsetting Collections - Reimbursable 287 385 0 0

Total Operating Level $758,195 $864,788 $873,146 $908,095

Human Resources

Appropriated FTE 0 0 0 0

Other FTE 4 6 0 0

Total FTE (direct and reimbursable) 4 6 0 0

Includes Strategic Objective F4A

Measure FY 2005 FY 2006 FY 2007 FY 2008

Target

Actual

Met

There are no externally reported 

performance measures associated 

with this activity

Table 3.2.6

Dollars in Thousands

IRS - 80
Description of Performance 

The IRS continued to emphasize identification and implementation of cost savings within 

its infrastructure, in particular, rent costs. The IRS decreased rent costs in FY 2006 by 

over 2 percent from FY 2005 to $608 million. This was accomplished by identifying and 

completing 110 space reduction projects releasing a cumulative total of 878,000 square 

feet. These projects have annualized savings of $19.6 million. As a result of the flooding 

at the IRS Headquarter building, three projects (57,000 square feet) were maintained to 

house displaced employees. 

In FY 2007 and beyond, the IRS will continue to work to identify and implement rent 

reduction initiatives and leasing plans to minimize costs. These savings are critical for 

covering unfunded costs such as new mandates, budget rescissions, and pay raises. 

OS Budget Activity: Shared Services and Support 

3A – Description 

Shared Services and Support ($1,223,351,000 in direct appropriation, $50,990,000 from 

reimbursable programs, and $10,000,000 from user fees) 

This budget activity funds policy and management and IRS-wide support for research 

strategic planning, communications and liaison, finance, human resources, and equal 

employment opportunity and diversity services and programs. It also funds printing and 

postage, business systems planning, security, corporate training, legal services, 

procurement, and specific employee benefits programs. This includes the following 

program activities: 

• National Headquarters Management & Administration directs the management 

activities of strategic planning, communications and liaison, finance, human 

resources, EEO and diversity, and business systems planning and embedded training. 

This activity sets policies and goals, provides leadership and direction for the Internal 

Revenue Service, and builds partner relationships with key stakeholders (e.g., 

Congress, OMB, etc.). It provides policy guidance for conducting IRS planning and 

budgeting strategies, conducting analysis of programs and investments to support 

strategic decision-making, and developing and managing the human resources. Also, 

it includes official reception and representation expenses; 

• Facilities Services provides services and supplies required to manage IRS facilities; 

• Procurement supports the procurement function of the IRS; 

• EEO Field Operations plans and manages the IRS EEO and Diversity Program; 

• Customer Support plans and manages financial services, including relocation, travel, 

imprest fund, purchase cards, corporate express, and employee clearances; 

• Treasury Complaint Centers plans and manages the Treasury Complaint Centers; 

• Shared Support provides resources for shared cross-functional support such as 

copiers, postage meters, shredders, courier services, and P. O. Boxes; 

IRS - 81
• Printing and Postage provides operating divisions with printing and postage, 

including shipping of taxpayer and internal use materials; 

• Security protects employees, facilities and assets, and the confidentiality of taxpayer 

information; 

• Shared Services (excluding Space and Housing and Rent) provide addition services 

such as Public Transit Subsidy and Career Counselor Contract; 

• Communications & Liaison coordinates local government and liaison relationships; 

handles congressional, state, and national stakeholder relationships and issues; 

coordinates cross-cutting issues including managing audits and legislative 

implementation; handles national media contacts and local media relationships; and 

ensures Servicewide compliance with Disclosure and Privacy laws; 

• Security Services ensures that the IRS has effective security policies and programs in 

place to safeguard taxpayer records, employees, facilities, business processes, 

systems and other resources. It includes operation of the Computer Systems Incident 

Response Center (CSIRC) and Situation Awareness and Management Centers 

(SAMC), coordination of Service-wide disaster recovery and business continuity 

planning, security training and awareness, and sensitive system certification and 

accreditation coordination with Treasury on the Federal Critical Infrastructure 

Protection Program; 

• Research provides resources for researching annual income, financial, and tax data 

from tax returns filed by individuals, corporations, and tax-exempt organizations; 

• Statistics of Income provides resources for market-based research to identify 

compliance issues; for conducting tests of treatments to address non-compliance; and 

for the implementation of successful treatments of taxpayer non-compliant behavior; 

and 

• Benefit Payments provides resources to fund Workmen’s Compensation benefits and 

Unemployment Compensation payments. 

IRS - 82
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Shared Services and Support Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $1,211,877 $1,176,202 $1,163,846 $1,223,351

Offsetting Collections - Reimbursable 10,216 13,844 44,990 50,990

Mandatory Appropriations - User Fees 0 0 20,000 10,000

Total Operating Level $1,222,093 $1,190,046 $1,208,836 $1,274,341

Human Resources

Appropriated FTE 7,084 7,047 6,705 6,693

Other FTE 101 171 140 143

Total FTE (direct and reimbursable) 7,185 7,218 6,845 6,836

Includes Strategic Objective F4A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target

Actual

Met

Table 3.2.7

There are no externally reported 

performance measures associated 

with this activity.

Dollars in Thousands

Description of Performance 

The IRS continues to provide shared services to all IRS programs through various 

support programs including: facilities, management and administration of human 

resources, research, procurement, and security.

In FY 2006, the IRS introduced its Human Capital Strategic Implementation Plan. The 

plan links achievement of Treasury’s Human Capital (HC) Strategic Goals, the IRS’ 

Strategic Goals, and the IRS’ HC Strategic Goals outlined in the HC Strategic Plan 

(2005-2009). The plan also establishes measures to monitor performance against HC 

objectives, processes, and projects to ensure the IRS builds and maintains a workforce 

that can carry out its mission. 

The IRS remains committed to increasing employee engagement and employee 

satisfaction. The IRS’ Employee Engagement Surveys measure the percentage of IRS 

employees who feel they are in the right job, managed well, and are productive. In 

FY 2006, the IRS addressed Employee Engagement through programs that promote 

IRS - 83
employee development and continuity such as safety and security, training, succession 

planning and workplace conflict prevention. The IRS employee engagement score, as 

measured by the grand mean on Gallup’s survey, increased from 3.80 in 2005 to 3.82 in 

2006. 

Ninety-six percent of IRS systems are compliant, with 33 percent certified under the new 

more stringent National Institutes of Standards and Technology (NIST) standards. The 

IRS efforts in 2004 and 2005 were focused on security certification and accreditation of 

the network and infrastructure systems, which were achieved at the end of FY 2005. Our 

priority in FY 2006 was updating the security certification and accreditation of IRS 

business applications to comply with new process guidance issued by the Office of 

Management and Budget (OMB) and NIST. The remaining systems will be updated in 

FY 2007 and FY 2008. 

The IRS achieved Personal Identity Verification (PIV I) compliance by October 2005, as 

mandated by Homeland Security Presidential Directive 12 (HSPD-12). The IRS now 

leads the Treasury HSPD-12 Program to adopt an enterprise solution for PIV II through 

the implementation of new Federal identification cards. PIV I compliance focused on 

implementing standard processes for common identity proofing, registration and issuance 

that incorporate security and privacy requirements. The Treasury HSPD-12 enterprise 

solution, PIV II, focuses on government-wide uniformity and the issuance of new 

identification cards that are interoperable across the federal government. The IRS will 

continue to work collaboratively with other agencies to manage security costs as it 

addresses increased security requirements at government facilities nationwide. 

Research enables the IRS to develop strategies to combat specific areas of 

noncompliance, improve voluntary compliance, allocate resources more effectively, and 

reduce the tax gap. 

The National Research Program (NRP) demonstrates the importance of comprehensive 

compliance data. As part of the NRP, the IRS reviewed approximately 46,000 randomly 

sampled individual income tax returns from tax year 2001 – the first comprehensive 

compliance study for individual income tax returns since 1988. Returns for which 

reported information could not be independently verified were audited. An NRP 

reporting compliance study of 5,000 S corporation tax returns filed in 2003 and 2004 is 

currently underway. Data from the NRP reporting compliance study have been used to 

estimate the individual income tax component of the tax gap and to identify sources of 

noncompliance. Accurate NRP data provide a critical benchmark for determining the 

sources of noncompliance and for measuring changes in compliance rates over time. The 

IRS is also using the findings from the NRP to target examinations and other compliance 

activities better, thus increasing the dollar-per-case yield and reducing “no change” audits 

of compliant taxpayers. Innovations in audit techniques to reduce taxpayer burden, 

pioneered during the 2001 NRP, have been adopted in regular operational audits. In 

addition, Statistics of Income (SOI) gathered, analyzed, and published information, which 

was used internally as well as by a variety of federal agencies and other interested parties. 

IRS - 84
This information is used to analyze tax policy, project tax revenues, and to estimate the 

impact of tax law changes on tax collections. 

In FY 2007 and FY 2008, the IRS will implement new research projects in the following 

areas: update and initiate new NRP reporting compliance studies, examine the linkages 

between taxpayer service and compliance, and develop new tools to uncover patterns of 

noncompliance. 

OS Budget Activity: Information Services 

3A – Description 

Information Services ($1,638,141,000 in direct appropriation, $5,741,000 from 

reimbursable programs, and $62,000,000 from user fees) 

 

This budget activity funds staffing, equipment, and related costs to manage, maintain, and 

operate the information systems critical to the support of tax administration programs. 

The IRS’ business programs rely on these systems to process tax and information returns, 

account for tax revenues collected, send bills for taxes owed, issue refunds, assist in the 

selection of tax returns for audit, and provide telecommunications services for all 

business activities including the public’s toll-free access to tax information. These 

systems are located in a variety of sites, including the Martinsburg, Tennessee, and 

Detroit Computing Centers, Service Centers, and in other field office operations. Staffing 

funded by this activity develop and maintain the millions of lines of programming code 

supporting all aspects of tax-processing, as well as operate and administer the hardware 

infrastructure of mainframes, minicomputers, personal computers, networks, and a 

variety of management information systems. This includes the following program 

activities: 

• Tier B provides support to single owner, small to medium-sized investment projects 

using core data to support specialized functions; 

• Information Technology Services (ITS) Management provides support to the 

immediate office of the Associate CIO, ITS, and provides executive direction for the 

ITS organization and its divisions: Infrastructure, Architecture & Engineering; 

Business Systems Development; Enterprise Operations; Enterprise Networks; End 

User Equipment & Services; Web Services; and Electronic Tax Administration. This 

program also includes and funds the MITS Competitive Sourcing Office; 

• MITS Executive Oversight provides support to the immediate office of the Chief 

Information Officer, as well as the direct reports for EEO and Diversity, and the 

Director, Stakeholder Management (including Communications Services and 

Program Oversight). The program provides executive direction for the MITS 

organization, enabling MITS to be a customer-focused supplier of information 

technology solutions that are responsive to customer business priorities and 

effectively meet functional and operational needs; 

IRS - 85
• Business Systems Development performs the analysis, design, development, testing, 

and implementation of approximately 85,000 application programs supporting critical 

tax processing, management information reporting, and financial and management 

support systems for the IRS. This program activity also supports external trading 

partner data exchanges with federal government agencies, state and local 

governments, and other third party entities. The program controls application source 

code and deploys applications to the production environment; 

• Enterprise Operations designs, develops, and maintains information technology that 

supports critical tax processing, management information reporting, and financial and 

management support systems for the IRS. The program supports data exchanges with 

external organizations, such as other federal government agencies, state and local 

governments, and external entities (e.g., employers, banks, etc.) and includes a 

comprehensive disaster recovery capability to ensure continued operations in the 

agency in the event of a major interruption of service; 

• Enterprise Network provides telecommunications service delivery to all customer 

segments, including management of day-to-day operations and executing routine 

modifications to the telecommunications infrastructure and applications. It addresses 

all phases of engineering, acquisition, implementation and operation of 

telecommunications systems and services, including voice, video and data 

communications; 

• Enterprise Services plans and manages service and delivery methods used across the 

MITS organization, including demand analysis, enterprise architecture, configuration 

management, project reporting, enterprise life cycle management, release 

management, systems engineering, dashboard reporting and internal management; 

• Web Services implements applications and technologies for IRS employees; 

• End User Equipment and Services maintains the IRS’ automated business processes 

at headquarters and field sites, including technical systems support and applications 

software support to end users, maintaining legacy operations, local and corporate 

systems administration activities, email and domain user account maintenance, 

network and systems monitoring administration, asset management activities, and 

support and maintenance of the voice and data infrastructure at the Territory Offices; 

• Infrastructure Architecture & Engineering provides the systems architecture, 

sequencing plans, release management, and high-level engineered designs supporting 

information systems applications, software development tools, and infrastructure 

products necessary to build and evolve enterprise-wide business solutions; 

• MITS Management provides the management and oversight of investments in 

information technology, human capital investment, and other MITS operational 

priorities; 

• Information Technology Operational Security oversees FISMA reporting, including 

preparing for, conducting, and reporting Certification and Accreditation of systems 

using FIPS 199 and NIST 800-37; and self-assessments and annual testing of controls 

based on NIST 800-53; 

IRS - 86
• Information Technology Operational Security oversees FISMA reporting, including 

preparing for, conducting, and reporting NIST 800-26 self-assessments and annual 

testing of controls; 

• Information Technology Security Training provides training for FISMA reporting 

purposes; and 

• Information Technology Homeland Security Presidential Directive-12 oversees the 

use of Personal Identify Verification (PIV) technology for physical access to 

federally-controlled facilities and logical access to information systems for all federal 

employees and contractors who require long-term access. 

3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Information Services Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $1,485,802 $1,420,600 $1,482,236 $1,638,141

Offsetting Collections - Reimbursable 4,098 7,481 5,618 5,741

Mandatory Appropriations - User Fees 113,000 19,000 54,000 62,000

Total Operating Level $1,489,900 $1,428,081 $1,487,854 $1,643,882

Human Resources

Appropriated FTE 6,901 6,421 6,249 6,264

Other FTE 4 30 20 20

Total FTE (direct and reimbursable) 6,905 6,451 6,269 6,284

Includes Strategic Objective F4A

Measure FY 2005 FY 2006 FY 2007 FY 2008

Target

Actual

Met

There are no externally reported 

performance measures associated 

with this activity.

Dollars in Thousands

Table 3.2.8

IRS - 87
Description of Performance 

In FY 2007 and FY 2008, the IRS will continue to provide new technology solutions and 

improve work processes. In addition, the IRS will enhance efficiencies in tax 

administration operations by delivering modernized information systems to front-line IRS 

programs. 

Information technology solutions are the most effective and efficient means of increasing 

the number of IRS contacts with taxpayers by increasing the volume of transactions, and 

offers a greater variety of faster alternatives to file and pay their tax obligations. 

Information technology solutions also enhance the IRS’ ability to identify noncompliance and to combat tax avoidance schemes that contribute to the tax gap. 

The IRS’ FY 2008 Budget provides base funding to develop and continue projects 

selected for the FY 2007 and 2008 investment portfolio. The FY 2008 selected projects 

fall into five major categories as described below: 

• Decision Analytics (DA) - In FY 2008, the IRS is investing in several strategic IT 

projects to enhance compliance and customer service through the development of 

better case selection tools. Technologies being pursued in FY 2008 include 

predictive model development, data mining and data marts/data warehouse 

technologies. 

• Case Creation: Electronically build issue and assign workload - Many current 

production environment (CPE) systems rely, in part, on manual (paper) processes to 

build, assign and track cases. In FY 2008, these investments target near or mid-term 

enhancements to CPE systems and enable the migration from manual processes to 

electronic processes. Enabling technologies being pursued in FY 2008 include 

document imaging and document management and research of third party data 

sources. 

• Case Processing - These IT investments significantly augment and may, over time, 

replace CPE systems that bring new tools to improve customer service and/or 

increase casework. Other FY 2008 projects provide automation for discrete manual 

tasks that are very time consuming by leveraging available electronic data to prepopulate templates and perform preliminary analytics and centralize the availability 

of critical customer contact information. 

IRS - 88
• E-Filing/Self-Service - In FY 2008, these investments will expand the taxpayer’s 

ability to electronically interact with the IRS, whether filing or for self-service 

capabilities. Other projects anticipated in FY 2008 will expand electronic filing 

services that are central to the IRS’ overall e-file strategy. 

In addition, in FY 2008, the IRS will continue to develop and test the automated 

Correspondence Imaging System and improve FISMA compliance. Maintaining the 

infrastructure, modernizing our information systems and developing better tools will 

allow the IRS to operate more efficiently with improved productivity. 

IRS - 89
Business Systems 

Modernization 
Business Systems Modernization (BSM) 

Appropriation Description 

The Business Systems Modernization (BSM) appropriation provides resources for the 

planning and capital asset acquisition of information technology to modernize the IRS’ 

business systems. The program combines best practices and expertise in business 

solutions and internal management from IRS, business, and technology to develop a 

world-class tax administration system that fulfills the revenue collection requirements of 

the United States as well as taxpayers’ needs and expectations. 

The Business Systems Modernization budget request for FY 2008 is $282,090,000 in 

direct appropriations and 317 FTE. This is an increase of $85,280,000 or 43.3 percent, 

and no change in FTE, over the FY 2007 Continuing Resolution (CR) rate of 

$196,810,000 and 317 FTE. 

Appropriation Detail Table 

Business Systems Modernization 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Business Systems Modernization 317 $242,010 317 $158,702 317 $212,310 317 $196,810 317 $282,090 0.00% 43.33%

Subtotal New Appropriated Resources 317 $242,010 317 $158,702 317 $212,310 317 $196,810 317 $282,090 0.00% 43.33%

Other Resources:

Recoveries $4,361

Offsetting Collections - Reimbursable

Available multi-year/no-year funds $115,777 101,433 $97,112 $97,112 $136,790

Transfers In/Out

Subtotal Other Resources 0 $115,777 0 $105,794 0 $97,112 0 $97,112 0 $136,790 0.00% 40.86%

Total Resources Available for Obligation 317 $357,787 317 $264,496 317 $309,422 317 $293,922 317 $418,880 0.00% 42.51%

Obligations Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2006 FY 2008

Table 3.1

IRS - 90
Budget Adjustment Table 

Business Systems Modernization 

FTE Amount

FY 2007 President's Budget 317 $212,310

CR-rate Adjustment 0 (15,500)

FY 2007 CR-rate 317 $196,810

Interappropriation Transfer Corrections to Budget Restructure 0 $0

FY 2007 Operating Plan at CR-rate 317 $196,810

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $21,886

Base Adjustment 0 21,886

Maintaining Current Levels (MCLs) $1,245

Pay Annualization 0 226

Pay Inflation Adjustment 0 1,019

Non-Pay Inflation Adjustment 0 $0

Subtotal, Changes to Base 0 $23,131

FY 2008 Base 317 $219,941

Program Changes:

Program Increases: 0 $62,149

Fund Business Systems Modernization 0 62,149

Subtotal, FY 2008 Program Changes 0 $62,149

Total, FY 2008 President's Budget Request 317 $282,090

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Business Systems Modernization

IRS - 91
Operating Levels Table 

Business Systems Modernization 

Appropriation Title: Business Systems 

Modernization FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 317 317 317 317 317

Object Classification:

11.1 Full-Time Permanent Positions............................ $33,969 $33,968 ($12,873)

($12,873)

(2,627)

$21,095 $21,095 $34,896

11.3 Other than Full-Time Permanent Positions......... 446 447 0 447 447 470

11.5 Other Personnel Compensation.......................... 626 625 0 625 625 658

11.8 Special Personal Services Payments................. 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $35,041 $35,040 $22,167 $0 $22,167 $36,024

12.0 Personnel Benefits................................................ 9,772 9,772 7,145 7,145 10,034

13.0 Benefits to Former Personnel.............................. 0 0 0 0 0 0

21.0 Travel...................................................................... 187 187 0 187 187 187

22.0 Transportation of Things....................................... 0 0 0 0 0 0

23.1 Rental Payments to GSA...................................... 0 0 0 0 0 0

23.2 Rent Payments to Others...................................... 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc........................ 0 0 0 0 0 0

24.0 Printing and Reproduction.................................... 0000 0 0

25.1 Advisory & Assistance Services........................... 0 0 0 0 0 0

25.2 Other Services....................................................... 147,498 117,799 0 117,799 117,799 172,102

25.3 Purchase of Goods/Serv. from Govt. Accts......... 0000 0 0

25.4 Operation & Maintenance of Facilities................. 0000 0 0

25.5 Research & Development Contracts................... 0 0 0 0 0 0

25.6 Medical Care......................................................... 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 5,700 5,700 0 5,700 5,700 7,095

25.8 Subsistence & Support of Persons...................... 0000 0 0

26.0 Supplies and Materials......................................... 0 0 0 0 0 0

31.0 Equipment.............................................................. 43,812 43,812 0 43,812 43,812 56,648

32.0 Lands and Structures........................................... 0 0 0 0 0 0

33.0 Investments & Loans............................................. 0000 0 0

41.0 Grants, Subsidies.................................................. 0 0 0 0 0 0

42.0 Insurance Claims & Indemn................................. 0 0 0 0 0 0

43.0 Interest and Dividends................................. 0000 0 0

44.0 Refunds.................................................................. 0 0 0 0 0 0

91.0 Unvouchered.............................................. 0000 0 0

Total Budget Authority....................................... $242,010 $212,310 $196,810 $0 $196,810 $282,090

Budget Activities:

IT Investments $242,010 $212,310 $196,810 $196,810 $282,090

Total Budget Authority....................................... $242,010 $212,310 $196,810 $0 $196,810 $282,090

Table 2.2

Dollars in Thousands

($15,500)

($15,500)

($15,500)

IRS - 92
BSM Budget Activity: Business Systems Modernization 

3A – Description 

Business Systems Modernization ($282,090,000 in direct appropriation) 

This budget activity funds the planning and capital asset acquisition of information 

technology to modernize the IRS’ business systems, including related contractual costs. 

The program combines best practices and expertise in business solutions and internal 

management from the IRS, business, and technology to develop a world-class tax 

administration system that fulfills the revenue collection requirements of the United 

States as well as taxpayers’ needs and expectations. The IRS’ BSM program is required 

to submit for approval an annual expenditure plan that justifies the projects for which 

resources are requested. 

BSM management provides executive direction over the program. The BSM program 

develops the vision and strategy, manages the release of projects, and provides enterprise 

architecture support. The program ensures that all the integrated components of both 

technical and business modernization will provide a total business solution. This 

program will meet the needs of both taxpayers and internal users by providing business 

processes, enabled by information technology, that permit timely and accurate delivery of 

tax account and other tax-related information while ensuring security and privacy. The 

BSM program is responsible for the acquisition management activities of all the 

modernization projects and provides the direct interface to the PRIME Integrated Product 

Teams. 

BSM projects are developed and funded on a useable-segment basis—each request for 

funding for each project covers an identifiable portion of the project’s development. As 

projects are completed and have demonstrated successful operation, they leave the BSM 

fold and their operational costs are funded from the Operations Support account. BSM 

funding by project is shown in the chart below. 

Project Activities

FY 2006 

Budget

FY 2007 

Budget

FY 2008 

President's 

Budget

Customer Account 

Data Engine 

Release content master plan which includes a mid-year release to add 

new functionality and January release adding tax law changes

60,000 58,500 58,500

Modernized e-File Complete forms 1041 and 990T and development of form 1040

27,881 20,000 55,802

Accounts 

Management 

Services

Provides a Common User Interface for access and update of taxpayer 

accounts managed by CADE Systems and IMF/CFOL/IDRS

21,518 0 28,983

Filing & Payment 

Compliance 6,984 3,500

Common Services Initiate work on cross-domain prioritization and sharing projects known 

as Common Services Project for Portal Upgrade 0 0 16,000

Core Infrastructure 44,610 43,500 39,150

 Architecture, Integration & Management 30,124 39,500 35,100

5,893 2,310 2,310

Total Capital Investments $197,010 $167,310 $235,845

BSM Labor 45,000 45,000 46,245

Total BSM Program Request $242,010 $212,310 $282,090

NOTE: The IRS will work to allocate BSM staffing costs to the projects for the FY 2009 President's Budget.

FY 2008 BSM Project Activities

(Dollars in Thousands)

Management Reserve

IRS - 93
3B – Budget and Performance Plan

Budget and Performance by Budget Activities 

Business Systems Modernization Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

Enacted1 Enacted CR-rate Budget

Financial Resources

Appropriated Resources $203,360 $242,010 $196,810 $282,090

Offsetting Collections - Reimbursable

Total Operating Level $203,360 $242,010 $196,810 $282,090

Human Resources

Appropriated FTE 0 317 317 317

Other FTE

Total FTE (direct and reimbursable) 0 317 317 317 1

 FY 2005 Enacted excludes Salaries and Expenses.

Includes Strategic Objective F4A

Measure

BSM Project Cost Variance by Release/Subrelease (E)

FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 10% 10% 10%

Actual -46%

Met N

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 32%

Met N

Target N/A 10% 10% 10%

Actual -53%

Met N

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 15%

Met N

MeF R4 MS3 (Modernized e-file)

CADE R 1.3.2 FS06 (Customer 

Account Data Engine)

CADE R 2.1 MS4 (Customer 

Account Data Engine)

F&PC R1.2 MS4a (Filing and 

Account Payment Compliance)

MeF R3.2 MS4 (Modernized e-file)

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing 

Resolution, the implementation of the new tax legislation, and improvements resulting from program efficiencies.

Table 3.2.9 

F&PC R1.2 MS3 (Filing and 

Account Payment Compliance)

Dollars in Thousands

IRS - 94
Business Systems Modernization Includes Strategic Objective F4A

Measure

BSM Project Schedule Variance by Release/Subrelease (E)

FY 2005 FY 2006 FY 2007 FY 2008

Target1

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 6%

Met Y

Target N/A 10% 10% 10%

Actual -2%

Met Y

Target N/A 10% 10% 10%

Actual 59%

Met N

Target N/A 10% 10% 10%

Actual 0%

Met Y

Target N/A 10% 10% 10%

Actual 7%

Met Y

1

 Changes to the FY 2007 performance targets are attributed to funding adjustments under the Continuing 

Resolution, the implementation of the new tax legislation, and improvements resulting from program efficiencies.

MeF R4 MS3 (Modernized e-file)

CADE R 1.3.2 FS06 (Customer 

Account Data Engine)

CADE R 2.1 MS4 (Customer 

Account Data Engine)

F&PC R1.2 MS3 (Filing and 

Account Payment Compliance)

F&PC R1.2 MS4a (Filing and 

Account Payment Compliance)

MeF R3.2 MS4 (Modernized e-file)

Table 3.2.9 (Continued)

Description of Performance 

Core IT systems investments support services to both taxpayers and other government 

agencies and enforcement by providing the IRS frontline employees with the basic tools 

necessary to perform their jobs. A modernized and secure infrastructure will enhance the 

speed, security, and functionality necessary to keep pace with an automated economy. 

The IRS must keep pace with the growing demand and volume of electronic submission, 

payment, and refund transactions for tax remittances and offer taxpayers a variety of 

faster alternatives for satisfying tax obligations. These efforts will continue to place 

greater demand on the IRS to provide a modernized and secure IT infrastructure. 

Furthermore, a successful modernization program is critical to supporting long-term tax 

administration operations. Successful program delivery by the IRS during the past two 

years demonstrates that the IRS’ BSM program has established a foundation of 

disciplined program management processes and controls. The IRS executed BSM 

projects with a degree of sustained success not seen since program inception. This 

accomplishment is especially noteworthy in that the program achieved this while 

transitioning from a contractor-led program to an IRS-led program. 

The IRS has developed an IT Modernization Vision and Strategy (MV&S) for its IT 

systems for 2008 that align with and support the IRS Strategic Plan. Through the MV&S 

process, the IRS developed a plan showing how the IRS can effectively meet IT 

modernization goals in an incremental approach that provides near-term value. The plan 

IRS - 95
focuses on delivery of four major tax administration systems – Customer Account Data 

Engine (CADE), Account Management Services (AMS), Modernized e-File (MeF), and 

Filing & Payment Compliance (F&PC) – addressing the IRS’ strategic business priorities. 

The plan also capitalizes on IT infrastructure initiatives and smaller IT project initiatives 

to support a unified approach in continued improvement to program operations. 

Throughout FY 2006, the IRS modernization efforts continued to focus on its four core 

tax administration systems designed to provide more sophisticated tools to taxpayers and 

the IRS employees. The following highlights the IRS’ efforts in FY 2006 in advancing 

these core systems: 

• Introduced new CADE capabilities for the 2006 filing season. CADE supports 

faster refunds to taxpayers, issuing direct deposit refunds between one and seven 

days faster, and paper refunds four to thirteen days faster than refunds generated by 

the legacy system. CADE posted over 7.3 million returns – more than a 400 

percent increase over the previous year, and issued 7 million taxpayer refunds 

exceeding $3.4 billion. CADE improved taxpayer service by allowing access to 

account information up to seven days sooner, increasing the likelihood of single 

telephone call resolution, faster issue detection, and more timely account settlement. 

CADE is expected to post between 25 and 30 million returns in 2007. 

• Began the development of Account Management Services (AMS), a project that 

will enable real-time access to taxpayer account information, to support much faster 

resolution of taxpayer issues by IRS customer service representatives. AMS, in 

conjunction with CADE, will finally enable the IRS to break the weekly update 

system paradigm that has existed since the 1960s, enabling the IRS to begin to 

provide settlement of all account information by end-of-day, similar to what one 

expects from major private-sector financial institutions. The first release of AMS is 

due the summer of 2007 to support real-time address change capability in CADE 

and enable faster notice processing for a number of math-error notices. 

• Implemented Release 3.2 of its Modernized e-File (MeF) project, which enabled the 

filing of both federal and state returns concurrently for corporations (Forms 1120 

and 1120-S) and tax-exempt organizations (Form 990). In 2006, the MeF platform 

supported an e-filing mandate for certain large corporations and tax-exempt entities. 

Tax returns for large corporations typically include hundreds, or even thousands, of 

pages. Receiving the data electronically improves the accuracy of the tax return, 

reduces the volume of paper tax returns submitted to IRS Service Centers, and 

accelerates the examination process by having all tax return data available 

electronically. Electronic capture of return information enables the IRS to quickly 

deliver the data to analysts and agents for compliance risk assessment and action. 

In 2006, MeF accepted over 550,000 corporate returns. The IRS is expanding the 

MeF taxpayer base in 2007 to include Partnership Income tax returns (Form 1065), 

eventually enabling nearly 2.7 million small business and self-employed taxpayers 

to benefit from electronic filing. The IRS is in the planning stage to migrate the 

1040 individual tax return to the Modernized e-File platform. The development and 

IRS - 96
implementation of MeF 1040 capability will be completed by January 2011, with 

initial planned deployment for January 2009. 

• Completed the first release of the F&PC strategy. F&PC functionality analyzes tax 

collection cases and separates cases that require direct IRS involvement from those 

that can be handled by Private Collection Agencies (PCAs). The introduction of 

PCAs is expected to:

o Assist the IRS by addressing the volume of delinquent taxpayers that exceeds the 

IRS’ capacity to work, approximately 250,000 cases per year; and 

o Help eliminate backlogs in the large number of outstanding tax liabilities, which 

have grown by 118 percent over the last 12 years, increasing tax revenue and 

reducing the tax gap. 

Tax administration in the 21st century requires improved IRS information technology. 

For FY 2007 and FY 2008, the IRS is committed to continuing to make improvements in 

technology, including: 

• Replacing antiquated core account management systems and technology; 

• Expanding and enhancing compliance activities through early detection, better 

case selection, and better case management; 

• Delivering effective customer service, including expanded e-file systems and web 

services at reduced cost; and 

• Investing in infrastructure necessary to perform operations more efficiently, thus 

freeing up resources for enforcement and taxpayer service programs. 

IRS - 97
Health Insurance Tax 

Credit Administration 
Health Insurance Tax Credit Administration (HITCA) 

Appropriation Description 

The Health Insurance Tax Credit Administration (HITCA) appropriation provides 

funding for contractor support to develop and administer the advance payment option for 

the health insurance tax credit included in Public Law 107-210, the Trade Act of 2002. 

The IRS administers specific components of this credit: enrollment, payment and 

compliance. The Department of Labor, state workforce agencies, and the Pension 

Benefits Guaranty Corporation are responsible for determining potentially eligible Health 

Care Tax Credit (HCTC) taxpayers. 

The HITCA budget request for FY 2008 is $15,235,000 in direct appropriations and 17 

FTE. This is an increase of $389,000 or 2.6 percent, and no change in FTE, over the 

FY 2007 Continuing Resolution (CR) rate of $14,846,000 and 17 FTE. 

Appropriation Detail Table 

Health Insurance Tax Credit Administration 

FY 2007 FY 2007 

President's Budget CR-rate

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Health Insurance Tax Credit Administration 17 $20,008 10 $19,993 17 $14,846 17 $14,846 17 $15,235 0.00% 2.62%

Subtotal New Appropriated Resources 17 $20,008 10 $19,993 17 $14,846 17 $14,846 17 $15,235 0.00% 2.62%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable

Available multi-year/no-year funds

Transfers In/Out

Subtotal Other Resources 0 $0 0 $0 0 $0 0 $0 0 $0 0.00% 0.00%

Total Resources Available for Obligation 17 $20,008 10 $19,993 17 $14,846 17 $14,846 17 $15,235 0.00% 2.62%

FY 2006

Table 3.1

Obligations Budget

Dollars in Thousands

Enacted over CR-rate

% Change

Resources Available for Obligation

FY 2006 FY 2008

IRS - 98
Budget Adjustment Table 

Health Insurance Tax Credit Administration 

FTE Amount

FY 2007 President's Budget 17 $14,846

CR-rate Adjustment 0 $

FY 2007 CR-rate 17 $14,846

Interappropriation Transfer Corrections to Budget Restructure

FY 2007 Operating Plan at CR-rate 17 $14,846

Changes to Base:

Technical Adjustments to FY 2007 Base due to CR 0 $0

Base Adjustment 0 $

Maintaining Current Levels (MCLs) $389

Pay Annualization 0 15

Pay Inflation Adjustment 0 82

Non-Pay Inflation Adjustment 0 292

Subtotal, Changes to Base 0 $389

 FY 2008 Base 17 $15,235

Program Changes:

Subtotal, FY 2008 Program Changes 0 $0

Total, FY 2008 President's Budget Request 17 $15,235

FY 2008 Budget Highlights

Table 2.1

Dollars in Thousands

Appropriation: Health Insurance Tax Credit Administration

0

0

IRS - 99
Operating Levels Table 

Health Insurance Tax Credit Administration 

Appropriation Title: Health Insurance Tax Credit 

Administration FY 2006 

Enacted

FY 2007 

President's 

Budget

CR-rate 

Adjustment

FY 2007 

CR-rate

Proposed 

Reprogrammings

FY 2007 

Proposed 

Operating Plan 

at CR-rate

FY 2008 

President's 

Budget

FTE 17 17 17 17 17

Object Classification:

11.1 Full-Time Permanent Positions............................ $2,241 $2,302 $0 $2,302 $2,302 $2,386

11.3 Other than Full-Time Permanent Positions......... 0 0 0 0 0 0

11.5 Other Personnel Compensation.......................... 22 23 0 23 23 23

11.8 Special Personal Services Payments................. 0 0 0 0 0 0

11.9 Personnel Compensation (Total)................... $2,263 $2,325 $0 $2,325 $0 $2,325 $2,409

12.0 Personnel Benefits................................................ 348 358 0 358 358 371

13.0 Benefits to Former Personnel.............................. 0 0 0 0 0 0

21.0 Travel...................................................................... 142 144 0 144 144 148

22.0 Transportation of Things....................................... 0 0 0 0 0 0

23.1 Rental Payments to GSA...................................... 191 193 0 193 193 198

23.2 Rent Payments to Others...................................... 0 0 0 0 0 0

23.3 Communications, Utilities, & Misc........................ 0 0 0 0 0 0

24.0 Printing and Reproduction.................................... 0000 0 0

25.1 Advisory & Assistance Services........................... 0 0 0 0 0 0

25.2 Other Services....................................................... 17,057 11,819 0 11,819 11,819 12,102

25.3 Purchase of Goods/Serv. from Govt. Accts......... 0000 0 0

25.4 Operation & Maintenance of Facilities................. 0000 0 0

25.5 Research & Development Contracts................... 0 0 0 0 0 0

25.6 Medical Care......................................................... 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment............. 0 0 0 0 0 0

25.8 Subsistence & Support of Persons...................... 0000 0 0

26.0 Supplies and Materials......................................... 7 7 0 7 7 7

31.0 Equipment.............................................................. 0 0 0 0 0 0

32.0 Lands and Structures........................................... 0 0 0 0 0 0

33.0 Investments & Loans............................................. 0000 0 0

41.0 Grants, Subsidies.................................................. 0 0 0 0 0 0

42.0 Insurance Claims & Indemn................................. 0 0 0 0 0 0

43.0 Interest and Dividends................................. 0000 0 0

44.0 Refunds.................................................................. 0 0 0 0 0 0

91.0 Unvouchered.............................................. 0000 0 0

Total Budget Authority....................................... $20,008 $14,846 $0 $14,846 $0 $14,846 $15,235

Budget Activities:

Health Insurance Tax Credit Administration............... $20,008 $14,846 $0 $14,846 $14,846 $15,235

Total Budget Authority....................................... $20,008 $14,846 $0 $14,846 $0 $14,846 $15,235

Table 2.2

Dollars in Thousands

IRS - 100
HITCA Budget Activity: Health Insurance Tax Credit Administration 

3A - Description 

Health Insurance Tax Credit Administration ($15,235,000 in direct appropriation) 

The HITCA budget activity funds costs to administer a refundable tax credit for health 

insurance to qualified individuals. 

The Trade Adjustment Assistance Reform Act of 2002 created a tax credit for the 

purchase of certain types of health insurance coverage for eligible taxpayers. The credit 

was created to help displaced workers and retirees who have lost their jobs due to trade 

with countries who participate in the North American Free Trade Agreement. The credit 

pays for 65 percent of the health insurance premiums for eligible workers. The IRS’ 

responsibility relating to HCTC is to ensure participating eligible taxpayers receive the 

credit to which they are entitled. 

The Act required the IRS to develop and operate a system to provide an advance, 

refundable tax credit for certain individuals who receive a trade readjustment allowance 

or benefit from the Pension Benefit Guaranty Corporation. This activity maintains the 

administrative and direct support for the HITCA Program Office and the staff charged 

with administering the program for the Service. 

IRS - 101
3B – Budget and Performance Plan 

Budget and Performance by Budget Activities 

Health Insurance Tax Credit Administration Strategic Objective F4A

FY 2008

Resource Level FY 2005 FY 2006 FY2007 President's 

 Enacted Enacted CR-rate Budget

Financial Resources

Appropriated Resources $34,562 $20,008 $14,846 $15,235

Offsetting Collections - Reimbursable

Total Operating Level $34,562 $20,008 $14,846 $15,235

Human Resources

Appropriated FTE 17 17 17 1

Other FTE

Total FTE (direct and reimbursable) 17 17 17 17

Includes Strategic Objective F4A

Measure FY 2005 FY 2006 FY 2007 FY 2008

Target N/A Baseline $14.25 $13.97

Actual N/A $12.95 

Met N/A

Target Baseline 99 97 97

Actual 106 99

Met Y

Table 3.2.10

Sign-up Time

Cost per Taxpayer Served

Dollars in Thousands

7

Description of Performance 

The IRS administers specific components of this credit: enrollment, payment and 

compliance. The Department of Labor, state workforce agencies, and the Pension 

Benefits Guaranty Corporation are responsible for determining potentially eligible HCTC 

taxpayers. 

In FY 2005, the IRS implemented a new HCTC service delivery model that saved 

approximately $20 million. In FY 2006, the IRS continues to implement new business 

processes to identify, prevent, and recover erroneous payments. 

For FY 2007 and continuing in FY 2008, the IRS will maintain a balanced approach to 

administering the credit -- encouraging eligible taxpayers to comply and seeking to 

improve compliance through research that will guide future HCTC operation changes. 

IRS - 102
Supporting Material 
Section 4 – Supporting Materials 

4A – Human Capital Strategy Description 

The IRS’ approximate 104,000 employees represent approximately 81 percent of the 

Department of the Treasury’s total employee population. The IRS workforce is diverse in 

multiple dimensions, including job series, demographic mix, and geographic distribution. 

The IRS has a large seasonal workforce that accounts for as much as 23 percent of the 

IRS’ employee population during peak workload seasons. Between 76 and 77 percent of 

the IRS annual budget is dedicated to financing the IRS’ “human capital.” To ensure that 

strategic management of its human capital resources is aligned with the IRS mission, the 

four human capital strategic goals were established to help focus the use of these 

resources: 

Goal 1: Continually Assess and Shape the Workforce to Efficiently Accomplish the 

Service’s Mission 

Goal 2: Increase Employee Proficiency and Engagement to Enhance Tax Law 

Compliance 

Goal 3: Leverage Human Capital Technology to Reduce Burden 

Goal 4: Enable Quick and Agile Management Action to Achieve Business Goals. 

In FY 2006, the IRS published its first Human Capital Strategic Plan (HCSP) for 

FY 2005 - 2009 and the Human Capital Strategic Implementation Plan (HCSIP) for 

FY 2006-2007. These Plans focus on these strategic goals and address IRS workforce 

challenges. 

In terms of critical workforce challenges, the IRS and continues to make headway in the 

area of leadership succession. Over 60 percent of IRS’ current executive cadre will be 

eligible to retire within the next five years – half are eligible to retire by the end of 2009. 

The anticipated loss poses obvious concerns about IRS leadership continuity and clearly 

supports the need for aggressive leadership succession planning. 

Leadership Retirement Eligibility through FY 2011 

Optional Retirement Eligibility 

 OnBoards 

2006 

+Prior 2007 2008 2009 2010 2011 TOTAL 

Management Type 

Department Managers 374 35 31 21 17 17 24 145 

Executives 280 83 14 23 18 19 9 166 

Front-line Managers 6371 1028 310 368 351 324 285 2666 

Senior Managers 1534 342 119 137 109 98 93 898 

TOTAL 8559 1488 474 549 495 458 411 3875 

Based on National Finance Center data. Run date 11/28/06

IRS - 103
To address this challenge, the IRS has established an overarching Leadership Succession 

Program that focuses on the recruitment, development and retention of an enterprise-wide 

talent pool of highly skilled leaders across the organization to effectively and efficiently 

support tax administration. 

In addition to leadership attrition, the IRS continues to focus on the attrition rates of its 

overall workforce. The following table is based on data from the TreasNet database and 

shows the number and percent of the current permanent employee population that will be 

eligible to retire through 2009. 

Number 

Eligible 2007 

Percent 

Eligible 2007 

Number 

Eligible 2008 

Percent 

Eligible 2008 

Number 

Eligible 2009 

Percent 

Eligible 2009 

22,490 22.59% 26,747 26.87% 31,250 31.39% 

Based on minimum eligibility for Optional Retirement. 

To mitigate the anticipated loss of talent and ensure continued workforce competency, 

the IRS is using the following strategies to maintain the optimum skill/competency level 

of its workforce: 

1. Selecting Mission Critical Occupation (MCO) new hires with increased 

education/experience; 

2. Established a FY 2007 IRS-wide Retention Plan to retain employees who possess 

mission critical skills and competencies; 

3. Expanded use of competency assessment tools to include additional MCO and 

target technical knowledge; 

4. Developed and implemented the Leadership Succession Plan redesign to complete 

succession management strategies and increase workforce management readiness; 

and 

5. Provided quality continued professional education, e-learning and other training 

to sustain and/or increase the proficiency of the current workforce. 

IRS - 104
Human Resources Table 

Table 4.1

Changes in Full Time Equivalents

Direct and Reimbursable

FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 94,282 92,846 93,718

Increases:

Reason #1: Adjusted to enacted level1 3,158 3,683

Reason #2: Program Reinvestment 805 11

Reason #3: Program Increase 1,672 1,584

Reason #4: Transfer of ICDE from Justice 329

Reason #5: Increase in reimbursable work 112 14

Reason #6:

Subtotal, Increases 6,076 3,694 1,598

Decreases:

Reason #1: Base Adjustment (2230) (937)

(605)

(1018)

(1424) (1184)

(3659)

(1318)

(461)

(7512) (2822) (2502)

Reason #2: Rescission

Reason #3: Operating Plan FTE Adjustment

Reason #4: Program Cost Savings & Efficiencies

Reason #5: Adjusted to operating level/under 

Reason #6: CR-rate Adjustment

Reason #7: Decrease in reimbursable work

Subtotal, Decreases

Year-end Actual/Estimated FTEs 92,846 93,718 92,814

Net Change from prior year SOY to budget year EOY

1 FY 2005 enacted level was 97,440 and FY 2006 enacted level was 96,529.

IRS - 105
4B – Information Technology Strategy 

In the spring of 2006, the IRS unveiled a comprehensive vision for IRS future operations 

beyond 2006. The Modernization Vision & Strategy (MV&S) establishes a plan that 

drives investment decisions, addressing the priorities for modernizing front-line tax 

administration and establish technical capabilities provided by the infrastructure and 

security. The MV&S reflects the priorities of the organization across all IRS business 

units and is coordinated with Treasury’s overall Enterprise Architecture. It serves as a 

guide for where investments should be focused. This strategy allows IRS to develop 

defined, strategically prioritized, costs and a ranked list of proposed IRS modernization 

projects (investments) for a given year. Whenever possible, the MV&S approach 

leverages existing systems and, as necessary, the program will include new development 

to optimize capacity, manage program costs, and deliver functionality in smaller and 

more frequent releases. The IRS expects this approach to deliver business value sooner 

and at lower risk. 

The IRS has 31 investments that are defined as major because they meet one or more of 

the criteria set by OMB in Circular A-11 for a major investment: (1) requires special 

management attention because of the investment’s importance to the mission or function 

of the IRS; (2) is for financial management purposes and obligates more than $500,000 

annually; (3) has significant program or policy implications; (4) has high executive 

visibility; (5) has high development, operating, or maintenance costs; or (5) is defined as 

a “major” by the Treasury or IRS’ capital planning and investment control process. An 

Exhibit 300 has been submitted as part of the FY 2008 Congressional Budget Submission 

for each of these 31 investments. 

The IRS Business Systems Modernization (BSM) program has delivered significant 

benefits, and particularly in recent years, the program has demonstrated a consistent 

record of success – replacing major segments of antiquated systems with modernized 

capabilities. 

Following two consecutive successful years in FY 2004 and FY 2005, the IRS 

modernization effort in FY 2006 continued to sustain a track record of successful 

implementation of modernized capabilities and remains positioned to continue this 

success in FY 2007. A key success factor has been focusing more directly on managing 

contractor performance and leveraging IRS resources. This approach is integrated into 

the Modernization Vision and Strategy (MV&S) efforts, in which a key feature is to 

leverage the existing production environment. This enables greater cost effectiveness and 

speeds delivery of IRS modernization. 

IRS - 106
BSM Major Information Technology (IT) activities address internal and external 

priorities through a balanced investment portfolio fully aligned with core IRS strategic 

priorities: 

• Taxpayer Service + Enforcement = Compliance 

• Modernization of IRS technology 

The BSM Program has successfully implemented all projects delivered in the second half 

of FY 2005 and the first half of FY 2006 – attaining nearly all cost and schedule 

milestones as planned while delivering desired business benefits and functionality. 

During the summer of FY 2005, the IRS coordinated the development of a revised 

performance methodology with Treasury Inspector General for Tax Administration 

(TIGTA) and General Accountability Office (GAO). For the first time, the BSM 

Expenditure Plan introduces a performance measurement methodology based on greater 

control, visibility, and consistent treatment of baseline and variance calculations. 

In FY 2006, BSM continued to stabilize and institutionalize program management 

improvements. BSM continues to deliver projects with attention to cost and schedule 

targets and to providing benefits to taxpayers. On a program-wide basis, for four projects 

in progress (i.e., results represent current performance for projects exiting milestone 3 for 

F&PC, MeF and CADE), all four have met both cost and schedule targets. 

As BSM program management capabilities have continued to mature, the ability to more 

consistently establish and manage reasonable cost and schedule baselines has similarly 

improved. BSM has expanded its financial and schedule management capabilities to 

include finer levels of granularity and controls than previously available in past 

Expenditure Plans. 

Some specific examples of success over the past few fiscal years include the following: 

Customer Account Data Engine: 

• Supports faster refunds to taxpayers than is possible with legacy systems. CADE 

allows direct deposit refunds to be issued between one and seven days faster and 

paper refunds to be issued four to 13 days faster than refunds generated by the legacy 

system.

• During the 2006 Filing Season, CADE posted more than 7.3 million returns – a nearly 

fourfold increase over the previous year and issued more than $3.4 billion in refunds 

to nearly 7 million taxpayers; 

• Improves taxpayer service by allowing IRS customer service representatives access to 

current information up to seven days sooner, increasing the likelihood of single 

telephone call resolution; and

• Faster issue detection and more timely account settlement. 

IRS - 107
e-Service:

• Taxpayer and third party transcript request processing cycle time is reduced from 

15+ days to minutes; 

• To date e-Services has processed more than 1,276,000 requests for transcripts via the 

Registered User Portal and more than 7.4 million via the Employee User Portal since 

launch to employees and Telephone Routing Interactive System on May 16, 2005; 

• Disclosure Authorization cycle is reduced from 26 days to same day;

• Electronic Account Resolution cycle time reduced by up to two weeks, eliminating 

delay between initial contact and issue resolution; and 

• Prior to e-Services, 70 million, five percent, of the 1.4 billion Form 1099 documents 

could not be attached to specific taxpayer accounts due to Taxpayer Identification 

Number (TIN) matching errors. The IRS estimated that unreported income due to 

non-filing or invalid TINs accounts for $42 billion in income that cannot be taxed, 

which equates to roughly $93 million per year in tax underpayment. e-Services 

reduces this error rate to less than one percent (approximately $10 million), enabling 

recovery of much of this underpayment. 

Filing and Payment Compliance: 

• Provides a government/industry partnership enabling private collection agencies to 

assist the IRS by addressing the volume of delinquent taxpayers that exceeds the IRS’ 

capacity to work. Between now and 2017, this partnership will result in 

approximately 2.6 million delinquent cases receiving treatment that would otherwise 

have gone unworked; 

• Reduces backlogs in outstanding tax liabilities, which have grown by 118% over the 

last 12 years; 

• Improves overall economic outcomes by reducing the large number of unresolved 

cases (by approximately 250,000 cases/year), which undermine the fairness of the tax 

system. Reduction of unresolved cases also improves the prevailing attitudes of 

compliant taxpayers toward their tax obligation, reducing adverse effects associated 

with the current volume of unresolved cases; and 

• Improves financial performance by generating an estimated gross revenue of $2.8 

billion through 2017 and reducing taxpayer burden. 

Modernized e-File: 

• Major productivity and service efficiency gains helping taxpayer service and 

enforcement: 

o Taxpayer Service – IRS employees have all original documents available online 

and in real time. This capability eliminates back-end re-keying, data entry and 

enables responsive taxpayer support. Prior to MeF, only a limited subset of these 

documents was available – requiring retrieval of source documents – a time 

consuming process, which could take several weeks;

o Enforcement – Online abilities and 100 percent data access improves the ability of 

revenue agents to perform compliance and enforcement activities in a timely and 

accurate manner. Corporate returns can now be reviewed in a matter of days or 

weeks as opposed to previous 18 month-long cycle times. 

IRS - 108
• More than $34 million in savings to taxpayers in reduced tax preparation fees, 

postage, and storage; 

• Fully compatible with industry standard architectures, consistent with long term 

technology trends, and aligned with IRS third party partners who are also 

standardizing on Extensible Markup Language (XML)-based technologies. This 

capability reduces industry burden, greatly simplifies exchanging data in a secure 

fashion, and reduces the costs incurred by taxpayers and IRS business partners to do 

business with the IRS; and 

• Error rate is reduced to four percent, which compares favorably to the error rate of 

18 percent for returns processed in paper-based systems; and MeF processed Form 

7004 (filing extension for corporations), Form 1120 as well as Form 990PF 

(information return for private foundations) at higher than expected volumes – twice 

the anticipated number of return receipts over projections, while still achieving 

performance goals – a significant reduction in burden and time for corporate and taxexempt taxpayer.

IRS - 109
Summary of IT Resources Table IT Investments Portfolio Information Technology Investments (from Exhibit 53) (in $ Millions) Major IT Investments 1 Program Alignment Operating Plan Obligations Operating Plan % Change from FY 05 Obligations to FY 06 President's Budget % Change from FY 06 to FY 07 President's Budget % Change from FY 07 to FY 08 Account Management Services Program (AMS) - Major Modernization 0.0 0.0 8.5 8.5% 21.0 147.1% 33.6 60.0% Appeals Automation Environment (AAE) Exam/Collections 12.4 9.4 13.1 39.4% 14.8 13.0% 15.3 3.4% Automated Collection System (ACS) - Major Tax Collection 0.0 0.0 0.0 0.0% 4.8 0.0% 5.0 4.0% Business Masterfile (BMF) Submission Processing 11.9 11.7 14.2 21.4% 12.3 -13.4% 12.7 3.3% CEAS - Major Taxpayer Service 0.0 0.0 0.0 0.0% 7.5 0.0% 7.6 1.3% CEAS - Major Taxpayer Service 0.0 0.0 0.0 0.0% 5.4 0.0% 5.4 0.0% CEAS - Major Taxpayer Service 0.0 0.0 0.0 0.0% 2.1 0.0% 2.2 4.8% Correspondence Imaging System (CIS) - Release 2 - Major Tax Collection 0.0 0.0 0.0 0.0% 10.3 0.0% 10.6 2.9% Counsel Automated Systems Environment (CASE) Exam/Collections 26.3 25.8 27.0 4.7% 28.5 5.6% 29.2 2.5% Criminal Investigation Management Information System (CIMIS) - Major Criminal Investigations 0.0 0.0 0.0 0.0% 2.6 0.0% 2.6 0.0% Criminal Investigation Management (CIMIS) Criminal Investigations 0.0 0.0 0.0 0.0% 0.0 0.0% 0.0 0.0% Criminal Investigation Management (CIMIS) Criminal Investigations 0.0 0.0 0.0 0.0% 2.6 0.0% 2.6 0.0% Customer Account Data Engine (CADE) Submission Processing/Tax Collection 98.9 98.9 118.6 19.9% 120.4 1.6% 72.4 -39.9% Customer Account Data Engine (CADE) Same as above 92.6 92.6 104.7 13.0% 110.9 6.0% 62.6 -43.6% Customer Account Data Engine (CADE) Same as above 5.2 5.2 2.3 -55.8% 2.2 -4.3% 2.3 4.5% Customer Account Data Engine (CADE) Same as above 1.1 1.1 11.6 954.5% 7.3 -37.1% 7.5 2.7% Electronic Federal Tax Payment System (EFTPS) - Major Tax Collection 0.0 0.0 0.0 0.0% 69.9 0.0% 69.9 0.0%

 Electronic Federal Tax Payment System (EFTPS) Tax Collection 0.0 0.0 0.0 0.0% 2.1 0.0% 2.2 4.8%

 Electronic Federal Tax Payment System (EFTPS) Tax Collection 0.0 0.0 0.0 0.0% 67.8 0.0% 67.7 -0.1%

Electronic Fraud Detection System (EFDS) Tax Collection 11.9 11.9 11.1 -7.0% 11.3 2.1% 11.6 2.5%

 Electronic Fraud Detection System (EFDS) Tax Collection 8.0 8.0 7.5 -5.9% 7.8 3.6% 8.0 2.6%

 Electronic Fraud Detection System (EFDS)

Earned Income Tax Credit 3.9 3.9 3.5 -9.4% 3.5 -1.0% 3.6 2.4%

Electronic Management System (EMS)

IRS Submission Processing 10.6 10.8 9.8 -9.3% 8.9 -9.2% 9.1 2.2%

Enterprise Data Warehouse (EDW) Exam/Collections 7.6 7.6 7.0 -8.6% 7.0 0.0% 7.3 5.0%

e-Services Examinations 41.8 41.8 14.2 -66.0% 14.1 -0.7% 14.4 2.1%

 e-Services Examinations 36.9 36.9 0.0 -100.0% 0.0 0.0% 0.0 0.0%

 e-Services Examinations 4.9 4.9 14.2 189.8% 14.1 -0.7% 14.4 2.1%

Examination Desktop Support System (EDSS) - Release 2 - Major Examinations 3.6 3.6 7.0 94.4% 4.8 -31.4% 5.0 3.1%

Excise Files Information Retrieval System (ExFIRS) - Major Exam/Collections 0.0 0.0 0.0 0.0% 6.5 0.0% 6.6 1.5%

Excise Tax e-File & Compliance (ETEC) Major Submission Processing 0.0 0.0 0.0 0.0% 13.6 0.0% 2.3 -83.1%

Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.2 0.2 32.5 16150.0% 19.3 -40.6% 1.5 -92.2%

 Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.0 0.0 28.1 0.0% 19.3 -31.3% 0.0 -100.0%

 Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.2 0.2 0.2 0.0% 0.0 -100.0% 0.0 0.0%

 Filing and Payment Compliance (F&PC) (Blended) Exam/Collections 0.0 0.0 4.2 0.0% 0.0 -100.0% 1.5 0.0%

Financial Management Information System (FMIS) Tax Collection 4.5 4.5 2.5 -44.4% 5.9 136.0% 6.0 1.7%

Individual Master File (IMF) Submission Processing 11.9 10.1 12.7 25.7% 12.6 -0.8% 13.0 3.2%

Information Returns Processing (IRP) Submission Processing 6.9 7.3 7.4 1.4% 7.6 2.7% 7.9 3.9%

Integrated Collection System (ICS) Tax Collection 7.7 9.3 8.9 -4.3% 8.9 0.0% 9.2 3.4%

Integrated Customer Communications Environment (ICCE) Taxpayer Service 14.2 14.2 17.2 21.1% 17.0 -1.3% 17.9 5.4%

Integrated Data Retrieval Systems (IDRS) Tax Collection 16.7 16.7 17.9 7.2% 17.6 -1.7% 18.3 4.0%

Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 12.8 12.8 22.0 71.9% 16.6 -24.5% 17.0 2.4%

 Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 9.4 9.4 18.4 95.7% 12.9 -29.9% 14.8 14.7%

Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 0.0 0.0 0.0 0.0% 0.0 0.0% 0.0 0.0%

Integrated Financial System/CORE Financial System (IFS) Treasury-Financial 3.4 3.4 3.6 5.9% 3.7 2.8% 2.2 -40.5%

Integrated Submission and Remittance Processing System (ISRP) Submission Processing 12.4 13.7 18.0 31.3% 16.6 -7.7% 17.0 2.2%

Interim Revenue Accounting Control System (IRACS) Treasury-Financial 1.8 1.8 0.7 -61.1% 0.8 14.3% 0.8 0.0%

Modernized e-File (MeF) Submission Processing 69.2 69.2 69.9 1.0% 61.5 -12.0% 79.6 29.4%

 Modernized e-File (MeF) Submission Processing 61.0 61.0 57.4 -5.8% 48.2 -16.0% 61.4 27.4%

 Modernized e-File (MeF) Submission Processing 6.4 6.4 11.7 81.5% 12.0 2.7% 12.3 2.6%

 Modernized e-File (MeF) Submission Processing 0.0 0.0 0.0 0.0% 0.5 0.0% 5.2 940.0%

 Modernized e-File (MeF) Submission Processing 1.8 1.8 0.8 -54.7% 0.8 -3.5% 0.7 -12.5%

Service Center Recognition/Image Processing System (SCRIPS) Submission Processing 17.4 17.4 16.0 -8.1% 17.0 6.0% 17.4 2.5%

Tax Return Database (TRDB) Submission Processing 4.6 4.6 6.9 50.0% 4.8 -30.4% 5.0 4.0%

Travel Reimbursement and Accountin Treasury ) g System (TRAS -Financial 1.8 1.8 1.5 -16.7% 1.4 -6.7% 1.5 7.1%

IRS EA Investment 0.0 0.0 4.2 0.0% 4.4 4.8% 4.7 5.8%

Total 407.1 405.1 468.6 15.7% 570.2 21.7% 531.8 -6.7%

FY 2007 FY 2008 FY 2005 FY 2006

IRS - 110
Summary of IT Resources Table Major IT Investments 1 Program Alignment Operating Plan Obligations Operating Plan % Change from FY 05 Obligations to FY 06 President's Budget % Change from FY 06 to FY 07 President's Budget % Change from FY 07 to FY 08 Infrastructure Investments IRS Consolidated Infrastructure (Infrastructure) 312.4 312.4 238.4 -23.7% 323.0 35.5% 380.3 17.7% IRS Consolidated Infrastructure (Infrastructure) 312.4 312.4 238.4 -23.7% 323.0 35.5% 346.5 7.3% IRS Consolidated Infrastructure (Infrastructure) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 33.8 0.0% IRS Consolidated Infrastructure (Common Services) 0.0 0.0 8.8 0.0% 0.0 -100.0% 16.0 0.0% IRS Consolidated Infrastructure (ICommon Services)-Web Portal 0.0 0.0 8.8 0.0% 0.0 -100.0% 16.0 0.0% IRS Consolidated Infrastructure (Office Automation) 326.2 326.3 349.2 7.0% 259.9 -25.6% 300.3 15.5% IRS Consolidated Infrastructure (Office Automation) 326.2 326.3 349.2 7.0% 259.9 -25.6% 300.3 15.5% IRS Consolidated Infrastructure (Office Automation) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 0.0 0.0% IRS Consolidated Infrastructure (Security) 57.0 57.0 51.1 -10.4% 51.1 0.0% 77.3 51.3% IRS Consolidated Infrastructure (Security) 57.0 57.0 51.1 -10.4% 51.1 0.0% 72.9 42.7% IRS Consolidated Infrastructure (Security) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 4.4 0.0% IRS Consolidated Infrastructure (Telecommunications) 288.5 288.5 245.5 -14.9% 213.3 -13.1% 258.4 21.1% IRS Consolidated Infrastructure (Telecommunications) 288.5 288.5 245.5 -14.9% 213.3 -13.1% 256.4 20.2% IRS Consolidated Infrastructure (Telecom) - BSM Portion 0.0 0.0 0.0 0.0% 0.0 0.0% 1.0 0.0% IRS Consolidated Infrastructure (Telecom) - EITC 0.0 0.0 0.0 0.0% 0.0 0.0% 1.0 0.0% Total 984.1 984.2 893.0 -9.3% 847.3 -5.1% 1032.3 21.8%

Total Major Investments 1391.2 1389.3 1361.6 -2.0% 1417.5 4.1% 1564.1 10.3%

Non-Major IT InvestmentsProgram and Management Support Programs 170.5 167.5 185.5 10.7% 214.9 15.8% 236.2 9.9%

Information Technology Non-Major Systems/Programs 185.1 190.9 196.7 3.0% 98.1 -50.1% 101.6 3.6%Improvement Project Systems (FY 07 and 08 based on MV&S) 49.3 49.3 56.7 15.0% 45.4 -19.9% 46.6 2.6%Tier B Infrastructure 0.0 0.0 2.6 0.0% 7.3 182.6% 7.4 1.4%

Security Audit and Analysis System 0.0 0.0 6.6 0.0% 10.8 63.6% 11.0 1.4%

BSM Architecture & Integration 0.0 0.0 0.0 0.0% 27.6 0.0% 62.7 127.2%BSM Management Reserve 5.8 5.8 13.0 124.1% 2.3 -82.3% 2.3 0.0%

Total 410.7 413.5 461.1 11.5% 406.4 -11.9% 467.8 15.1%

Total IT Investments 1,801.9 1,802.8 1,822.7 1.1% 1,823.9 0.1% 2,031.9 11.4%

1 Ma

IT Investments Portfolio

Information Technology Investments (from Exhibit 53) (in $ Millions)

jor IT projects include funding for the IRS’ staffing associated with direct management of Business Systems Modernization projects.

FY 2005 FY 2006 FY 2007 FY 2008

IRS - 111
Program Assessment Rating Tool (PART) Evaluation Table 

The IRS continues to provide full support and attention to the PART process and 

recommendations. The following are examples of how the IRS uses the PART process to 

make improvements: 

• The Taxpayer Advocate Service (TAS) established teams charged with creating an 

application that will capture time spent on cases while in the system (Phase I) as well 

as the development of a front end application to allow capture of time spent on a case 

outside of the system (Phase II). The System Acceptability Testing (SAT) of Phase I 

was completed in mid-June and has been followed by a separate stress test to ensure 

the timekeeping component does not negatively impact Taxpayer Advocate 

Management Information System (TAMIS) response times. The Request for 

Information Services (RIS) has been submitted and TAS expects to have Phase 2 

implemented before the close of 2007. 

• The PART program improvements for the Earned Income Tax Program (EITC) 

program provide for the increased monitoring of the EITC examination and closure 

programs. These improvements support the President’s Management Agenda (PMA) 

initiative for “Eliminating Improper Payments” and also provide a potential means to 

narrow the tax gap. In FY 2006, the IRS launched the second phase of its EITC 

return preparer strategy with emphasis on tracking and research. The IRS plans to 

further expand the program to include client audits of preparers penalized in FY 2005 

for Reverse Preparer Action Case treatment. 

• In May 2006, the IRS implemented its new Criminal Investigation (CI) information 

management system in compliance with a PART recommendation from FY 2005. 

This information management system will enhance program effectiveness by 

providing more timely information on investigative trends and issues that will 

increase casework accuracy. 

IRS - 112
PART Tax Collection 

PART Name: Tax Collection

Year PARTed: FY 2002

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Reviewing the effectiveness of the revised collection performance measures of 

workload coverage and efficiency. Information from these measures will be used in the 

development of the 2008 budget.

2. IRS has been working to make management improvements in the last several years, 

including implementing good output measures. However, its financial management 

systems do not provide the information needed to make effective day to day management 

decisions.

3. IRS has a strong planning process closely linked to its budget process. IRS is currently

developing improved collection outcome measures and goals.

1. Implementing new tools in 2007 to segment collection workload according to risk to 

ensure IRS takes the right action to secure delinquent taxes.

2. Implementing legislation - including strong taxpayer rights protections - allowing IRS to 

hire private collection agents to help secure delinquent tax debt (full implementation by 

January 2008).

Table 4.3

PART Evaluation

This program collects tax debts from citizens and businesses. Agents contact taxpayers 

through notices, phone calls and personal visits to secure payments. If necessary, 

collection agents can use liens, levies or seizures, or refer delinquent taxpayers for 

criminal prosecution. 

1. IRS collection of unpaid taxes yields substantial revenue ($18 billion in 2001). However, 

IRS does not work enough collection cases with its current resources, work processes 

and technology to ensure fair tax enforcement. Each year billions of dollars of unpaid 

taxes goes uncollected.

IRS - 113
PART Earned Income Tax Credit 

PART Name: Earned Income Tax Credit

Year PARTed: FY 2002

Rating: Ineffective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Identifying paid tax return preparers with EITC error rates and using education and 

enforcement procedures to improve their performance.

2. IRS has a strong planning process closely linked to its budget process, but it has not 

yet used outcome information for this program to set performance targets that allow it to 

demonstrate results. 

3. IRS has made numerous management improvements in recent years. However, its 

financial management systems do not provide the information needed to make effective 

day to day management decisions.

1. Conducting 500,000 examinations of EITC returns per year based on enhanced case 

selection systems.

2. Preventing $270 million in incorrect refunds in 2006 by detecting and correcting errors 

during return processing. 

Table 4.3

PART Evaluation

This program administers the earned income tax credit (EITC) which rewards work and lifts 

families out of poverty. The program seeks to maximize participation of eligible taxpayers 

and reduce payments to ineligible taxpayers.

1. The program has failed to reduce EITC erroneous payments to acceptable levels. 

While IRS prevents roughly $1 billion in erroneous EITC payments per year, 27 to 32 

percent of all EITC payments were still made in error for 1999. The magnitude of this error 

rate is the reason for the rating of “ineffective”. 

IRS - 114
PART Submission Processing 

PART Name: Submission Processing

Year PARTed: FY 2003

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Using a single cost based efficiency measure by 2008 (cost per return processed). 

2. Every return converted from paper to electronic filing saves the IRS $2.15 in 

processing costs. More importantly, electronically filed returns have a less than one 

percent error rate compared to five percent for paper filed returns, saving taxpayers time 

and money. Finally, according to the annual American Customer Satisfaction Results 

report electronic filers have high satisfaction rates.

3. Based on IRS’ recently completed tax gap study, approximately 13 percent of refund 

dollars (excluding earned income tax credit refunds) are paid in error. With current third 

party reporting and technology, IRS is unable to identify and prevent these errors during 

processing.

1. Seeking legislative changes to promote electronic filing, including greater authority to 

require electronically-filed returns.

2. Setting goals by 2007 for reduced taxpayer filing burden resulting from the time and 

expense of preparing and filing their returns. 

Table 4.3

PART Evaluation

This program processes 224 million tax returns and one and a half billion information 

returns (such as bank reports on taxpayer’s interest income) each year and issues 109 

million refunds. In 2005, more than half of individual tax returns were submitted 

electronically.

1. More Americans are electronically filing their taxes. Electronic filing is growing more 

than 10 percent per year. However, this growth is not sufficient for IRS to meet the 

legislative goal of 80 percent electronic filing by 2007. Congress has not yet acted on the 

Administration’s proposals to accelerate the increase in electronic filing.

IRS - 115
PART Taxpayer Service 

PART Name: Taxpayer Service

Year PARTed: FY 2004

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Researching the impact of taxpayer service programs on voluntary compliance and 

reporting findings by 2007.

2. IRS continues to have trouble with the accuracy of answers. In 2004, IRS estimates only 

80 percent of tax law calls were answered accurately (improved to 89 percent in 2005). 

Accuracy is a significant challenge given the complexity of the tax code.

3. IRS has developed a strong set of balanced measures (quality, customer satisfaction 

and results) to understand its taxpayer service performance. During the assessment IRS 

added an efficiency measure (customer contacts per staff year) for this program.

1. Converting to cost based efficiency measures for the 2007 budget (e.g., cost per call 

answered) and adding efficiency measures for service processes for management. 

(Delayed until 2008)

2. Improving the accuracy of tax law telephone information provided to taxpayers to 90 

percent accuracy by 2010. 

This program reduces taxpayer burden by providing assistance on tax law and account 

issues in a professional and courteous manner. In 2005 the IRS answered 59 million calls, 

served 6.6 million taxpayers in walk-in offices, and had almost 116 million downloads from 

its forms, instructions and publications web site.

Table 4.3

PART Evaluation

1. IRS has significantly improved taxpayer service and maintained high levels of customer 

satisfaction in recent years. In 2001 IRS was able to answer only 62 percent of taxpayer 

calls. In 2005, IRS had improved this to 83 percent with a 94 percent customer satisfaction 

rate.

IRS - 116
PART Taxpayer Advocate Service 

PART Name: Taxpayer Advocate Service

Year PARTed: FY 2004

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Improving case quality to 91.5 percent by 2006, 93 percent by 2009, and 95 percent by 

2014. 

2. Taxpayer hardship cases caused by flaws in IRS' business processes have declined 

from 217,081 in 2001 to 129,382 in 2004 as the Advocate has worked with IRS program 

managers to improve processes. 

3. During the assessment, the program set goals and developed an efficiency measure. 

These include achieving a 100 percent closure-to-receipts ratio through 2010, 95 percent 

case quality score by 2009, and 4.53 (out of 5) customer satisfaction score by 2009. 

Efficiency is measured by counting the reduction in the quantity of taxpayer problems 

resulting from flaws in IRS' business processes.

1. Developing a unit cost measure for its casework by 2006 (delayed to 2007). 

2. Exploring other means to measure its effectiveness in solving systemic problems 

leading to taxpayer hardship. IRS will report its findings in 2006 for possible inclusion in its 

FY 2008 Budget. 

Table 4.3

PART Evaluation

This program helps taxpayers solve tax problems when normal IRS systems have failed to 

treat them fairly. It serves as an independent advocate within the IRS for individuals and 

proposes solutions to systemic problems. 

1. The quality of the Advocate's case work on behalf of taxpayers has improved from 71 

percent with quality standards in 2001 to 90.5 percent in 2004. 

IRS - 117
PART Criminal Investigations 

PART Name: Criminal Investigations

Year PARTed: FY 2005

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Table 4.3

PART Evaluation

This program ensures taxpayers comply with their tax obligations by investigating possible 

criminal violations of the tax code. Conviction of tax cheaters deters tax evasion among 

the general public and helps reassure taxpayers that the system is fair.

1. The tax gap, the difference for a given year between taxes legally owed and taxes 

actually paid, for 2001 (latest available figure) is estimated to be between $312 and $353 

billion. Criminal Investigation is one of the major IRS programs intended to minimize this 

revenue loss.

3. Developing methods to improve case prioritization in 2006 to ensure that cases yield 

the greatest impact on compliance.

2. Research suggests that higher levels of criminal sentences lead to higher tax 

compliance. IRS has succeeded in raising convictions in recent years. They rose from 

1,926 in 2002 to 2,215 in 2005. However, they remain low by historical standards (in 1996 

convictions totaled 2,915).

3. IRS has set long term goals and efficiency measures. However, it has difficulty 

measuring compliance in a timely manner due to the complexity and expense involved 

and in holding employees accountable for performance due to legal restrictions.

1. Exploring methods for measuring the impact of criminal investigations on tax 

compliance. IRS will report on its progress by the end of 2006. 

2. Implementing a new information management system in 2006 to enhance investigative 

case tracking and improve efficiency. 

IRS - 118
PART Examinations 

PART Name: Examinations

Year PARTed: FY 2005

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. Introducing cost based efficiency measures by 2008 (e.g., enforcement 

revenue/program budget).

2. After dropping substantially in the late 1990s, IRS’ audit rates have begun to rise and 

will continue to increase, largely through productivity growth. IRS’ audit rate has grown 

from a low of 1.49 percent (i.e., less than two returns in one hundred audited) in 2001 to 

3.09 percent in 2005.

3. IRS has set long tern goals and efficiency measures. However, it has difficulty 

measuring compliance in a timely manner due to the complexity and expense involved 

and in holding employees accountable for performance due to legal restrictions. It also 

needs cost based efficiency measures.

1. Researching tax compliance of S-corporations (a popular business form where profits 

are taxed only once passed through to the owners) based on a statistically valid sample of 

the filing population.

2. Improving tools for selecting the most productive audit cases by 2007 using the 

detailed compliance information gathered in the recent individual tax gap study. 

Table 4.3

PART Evaluation

This program ensures that citizens pay the correct tax by auditing returns at a high risk for 

non-compliance. Audits help ensure individuals comply with their tax obligations, deter tax

evasion among the general public, and help reassure taxpayers that the system is fair.

1. The tax gap, the difference for a given year between taxes legally owed and taxes 

actually paid, for 2001 (latest available figure) is estimated to be between $312 and $353 

billion. Examination is one of the major IRS programs intended to minimize this revenue 

loss.

IRS - 119
PART Retirement Savings Regulatory Program 

PART Name: Retirement Savings Regulatory Program

Year PARTed: FY 2006

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Table 4.3

PART Evaluation

This program ensures that tax breaks provided to encourage retirement savings are only 

allowed for retirement plans that follow minimum standards. The law requires that plans 

follow participation, funding and vesting standards and provide some protection for the 

surviving spouse of the plan participants.

1. The Internal Revenue Service cooperates with the Department of Labor and the 

Pension Benefit Guarantee Corporation to protect retirement investors and to ensure that 

retirement related tax brakes are used for the intended purposes. Tax breaks to 

retirement plans to encourage savings total more than $100 billion per year.

3. IRS will improve efficiency, processing timeliness and case targeting through a new 

information management system and other inventory selection tools implemented in 2007. 

2. Preliminary data from the program's compliance study shows that retirement plans are 

in compliance with legal standards 80 percent of the time. The IRS is working to improve 

this level by increasing enforcement efforts and improving targeting. This compliance 

study is a critical element in this effort because it gives the IRS better information on the 

sources of non-compliance.

3. IRS has had trouble processing requests for regulatory approval from retirement plans 

in a timely manner (less than 120 days). It is working to improve its performance in this 

area by implementing a new staggered schedule for retirement plan renewal requests and 

improving productivity.

1. IRS will introduce cost based efficiency measures by 2008.

2. IRS will work to nearly double enforcement efforts by 2011 in order to improve 

retirement compliance to 82 percent. 

IRS - 120
PART Health Care Tax Credit Administration 

PART Name: Health Care Tax Credit Administration

Year PARTed: FY 2006

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

3. IRS will continue to focus on administrative changes to lower program cost and improve

taxpayer service.

2. This credit has low participation. This can be attributed to the time it takes for other 

agencies to identify potentially eligible workers and for the Internal Revenue Service to 

enroll them. Another likely cause is the affordability of coverage to potential recipients. It 

is also possible that many of those identified as potentially eligible may ultimately not 

quality.

3. The IRS successfully implemented this unique tax credit in 2003. This required the 

creation of a new process outside of the normal tax filing system in a short timeframe. 

Since that time, in response to the low take up, the IRS has successfully reduced the cost 

of administering the credit by 50 percent.

1. IRS will work with other participating federal agencies to develop long term goals by 

2011 that capture the program's success to providing access to the tax credit to potential 

beneficiaries.

2. IRS will work with partner federal agencies to find ways to improve access to the tax 

credit for eligible workers.

Table 4.3

PART Evaluation

This program administers the Health Insurance Tax Credit which helps displaced workers 

and retirees afford health insurance. It is intended to benefit workers who have lost their 

jobs due to trade with countries which participate in free trade agreements (e.g., the North 

America Free Trade Agreement).

1. The program's measures do not adequately capture the program's success in 

providing access to the credit to potential beneficiaries.

IRS - 121
IRS Performance Measures Summary Table and Data Dictionary Link 

FY 2003 FY 2004 FY 2005 FY 2006 

Planned FY 2006 Actual FY 2007 

Planned1

FY 2008 

Planned

Customer Service Representative (CSR) Level of Service Oe, L 80.1% 87.3% 82.6% 82.0% 82.0% 78.0% 81.0%

Customer Contacts Resolved per Staff Year E 8,318 8,015 7,585 7,477 7,414 7,702 7,880

Percent of Eligible Taxpayers Who File for EITC Oe N/A 80.0% 80.0% 80.0% * 80.0% 80.0%

Customer Accuracy - Tax Law Phones Oe 82.0% 80.0% 89.0% 90.0% 90.9% 91.0% 91.2%

Customer Accuracy - Accounts (Phones) Oe 88.2% 89.3% 91.5% 92.0% 93.2% 93.3% 93.4%

Timeliness of Critical Filing Season Tax Products to the Public Ot N/A 76.0% 91.4% 92.0% 83.0% 85.2% 92.0%

Timeliness of Critical Other Tax Products to the Public Ot N/A 76.0% 80.0% 85.0% 61.2% 79.6% 86.0%

Percent Individual Returns Processed Electronically Oe, L 40.0% 46.5% 51.1% 55.0% 54.1% 57.0% 61.6%

Percent of Business Returns Processed Electronically Oe, L N/A 17.4% 17.8% 18.6% 16.6% 19.5% 21.2%

Refund Timeliness - Individual (paper) Oe 98.8% 98.3% 99.2% 99.2% 99.3% 99.2% 99.2%

Taxpayer Self Assistance Rate E, L 51.0% 46.4% 42.5% 45.7% 46.8% 48.6% 51.4%

Examination Coverage - Individual Oe, L N/A 0.8% 0.9% 0.9% 1.0% 1.0% 1.0%

Field Exam Embedded Quality Oe, L N/A N/A N/A Baseline 85.9% 87.0% 87.0%

Office Exam Embedded Quality Oe, L N/A N/A N/A Baseline 88.2% 89.0% 89.0%

Examination Quality - Industry Oe, L 74.0% 74.0% 77.0% 80.0% 85.0% 88.0% 90.0%

Examination Quality - Coordinated Industry Oe, L 89.0% 87.0% 89.0% 92.0% 96.0% 97.0% 97.0%

Examination Coverage - Business Oe, L N/A 7.5% 7.8% 7.5% 7.3% 8.2% 8.2%

Examination Efficiency - Individual E, L N/A N/A 121 121 128 136 136

Automated Underreporter Efficiency E, L N/A 1,514 1,701 1,759 1,832 1,932 1,808

Automated Underreporter Coverage E, L N/A 1.90% 2.2% 2.3% 2.4% 2.5% 2.7%

Collection Coverage - units Oe, L N/A N/A 53.0% 52.0% 54.0% 54.0% 54.0%

Collection Efficiency - units E, L N/A N/A 1,514 1,650 1,677 1,723 1,751

Field Collection Embedded Quality Oe, L N/A N/A N/A Baseline 84.2% 86.0% 86.0%

Automated Collection System Accuracy Oe N/A 87.8% 88.5% 88.0% 91.0% 91.0% 92.0%

Criminal Investigations Completed Ot, L 3,766 4,387 4,104 3,945 4,157 4,000 4,025

Number of Convictions Ot, L N/A 2,008 2,151 2,260 2,019 2,069 2,135

Conviction Rate E, L N/A 91.2% 91.2% 92.0% 91.5% 92.0% 92.0%

Conviction Efficiency Rate($) E, L N/A 362,849 295,316 339,565 328,750 314,008 314,560

TEGE Determination Case Closures Ot 171,812 143,877 126,481 112,400 108,462 118,200 109,500

BSM Project Cost Variance by Release/Subrelease E N/A N/A N/A Baseline ** 10.0% 10.0%

BSM Project Schedule Variance by Release/Subrelease E N/A N/A N/A Baseline ** 10.0% 10.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure and L - Long-Term Goal

g p g g j g p g

and improvements resulting from program efficiencies.

Performance Measures

* Data to estimate the eligibility rate will be available late in FY 2007..

FY 2008 IRS Performance Measures Summary Table

** Cost and Schedule variance is based on +/- 10% and is reported on several project releases/subreleases.

IRS - 122
Data Dictionary Link for Performance Measures: 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-par/

Part_IV_Appendices.pdf

IRS - 123
Treasury Forfeiture Fund 

Mission Statement 

To affirmatively influence the consistent and strategic use of asset forfeiture by law 

enforcement bureaus participating in the Fund to disrupt and dismantle criminal 

enterprises. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Asset Forfeiture Fund $313,957 $270,000 $270,000 $0 0.00%

Total Resources $313,957 $270,000 $270,000 $0 0.00%

FY 2008 Priorities 

A top priority of the Treasury Forfeiture Fund is to continue to cultivate and strengthen 

relationships at the federal, state, and local levels through the use of training and funding 

initiatives focusing on investigations that will have the greatest impact on disrupting and 

dismantling criminal enterprise. Additional priorities for FY 2008 include: 

• Educate and focus stakeholders and others on the vision and mission of 

Treasury’s multi-Departmental asset forfeiture program, 

• Focus resources in a high-impact manner that enhances enforcement against: 

terrorist financing, illegal immigration, bulk cash smuggling, and money 

laundering, providing support to the National Money Laundering Strategy,

• Foster and support the investment of forfeiture resources in the needs of the 

participating law enforcement bureaus, including new technologies and data 

collection, in order to promote program excellence and strengthen the overall 

quality of high-impact criminal investigations, 

• Reinforce relationships with member bureaus that extend across Departmental 

boundaries and with state, local and foreign law enforcement agencies that 

“extend the reach” of federal law enforcement, and

• Develop and modify forfeiture training and awareness programs that are 

responsive to today’s needs and continually re-evaluate such training 

initiatives for best practices. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

1C – Industry Outlook .................................................................................................... 3 

Section 2 – Budget Adjustments and Appropriations Language ................................. 4

2.2 – Operating Levels Table.......................................................................................... 4 

2B – Appropriations Language....................................................................................... 4 

2C – Legislative Proposals.............................................................................................. 4 

Section 3 – Budget and Performance Plan ..................................................................... 5

3.1 – Resource Detail Table............................................................................................ 5 

3A – Asset Forfeiture Fund............................................................................................. 5 

3.2.1 – Asset Forfeiture Fund Budget and Performance Plan......................................... 6 

Section 4 – Supporting Materials.................................................................................... 8

4.1 – Human Resources Table ........................................................................................ 8 

4A – Human Capital Strategy Description ..................................................................... 8 

4B – Information Technology Strategy .......................................................................... 8 

4.3 – PART Evaluation Table......................................................................................... 8 

TEOAF - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Treasury Forfeiture Fund (the Fund) is the receipt account for the deposit of non-tax 

forfeitures made pursuant to laws enforced or administered by bureaus participating in 

the Treasury Forfeiture Fund. The member bureaus include the Internal Revenue 

Service’s Criminal Investigation (IRS-CI), Customs and Border Protection (CBP), 

Immigration and Customs Enforcement (ICE), and the U.S. Secret Service (Secret 

Service.) The latter three bureaus are part of the Department of Homeland Security, 

transferred as part of the Homeland Security Act of 2002. These member bureaus are 

joined by the U.S. Coast Guard, Department of Homeland Security, as the result of a 

long-standing close law enforcement relationship with legacy Customs. 

Vision: The focus of Fund management is on strategic cases and investigations that 

result in high-impact forfeitures. Management believes this approach will have the 

greatest impact on criminal organizations and thus will accomplish the ultimate mission 

of the Fund to disrupt and dismantle criminal enterprises. The enhancement of forfeiture 

activity requires longer, more in-depth investigations. To this end, Fund management 

emphasizes the use of mandatory funding authorities that fund large case initiatives, 

including the purchase of evidence and information, joint operations expenses, 

investigative expenses leading to seizure, and asset identification and removal teams. In 

addition, it is also a priority to fund revenue-enhancing projects such as major case 

funding, database development and computer forensics through the use of the Secretary’s 

Enforcement Fund or Super Surplus funds when available. 

Priorities: Asset seizure and forfeiture is a priority for the Fund’s participating law 

enforcement organizations, as well as the Department of Treasury, and is linked directly 

to the National Money Laundering Strategies. In this regard, management has identified 

the following priorities for mission success: 

• Continue to educate and focus stakeholders, and others, on the vision and mission 

of Treasury’s multi-Departmental asset forfeiture program (i.e., affirmatively 

influence the consistent and strategic use of asset forfeiture by law enforcement 

bureaus participating in the Treasury Forfeiture Fund to disrupt and dismantle 

criminal enterprises), 

• Focus resources in a manner that enhances support of law enforcement’s national 

money laundering strategy and anti-terrorism financing efforts, and 

• Foster and support the investment of forfeiture resources in the needs of the 

participating law enforcement bureaus in order to promote program excellence 

and strengthen the overall quality of criminal investigations. 

TEOAF - 2 
1B – Program History and Future Outlook 

Program History: The Treasury Forfeiture Fund continued in its capacity as a multiDepartmental Fund in FY 2006, representing the forfeiture interests of the law 

enforcement components of the Departments of the Treasury and Homeland Security. In 

the midst of this period of growth and change, the Fund’s law enforcement bureaus 

continued their hard work of federal law enforcement and the application of asset 

forfeiture as a sanction to bring criminals to justice. FY 2006 continued a pattern of 

robust revenue years with income from forfeitures and recoveries totaling nearly $306 

million. 

Program Outlook: Management forecasts a continued vigorous program for FY 2007 and 

FY 2008 with forfeiture revenue estimated at $270 million for each year. 

1C – Industry Outlook 

FY 2007: Fund management remains focused on support for strategic investigative 

initiatives that will have the greatest impact on national and international criminal 

enterprise, including valuable training and investigative expense funding that emphasizes 

high impact cases. 

FY 2008: Fund management plans to: continue investment in technologies and data 

collection; encourage bureaus to pursue high-impact major cases and establish financial 

plans that reflect such priorities; further develop and modify forfeiture training and 

forfeiture awareness programs that are responsive to today’s needs and designed to foster 

the understanding and application of asset forfeiture; and to continually re-evaluate the 

basic methods of operation to ensure that this methodology is the best one. 

Fund management will continue its work to reinforce relationships with member bureaus 

that extend across Departmental boundaries to ensure that the vision, mission, and 

operating strategies and policies of the Treasury Forfeiture Fund continue to be 

recognized by the various Departments. 

TEOAF - 3 
Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands 

Account Title: Treasury Forfeiture Fund FY 2006

Obligated

FY 2007 

Estimated 

FY 2008

Estimated

FTE 20 20 20

Object Classification:

25.2 Other Services........................................ 95,616 130,000 130,000

25.3 Purchase of Goods/Serv. from Govt. Acc 134,187 84,936 52,000

41.0 Grants, Subsidies................................... 84,154 88,000 88,000

Total Operating.......................................... $313,957 $302,936 $270,000

2B – Appropriations Language 

The Treasury Forfeiture Fund does not receive any discretionary appropriation authority 

from the Congress and, therefore, does not have appropriations language. 

2C – Legislative Proposals 

The Treasury Forfeiture Fund has no Legislative Proposals for FY 2008. 

TEOAF - 4 
Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands 

% Change

FY 2007

to FY 2008

AMOUNT AMOUNT AMOUNT AMOUNT

Summary of Revenue and Expenses:

Revenue:

Carryover from prior year and

recoveries

125,706 82,936 50,000 -39.71%

Current year forfeiture revenue 271,187 270,000 270,000 0.00%

Total Revenue $396,893 $352,936 $320,000 -9.33%

Expenses:

Permanent Authority 313,957 302,936 270,000 -10.87%

 Subtotal Manufacturing and Sales $313,957 $302,936 $270,000 -10.87%

Carryover to next year * $82,936 $50,000 $50,000 0.00%

*

Estimated

The Fund incurs expenses at the start of the year for an array of property contacts, so a carryover is

required every year.

FY 2006 FY 2007 FY 2008

Actual Estimated

3A – Asset Forfeiture Fund ($270,000,000 from reimbursable programs): The function 

of the Treasury Forfeiture Fund is to ensure resources are managed to cover the costs of 

an effective asset seizure and forfeiture program, including the costs of seizing, 

evaluating, inventorying, maintaining, protecting, advertising, forfeiting and disposing of 

property. Asset forfeiture is used by federal law enforcement to disrupt and dismantle 

criminal enterprises. 

Summary of Treasury Forfeiture Fund Authorities: The Treasury Forfeiture Fund is a 

special fund with permanent, indefinite authority. Special funds are federal fund 

collections that are earmarked by law for a specific purpose, and which consist of 

separate receipt and expenditure accounts. The enabling legislation for the Treasury 

Forfeiture Fund (31 U.S.C. § 9703) defines those purposes for which Treasury forfeiture 

revenue may be used. The funds can be allocated and used without the enactment of an 

annual appropriation by Congress. 

A forfeiture process begins once property or cash is seized. Upon forfeiture, seized 

currency, initially deposited into suspense, or holding account, is transferred to the Fund 

as forfeited revenue. Once forfeited, physical properties are sold and the proceeds are 

deposited into the Fund as forfeited revenue. It is forfeiture revenue that composes the 

budget authority for meeting expenses of running the Treasury Forfeiture Fund program. 

TEOAF - 5 
Expenses of the Fund are set in a relative priority so that unavoidable or “mandatory” 

costs are met first. Expenses may not exceed revenue in the Fund. 

Types of spending authority of the Fund: 

The mandatory authority items are generally used to meet “business expenses” of 

the Fund, including expenses of storing and maintaining seized and forfeited assets; 

valid liens and mortgages; investigative expenses incurred in pursuing a seizure; 

information and inventory systems; and certain costs of local police agencies incurred 

in joint law enforcement operations. Following seizure, equitable shares are paid to 

state and local law enforcement agencies that contributed to the seizure activity at a 

level proportionate to their involvement. 

Secretary’s Enforcement Fund (SEF) is derived from equitable shares received 

from the Department of Justice or U.S. Postal Service (USPS) forfeitures. These 

shares represent Treasury’s portion in the overall investigative effort that lead to a 

Justice or USPS forfeiture. SEF revenue is available for Federal law enforcement 

purposes of any law enforcement organization participating in the Treasury Forfeiture 

Fund. 

Super Surplus represents the remaining unobligated balance at the close of the fiscal 

year after an amount is reserved for Fund operations in the next fiscal year. Super 

Surplus can be used for any federal law enforcement purpose. 

3.2.1 – Asset Forfeiture Fund Budget and Performance Plan 

Dollars in Thousands 

Asset Forfeiture Fund Budget Activity Includes Strategic Objective F3A

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 315,597 340,583 313,957 270,000 270,000

Total Operating Level $315,597 $340,583 $313,957 $270,000 $270,000

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 20 20 20 20 20

Total FTE (direct and reimbursable) 20 20 20 20 20

Asset Forfeiture Fund Budget Activity Includes Strategic Objective F3A

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 75% 75% 75% 75% 75%

Actual 83.95% 81% 72.93%

Percent of forfeited cash proceeds resulting from 

high-impact cases (%) (Oe) 

Met Yes Yes No

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

TEOAF - 6 
Description of Performance 

For FY 2008, Fund management will measure the strategic performance of the 

participating law enforcement bureaus through the use of the performance measure: 

Percent of forfeited cash proceeds resulting from high-impact cases. This measures the 

percentage of forfeited cash proceeds resulting from high-impact cases; those with 

currency seizures in excess of $100,000. Fund management believes that focusing on 

strategic cases and investigations that result in high-impact seizures will do the greatest 

damage to criminal organizations while accomplishing the ultimate objective which is to 

disrupt and dismantle criminal activity. 

Target: A target of 75 percent high-impact cases has been set for this performance 

measure. The target allows for those cases which may not be high-impact in nature but 

that are important to the exercise of law enforcement. The measure is calculated by 

dividing the total amount of forfeited cash proceeds from cases equal to or greater than 

$100,000 by the total amount of forfeited cash proceeds for all cases. 

Performance Exceeds Target: Law enforcement bureaus participating in the Treasury 

Forfeiture Fund have exceeded the performance target in three of the last four fiscal 

years, only narrowly missing the target in FY 2006 as the result of forfeiture deposit 

timing. This achievement remains excellent given the extra demands placed on law 

enforcement personnel for anti-terrorism initiatives. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

TEOAF - 7 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Reimbursable FTE FY 2006 007 008

Fund Management 20

FY 2

20

FY 2

20

4A – Human Capital Strategy Description 

The Treasury Forfeiture Fund is managed by the Executive Office for Asset Forfeiture 

(EOAF), a policy office that reports to the Assistant Secretary for Terrorist Financing. 

EOAF reimburses Departmental Offices (DO) for a total of 20 FTE annually. 

4B – Information Technology Strategy 

The Treasury Forfeiture Fund uses the Departmental Offices’ systems, and is part of 

DO’s information technology strategy. 

4.3 – PART Evaluation Table 

The scheduling of PART evaluation is done by the Department and the Treasury 

Forfeiture Fund is not scheduled to be PARTed at this time. 

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

TEOAF - 8 
Working Capital Fund 

Introduction 

The Department of the Treasury Working Capital Fund (WCF) was established by the 

Excise, Estate, and Gift Tax Adjustment Act of 1970 (P.L. 91-614 § 401). As codified in 

31 USC §322, “Amounts in the fund are available for expenses of operating and 

maintaining common administrative services of the Department that the Secretary of the 

Treasury, with the approval of the Director of the Office of Management and Budget, 

decides may be carried out more advantageously and more economically as central 

services.” 

Program Summary by Bureau Type 

Dollars in Thousands 

Funding Source FY 2006 FY 2007 FY 2008 $ Change % Change

Enacted Estimate Estimate FY 2007 FY 2007

To FY 2008 To FY 2008

Treasury Appropriated Bureaus $189,637 $242,754 $227,240 ($15,514) -6.39%

Treasury non-Appropriated Bureaus $11,773 $15,156 $13,239 ($1,917) -12.65%

Non-Treasury $19,614 $8,682 $8,916 $234 2.70%

Grand Total Financial Plan Requirements $221,024 $266,592 $249,395 ($17,196) -6.45%

Operation of the Working Capital Fund 

The following is the standard criteria used to determine whether a function should be 

financed through the Treasury Department’s WCF: (1) promotes economies of scale, (2) 

reduces overhead costs, (3) promotes central management, (4) avoids duplication among 

those who might provide the service, (5) improves service quality, (6) makes available 

goods and services to those users who could not afford them except on a centralized 

basis, (7) provides flexibility in the timing of purchases, and (8) allows for replacement 

of equipment and other assets on a long-term basis through the use of depreciation 

charges to users, as a means of recovering those costs. 
Table of Contents

Section 1 – Purpose........................................................................................................................ 2 

1.1 – Description of Service Providers............................................................................................ 2 

A – Intelligence and Security...................................................................................................... 2 

1. Security Programs.............................................................................................................. 2 

B – DAS, Human Resources/Chief Human Capital Officer....................................................... 2 

1. Human Resources Strategy and Solutions......................................................................... 2 

2. Equal Opportunity and Diversity....................................................................................... 4 

C – DAS, Information Systems/Chief Information Officer........................................................ 4 

1. ACIO HR Connect and NFC/Employee Express .............................................................. 4 

a. HR Connect ................................................................................................................... 4 

b. NFC/Employee Express................................................................................................ 5 

2. CIO Executive Office ........................................................................................................ 5 

3. Resource Management Services........................................................................................ 6 

4. ACIO Telecommunications (Treasury-wide).................................................................... 6 

a. Digital Telecommunications System............................................................................. 7 

b. Treasury Communications System................................................................................ 7 

c. Treasury Communications Services Follow On-- GSA Networx Transistion............... 9 

d. Wireless Program .......................................................................................................... 9 

5. ACIO Cyber Security ...................................................................................................... 10 

6. ACIO E-Government....................................................................................................... 10 

a. Enterprise Architecture................................................................................................ 11 

b. Enterprise Solutions .................................................................................................... 11 

c. Planning....................................................................................................................... 12 

7. HSPD-12.......................................................................................................................... 12 

8. ACIO Capital Planning and Information Management ................................................... 13 

a. Capital Planning .......................................................................................................... 13 

b. Information Management............................................................................................ 13 

9. ACIO Telecommunications - Secure Communications Center....................................... 14 

10. ACIO Telecommunications - VAX Computer Usage ................................................... 14 

D – AS Management & CFO.................................................................................................... 15 

1. Emergency Programs....................................................................................................... 15 

2. Small and Disadvantaged Business Utilization ............................................................... 15 

3. Procurement Programs..................................................................................................... 16 

4. Government-wide Council Payments.............................................................................. 18 

G – Deputy Chief Financial Officer.......................................................................................... 18 

1. Financial Systems Integration.......................................................................................... 18 

H – DAS, Headquarters Operations.......................................................................................... 18 

1. Environment, Safety, and Health..................................................................................... 18 

2. Printing and Graphics Services........................................................................................ 19 

3. Communications, Information, and Locator Center ........................................................ 20 

I – Support Services.................................................................................................................. 20 

Section 2 – Budget and Performance Plan................................................................................ 22 

2.1 – Funding Detail by Program .................................................................................................. 22 

2.2 – Full-Time Equivalents by Program ...................................................................................... 23 

2.3 – Funding Detail by Bureau .................................................................................................... 24 

2.4 – Funding Detail by Operating Levels .................................................................................... 25 

WCF - 1
Section 1 – Purpose 

1.1 – Description of Service Providers 

The majority of the service providers under the WCF program are organizational 

components of the Assistant Secretary for Management and Chief Financial Officer 

(ASM/CFO) in the Departmental Offices. The exception is the Security Program which 

is located in the Office of Terrorism and Financial Intelligence. The current programs in 

the WCF are as follows: 

A – Intelligence and Security

1. Security Programs 

Resource Level: $736,000 and 3 FTEs 

Program Description: Security programs under the Assistant Secretary of Intelligence 

and Analysis, develops guidance and provides operational assistance and direction to 

WCF customers for: 

• Information security (classified and sensitive information), 

• Industrial security (access to and use of Treasury/U.S. Government classified and 

sensitive information by the private sector), 

• Physical security (protection of personnel, property, facilities - including 

information), 

• Personnel security (background investigations for sensitive and national security 

positions), 

• Security education, training for persons authorized access to classified 

information, 

• General guidance to un-cleared employees, 

• Physical protection of critical infrastructure, 

• Counter-intelligence awareness (including precautions during official foreign 

travel). 

Billing Methodology: The charge assessed to each customer is based on the number of 

FTE in the current year enacted budget as a percent of the total. Bureau-specific orders 

are billed based on the cost of the service requested. 

B – Deputy Assistant Secretary, Human Resources/Chief Human Capital Officer

1. Human Resources Strategy and Solutions 

Resource Level: $851,000 and 4 FTEs 

WCF - 2
Program Description: The Human Resources Strategy and Solutions (HRSS) program

provides critical, crosscutting human resource management services to the bureaus. 

HRSS provides a consolidated approach to programs and issues, including the President’s 

Management Agenda, at the Department level which enhances the bureaus' ability to 

meet critical goals. This staff provides services in the following areas: 

HR Program Efficiencies: HRSS develops efficiencies for the management of human 

resources programs that have Department-wide impact and enhance the bureaus ability to 

meet their missions. For example, the staff provides coordinated recruitment efforts; 

facilitates bureau efforts on meeting the 45 day hiring model; works with HR Connect on 

improving the effective use of CareerConnector; coordinates joint-bureau participation in 

career fairs; establishes contacts with a large number of higher-education institutions; and 

represents bureau interests in pursuing hiring flexibilities. 

In addition, the staff identifies areas where bureaus need technical training or specialized 

guidance on a variety of complex HR issues and disseminates information through 

agency-wide workgroup meetings, written products, or arrange for it through Office of 

Personnel Management (OPM) or outside vendors (e.g., training on Fair Labor Standards 

Act, Career Transition Assistance Program/Reemployment Priority List, and new Human 

Resources flexibilities). 

Federal Health Benefit Programs Management: The program staff manages the 

Federal Health Benefits Open Season contract which consolidates the handling of all 

materials for participating bureaus. In addition, the staff provides support on employee 

benefits programs including the centralized distribution of benefit materials (e.g., Federal 

Employee Health Benefits, Federal Employee Group Life Insurance, Thrift Savings Plan 

forms/brochures) and the dissemination of guidance and materials for bureau benefits 

specialists. 

Crosscutting HR Products and Services: HRSS staff: leads the development and 

implementation of new programs; holds bureau work groups and meetings to resolve 

issues; assists bureaus by making suggestions to improve bureaus processes and headsoff potential problems; and provides training and technical guidance to bureau staffing 

contacts. 

The staff assists bureaus with creating, developing, and implementing new pay systems 

and schedules under special pay authorities (e.g., police pay systems and pay bands.) 

The staff works with bureaus on staffing issues. Example: After consolidating bureau 

concerns, HRSS wrote a 30-page report for OPM on behalf of all the bureaus, which 

identified specific barriers to effective/efficient recruitment, and recommended solutions. 

This effort was cited by OPM as particularly effective. 

The staff also develops and publishes tools that assist bureaus in carrying out HR 

program responsibilities. 

WCF - 3
Department-level External Influence: HRSS represents Treasury bureaus' interests on 

OPM/interagency task forces (e.g., the Federal Career Intern Program, this office played 

a key role in the development of the program, and succeeded in inserting regulations that 

allowed for Treasury bureaus' preference on how to handle poor performers.) 

The staff represents the interests of the bureaus in proposing, developing, or requesting 

changes in legislation, regulations, and other proposals. 

They serve as the bureaus’ advocate in getting Departmental, OPM, or other approvals 

pertaining to certain personnel authorities (e.g., request for authority to establish an 

extended probationary period for certain positions; changes in qualifications standards 

and approval of new competencies standards, and waivers of dual compensation.) 

They assist bureaus with downsizing and restructuring by providing consultation and 

assistance on complex restructuring initiatives and gaining OPM approval of buyout and 

early-out (VERA/VSIP) authority. 

Billing Methodology: The charge assessed to each customer is based on the number of 

FTE in the current year enacted budget as a percent of the total. 

2. Equal Opportunity and Diversity 

Resource Level: $1,301,000 and 9 FTEs 

Program Description: The Equal Opportunity and Diversity (EOD) program ensures 

that Treasury employees, former employees, and applicants are protected from

discrimination on the basis of race, color, religion, national origin, sex, age, disability, 

reprisal for engaging in protected activity, sexual orientation, parental status, and 

protected genetic information. 

The EOD program supports the department-wide goals of providing diversity and equal 

opportunities; that people with disabilities have equal access to the Department's

programs and facilities; that Treasury's federal financial assistance beneficiaries are not 

excluded from participation in, denied the benefits of, or otherwise subjected to 

discrimination under any program or activity funded by the Department. 

Billing Methodology: The charge assessed to each customer is based on the number of 

actual complaints filed in the previous 12 month period as a percent of the total. 

Customers with no complaints are assessed one complaint charge for maintenance. 

C – Deputy Assistant Secretary, Information Systems/Chief Information Officer

1. Associate Chief Information Officer HR Connect and National Finance 

Center/Employee Express 

a. HR Connect 

WCF - 4
Resource Level: $24,393,000 and 30 FTEs

Program Description: HR Connect is a web-based, Treasury-wide human resources 

solution, based on Oracle/PeopleSoft commercial software. The software enables all HRrelated processing to be performed in a totally web-based environment. The product also 

includes a robust suite of web-based, self-service applications for managers and 

employees. 

HR Connect is designated as one of the Shared Service Center providers under the Office 

of Personnel Management’s HR Line of Business (LoB) initiative. As an HR LoB, HR 

Connect is positioned to provide interoperable HR Information Technology (IT) solutions 

in support of Human Capital strategic management to other federal agencies. HR 

Connect services 148,000 employees within Treasury and other federal agencies. 

Billing Methodology: The HR Connect charge assessed to each customer is based on 

the number of active accounts as a percent of the total. 

b. NFC/Employee Express 

Resource Level: $22,997,000 and 18 FTEs

Program Description: The National Finance Center (NFC) of the U.S. Department of 

Agriculture serves as Treasury’s payroll provider responsible for payment of employees’ 

salaries, W-2 processing, debt collection, and related payroll reporting and services. 

Billing Methodology: The NFC/Payroll and Employee Express charge assessed to each 

customer is based on the actual number of W-2s issued as a percent of the total. 

2. Chief Information Officer Executive Office 

Resource Level: $1,336,000 and 1 FTEs 

Program Description: The Office of the Chief Information Officer (OCIO) facilitates 

the mission, goals, and activities of the United States Department of the Treasury through 

leveraging information technology (IT), IT initiatives, products, and services for citizens, 

government, and industry. The OCIO provides direction, guidance, and oversight for all 

OCIO Working Capital Fund (WCF) programs and is dedicated to improving the 

performance of these programs for OCIO partners. 

OCIO coordinates budget requests, supports Federal Chief Information Council (CIO) 

Initiatives, participates in workforce improvement activities, and provides operational 

direction and guidance for Treasury program areas in the OCIO organization. 

In the IT Governance and Capital Planning area, the OCIO continues to manage a robust 

governance process that engages bureau heads and CIOs. An active and engaged 

Treasury CIO Council, Treasury Investment Review Board, and Executive Investment 

WCF - 5
Review Board provide executive oversight to the Treasury Department’s investment 

planning and management of information and IT resources. OCIO completed the 

deployment of the “Select” and “Control” modules in the Treasury Department’s 

enterprise portfolio management tool capital planning function. 

As part of the capital planning and investment control process, the Treasury Department 

conducts regular quarterly “control” reviews evaluating the overall health of its IT 

investment portfolio. To strengthen leadership and to facilitate priority initiatives 

execution, four sub-councils were established and chartered under the direction and 

authority of the Treasury Department’s CIO Council. The sub-councils are in the areas 

of cyber security, telecommunications, enterprise architecture, and capital planning. 

Billing Methodology: The allocation percentage is derived by taking each customer’s 

contribution to the various CIO programs and dividing it by the total contribution amount 

of all the customers who contributed to more than one program. 

3. Resource Management Services 

Resource Level: $2,100,000 and 8 FTEs 

Program Description: Resource Management Services (RMS) is responsible for 

maintaining effective and efficient controls over the Office of the Chief Information 

Officer (OCIO) resources. RMS activities facilitate the achievement of operational 

objectives through assistance, advice, and analytical support to the Chief Information 

Officer (CIO) and other internal and external customers. 

Working with the CIO, the Associate CIOs (ACIOs), and staff, RMS develops and 

executes the financial plans for the organization. The staff provides financial and 

programmatic support to the OCIO’s executive management team, project mangers, and 

their staff. The staff coordinates requirements with customers and stakeholders, internal 

and external to the organization, and facilitates the efficient and effective operation and 

management of the organization, with respect to resource management activities. 

Billing Methodology: The allocation percentage is derived by taking each customer’s 

contribution to the various CIO programs and dividing it by the total contribution amount 

of all the customers who contributed to more than one program. 

4. ACIO Telecommunications (Treasury-wide) 

Resource Level: $137,500,000 and 33 FTEs 

ACIO Telecommunications – Front Office: 

Program Description: Within Office of the Chief Information Officer (OCIO), the 

Telecommunications Management program supports the Treasury Department’s 

WCF - 6
operations and business functions by providing a wide range of telecommunications and 

information technology (IT) services to the Department of the Treasury. 

The program is responsible for developing telecommunications standards and guidance; 

provides and manages enterprise voice, video, and data services; and ensuring the 

security, resiliency, and redundancy of the Treasury Department’s telecommunications 

and IT infrastructure. 

Billing Methodology: The allocation percentage is derived by taking each customer’s 

contribution to the various CIO Telecommunication’s programs and dividing it by the 

total contribution amount of all the customers who contributed to more than one program. 

a. Digital Telecommunications System 

Program Description: The current Digital Telecommunications System (DTS) network 

provides telecommunications capabilities to Treasury Department sites in the 

Washington, D.C. metropolitan area, including sites in suburban Maryland and Northern 

Virginia, and physical interfaces to other telecommunications programs and contracts. 

The DTS program consists of DTS2, Local Access Transport Services, and Synchronous 

Optical Network Technologies (SONET). DTS2 is a performance based services contract 

that provides voice, data, and video services via Integrated Services Digital Network 

(ISDN) Basic Rate Interface, ISDN Primary Rate Interface, and analog service to the 

DTS2 user community. The DTS2 network is comprised of telecommunications 

infrastructure and physical interfaces in a star topology connecting bureau sites to a host 

switch. Optical Remote Modules, Remote Integrated Service Line Units, and NT-1 

equipment are connected to the host switch via leased dark fiber from SONET, and 

standard copper wiring. 

Billing Methodology: The charge assessed to each customer for this program is derived 

from three different methodologies. DTS2 uses the customer’s seat count average for a 

three-month period divided by the average program total for the same three months. The 

voice mail services uses the number of each customer’s mailboxes as a percentage of the 

total mailboxes. Bureau-specific orders are billed based on the cost of the service 

requested. 

b. Treasury Communications System 

Program Description: The Treasury Communications System (TCS) provides best-cost, 

secure, robust and reliable data telecommunications services to the Department of the 

Treasury and its associated bureaus and business partners. 

The Department of the Treasury has long recognized the need to maintain a robust and 

highly-available, secure communications infrastructure to enable the provisioning and 

distribution of enterprise information and data services to and among its bureaus and 

external business partners, suppliers, and vendors. TCS offers a complete range of 

Information Technology (IT) services from a single Private Line, Frame Relay to 

WCF - 7
Asychronous Transfer Mode telecommunications services, business application 

development and system integration, Web hosting/housing, business application 

infrastructure platform hosting, telecommuting network access, and other enabling 

managed services as extensions to the Wide Area Network (WAN). TCS also offers a 

complete series of lifecycle services including Strategic Consulting, Network 

Engineering/Design, Installation, Security, Systems Integration, Financial Tracking, 

System Operations and Administration, and Field Maintenance. 

The TCS network supports Treasury’s vision and strategic direction to fulfill the ClingerCohen Act: 

• TCS is a key element of the Treasury Department’s enterprise architecture that 

allows for distribution of information and data among the Treasury Department. 

• Create a Treasury Department enterprise architecture: TCS provides Treasury 

with a framework for providing a common, multi-purpose, and standards-based 

network infrastructure for optimizing the transport of information and data of 

Treasury Department business systems. 

• Integrate information exchange across the Treasury Department’s operating 

environment: TCS provides the Treasury Department with a common network 

infrastructure and uniform connectivity for enabling the coordination and 

exchange of information and data among the Treasury Department. 

• Incorporate enterprise IT security: TCS is an essential element for employing a 

corporate IT security capability and ensuring the deployment of uniform security 

measures. 

Billing Methodology: TCS services are billed under two fee structures: shared services 

and bureau-specific services. Shared services are services that are used across all bureaus 

(e.g., enterprise network operations center, key management, services provisioning). 

Shared service fees are based on a funding algorithm that is derived from different 

operational factors, such as service utilization. Bureau-specific services are utilized by a 

single customer. 

The shared cost allocation methodology utilizes activity based accounting to allocate 

shared costs among the bureaus. The model places costs associated with "services" into 

agreed upon categories then uses specific drivers to allocate the costs. These drivers 

allocate approximately 29 percent of the total shared costs and are revalidated annually to 

obtain the most current and accurate measurements. 

There are three methodologies used to distribute shared costs. They are 1) circuits/ 

maintenance (including Federal Telecommunications Systems) using the most recent 

invoice data available, 2) amounts of traffic coming in and out of email, using the most 

recent data, and 3) actual count of operational locations and the program management 

office. 

WCF - 8
The remaining shared costs are divided into three sub-categories. They are 1) overhead 

which includes costs representing contractor program management, network engineering 

base fee, and award fee, 2) government program management which represents cost for 

staff salaries, benefits, travel, training, IRS contracting staff, office supplies, and 

contractors, and 3) initiative costs which include costs for TCS transition to the Treasury 

Communication Enterprise (TCE), back up disaster recovery, industrial security, and 

intrusion detection. These shared costs are allocated to the customers by utilizing the 

CIO total cost allocation methodology. 

The shared allocation is derived by taking the dollar amounts from the three drivers 

(using the percentages calculated from the data, then multiplying that by the total dollar 

amounts), adding the remaining three categories (using a flat rate, multiplying it by the 

total costs within the category), then dividing the total shared costs to obtain bureauspecific percentages. 

Bureau-specific orders are billed based on the cost of the service requested. 

c. Treasury Communications Services Follow On-- GSA Networx Transition 

Program Description: The Treasury Communications Enterprise (TCE) program was 

cancelled in December 2006; Treasury will utilize the GSA Networx program to replace 

the Treasury Communications System during fiscal years 2007 and 2008. The same

basic approach will be used. The service will be designed as an enterprise approach to 

the delivery of data services. Eventually, the contract will include components for voice 

and other services. The Networx vehicle will provide the ability to bundle all vendor 

offerings into a simplified service structure, which offers monthly service options for 

levels of bandwidth and class of service (COS). 

Billing Methodology: The shared cost allocation is derived by taking the estimated TCE 

commercial circuit and maintenance charges per customer and dividing it by the total 

estimate for all customers. Bureau-specific orders are billed based on the cost of the 

service requested. Treasury is recalculating both the PMO and transition costs of this 

program. 

d. Wireless Program 

 

Program Description: The Wireless Program Office (WPO) was created as a 

centralized management entity to provide assistance with all wireless assets and spectrum

usage across the Treasury Department. Wireless assets are defined as any 

telecommunications device that carries signal over radio frequency spectrum, in lieu of 

wire lines, over all or a portion of the communication path. Treasury recognizes wireless 

strategic importance in maintaining mission-critical tactical activities during 

emergencies. 

WCF - 9
The federal spectrum is managed by the Department of Commerce in the National 

Telecommunications and Information Administration (NTIA). NTIA provides Treasury 

with a consolidated spectrum bill. 

Billing Methodology: Each customer is charged based on their percentage of two 

factors. The first factor relates to tactical wireless communications which is based on the 

number of frequencies identified in the Spectrum Government Master File account 

divided by the total frequencies of all customers. The second factor relates to nontactical communications which the charge assessed to each customers is based on the 

number of FTE in the current year enacted budget as a percent of the total. 

5. ACIO Cyber Security 

Critical Infrastructure Protection and Information Security: 

Resource Level: $1,005,000 and 6 FTEs 

Program Description: The Cyber Security Program establishes and maintains best 

practices and awareness to ensure the confidentiality, integrity, and availability of

information. The program goal is to assist the Bureaus in achieving a world-class 

information security capability that identifies, prioritizes, and protects information in 

accordance with federal requirements, including the Federal Information Security 

Management Act (FISMA), the Critical Infrastructure Protection (CIP) according to 

Homeland Security Presidential Directive 7 (HSPD 7) and the Treasury Department’s 

mission needs. 

Billing Methodology: The charge assessed to each customer is based on their 

contribution to various programs then dividing it by the total contributions from all 

customers who contributed to more than one program. 

6. ACIO E-Government 

Enterprise Architecture, Enterprise Solutions, Planning, and Payments 

Resource Level: $15,988,000 and 15 FTEs 

Program Description: The Department of the Treasury’s E-Government program is 

dedicated to leveraging innovative Information Technology solutions to modernize and 

web-enable government services, increasing government responsiveness to citizens and 

business, and enhancing government-wide efficiency and effectiveness. The Department 

of the Treasury continues to identify and develop targeted Treasury Department EGovernment initiatives to improve service delivery to citizens and businesses. The 

Treasury Department is a managing partner for IRS Free File and participates in several 

other Presidential E-Government initiatives. E-Government is also responsible for 

managing, coordinating and reporting on Presidential Management Agenda (PMA) EGovernment Initiatives and Lines of Business. 

WCF - 10 
a. Enterprise Architecture 

Program Description: The Treasury Enterprise Architecture (TEA) office establishes a 

roadmap for the modernization and optimization of the Treasury Department’s business 

processes and Information Technology (IT) environment. The TEA staff provides a 

framework that guides IT investment planning, streamline systems, and ensures that IT 

programs align with Treasury-wide business requirements and strategic goals. Through 

Enterprise Architecture, the Treasury Department can conduct enterprise-wide analysis 

and management of results, focus on lines of businesses to facilitate better alignment and 

cross-bureau collaboration in investments, and develop more robust business cases. 

Enterprise Architecture fulfills the requirement to capitalize on development 

opportunities of enterprise-wide solutions and E-Government participation and 

leadership. 

Billing Methodology: The charge assessed to each customer is based on the number of 

FTE in the current year enacted budget as a percent of the total. 

b. Enterprise Solutions 

Program Description: The Department of the Treasury’s E-Government program is 

dedicated to leveraging innovative IT solutions to modernize and web-enable government 

services in an effort to eliminate redundant IT investments. The Enterprise Solutions 

(ES) business model is to optimize cost-effective discovery and delivery of enterprise 

services through a small professional staff of senior project managers and, as required, 

contractor support. The ES Team works closely with Enterprise Architecture and 

Information Security staff to identify and implement common (multi-bureau) and 

enterprise (Treasury-wide) solutions that support efficient technology architecture that 

aligns with the rest of the federal government. The ES Team works closely with the 

bureaus to help them understand and take advantage of these solutions. 

Billing Methodology: 

Enterprise Solutions contains four different allocation methodologies for its services. 

1. Webhosting applies the TCS allocation methodology based on usage of the 

Treasury website, public and private, hosting, and housing services. 

2. Metis, Enterprise License & Consolidation Services, Secure Extranet Gateway, 

Public Key Infrastructure, and X.500 Directory/Treasury Enterprise Directory 

Services use the number of FTE in the current year enacted budget as a percent of 

the total. 

3. Portfolio Management/ProSight is based on the number of licenses utilized by 

each bureau divided by the total number of licenses. 

4. Enterprise Solutions Program Management’s allocation is derived from each 

bureau’s individual contribution for ES divided by the total amount contributed 

by all bureaus to ES, excluding the program management costs. 

WCF - 11 
c. Planning 

Program Description: The E-Government Program Office provides the critical 

leadership, coordination, and direction needed to achieve the Treasury Department’s 

Presidential Management Agenda (PMA), Electronic Government, and the ClingerCohen goals. Utilizing an enterprise architecture approach, the program personnel 

identifies high payoff IT investment opportunities, enhances cross bureau collaboration, 

and establishes performance metrics which supports the Treasury Department’s overall 

mission goals and objectives. The E-Government Planning Office sets goals, objectives, 

and strategies to guide enterprise-wide solutions. 

Billing Methodology: The charge assessed to each customer is based on the number of 

FTE in the current year enacted budget as a percent of the total. 

7. HSPD-12 

Resource Level: $8,869,000 and 0 FTE 

Program Description: Homeland Security Presidential Directive-12 (HSPD-12) was 

signed on August 27, 2004, mandating a common identification standard for federal 

employees and contractors. HSPD-12 requires a standardized Personal Identity 

Verification (PIV) process for the issuance and use of a common federal government 

identification card. The directive mandates that any identification card issued by a 

federal agency must be: 

• Secure and reliable; 

• Issued based upon sound criteria for verifying an individual’s identity; 

• Resistant to identity fraud, tampering, counterfeiting, and terrorist exploitation; 

• Interoperable across federal agencies; 

• Used to allow both physical access and logical access to federally-controlled 

facilities and information systems. 

This initiative is being lead by the Internal Revenue Service (IRS) in an Executive Agent 

arrangement with Departmental Offices. The program is under the auspices of the 

Associate Chief Information Officer of E-Government. 

Billing Methodology: Program costs are distributed across the Treasury Department’s 

bureaus by percentages based on the customer’s number of federal government and 

contractor personnel against the total Department of the Treasury government and 

contractor personnel. The data was submitted in the HSPD-12 Working Groups. The 

customer’s enrollment and issuance stations were ordered based on their specific 

requirements. 

WCF - 12 
8. ACIO Capital Planning and Information Management 

Resource Level: $4,542,000 and 12 FTEs 

a. Capital Planning 

Program Description: The Clinger-Cohen Act of 1996 requires agencies to use a 

disciplined Capital Planning and Investment Control (CPIC) process to acquire, use, 

maintain, and dispose of information technology (IT). CPIC is a dynamic process where 

IT investments are selected, continually monitored, and evaluated. The process ensures 

each investment is well managed, cost effective, and supports the mission and strategic 

goals of the organization. 

The Treasury Department’s CPIC team is comprised of Treasury Chief Information 

Officer (CIO) personnel and is responsible for providing a service to monitor the 

Department of the Treasury’s investment management process. The team develops 

bureau level IT portfolio expertise and provides input and recommendations to the 

bureaus, Treasury’s CIO, and the Treasury Investment Review Board. Members of the 

CPIC team, known as Desk Officers, may be responsible for the monitoring of one or 

more bureaus, serve as the bureau CPIC coordinator’s primary point of contact, are 

responsible for the scoring of the Exhibits 300, and coordinating information sharing with 

the Departmental Budget Office and other critical partners. 

Exhibit 300s for each of the Treasury Department’s IT investments can be found at 

http://www.treas.gov/exhibit300/ . 

b. Information Management 

Program Description: Information Management (IM) is the program area within the 

Office of the CIO which provides enterprise-wide direction for the legislative and 

regulatory mandates which are implemented by all federal departments and agencies. 

Through the promulgation of the Treasury Department’s policy orders, directives, 

manuals, and procedures, the IM function generates the guidance vehicle fundamental to 

the implementation and oversight of every IT related program. The IM program staff 

manages Treasury-wide program responsibilities to implement statutory and regulatory 

provisions, especially for paperwork reduction/information collection purposes; manages 

a broad range of information resources management functions to include information 

dissemination, information privacy, accessibility, directives and forms management, 

information quality, data integrity board activities, IT workforce issues, information and 

public reporting requirements, and the IT standards and records management programs; 

conduct reviews of bureau programs to ensure compliance with statutory and regulatory 

mandates; coordinates the preparation and submission of information resources 

management reports to oversight agencies; and interprets and monitors the 

implementation of related policies emanating from legislative and regulatory bodies. 

WCF - 13 
Information Management provides a basis for effective decision-making; supports 

administration of programs and services; provides a record of the Department’s decisions 

and activity; supports evidential needs; addresses customers, partners, and stakeholders’ 

inquiries; and provides a basis for proactive performance and customer satisfaction 

measurements. Minimizing the collection of information and maximizing its reuse is the 

foundation of Information Management. 

Through the issuance of program specific guidance and directive, the IM function 

facilitates the implementation of legislative and regulatory mandates. This guidance 

results in a more standardize implementation of these programs and gives the OCIO a 

baseline from which to assess bureau and office efforts to complete these mandates. 

The IM program identifies, schedules, and contracts for appropriate training for bureaus 

and office program managers and staff. This training facilitates the implementation of

and compliance with the subject programs. The IM program also conducts and/or 

facilitates all employees training, including web-based training and assists bureaus with 

their specific training needs, e.g., staff will provide disaster recovery training to the 

Bureau of Public Debt staff in West Virginia. 

Billing Methodology: The charge assessed to each customer is based on their 

contribution to various programs then dividing it by the total contribution from all 

customers who contributed to more than one program. 

9. ACIO Telecommunications - Secure Communications Center 

Resource Level: $6,455,000 and 18 FTEs 

Program Description: The Secure Communications Center (SCC) provides secure 

handling of highly-classified, sensitive data for the Departmental Offices and the 

Treasury Department’s bureaus and their senior management staffs. The SCC provides 

Communications Security support for the Treasury Department, including site surveys 

and distribution of encrypted keys. 

Billing Methodology: The charge assessed to each customer is based upon the number 

of messages received as a percentage of the total number of message traffic. 

10. ACIO Telecommunications - VAX Computer Usage 

Resource Level: $288,000 and 1 FTE 

Program Description: The Open Virtual Memory System Alpha cluster provides 

powerful, streamlined data management capabilities that support and benefit the 

administration of financial information technology data for the Federal Financing Bank. 

Billing Methodology: The charge assessed to the customer is based upon the actual use 

of the services the Computer Data Center provides on the VAX computer.

WCF - 14 
D – Assistant Secretary Management & Chief Financial Officer

1. Emergency Programs 

Resource Level: $1,623,000 and 4 FTEs

Program Description: The Office of Emergency Programs ensures continuity of the 

Treasury Department’s essential functions during disasters. The focus of the WCF 

funded component is the maintenance of facilities and communications between the 

Department of the Treasury’s bureaus and senior officials in a state of emergency. 

The program provides operational activities associated with implementing National 

Security Emergency Preparedness (NSEP) goals and objectives that are identified in: 

• The National Strategy for Pandemic Influenza; 

• The Implementation Plan for the National Strategy for Pandemic Influenza; 

• Executive Order 12656; 

• Presidential Decision Directive 67; 

• Homeland Security Presidential Directives 5, 8, 9, 10, and 12; 

• The National Response Plan; and 

• Federal Preparedness Circulars 65-67 (FPC 65). 

The staff administers and maintains the Treasury Emergency Management program, 

codified in the Treasury Security Manual - TDP-71-10. The program ensures that the 

Department of the Treasury is fully prepared for natural and man-made disasters by 

executing major operational items contained in FPC 60 and 65 during White House or 

Department of Homeland Security sponsored Continuity of Operations activation and 

training scenarios. 

Billing Methodology: The charge assessed to each customer is based on the number of 

FTE in the current year enacted budget as a percentage of the total. 

2. Small and Disadvantaged Business Utilization 

Resource Level: $725,000 and 4 FTEs 

Program Description: The Small and Disadvantaged Business Utilization program

facilitates acquisitions from the business community of veteran-owned, service-disabled 

veteran-owned, Historically Underutilized Business Zone, small disadvantaged, and 

women-owned small businesses for all of the Department of the Treasury. 

This program: 

• Disseminates information through the maintenance of a robust small business 

procurement assistance website - www.treas.gov/sba; 

WCF - 15 
• Generates “Small Business Marketing Publications” such as “Forecast of Contract 

Opportunities”, “Historical Top 25 Data”, and “Subcontracting Opportunities 

Directory”. This material is available electronically, in hard copy, or mini 

marketing disks and contains information on each individual bureau; 

• Provides outreach to small businesses through monthly Vendor Outreach 

Sessions, Annual Office of Small and Disadvantaged Business Utilization 

Directors’ Conference, and other external outreach events; 

• Provides small business program training to bureaus. The staff presents on a 

variety of small business topics such as new developments, refresher training, and 

training for new employees; 

• Develops and manages Mentor-Protégé Program where experienced firms are 

teamed with less experienced firms to compete more effectively for Treasury 

Department contracts. The staff reviews business applications for participation in 

the program and provide follow-up reviews on an annual basis; 

• Updates the “Small Business Handbook” to provide guidance, tips, and best 

practices to the Treasury Department’s bureaus through Acquisition Bulletins. 

• Establishes department-wide “Annual Small Business Goals” in compliance with 

the Small Business Act, Executive Orders, and the Office of Federal Procurement 

Policy guidelines; and. 

• Assists the bureaus in identifying qualified small businesses for match-making to 

increase procurement opportunities whereby the staff works with individual 

bureaus to develop acquisition strategies, and small business friendly contract 

vehicles. 

Billing Methodology: The charge assessed to each customer is based on their 

percentage of procurement dollars as a percent of the total procurement dollars for the 

Department of the Treasury.

3. Procurement Programs 

Resource Level: $766,000 and 2 FTEs 

Program Description: The Procurement Program provides services to the Treasury 

Department’s bureaus for the following: 

• Purchase Card Program: The program provides coordination and best practices 

for the Department of the Treasury’s purchase card program. The goals are to 

ensure proper usage, maximize rebates and to develop and maintain a quality 

Treasury-wide purchase card program. 

• Integrated Acquisition Environment (IAE) Implementation & Liaison: This 

office acts as the Treasury Department’s liaison for the various IAE service 

providers. This office disseminates implementation information, and tracks 

Treasury-wide use of IAE systems. The staff is the IAE System Administrator for 

WCF - 16 
the bureaus, and operates as the focal point for any Treasury Department issues to 

be raised with service providers. IAE systems streamline service delivery to 

customers, reduce paperwork, and apply best commercial practices to improve 

operational efficiency. The IAE facilitates purchasing office interaction with 

customers and businesses while saving resources and streamlining the acquisition 

process. This results in improved efficiency and effectiveness of the Treasury 

Department's acquisition systems. 

• Acquisition/Business Career Management Fulfillment Program and Federal 

Certification in Contracting Program: The staff provides a formal process for GS1102 employees to equate their past education, experience, and acquisition 

training to the mandatory 1102 series curriculum for civilian agency employees. 

The Treasury Acquisition Career Manager reviews and recommends certification 

of acceptable fulfillment requests and contracting certification requests submitted 

by employees. The Senior Procurement Executive makes decisions on requests 

and signs a certificate for each successful applicant. 

• E-Government – Integrated Acquisition Environment (IAE): IAE is one of the 24 

E-Government initiatives which support the President’s Management Agenda. 

The IAE provides a common, secure business environment, which facilitates and 

supports cost effective acquisition of goods and services and will interoperate 

with multiple E-Government initiatives. Federal agencies receive the benefit of 

shared use of the IAE in the conduct of their acquisition functions. The General 

Services Administration (GSA), the Managing Partner of the IAE project, is 

reimbursed for the cost of managing, operating and maintaining the IAE 

architecture by the federal agencies that use the IAE. Agencies share the expense. 

To reimburse GSA, the Department of the Treasury collects funds from

participating bureaus and transfers the aggregated funds to GSA in accordance 

with the Memorandum of Agreement between GSA and the Department of the 

Treasury. The IAE provides the Treasury Department’s bureaus with access to 

the following systems: 

 Central Contract Registration, 

 FedBizOpps, 

 Acquisition Career Management Information System, 

 Federal Procurement Common Architecture, 

 Federal Acquisition Information System, 

 Public Key Infrastructure Digital Certificates, 

 Federal Technical Engineering Drawings Online, 

 Government Wide Acquisition Contract/Multiple Agency Contracts 

Portal, 

 Contractor Performance System, and 

 Federal Procurement Data System – Next Generation. 

WCF - 17 
Billing Methodology: The charge assessed to each customer is based on their 

percentage of procurement dollars as a percent of total Treasury Department procurement 

dollars. 

4. Government-wide Council Payments 

Resource Level: $397,000 and 0 FTE 

Program Description: The Government-wide Council Payments support Treasury’s 

participation in Government-wide Councils. These councils are: Chief Financial 

Officer’s Council, Chief Information Officer’s Council, Chief Acquisitions Officer’s 

Council, Chief Human Capital Officer’s Council and President’s Management Council. 

Billing Methodology: The bureaus’ contributions are based on the percentages derived 

from their funding against the Treasury Department’s total funding. This information 

was obtained from the FY 2006 column of the FY 2007 President’s budget. 

G – Deputy Chief Financial Officer

1. Financial Systems Integration 

Resource Level: $2,411,000 and 2 FTEs 

Program Description: The Office of the Deputy Chief Financial Officer, Financial 

Systems Integration (FSI) program provides systems and program support to produce the 

Treasury Department's financial statements and management reports. These monthly and 

quarterly reports are distributed to the Office of Management and Budget (OMB), 

Financial Management Service (FMS), and bureau Chief Financial Officers. Programs 

covered by FSI include financial analysis and reporting, audit follow-up and performance 

management. Bureaus submit data to the Financial Analysis and Reporting System

(FARS) to meet program, legislative and OMB requirements.

Billing Methodology: Treasury Information Executive Repository (TIER) & CFO 

Vision charge is based 80 percent on funding and 20 percent on the average number of 

records submitted to TIER as a percentage of the total. The Joint Audit Management 

Enterprise System (JAMES) is based on the number of audit recommendations and 

planned corrective actions as a percent of the total. Performance reporting is based 80 

percent on the current year enacted budget and 20 percent on the number of performance 

measures as a percent of the total.

H – DAS, Headquarters Operations

1. Environment, Safety, and Health 

Resource Level: $1,153,000 and 1 FTE 

WCF - 18 
Program Description: Environmental, Safety, and Health Management Office provides 

support for safety and environmental health issues that affect most bureaus. This 

program also maintains the Safety and Health Information Management System

(SHIMS).

SHIMS is a department-wide “web” enabled electronic system that records and tracks 

occupational injuries and illnesses. The system allows data manipulation by individual 

organizations and data consolidation providing department-wide mandatory reporting to 

the Department of Labor’s Office of Workers’ Compensation system. SHIMS identifies 

trends in accident experiences and causes which can provide assistance in injury 

reduction and the reduction in lost work days. The system generates the annual incidents 

summary as required by the “Annual Safety and Health Program” and in performance 

reporting. 

Billing Methodology: The charge assessed to each customer is based on the number of 

Safety and Health Information Management System claims filed by each customer as a 

percent of the total.

2. Printing and Graphics Services 

Resource Level: $4,793,000 and 27 FTEs 

Program Description: The mission of the Printing and Graphics Division is to provide 

quality graphics, design, printing (both offset and digital printing), duplicating, and 

electronic services and to be the provider of choice for the effective, economical, and 

quality presentation of information for the Department of the Treasury. The Printing and 

Graphics Division uses a variety of methods and alternative strategies that draw upon 

their collective expertise. 

The Printing and Graphics Division is organizationally divided into three branches: the 

Printing Procurement Branch; the Departmental Printing Branch; and the Graphics 

Branch. 

Products are numerous and range from internal routing slips, posters, brochures, and full 

color presentations, to the commercial procurement of large quantities of complicated and 

expensive printed pieces and presentation materials used by the Secretary and/or the 

President for press and Congressional briefings. 

Services include: 

• A full range of visual services with design consulting/production; 

• High-resolution scans and low-resolution scans for web application; 

• Prepress requirements and preparing the electronic files for printing and/or web 

position to ensure our customer files are prepared correctly, i.e., checking for 

printability with correct fonts, formats, setups for color separations; 

• Security printing to protect against fraud; 

WCF - 19 
• Electronic publishing on-demand digital printing and duplicating; 

• On-site high speed digital black and white and color printing; 

• High-quality process/multi-color printing; 

• Variable data printing; 

• Coordination with the Government Printing Office (GPO) and contractors; 

• Ensure adherence to Treasury Department policy and government statutes and 

regulations governing printing and binding; 

• A full line of specialized binding; 

• Printing procurement acquisition services outside GPO; 

• Quality assurance follow up and problem resolution between the customers and 

the printers; 

• Internet job submission; 

• Government Printing Office printing costs for publications, forms and various 

documents that benefits all the Treasury Department’s bureaus; and 

• Blank paper and other supplies procured through the Government Printing Office 

for the printing of publications, forms, and various documents. 

Billing Methodology: The charge assessed to each customer is based on their previous 

year (PY) usage of the various programs then divided by the total PY usage from all 

customers. 

3. Communications, Information, and Locator Center 

Resource Level: $711,000 and 8 FTEs 

Program Description: The Communications Information and Locator Center staff 

provides Treasury with operator telephone answering and personnel locator services 

when calls are received on the Department of the Treasury's published number. The 

service operates Monday through Friday from 6 a.m. to 7:30 p.m. 

Billing Methodology: The charge assessed to each customer is based on the number of 

calls received and services provided as a percent of the total. 

I – Support Services

Resource Level: $8,071,000 and 27 FTEs 

Program Description: The WCF Support Services cost center captures centralized 

administrative support costs for all WCF funded personnel that is not reflected in each 

WCF program’s budget. It also captures the costs of the administrative personnel who 

directly serve the WCF programs. 

Centralized Administrative Support Costs are paid by the Treasury Department through 

centralized bills. Examples include security programs, health benefits open season 

information, trash removal, mail, moving, copiers, industrial hygienist, Equal 

Employment Opportunity complaint center, child care, worker’s compensation, health 

WCF - 20 
exams, nursing services, electricity, steam, gas, water and sewer, parking, accounting 

system, Digital Telecommunications System, Treasury Communications System, and 

transit subsidy. 

Administrative personnel costs are for services that are used by all WCF programs. They 

are: 

• Legal Services: Legal services, such as legal advice and guidance; 

• Information Technology Support Services: Information technology support 

services include infrastructure support, applications development and planning 

activities; 

• Human Resources Services: Human resources personnel services such as position 

classification, hiring, performance management, and pay/benefits; 

• WCF Corporate Office - Fund Management, Communication, and Customer 

Advocates Service: Policy, guidance, and overall management of the WCF is 

provided through the Fund Manager; 

• Accounting, Budgeting, and Procurement Services: Accounting, budget 

formulation, budget execution, day-to-day financial operations of requisition fund 

certification, Memorandum of Understanding creation, operation of the integrated 

financial system for WCF invoice payments, and procurement services are 

provided to the WCF; 

• Facilities and Support Services: Facilities and support services such as space and 

mail and messenger services. 

Billing Methodology: The charge assessed to each customer is based on the total dollar 

value of WCF services received as a percent of the total. 

WCF - 21 
Section 2 – Budget and Performance Plan

2.1 – Funding Detail by Program 

Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Initial Initial Plan Budget

Resources Available for Obligation Plan Estimate Estimate

INTELLIGENCE & SECURITY

Security Programs $1,303 $718 $736

Emergency Programs 1/ $1,656 N/A N/A

Intelligence & Security (Total) $2,959 $718 $736

DAS, HUMAN RESOURCES/CHCO

Human Resources Strategy and Solutions $767 $831 $851

Equal Opportunity and Diversity $853 $1,270 $1,301

Human Resources (Total) $1,620 $2,101 $2,152

DAS, INFORMATION SYSTEMS & CIO

ACIO HRConnect Operations & Maintenance $23,736 $23,821 $24,393

ACIO NFC Payroll/Employee Express $21,856 $22,458 $22,997

HR Connect (Subtotal) $45,592 $46,279 $47,390

CIO Executive Office $1,310 $1,304 $1,336

CIO Resource Management $1,983 $2,060 $2,110

ACIO Telecommunications $124,826 $134,278 $137,500

ACIO Cyber Security $926 $981 $1,005

ACIO E-Government $13,674 $15,614 $15,988

ACIO E-Government Payments $978 $0 $0

HSPD-12 $0 $31,688 $8,869

ACIO Capital Planning & Information Management $4,327 $4,436 $4,542

DO Information Technology:

ACIO Telecommunications - Secure Comm. Center $4,938 $6,304 $6,455

ACIO Telecommunications - Secure Comm. Equip Res. $362 $367 $376

ACIO Telecommunications - VAX Computer $265 $282 $288

Information Systems (Subtotal) $153,588 $197,315 $178,470

Information Systems (Total) $199,180 $243,594 $225,859

$0

AS MANAGEMENT & CFO

Emergency Programs 1/ N/A $1,585 $1,623

Small & Disadvantaged Business Utilization $667 $708 $725

Procurement Program $469 $761 $766

Government-wide Council Payments $185 $387 $397

AS, Management & CFO (Total) $1,321 $3,441 $3,510

Deputy Chief Financial Officer (DCFO)

Financial Systems Integration $2,445 $2,355 $2,411

DAS, HEADQUARTERS OPERATIONS (DASHO)

Facilities & Support Services:

Environment, Safety, & Health $1,075 $1,126 $1,153

Printing Procurement, Reproduction & Graphics Services $4,440 $4,681 $4,793

Printing & Graphics Equipment Reserve $0 $0 $0

Communications, Information, & Locator Center $629 $695 $711

Headquarters Operations (Total) $6,144 $6,501 $6,657

Centralized Support Services $7,355 $7,882 $8,071

Grand Total $221,024 $266,592 $249,395

1/ Emergency Programs was requested in the ASM & CFO activity in FY 2007.

WCF - 22 
2.2 – Full-Time Equivalents by Program 

Dollars in Thousands 

Federal & Contractor Staff

Fed. Cont. Fed. Cont. Fed. Cont.

Intelligency & Security

Security Programs 8 - 3 - 3 -

Emergency Programs 1/ 4 - N/A N/A N/A N/A

Intelligence & Security (Total) 12 - 3 - 3 -

DAS, HUMAN RESOURCES/CHCO

Human Resources Strategy and Solutions 4 - 4 - 4 -

Equal Opportunity and Diversity 7 - 9 - 9 -

Human Resources (Total) 11 - 13 - 13 -

DAS, INFORMATION SYSTEMS & CIO

ACIO HRConnect Operations & Maintenance 24 42 30 34 30 34

ACIO NFC Payroll/Employee Express 18 2 18 2 18 2

HR Connect (Subtotal) 42 44 48 36 48 36

CIO Executive Office 1 2 1 2 1 2

CIO Resource Management 8 4 8 4 8 4

ACIO Telecommunications 28 307 33 306 33 306

ACIO Cyber Security - Information Security 6 - 6 - 6 -

ACIO E-Government - Management 14 15 15 15 15 15

ACIO E-Government - Payments - - - - - -

HSPD-12 - - - - - -

ACIO Capital Planning & Information Management 8 7 12 7 12 7

DO Information Technology:

ACIO Telecommunications - Secure Comm. Center 18 6 18 6 18 6

ACIO Telecommunications - Secure Com. Equip. Res. - - - - - -

ACIO Telecommunications - VAX Computer 1 - 1 - 1 -

Information Systems (Subtotal) 84 341 94 340 94 340

CIO/Information Systems (Total) 126 385 142 376 142 376

AS MANAGEMENT & CFO

Emergency Programs 1/ N/A N/A 4 - 4 -

Small & Disadvantaged Business Utilization 4 - 4 - 4 -

Procurement Program 2 - 2 - 2 -

Government-wide Council Payments - - - - - -

AS, Management & CFO (Total) 6 - 10 - 10 -

Deputy Chief Financial Officer (DCFO)

Financial Systems Integration 2 8 2 8 2 8

DAS, Headquarters Operations (DASHO)

Facilities & Support Services:

Environment, Safety, & Health 1 2 1 2 1 2

Printing Procurement, Reproduction, & Graphics 27 1 27 1 27 1

Printing & Graphics Equipment Reserve - - - - - -

Communications, Information, & Locator Center 8 - 8 - 8 -

Headquarters Operations (Total) 36 3 36 3 36 3

Centralized Support Services 27 - 27 - 27 -

Grand Total 220 396 233 387 233 387

1/ Emergency Programs was requested in the ASM & CFO activity in FY 2007.

The Terms "Fed" and "Cont" in the column headers refers to "Federal Employees" and "Contractors," respectively. 

Plan Estimate Estimate

FY 2006 FY 2007 FY 2008

Initial Initial Plan Budget

WCF - 23 
2.3 – Funding Detail by Bureau 

Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Initial Initial Plan Budget

Resources Available for Obligation Plan Estimate Estimate

ALCOHOL & TOBACCO TAX & TRADE BUREAU $2,864 $2,929 $2,920

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND $331 $371 $364

DEPARTMENTAL OFFICES (OTA) $69 $85 $87

DEPARTMENTAL OFFICES (S&E) $15,774 $17,634 $17,819

FINANCIAL CRIMES ENFORCEMENT NETWORK $654 $717 $605

FINANCIAL MANAGEMENT SERVICE $5,871 $7,562 $7,022

INTERNAL REVENUE SERVICE $161,402 $209,424 $194,831

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION $983 $1,339 $1,206

OFFICE OF INSPECTOR GENERAL $358 $455 $437

PUBLIC DEBT $1,332 $2,238 $1,949

Subtotal (Treasury Appropriated Bureaus) $189,637 $242,754 $227,240

COMPTROLLER OF THE CURRENCY $3,453 $4,365 $3,795

DC PENSION $70 $79 $76

DEPARTMENTAL OFFICES (WCF) $311 $222 $197

ENGRAVING & PRINTING $4,494 $5,296 $4,772

EXECUTIVE OFFICE FOR ASSET FORFEITURE $167 $255 $257

FEDERAL FINANCING BANK $292 $333 $338

OFFICE OF THRIFT SUPERVISION $466 $950 $642

FF - FMS TREASURY AGENCY SERVICES (TAS) $39 $2 $2

FF - BPD ADMINISTRATIVE RESOURCE CENTER (ARC) $495 $334 $342

FF - DO FEDERAL CONSULTING GROUP $5 $3 $3

FF - DO FED SOURCE $77 $195 $198

U.S. MINT $1,907 $3,122 $2,616

Subtotal (Treasury non-Appropriated Bureaus) $11,773 $15,156 $13,239

ALCOHOL, TOBACCO, FIREARMS, & EXPLOSIVES $11,920 $3,278 $3,367

ALCOHOL, TOBACCO, FIREARMS, & EXPLOSIVES (NIBIN) $2,531 $301 $310

DHS - FLETC $0 $2 $2

DHS - HEADQUARTERS $702 $387 $397

DHS - OFFICE OF INSPECTOR GENERAL $1,361 $1,647 $1,692

DHS - U.S. SECRET SERVICE $1,555 $1,600 $1,644

HOUSING AND URBAN DEVELOPMENT $1,510 $1,466 $1,505

U.S. TAX COURT $35 $0 $0

Subtotal (Non-Treasury) $19,614 $8,682 $8,916

Grand Total Financial Plan Requirements $221,024 $266,592 $249,395

Note: Non-Treasury customers purchase services from: HR Connect, Telecommunications, E-Government, Financial Systems

 Integration, and Enfironment, Safety, & Health. 

WCF - 24 
2.4 – Funding Detail by Operating Levels 

Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Initial Initial Plan Budget

Resources Available for Obligation Plan Estimate Estimate

Object Classification:

11.1 Full-Time Permanent Positions $19,283 $22,021 $22,550

11.1 Other than Full-Time Permanent Positions 0 0 0

11.5 Other Personnel Compensation 379 334 342

11.8 Special Personal Services Payments 0 0 0

11.9 Personnel Compensation (Total) $19,663 $22,355 $22,892

12.0 Personnel Benefits 4,403 5,202 5,327

13.0 Benefits to Former Personnel 0 0 0

21.0 Travel 482 517 529

22.0 Transportation of Things 465 0 0

23.1 Rental Payments to GSA 0 0 0

23.2 Rent Payments to Others 0 0 0

23.3 Communications, Utilities, & Misc 20,121 5,535 5,668

24.0 Printing and Reproduction 422 422 432

25.1 Advisory & Assistance Services 0 0 0

25.2 Other Services 167,824 228,136 210,017

25.3 Purchase of Goods/Serv. from Govt. Accts 0 0 0

25.4 Operation & Maintenance of Facilities 0 0 0

25.5 Research & Development Contracts 0 0 0

25.6 Medical Care 0 0 0

25.7 Operation & Maintenance of Equipment 0 0 0

25.8 Subsistence & Support of Persons 0 0 0

26.0 Supplies and Materials 1,036 812 831

31.0 Equipment 6,608 3,613 3,699

32.0 Lands and Structures 0 0 0

33.0 Investments & Loans 0 0 0

41.0 Grants, Subsidies 0 0 0

42.0 Insurance Claims & Indemn 0 0 0

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 0 0

Total Budget Authority $221,024 $266,592 $249,395

WCF - 25 
Treasury Franchise Fund 

Mission Statement 

To offer world-class administrative solutions that provide value to federal customers 

while allowing them to concentrate on their core missions. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Consolidated/Integrated Administrative 

Management $540,586 $595,160 $689,460 $94,300 15.84%

Financial Management Administrative 

Support Services 88,735 90,861 98,685 7,824 8.61%

Financial Systems, Consulting and 

Training 13,133 8,650 9,167 517 5.98%

Total Cost of Operations $642,454 $694,671 $797,312 $102,641 14.78%

FY 2008 Priorities 

• Increase efficiency and effectiveness of administrative business processes. 

• Enhance the system environment of administrative operations. 

• Create a stronger shared services structure for Treasury. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

1C – Industry Outlook .................................................................................................... 6 

Section 2 – Budget Adjustments and Appropriations Language ................................. 7

2.2 – Operating Levels Table.......................................................................................... 7 

2B – Appropriations Language....................................................................................... 7 

2C – Legislative Proposals.............................................................................................. 7 

Section 3 – Budget and Performance Plan ..................................................................... 8

3.1 – Resource Detail Table............................................................................................ 8 

3A – Consolidated/Integrated Administrative Management .......................................... 8 

3.2.1 – Consolidated/Integrated Administrative Management Budget and Performance 

Plan ................................................................................................................................. 9 

3B – Financial Management Administrative Support Services...................................... 9 

3.2.2 – Financial Management Administrative Support Services Budget and 

Performance Plan.......................................................................................................... 10 

3C – Financial Systems, Consulting and Training ....................................................... 11 

3.2.3 – Financial Systems, Consulting and Training Budget and Performance Plan ... 12 

Section 4 – Supporting Materials.................................................................................. 13

4.1 – Human Resources Table ...................................................................................... 13 

4A – Human Capital Strategy Description ................................................................... 13 

4B – Information Technology Strategy ........................................................................ 14 

4.3 – PART Evaluation Table....................................................................................... 14 

TFF - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The vision of the Treasury Franchise Fund is to transform the administrative support 

arena in the federal government by energizing a shared services business model that can 

offer marketplace success through competition. 

The Franchise Fund businesses have been leaders in redefining the processes and 

methods for delivering administrative products and services that combine streamlined 

processes, simplified rules, full accountability, competitive costing, timely completion, 

and one-stop shopping for customers. Franchise Fund efforts have resulted in significant 

dollar savings throughout the federal government primarily through the following 

franchising objectives: 

• Promote efficiencies in the delivery of administrative products and services 

• Reduce duplication of effort 

• Foster competition 

• Achieve full cost/self sufficiency 

• Enhance customer satisfaction 

The Treasury Franchise Fund is made up of four individual franchise businesses that are 

rolled into three budget activities that group their offerings into similar services. 

Consolidated/Integrated Administrative Management – Includes FedSource

The mission of FedSource is to provide entrepreneurial business solutions for the 

acquisition and financial management of common administrative services and products in 

support of agency missions and objectives. FedSource focuses on support services and 

copier/printer management. 

Financial Management Administrative Support Services – Includes the Administrative 

Resources Center (ARC)

ARC has been providing federal government agencies with common administrative 

support in the areas of Accounting, Travel, Human Resources and Procurement with a 

focus on excellence and superior service. ARC’s mission is to aid in improving overall 

government effectiveness by delivering responsive and cost effective administrative 

support to its customers, thereby improving the customers’ ability to effective discharge 

their mission. 

Financial Systems, Consulting and Training – Includes Treasury Agency Services (TAS)

and Federal Consulting Group (FCG)

Treasury Agency Services (TAS) helps agencies improve the quality of government 

financial management by providing information, advice, assistance, and training that is 

customized to meet today’s environment and client agencies’ requirements. 

TFF - 2 
The mission of the Federal Consulting Group (FCG) is to consult with other federal 

government agencies to support their transformation efforts to become more efficient, 

effective, citizen-centric, and results-oriented. The Federal Consulting Group’s three 

business lines--consulting, executive coaching, and measuring performance and customer 

satisfaction--provide federal agencies with innovative solutions using the latest 

management and information technology tools, techniques, and best practices. 

1B – Program History and Future Outlook 

Demonstrated Success – Eliminating Duplication

Shared Platform & Services 

The Administrative Resource Center (ARC) has reduced the number of federal 

administrative systems by providing access to an integrated system platform for 

accounting, travel, procurement, and personnel functions. In addition, ARC acts as a 

shared service provider for many customers providing full-service transaction processing 

and reporting. ARC, a Center of Excellence for Financial Management, now provides: 

• 31 organizations with administrative accounting services 

• 38 organizations with travel services 

• 30 organizations with procurement services 

• 25 organizations with personnel services 

The consolidation of these federal customers onto a shared systems platform has provided 

substantial savings to the federal government. These organizations now get better system

license costs because the vendors offer large volume discounts. These organizations also 

share the costs associated with operations and maintenance. In addition to the cost 

savings, these organizations are upgraded to the latest version of the software 

simultaneously as opposed to each organization managing their upgrade independently. 

In the past, the Department of the Treasury had a decentralized administrative service 

environment. There were 14 different bureaus and organizations within Treasury running 

their own accounting, procurement, and travel systems on various platforms. Each 

organization trained separate staffs to manage their systems and process their 

transactions. With the evolution of the Administrative Resource Center (ARC), Treasury 

has now moved to a shared services environment where 11 of the 14 entities share 

systems on a single integrated platform. In addition, many of the bureaus take advantage 

of ARC’s experienced staff to process their transactions and provide their reporting. 

Consolidating Agency Needs 

FedSource has consolidated multiple requirements from several offices within the same

agency into one procurement vehicle. For example, FedSource has combined copier 

equipment, software for the copy center, and placements to run the copy center– all for 

TFF - 3 
one price. They were able to give the customer one agreement for multiple services 

eliminating the need for the agency to seek several vendors. FedSource became “onestop” shopping. In another example, FedSource established a single “master agreement” 

for one of its customers that eliminated the need for separate agreements for each of its 

customer’s offices. That alone saved the customer agency time and reduced its 

administrative burden significantly. This not only proved to be a time saver, it also 

facilitated cost savings for the customer. 

Demonstrated success – timeliness & accuracy

Timely Financial Information 

The Administrative Resource Center has always been among Treasury's best in quality 

and timeliness of financial reporting. ARC continues to strive to set the example for 

efficiency and quality in the area of financial reporting. With Oracle’s reporting tool 

(Discoverer), federal managers have real-time data at their fingertips any day of the 

month. By closing their customer’s books by the third business day following each 

month, timely financial data (such as unobligated balances) is quickly in the hands of 

federal mangers for decision-making. By closing the year-end books five business days 

after year-end, federal managers have the data necessary to provide year-end reporting 

well ahead of their counterparts in other agencies. 

There is no better test for the accuracy and quality of financial data than an annual 

financial statement audit. Externally, ARC has helped its customers receive over 87 

consecutive clean audit opinions. ARC also maintains an exceptional internal control 

structure. Each year ARC undergoes a SAS 70 audit that verifies the entire control 

structure from disbursement processing to financial reporting. Each agency saves money 

on its annual financial statement audits because their auditors can rely on the work done 

during ARC’s SAS 70 Audit. 

Demonstrated Success – Efficiency

Efficiency is the ability to perform well or achieve a result without wasting energy, 

resources, effort, time or money. Competition, a cornerstone of the franchising concept, 

has been the impetus behind improving government efficiency. Competition has 

increased the focus of service providers on the needs of the customer, introduced the need 

for market solutions (instead of administrative bureaucracy), decentralized authority, and 

improved efficiency by delivering better services at lower costs in the most effective 

manner. 

Reducing Overhead Costs 

Many customers have realized reduced pricing, rebates, and volume discounts as a result 

of the economies of scale and improved efficiency of FedSource’s services. In order to 

remain competitive, FedSource continues to find ways to reduce its operating (overhead) 

costs. FedSource is able to give a price reduction when obtaining large orders because in 

most instances its operating costs remain fairly constant. This is best illustrated by 

looking at its operating percentage, which quantifies operating costs as percentage of 

TFF - 4 
total revenue. The increase in revenue has outpaced the increase in operating costs. As a 

result, FedSource’s operating percentage has steadily decreased from 7 percent in 

FY 1998 to 3.7 percent in FY 2006 representing a 47 percent reduction. 

Private Sector Accountability 

FedSource worked with two of its largest vendors to enhance the methods in which they 

invoice the government. This enabled FedSource to easily review each invoice for 

accuracy, which saved more than ten days of staff time each month. In addition 

FedSource receives many invoices electronically, which allows their system to 

automatically check it against the contract for errors. As a result, FedSource is able to 

provide its customers with a more timely and accurate bill. In this case, the government 

and the private sector have become more efficient. 

 

Awards and Public Recognition 

• In 2005 the Administrative Resource Center was recognized as a Center of 

Excellence in the Financial Management Line of Business. 

• The Administrative Resource Center received the Certificate of Achievement for a 

Government Travel Management Program from the Society of Government Travel 

Professionals (SGTP) for implementing the commercial, off-the-shelf software to 

automate the relocation process as part of the e-Travel implementation 

Future Outlook

Through FY 2008 the Fund will maintain its commitment to excellence and will continue 

to meet or exceed all strategic goals and benchmarks. Additionally, the Fund should 

continue to see controlled growth. 

Creating Opportunities through Innovation 

Government business has significant needs when it comes to information. Making 

information actionable is central to an entity’s performance. The ability to collaborate 

and share ideas, to make better-informed decisions, and to connect with customers relies 

on effectively managing information. At the same time, reducing costs remains a longterm priority. For these reasons, the importance of information technology as a strategic 

asset has never been greater. Franchise Fund is collaborating with its private sector 

partners to create high-impact solutions that integrate across the organization, such as 

using technology to give its customers desktop access to critical information. Focusing on 

its customer’s needs fuels its passion for innovation. Franchise Fund believes innovative 

technology has the power to eliminate obstacles and create opportunities. As such, 

Franchise Fund will focus much of its efforts in FY 2007 and beyond to further 

developing its on-line offerings. 

Raising the Bar 

Although Franchise Fund is proud of its marketplace success and track record of 

delivering innovation, quality and results to its clients, the time has come for us to raise 

TFF - 5 
the bar in the industry once again. The designation of the Treasury Franchise Fund as a 

“Center of Excellence” in Financial Management will open new doors. Not only will this 

designation help expand the Fund’s Administrative Resource Center’s current target 

audience of small to mid-level agencies but it should provide the pathway to compete for 

the business of large cabinet level agencies. To ensure the Fund can meet these new 

opportunities the Fund has been making substantial investments today to enhance the 

power and value of its integrated system platform. The Franchise Fund is optimistic about 

its long-term growth opportunities. 

1C – Industry Outlook 

There is a positive outlook for the shared services sector in the federal government. The 

success of the Treasury Franchise Fund and its private sector counterparts is providing 

government leaders with a basis for looking at shared services providers to supply 

administrative resources. The Fund anticipates further growth in this sector due to the 

development of the Financial Management Line of Business and the Fund’s status as a 

Center of Excellence. 

TFF - 6 
Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands 

Treasury Franchise Fund FY 2006

Obligated

FY 2007 

Estimated

FY 2008 

Estimated

FTE 645 909 827 

Object Classification:

11 Personnel Compensation...................................... $39,310 $43,158 $48,625

12 Personnel Benefits.............................................................. 11,107 14,864 16,777

13 Ben. Former Personnel................................................ 109 0 0

21 Travel and Transportation of Persons...................... 1,522 1,255 1,308

22 Transportation of Things................................................ 195 163 165

23 Rents Communications, Utilities, and Misc. Charges........... 3,790 2,486 2,544

24 Printing and Reproduction.......................................... 247 93 95

25 Other Services............................................................. 574,093 620,914 716,896

26 Supplies and Materials........................................ 1,215 2,092 2,143

31 Equipment......................................................... 12,451 9,534 8,676

32 Land and Structures............................................ (1,652) 106 78

42 Insurance Claims and Indemnities.......................... 0 0 0

43 Interest............................................................. 66 5 5

Total............................................................................ $642,454 $694,671 $797,312

Budget Activities:

Consolidated/Integrated Administrative Management........... $540,586 $595,160 $689,460

Financial Management Administrative Support Services...... 88,735 90,861 98,685

Financial Systems, Consulting and Training....................... 13,133 8,650 9,167

Total............................................................................ $642,454 $694,671 $797,312

2B – Appropriations Language 

The Treasury Franchise Fund receives no appropriated funds from Congress. 

2C – Legislative Proposals 

The Treasury Franchise Fund has no legislative proposals for FY 2008. 

TFF - 7 
Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands 

% Change

FY 2006 FY 2007 FY 2008 FY 2007

Description Actual * Estimated Estimated to FY 2008

AMOUNT AMOUNT AMOUNT AMOUNT

Summary of Revenue and Expenses:

Revenue:

Consolidated / Integrated Administrative Mgt. $517,315 $600,000 $700,000 16.67%

Financial Management Administrative Support 83,966 91,000 97,800 7.47%

Financial Systems, Consulting & Training 12,226 8,700 9,400 8.05%

Total Revenue $613,507 $699,700 $807,200 15.36%

Expenses: 

Consolidated / Integrated Administrative Mgt. $509,185 $595,160 $689,460 15.84%

Financial Management Administrative Support 90,516 90,861 98,685 8.61%

Financial Systems, Consulting & Training 10,254 8,650 9,167 5.98%

Total Expenses $609,955 $694,671 $797,312 14.78%

Net Results $3,552 $5,029 $9,888 96.59%

Customer Growth

Consolidated / Integrated Administrative Mgt. 2,870 2,870 3,000 4.53%

Financial Management Administrative Support 59 61 63 3.28%

Financial Systems, Consulting & Training 239 263 290 10.27%

Total Customer Growth 3,168 3,194 3,353 4.98%

* Data is from the FY 2006 Statement of Net Cost. That data is on the accrual basis instead of the cash basis presentation in the President's Budget.

3A – Consolidated/Integrated Administrative Management ($689,460,000 from 

reimbursable programs): The purpose of the Consolidated/Integrated Administrative 

Management budget activity is to provide government customers with entrepreneurial 

business solutions for the acquisition and financial management of common 

administrative services and products in support of agency missions and objectives. The 

Consolidated/Integrated Administrative Management activity includes FedSource which 

offers a “first choice” option or alternate source for the acquisition of these services and 

products in a fast, cost effective manner while continuing to assure quality and customer 

service. 

FedSource uses numerous cost saving vehicles to generate or enhance efficiency and 

effectiveness in agency customer programs. FedSource consolidates multiple 

requirements from several offices within the same agency into one procurement vehicle, 

providing the customer one agreement for multiple services, and eliminating the need for 

the agency to seek several vendors. FedSource can establish a single “master agreement” 

TFF - 8 
for its customers that eliminate the need for separate agreements for each of its 

customer’s offices, saving the customer agency time and significantly lowering 

administrative burden. 

FedSource customers realize reduced pricing, rebates, and volume discounts as a result of 

economies of scale and improved efficiency of FedSource’s services. FedSource is able 

to give a price reduction to customers obtaining large orders because in most instances 

operating costs remain fairly constant. In order to remain competitive, FedSource 

continues to find ways to reduce operating (overhead) costs. FedSource has consolidated 

its Acquisition Center to help ensure compliance with the numerous procurement rules 

and regulations, and continues to adapt its organization structure and product and service 

lines to enhance delivery of administrative services. FedSource expects to continue to be 

one of the most efficient and effective procurement options for the federal government. 

Continued growth will enable FedSource to demand even lower prices from their vendors 

based on increased buying power derived from all their customers. 

3.2.1 – Consolidated/Integrated Administrative Management Budget and 

Performance Plan 

Dollars in Thousands 

Consolidated/Integrated Administrative 

Management Budget Activity

Includes Strategic Objectives F3A and M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources 

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 480,478 701,150 540,586 595,160 689,460

Total Operating Level $480,478 $701,150 $540,586 $595,160 $689,460

Human Resources 

 Appropriated FTE 0 0 0 0 0

 Other FTE 80 80 111 150 150

Total FTE (direct and reimbursable) 80 80 111 150 150

Consolidated/Integrated Administrative 

Management Budget Activity

Includes Strategic Objectives F3A and M5B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline 71% 80% 80%

Actual 71% 51%

Customer Satisfaction Index - 

Consolidated/Integrated Administrative Mngmnt 

(%)(Oe) Met Yes No

Target Baseline 4% 12% 12% 12%

Actual 4% 4% 4%

Operating expenses as a percentage of 

revenue--Consolidated/Integrated Administrative 

Management (%)(E) Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

3B – Financial Management Administrative Support Services ($98,685,000 from 

reimbursable programs): The purpose of the Financial Management Administrative 

Support activity is to offer value to its customers through cost savings (system 

acquisitions and operations and maintenance) and quality services. The Financial 

Management Administrative Support Services activity includes the Administrative 

Resources Center (ARC). ARC provides traditional administrative support functions with 

a focus on accounting, procurement, travel, and human resources (HR) services. This 

program has been very successful in meeting its mission goals as evidenced by the 

increasing demands for and satisfaction from their services. 

TFF - 9 
ARC has reduced the number of federal administrative systems by providing access to an 

integrated system platform for accounting, travel, procurement, and personnel functions. 

In addition, ARC acts as a shared service provider for many customers providing fullservice transaction processing and reporting. 

The consolidation of these federal customers onto a shared systems platform has provided 

substantial savings to the federal government. These organizations now get better license 

costs because the vendors offer large volume discounts. These organizations also share 

the costs associated with operations and maintenance. In addition to the cost savings, 

these organizations are upgraded to the latest version of the software simultaneously as 

opposed to each organization managing its upgrade independently. 

ARC already has agreements in place to add customers through FY 2008. ARC is in 

discussions with several agencies (small and large) to ensure work beyond FY 2008. 

ARC will generate substantial cost savings to these new customers through the year-one 

conversion phase. Customers will receive a compliant system platform at a fraction of the 

cost of the agency implementing their own new system. Customers also receive cost 

savings in out years by sharing system upgrade costs with ARC’s other customers. 

Operations and maintenance costs are also lowered because ARC can negotiate much 

better system license costs with their vendors. As a result of the projected business, ARC 

hopes to help customers eliminate 15-20 duplicate financial related systems by FY 2008. 

ARC can use the solutions that are implemented by one customer to help similar issues 

encountered by other customers. This “economies of scale” could not be obtained if the 

agencies performed their own work. ARC has also begun to re-look at their processes to 

streamline their procedures to gain new efficiencies. 

3.2.2 – Financial Management Administrative Support Services Budget and 

Performance Plan 

Dollars in Thousands 

Financial Management Administrative

Support Services Budget Activity

Includes Strategic Objective M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 64,450 74,850 88,735 90,861 98,685

Total Operating Level $64,450 $74,850 $88,735 $90,861 $98,685

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 531 580 504 667 747

Total FTE (direct and reimbursable) 531 580 504 667 747

TFF - 10 
Financial Management Administrative

Support Services Budget Activity

Includes Strategic Objective M5B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline 71% 80% 80%

Actual 71% 75%

Customer Satisfaction Index - Financial Mgmt 

Admin Support Services (%) (Oe) 

Met Yes Yes

Target Baseline 11% 12% 12% 12%

Actual 9% 9% 17%

Operating expenses as a percentage of 

revenue--Financial Management Administrative 

Support (%) (E) Met Yes Yes No

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

3C – Financial Systems, Consulting and Training ($9,167,000 from reimbursable 

programs): The purpose of the Financial Systems, Consulting, and Training activity is to 

offer value to customers by proving solutions through consulting and training. The 

Financial Systems, Consulting and Training activity consists of Treasury Agency 

Services and the Federal Consulting Group. 

Treasury Agency Services shares one common purpose with their host bureau Financial 

Management Service (FMS)—help agencies improve the quality of government financial 

management. TAS is a reimbursable provider of information, advice, assistance, and 

training that is customized to meet today’s environment and client agencies’ 

requirements. These services provide the venue for linking program objectives and 

services with best financial management practices. TAS’ vision is to be the partner of 

choice for federal managers seeking financial management improvements and success. Its 

strength is FMS expertise combined with entrepreneurial initiative. 

The mission of the Federal Consulting Group (FCG) is to consult with other federal 

government agencies to support their transformation efforts to become more efficient, 

effective, citizen-centric, and results-oriented. The Federal Consulting Group’s three 

business lines--consulting, executive coaching, and measuring performance and customer 

satisfaction--provide federal agencies with innovative solutions using the latest 

management and information technology tools, techniques, and best practices. 

The Consulting Business Line focuses on assisting federal agencies in achieving 

organizational effectiveness through strategic planning, organizational development, 

process improvement, and workforce planning. FCG provides guidance to meet the 

requirements of the President’s Management Agenda and the Program Assessment 

Rating Tool. Other services include conducting Baldrige and various types of program

assessments. The Executive Coaching Business Line focuses on leadership development, 

team building, appreciative inquiry, executive coaching/mentoring, personal leadership 

skills and feedback coaching. The Performance Measurement and Customer Satisfaction 

Business Line focuses on aiding federal agencies in understanding what internal and 

external customers think of their efforts and improving overall customer satisfaction. 

This is accomplished through the use of the American Customer Satisfaction Index 

(ACSI), which is the world’s leading metric for assessing and improving customer 

satisfaction and other measures of customer and employee satisfaction. 

The FCG serves as one of the most cutting edge consulting and performance 

measurement service providers to the federal government. As the pressure grows for 

TFF - 11 
federal agencies to achieve results, measure performance, increase trust and confidence in 

government and prepare the next generation of leaders, the demand for and value of the 

services provided to client agencies continues to grow. FCG’s mantra of “experience 

meeting government’s challenges” is clearly demonstrated by its team of experienced, 

forward looking federal executives who can help agencies focus their efforts and become 

high performing. 

3.2.3 – Financial Systems, Consulting and Training Budget and Performance Plan 

Dollars in Thousands 

Financial Systems, Consulting and 

Training Budget Activity

Includes Strategic Objective M5B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources 

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 12,920 12,250 13,133 8,650 9,167

Total Operating Level $12,920 $12,250 $13,133 $8,650 $9,167

Human Resources 

 Appropriated FTE 0 0 0 0 0

 Other FTE 50 50 30 10 12

Total FTE (direct and reimbursable) 50 50 30 10 12

Financial Systems, Consulting and Training 

Budget Activity

Includes Strategic Objective M5B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline 71% 80% 80%

Actual 71% 81%

Customer Satisfaction Index - Financial System, 

Consulting & Training 

Met Yes Yes

Target Baseline 12% 12% 12% 12%

Actual 14% 11% 10%

Operating expenses as a percentage of 

revenue--Financial Systems, Consulting and 

Training (%) (E) Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Customer Satisfaction 

It is imperative that the Franchise Fund customers are satisfied with all aspects of the 

services provided. In the past the Fund used an 80% benchmark because of the scales 

used by the businesses to assess customer satisfaction. In FY 2005 and FY 2006, the 

Franchise Fund used the American Customer Satisfaction Index (ACSI). As a result, the 

Fund's base-line measures have changed. 

Operating Expenses as a Percentage of Revenue 

The Franchise Fund will either maintain or decrease the cost of goods sold as a 

percentage of revenue year to year. Cost of goods sold is defined as the costs actually 

incurred in producing the product or service. It is the direct cost of production or service. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

TFF - 12 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Reimbursable FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 686 645 827

Increases:

Reason #1: Business growth 156 182 82

Subtotal, Increases 156 182 82

Decreases:

Reason #1: Normal Attrition -17

Reason #2: Office closures/transfers -26

Reason #3: Move Off. Of Mgmt Services

back to BPD

-154

Subtotal, Decreases -197 0 0

Year-end Actual/Estimated FTEs 645 827 909

Net Change from prior year SOY to budget year EOY 264

4A – Human Capital Strategy Description 

The Fund relies heavily on its host Bureaus (Bureau of Public Debt (BPD), FMS, and 

Departmental Offices) to provide the basis of its human capital strategy. Each bureau has 

done significant work in this area. The Fund, in a supplemental role, continues to 

improve recruitment, retention, professional development and evaluation strategies. The 

Fund makes full use of special hiring authorities, such as the Federal Career Intern, 

Outstanding Scholar and Student Career Experience Programs. With a significant portion 

of the Fund’s FTE’s located in Parkersburg, WV, the Fund has had a great deal of success 

recruiting highly qualified personnel. For example, the Fund’s core business line – 

ARC’s Financial Management Services – has been able attract over 38 certified public 

accountants making up roughly 21 percent of its total accounting staff. 

The Treasury Franchise Fund has implemented its “EthicSmart” initiative that has 

increased awareness of ethical dilemmas that are heightened in a service business 

environment. This initiative helps support one of the Fund’s goals of complying with 

relevant laws and regulations. The program is designed to help convey management’s 

desire to create an environment where employees can make the right decision and take 

the right course. 

TFF - 13 
4B – Information Technology Strategy 

The Treasury Franchise Fund (TFF) determines what IT investments should be added to 

its portfolio using an Investment Review Board (IRB). The Fund’s Advisory Board acts 

as the IRB and looks at investment activity monthly. All IT investments must be 

supported by a business need and the investment must add value to the services TFF 

provides its customers. When reviewing investments, the TFF IRB considers/addresses 

these questions: 

• Does the IT investment support core/priority mission functions that need to be 

performed by the Treasury Franchise Fund?

• Does the project have to be undertaken by the Franchise Fund because no alternative 

private sector or government source can more efficiently support the function?

• Does the investment support work processes that have been simplified or otherwise 

redesigned to reduce costs, improve effectiveness, and make maximum use of 

commercial, off-the-shelf technology?

• Does the investment eliminate redundant systems and centralize core functions?

The Administrative Resource Center’s IT portfolio is managed by the BPD, while 

Treasury Agency Service’s portfolio is managed by the FMS. FedSource and FCG’s IT 

portfolio is managed by the Treasury Franchise Fund’s IRB. The Treasury Franchise 

Fund does not have any IT or Non-IT investments in their current portfolio. 

4.3 – PART Evaluation Table 

The Treasury Franchise Fund is not scheduled to be PARTed. 

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

TFF - 14 
Bureau of Engraving and Printing 

Mission Statement 

To design and manufacture high quality security documents that meet customer 

requirements for quality, quantity and performance, including counterfeit deterrence. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Manufacturing $445,000 $493,000 $537,000 $44,000 8.92%

Protection and Accountability of Assets 61,000 63,000 65,000 2,000 3.17%

Total Resources $506,000 $556,000 $602,000 $46,000 8.27%

FY 2008 Priorities 

• Produce and deliver the most secure currency for the nation in the most cost effective 

manner possible. BEP expects to produce and deliver 9.7 billion notes to the Federal 

Reserve System in 2008, an increase of nearly 7 percent over the 2007 program. 

• Redesign the $5 and $100 notes. The redesigned $5 note will begin circulating in 

spring 2008; the new $100 note should begin circulating in FY 2009. The new notes 

are part of the current multi-year initiative to implement the most ambitious currency 

redesign in United States history. 

• Continue process improvements as required of an ISO 9001 certified organization, a 

designation that indicates to current and prospective customers that the Bureau 

employs a rigorous quality management program. 

• Continue to work with the Advanced Counterfeit Deterrent Committee to research 

and develop state-of-the-art counterfeit deterrent features for use in future currency 

notes that will enhance and protect future notes. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

Section 2 – Budget Adjustments and Appropriations Language ................................. 6

2.2 – Operating Levels Table.......................................................................................... 6 

2B – Appropriations Language....................................................................................... 7 

2C – Legislative Proposals.............................................................................................. 7 

Section 3 – Budget and Performance Plan ..................................................................... 8

3.1 – Resource Detail Table............................................................................................ 8 

3A – Manufacturing........................................................................................................ 8 

3.2.1 – Manufacturing Budget and Performance Plan.................................................... 9 

3.2.2 – Protection and Accountability of Assets Budget and Performance Plan.......... 10 

Section 4 – Supporting Materials.................................................................................. 11

4.1 – Human Resources Table ...................................................................................... 11 

4A – Human Capital Strategy Description ................................................................... 11 

4.2 – Summary of IT Resources Table ......................................................................... 13 

4B – Information Technology Strategy ........................................................................ 14 

4.3 – PART Evaluation Table....................................................................................... 15 

BEP - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The mission of the Bureau of Engraving and Printing is to design and manufacture high 

quality security documents that deter counterfeiting and meet customer requirements for 

quality, quantity and performance. 

The Bureau of Engraving and Printing began printing currency in 1862. The Bureau 

operates on the basis of authority conferred upon the Secretary of the Treasury by 31 

U.S.C. 321(a) (4) to engrave and print currency and other security documents. 

Operations are financed by a means of a revolving fund established in 1950 in accordance 

with Public Law 81-656. This fund is reimbursed through product sales for direct and 

indirect costs of operations including administrative expenses. In 1977, Public Law 95-

81 authorized the Bureau to include an amount sufficient to fund capital investment and 

to meet working capital requirements in the prices charged for products. This eliminated 

the need for appropriations from Congress. 

The Bureau’s vision is to maintain its position as a world-class securities printer 

providing our customers and the public superior products through excellence in 

manufacturing and technological innovation. It strives to produce U.S. currency of the 

highest quality, as well as many other security documents issued by the federal 

government. Other activities at the Bureau include engraving plates and dies; 

manufacturing inks used to print security products; purchasing materials, supplies and 

equipment; and storing and delivering products in accordance with the requirements of 

customers. In addition, the Bureau provides technical assistance and advice to other 

federal agencies in the design and production of documents, which, because of their 

innate value or other characteristics, require counterfeit deterrence. 

In line with BEP’s vision, the Bureau’s top priorities for FY 2008 to achieve it’s mission 

are the introduction of a new $5 note into circulation in spring 2008, and a new $100 note 

should begin circulating in 2009. The new notes will contain enhanced security features 

including subtle background colors. Background colors help consumers, particularly 

those who are visually impaired, to tell the denominations apart. However, in addition to 

background colors, BEP is developing and testing several new overt counterfeit deterrent 

features for inclusion in the new $100 note. The Bureau is continuing its work with the 

Advanced Counterfeit Deterrent Committee to research and develop future currency 

designs that will enhance and protect future notes. 

Manufacturing – The Bureau of Engraving and Printing manufactures high quality 

security documents that deter counterfeiting. These products are grouped into two 

programs: Federal Reserve notes and other security documents.

BEP - 2 
Protection and Accountability of Assets – Because of the value of the products 

manufactured, the Bureau must maintain an accurate and cost effective system of 

accountability for all Bureau products, which will ensure that products are accounted for 

while in production and that customers receive the correct quantity of the product 

ordered. The protection and accountability of assets is a joint effort crossing many 

divisions within the Bureau; products are tracked and accounted for at every step of the 

production process. The primary mission of the Bureau’s Office of Security is to 

preserve the integrity of and safeguard critical Bureau resources and assets such as 

personnel, products, facilities and equipment. 

1B – Program History and Future Outlook 

Redesigned Federal Reserve Notes: The Bureau of Engraving and Printing has a long 

term commitment to develop state-of-the-art counterfeit deterrent features for use in 

future currency notes through new, more innovative technologies. The Bureau expects to 

redesign United States currency every seven to ten years in an effort to stay ahead of 

counterfeiters as advances in technology make counterfeiting of currency less difficult. 

The Advanced Counterfeit Deterrent Steering Committee, which includes members from

BEP, other Department of the Treasury officials, the United States Secret Service, and the 

Federal Reserve Board, is continually researching counterfeit deterrent features for 

possible use in future currency designs that will enhance and protect future notes from

counterfeiting. 

Recent redesigned notes retained three important counterfeit deterrent features that were 

first introduced in the late 1990’s and are easy for consumers and merchants to 

authenticate. 

• The watermark: The faint image similar to the large portrait, which is part of the 

paper itself, is visible from both sides when the note is held up to light. 

• The security thread: This is visible from both sides when held up to light, this 

vertical strip of plastic is embedded in the paper and spells out “USA” as well as the 

denomination. 

• The color-shifting ink: The numeral in the lower-right corner on the face of the note 

changes from copper to green when the note is tilted. The color shift is more 

dramatic and easier to see on the new design notes. 

Counterfeiting has been kept at low levels through a combination of improvements in 

security features, aggressive law enforcement and education efforts to inform the public 

about how to authenticate their currency. The most recent redesigned note, the $10, 

entered into circulation in March 2006. The redesigned $10 was the third denomination 

in the new currency series that incorporates enhanced security features, as well as subtle 

background colors and symbols of freedom into the designs. A redesigned $5 note is 

scheduled to be introduced into circulation in spring 2008, and a new $100 note will 

begin circulating in 2009. 

BEP - 3 
Public Education: Because the improved security features in the redesigned currency are 

most effective when the public knows about and uses the features to authenticate their 

currency, a broad, public education program is crucial to the anti-counterfeiting effort. In 

cooperation with the Federal Reserve, BEP administers a public education program to 

support the introduction of new currency designs. The goal of this program is to build an 

adequate threshold of awareness to ensure seamless, "business as usual" transitions as 

new currency designs are introduced to the public. 

An education campaign will be conducted for the new $5 and $100 notes following the 

successful campaigns for the redesigned $20, $50 and $10 notes. No domestic paid 

advertising will be used to introduce the new notes, but it is possible that paid media of 

some nature may prove necessary in certain foreign markets for the $100 note. $100 

notes comprise roughly 65 percent of the estimated $789 billion of outstanding United 

States currency, an estimated two-thirds which is held outside the United States borders. 

This education program ensures that people all over the world accept, recognize and use 

the enhanced security features of the new currency. 

Quality: Along with innovative, cutting-edge designs, BEP will maintain its focus on 

producing high quality security products in the most cost effective manner possible. It 

will continue to pursue process improvements as required of an ISO 9001 certified 

organization, a designation that indicates to current and prospective customers that the 

Bureau employs a rigorous quality management program. Continuous process 

improvements will be the catalyst for world class quality and improved cost performance 

through streamlined processes and low spoilage. In 2007, the BEP plans to attain ISO 

14001 certification for its environmental management systems to institutionalize its 

commitment to sound environmental stewardship. 

Cost Reduction Efforts: The Bureau strives to provide its customers with superior 

products for the lowest possible price. The BEP continuously looks for ways to cut costs 

without compromising quality. During 2006, performance on key program performance 

measures relating to cost was favorable. In addition, direct manufacturing costs for the 

currency program were below established standards in 2006. To best position the Bureau 

of Engraving and Printing for the future, during 2006 it undertook a functional review of 

its organizational structure. The goal of the review was to streamline the organization by 

grouping similar functions to benefit from synergies, improve efficiency costs, reduce 

response time and facilitate currency redesign efforts. The Bureau expects to complete 

this functional realignment in early FY 2007. 

Recent developments in Optical Character Recognition and image inspection software 

have led to the availability of commercial inspection systems that BEP can use in its 

currency manufacturing processes. These PC-based systems use commercially available 

hardware along with a proprietary software package to provide real time inspection of 

printed work. The Bureau’s investment in an automated inspection system has proven to 

be more cost effective than the system it replaced. It has also afforded BEP some

BEP - 4 
flexibility in redeploying resources to other areas while enhancing it’s capability of

delivering a high quality product. 

BEP’s success would not be possible without the contributions of its people. The Bureau 

remains strongly committed to the development of its workforce through an array of 

career development programs tailored to the demand and skill requirements of a hightechnology workplace. Strategic investment in people and technology will continue to be 

critical factors in maintaining the Bureau’s status as a world class securities 

manufacturer. 

BEP - 5 
Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands 

Account Title: Bureau of Engraving and Printing FY 2006 FY 2007 FY 2008 

Obligated Estimated Estimated

FTE 2,190 2,300 2,250

Object Classification

11.1 Full-Time Permanent Positions..................................... $ 167,000 $ 170,000 $ 175,000

11.1 Other than Full-Time Permanent Positions.............. 1,500 1,500 2,000

11.5 Other Personnel Compensation................................... 8,000 11,000 12,000

11.8 Special Personal Services Payments..................... 2,000 2,000 2,000

11.9 Personnel Compensation (Total)............................. - - -

12.0 Personnel Benefits......................................................... 178,500 184,500 191,000

13.0 Benefits to Former Personnel........................................ 43,500 46,000 48,000

21.0 Travel............................................................................. - - -

22.0 Transportation of Things........................................... 1,750 1,750 1,750

23.1 Rental Payments to GSA............................................... 100 150 150

23.2 Rent Payments to Others............................................... 2,000 2,000 2,000

23.3 Communications, Utilities, & Misc.................................. 1,000 1,000 1,000

24.0 Printing and Reproduction............................................. 13,000 14,000 14,000

25.1 Advisory & Assistance Services..................................... 850 800 800

25.2 Other Services............................................................... 4,000 5,000 5,000

25.3 Purchase of Goods/Serv. from Govt. Accts...... 50,000 51,000 53,000

25.4 Operation & Maintenance of Facilities................... - - -

25.5 Research & Development Contracts.............................. 8,200 8,200 8,200

25.6 Medical Care.................................................................. 3,000 3,000 3,000

25.7 Operation & Maintenance of Equipment...................... - - -

25.8 Subsistence & Support of Persons................................ 6,000 7,000 7,000

26.0 Supplies and Materials................................................... - - -

26.0 Metal and Fabrication.................................................... 134,000 184,000 207,000

31.0 Non-Capital Equipment.................................................. 60,000 50,000 60,000

33.0 Investments & Loans.................................................... - - -

41.0 Grants, Subsidies.......................................................... - - -

42.0 Insurance Claims & Indemn........................................... - - -

43.0 Interest and Dividends............................................. 100 100 100

44.0 Refunds......................................................................... - - -

 Depreciation - - -

Total Operating................................................ $ 506,000 $ 558,500 $ 602,000

Budget Activities:

 Manufacturing $ 445,000 $ 493,000 $ 537,000

 Protection and Accountability of Assets 61,000 63,000 65,000

Total Budget Authority....................................... $ 506,000 $ 556,000 $ 602,000

BEP - 6 
2B – Appropriations Language 

BEP receives no appropriated funds from Congress. 

2C – Legislative Proposals 

BEP has no Legislative Proposals for FY 2008. 

BEP - 7 
Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands 

% Change

FY 2006 FY 2007 FY 2008 FY 2007

Description FTE Obligated FTE Estimated FTE Estimated FTE to FY 2008

Revenue:

Federal Reserve Notes 2,175 $500,000 2,285 $550,000 2,235 $596,000 -2.2% 8.4%

Postage Stamps 0 0 0

Other Security Products 15 6,000 15 6,000 15 6,000 0.0% 0.0%

Total Revenue 2,190 $506,000 2,300 $556,000 2,250 $602,000 -2.2% 8.3%

Expenses:

Direct Manufacturing

Paper and Ink $125,000 $175,000 $207,000 18.3%

Direct Labor 32,000 33,000 34,500 4.5%

Other Direct Mfg Costs 6,000 7,000 7,500 7.1%

Subtotal Direct Manufacturing Costs 163,000 215,000 249,000 15.8%

 Indirect Manufacturing Support 282,000 278,000 288,000 3.6%

 Total Manufacturing Activity Costs 445,000 493,000 537,000 8.9%

Total Protection & Accountability of Assets Activity Costs 61,000 63,000 65,000 3.2%

Total Expenses $506,000 $556,000 $602,000 8.3%

Net Results 0.0 0.0 0.0 0.0%

Federal Reserve Notes Manufactured (in Billions) 8.2 9.1 9.7 6.6%

0.0%

3A – Manufacturing ($537,000,000 from reimbursable programs): BEP manufactures 

high quality security documents that deter counterfeiting. These manufactured products 

are grouped into two programs: Federal Reserve notes and other security documents. 

The Bureau’s Manufacturing Activity supports Treasury’s strategic objective, Increase 

the Reliability of the United States Financial System. 

 BEP uses the latest technologies for security printing and processing, including 

automated inspection equipment used in the production of the nation’s currency. The 

manufacturing of state-of-the-art currency deters counterfeiting, contributes to public 

confidence, and facilitates daily commerce. The Bureau’s production equipment is 

operated by highly skilled craft personnel that have developed their unique skills through 

multi-year apprenticeship programs. 

In 2006, the Bureau delivered 8.2 billion Federal Reserve Notes to the Federal Reserve 

Banks. The currency order was fulfilled on schedule, at lower cost and spoilage than 

anticipated. The Federal Reserve has ordered 9.1 billion notes for delivery in FY 2007 

and their order is estimated at 9.7 billion notes for FY 2008. 

BEP - 8 
3.2.1 – Manufacturing Budget and Performance Plan 

Manufacturing Budget Activity Includes Strategic Objective F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 481,000 436,000 445,000 493,000 537,000

Total Operating Level $481,000 $436,000 $445,000 $493,000 $537,000

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 1,841 1,787 1,800 1,800 1,750

Total FTE (direct and reimbursable) 1,841 1,787 1,800 1,800 1,750

Manufacturing Budget Activity Includes Strategic Objective F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target $35 $31 $28.5 $30.0 $33.0

Actual $28.06 $28.83 $27.49

Manufacturing costs for currency (dollar costs 

per thousand notes produced) ($) (E) 

Met Yes Yes Yes

Target 99.9% 99.9% 99.9% 99.9% 99.9%

Actual 100% 99.9% 99.9%

Percent of currency notes delivered to the 

Federal Reserve that meet customer quality

requirements (%) (Oe) Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: Manufacturing Costs for Currency (dollar cost per 1,000 

notes produced) is an indicator of manufacturing efficiency and effectiveness of program

management. This measure is based on contracted price factors, and anticipated 

productivity improvements. Actual performance against standard depends on BEP’s 

ability to meet annual spoilage, efficiency, and capacity utilization goals. Performance 

against this measure has been favorable for the past six years. 

3B – Protection and Accountability of Assets ($65,000,000 from reimbursable 

programs): The Bureau’s Protection and Accountability of Assets Activity also supports 

Treasury’s strategic objective, Increase the Reliability of the United States Financial 

System. BEP’s ability to provide effective and efficient product security and 

accountability during the manufacture and delivery of currency notes to the Federal 

Reserve preserves the integrity of the nation’s currency. 

Because of the value of the products manufactured, the Bureau must maintain an accurate 

and cost effective system of accountability for all Bureau products which will ensure that 

products are accounted for while in production and that our customers receive the correct 

quantity of the product ordered. The protection and accountability of assets is a joint 

effort crossing many divisions within the Bureau; products are tracked and accounted for 

at every step of the production process. 

The Bureau’s annual financial statement audit represents an assessment by an 

independent, certified public accounting firm of the integrity of the Bureau’s revolving 

fund and the reliability of the financial data used for managerial decision making. 

Successful financial reporting at the Bureau is a joint effort that requires coordination 

BEP - 9 
between financial management, operations, and information technology personnel, as 

well as close coordination with the independent, certified public accounting firm

contracted to perform the annual audit and the Office of Inspector General, which 

oversees their work. In addition, the Bureau’s Office of Security’s primary mission is to 

preserve the integrity of and safeguard critical Bureau resources and assets such as 

personnel, products, plant facilities and equipment. 

3.2.2 – Protection and Accountability of Assets Budget and Performance Plan 

Protection and Accountability of Assets 

Budget Activity

Includes Strategic Objective F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 58,000 56,000 61,000 63,000 65,000

Total Operating Level $58,000 $56,000 $61,000 $63,000 $65,000

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 490 495 500 500 500

Total FTE (direct and reimbursable) 490 495 500 500 500

Protection and Accountability of Assets 

Budget Activity

Includes Strategic Objective F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 0.01 0.01 0.01 0.01 0.01

Actual 0.01 0 0.01

Currency shipment discrepancies per million 

notes ($) (Oe) 

Met Yes Yes Yes

Target Baseline $5.95 $6.25 $6 $5.65

Actual $5.95 $5.75 $6

Security costs per 1000 notes delivered ($) (E) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: Currency Shipment Discrepancies are an indicator of the 

Bureau’s ability to provide effective product security and accountability. This measure 

refers to product overages or underages of as little as a single currency note in shipments 

of finished notes to the Federal Reserve Banks. For several years, this measure has had 

an annual target of .01 percent. The Bureau has been able to meet or exceed this target on 

a regular basis. BEP continually strives to meet its long term goal of 0 percent, and has 

been able to do so several times. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

BEP - 10 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Reimbursable FTE FY 2006 FY 2007 FY 2008

BASE: Year-end Actual from Prior Year 2,282 2,190 2,300

Increases: 

Reason #1: Production of Redesign $100 (possible 0 110 0

additional production Step)

Subtotal, Increases 0 110 0

Decreases:

Reason #1 Realignment efforts/Technology upgrades 0 0 -50

Reason #2 End of postage stamp program (attrition) -55 0 0

Reason #3 Competitive Sourcing- Security Screening -10 0 0

(non-add, reflects overtime FTE savings)

Reason #4 FY 2005 Buyouts -27 0 0

Subtotal, Decreases -92 0 -50

Year end Actual/Estimated FTEs 2,190 2,300 2,250

Budgeted FTE's 2300 2300 2250

Net Change from prior year SOY to budget year EOY 60

Changes in Full Time Equivalents

4A – Human Capital Strategy Description 

To best position the Bureau of Engraving and Printing for the future, the bureau 

undertook a functional review of its organizational structure. The goal was to streamline 

organization and group similar functions to benefit from synergies. Elements of the 

Bureau’s strategy include: 

• Implementation of realignment to be completed in early FY 2007. 

• Mission critical training for all Bureau employees is documented in the “BEP Master 

Training Plan.” In collaboration with management, mission critical training is 

identified and made available to all Bureau employees. 

• Management’s annual performance goals and accomplishment of strategic goals are 

directly linked to the achievement of organizational goals. 

• All employee performance plans include core elements directly linked to 

organizational goals. 

BEP - 11 
• BEP’s Senior Management Service (SES) Candidate Development Program (CDP) 

reflects the Bureaus’ commitment to provide equal opportunities at the highest 

management levels and improve succession planning. Four CDP graduates were 

appointed to back-fill retired SES appointees with no interruption in leadership. BEP 

made seven selections for its second SES CDP program in 2005. 

• Successfully used pay incentive flexibilities to retain unique expertise that enabled 

the Bureau to meet its goals, for example to fully implement a $1 million dollar 

automation application. 

BEP - 12 
4.2 – Summary of IT Resources Table 

Dollars in MillionsInformation Technology Investments

Identify FY 2006 % Change FY 2007 

program that from FY05 % Ch

system is Operating Operating Obligations to President's from 

Major IT Investments (In millions) Budget Activity aligned to Plan Obligations Plan FY06 Budget to F

N/A 0 0 0 0% 0 

Total 0 0 0 0% 0 Non-Major IT Investments Technology1 N/A

Manufacturing Support Systems 0 0 1.1 100% 1.3 Public Sales System 0 0 0.78 100% 0.78 WebTA 0 0 0.35 100% 0.05 

Total 0 0 0 0% 0 Infrastructure Investments2 0 0 0 0% 0 

BEP Infrastructure (for Consolidation) Manufacturing 5.1 5.4 3 -44% 3 BEP Office Automation (for Consolidation) Manufacturing 4.7 4.4 4.3 -2% 3.7 BEP Telecommunications (for Consolidation) Manufacturing 0.61 0.61 0.64 5% 0.67 BEP Infrastructure Security (for Consolidation) Manufacturing 0.75 0.91 1.3 38% 1.8 

Total 0 0 0 0% 0 Enterprise Architecture N/A 2.3 2.3 1.2 -48% 1.3 Total IT Investments 0 0 0 0% 0 Note1: In FY 2005 and prior years, costs for these systems were included in BEP's Infrastructure and Office Automation programs.Note2: Infrastructure funding is consolidated into the Treasury Departmental Integrated IT Infrastructure Exhibit 300.

FY 2005

BEP - 13 
4B – Information Technology Strategy 

Information Technology (IT) and IT-Embedded Investments are fully aligned with BEP’s 

Strategic Plan and support the capture, analysis, validation and reporting of key product 

quality and resource measures to include: product quality, product spoilage, ink mileage, 

production costs.

Major Investments: BEP has no planned independent major investments. BEP 

participates as a partner in significant Treasury-wide enterprise level investments such as 

Treasury Communication System/Treasury Communication Enterprise, Homeland 

Security Presidential Directive -12, Internet Protocol version six and the Treasury 

Consolidated Infrastructure. 

Non-Major Investments: BEP is partnering with Treasury’s Capital Planning and 

Investment Control organization to breakout and align non-major investments in line with 

Federal Information Management Systems Management Act system designations. 

Limited additional non-major investments are planned to garner savings in administrative 

costs and to further automate supply chain management functions 

Infrastructure Investments: Appropriately categorized as part of Treasury Consolidated 

Infrastructure Investment. 

Enterprise Architecture: It is the policy of the Bureau of Engraving & Printing to 

implement and comply with the precepts and requirements of the Clinger-Cohen Act, the 

Government Performance and Results Act (GPRA), the Federal Information Security 

Reform Act (FISMA), OMB Circular A-130, “Management of Federal Information 

Resources,” OMB Circular A-11, Part 7, and associated Capital Programming Guide, and 

all applicable Federal Enterprise Architecture guidance issued by OMB, to include both 

the Federal Enterprise Architecture and associated reference models. 

BEP - 14 
4.3 – PART Evaluation Table 

PART Name: New Currency Manufacturing

Year PARTed: 2003

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. BEP works closely with the Advanced Counterfit Deterrent Steering Committee to identify and evaluate future counterfeit 

deterrent designs.

2. BEP/Treasury Department/Federal Reserve Board/United States Secret Service work together within the Advanced

Counterfeit Deterrent Steering Committee to assess impacts The Bureau participates jointly with these federal agencies to 

determine the effectiveness of current counterfeit deterrence features. The focus of the program is on both reliability of the

manufacturing process and incorporating advanced counterfeit deterrent features in bank notes and the effectiveness of these 

features through the course of daily cash transactions.

1. Monitor design and overhead costs related to the manufacture of New Currency to ensure the most effective production and

distribution of future denominations.

2. Continue to work with Federal partners to asess the impact of New Currency on counterfiting performance measures across 

government.

BEP's Protection and Accountability program reviewed in FY 2006 received an Effective 

rating from the Office of Management and Budget. 

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

BEP - 15 
United States Mint 

Mission Statement 

To apply world-class business practices in making, selling and protecting our nation’s 

coinage and assets. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Manufacturing $1,469,100 $1,911,439 $1,859,892 ($51,547) -2.70%

Protection 36,917 38,121 39,143 1,022 2.68%

Total Cost of Operations $1,506,017 $1,949,560 $1,899,035 ($50,525) -2.59%

Capital Investments $21,284 $38,484 $38,469 ($1,015) 2.6% 

(Not Included in Total Cost of Operations Above) 

FY 2008 Priorities 

• Efficiently and effectively produce and distribute approximately 15.1 billion coins to 

meet demand for circulation during FY 2008. 

• Continue to produce and ship Presidential $1 Coin Act products, including 

Presidential $1 coins for circulation, Sacagawea $1 coins for circulation, 24-karat 

First Spouse Gold coins and 24-karat Gold Bullion coins. 

• Produce and distribute required numismatic products and sets, as well as other 

numismatic items, in quantities sufficient to make them available and affordable to 

Americans who chose to purchase them. 

• Produce coins for the final year of the United States Mint 50 State Quarters® Program 

to honor the following states: Oklahoma, New Mexico, Arizona, Alaska, and Hawaii. 

These five states conclude the 50 State Quarters Program. 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 2 

1C – Industry Outlook .................................................................................................... 3 

Section 2 – Budget Adjustments and Appropriations Language ................................. 6

2.2 – Operating Levels Table.......................................................................................... 6 

2B – Appropriations Language....................................................................................... 7 

2C – Legislative Proposals.............................................................................................. 7 

Section 3 – Budget and Performance Plan ..................................................................... 8

3.1 – Resource Detail Table............................................................................................ 8 

3A – Manufacturing........................................................................................................ 8 

3.2.1 – Manufacturing Budget and Performance Plan.................................................. 11 

3B – Protection ............................................................................................................. 11 

3.2.2 – Protection Budget and Performance Plan ......................................................... 12 

Section 4 – Supporting Materials.................................................................................. 13

4.1 – Human Resources Table ...................................................................................... 13 

4A – Human Capital Strategy Description ................................................................... 13 

4.2 – Summary of IT Resources Table ......................................................................... 14 

4B – Information Technology Strategy ........................................................................ 15 

4.3 – PART Evaluation Table....................................................................................... 16 

Mint - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The United States Mint is the world’s largest coin manufacturer with operations in 

California, Colorado, Kentucky, New York, Pennsylvania, and Washington, D.C. Its 

mission is to apply world-class business practices in manufacturing, selling, and 

protecting the nation’s coinage and assets. The United States Mint’s vision is “together, 

we will provide value to the American people, ensure integrity in our commitments and 

communications, and achieve world-class performance.” The United States Mint remains 

committed to holding down costs, streamlining operations, and providing value to the 

American people. 

The following priorities have been established toward achieving the mission in line with 

this vision: 

• Increase in Efficiency 

• Increase accessibility and awareness of United States Mint products and programs. 

 

• Commitment to Its workforce. 

1B – Program History and Future Outlook 

Since FY 1996, the United States Mint has been operating under the United States Mint’s 

Public Enterprise Fund (PEF). As authorized by Public Law 104-52 (31 U.S.C. § 5136), 

the PEF eliminates the need for appropriations. Proceeds from the sales of circulating 

coins to the Federal Reserve Banks and numismatic items to the public are the source of 

funding for operations. Both operating expenses and capital investments are associated 

with the production of circulating and numismatic coins and coin-related products, and 

protective services. Revenues in excess of amounts required by the PEF are transferred 

to the United States Treasury General Fund. 

The United States Mint’s consolidated earned revenue, plus other financing sources 

(seigniorage), increased to $2,323.5 million in FY 2006 from FY 2005 consolidated 

earned revenue plus other financing sources, totaling $1,771.0 million. These results 

reflect increases in the demand for both circulating and numismatic products. As a result 

of operations, the United States Mint transferred $750 million to the Treasury General 

Fund in FY 2006. 

During FY 2006, the United States Mint’s circulating coinage operations faced a 

challenging environment of rising metal prices. The face value of circulating coins 

shipped to the Federal Reserve was $1,271.9 million, slightly higher than $1,144.8 

Mint - 2 
million in FY 2005. The average market prices through September 2006 for copper, 

nickel, and zinc increased 83 percent, 27 percent, and 111 percent, respectively, from FY 

2005. Rising metal prices had a significant effect on circulating coinage results and are 

causing the one-cent and five-cent coins to cost more than their face value to manufacture 

on a per-unit basis. The United States Mint is working with the Department of the 

Treasury and Congress to keep the public informed and to examine alternatives that could 

mitigate the impact that current metal prices are having on the circulating coinage. 

Ultimately, the metal content of all coins is specified by laws passed by Congress. The 

Constitution gives Congress the power to coin money and to regulate its value. 

The United States Mint’s numismatic and bullion operations performed strongly in FY 

2006, as sales to the public increased to $1,051.6 million from $626.1 million in FY 

2005. This included sales of the nation’s first 24-Karat American Buffalo Gold Coins, 

introduced to the public six months after enactment of Public Law 109-145 (December 

22, 2005). 

These successes could not have been possible without the contributions of the workforce. 

The United States Mint has begun planning for a future environment that is anticipated to 

bring new challenges and opportunities. Future success depends on further developing 

coin production expertise, increasing organizational flexibility, and implementing new 

production technology. To achieve this, the United States Mint is looking into exciting 

new technologies and materials to increase capability and agility in the design and 

manufacture of new products and to streamline administrative and related support 

services. 

1C – Industry Outlook 

United States Mint operations face key challenges. The increased use of electronic 

transactions, coin counting machines, and improvements to coin distribution channels 

will likely affect demand for newly minted circulating coins. However, this new 

environment provides an opportunity for growth in numismatic products. The new 

products legislated by the Presidential $1 Coin Act of 2005, coupled with efforts for the 

core recurring numismatic products, will offer the public many new opportunities for 

collections, gifts, or investments. Some of the key challenges expected in the coming 

years are: 

 

• Rising Prices of Metal Leading to Higher Production Costs – Steady and dramatic 

increases in the prices of zinc, copper, and nickel have raised the cost of producing 

circulating coinage. This is causing the one-cent and five-cent coins to cost more 

than their face value on a per-unit basis. The impact this is having is being addressed 

with the Department of the Treasury and with Congress to explore alternatives to 

mitigate the impact of high metals prices. Ultimately, the metal content of all coins is 

specified by laws passed by Congress. 

• Potential Downward Trend in Demand for Circulating Coins – Over the past five 

years, the public’s use of credit and debit cards, and other forms of electronic 

Mint - 3 
transactions, has increased substantially. This transformation toward more cash-free 

transactions could have significant implications for the nation’s future demand for 

circulating coins. 

• Conclusion of the 50 State Quarters® Program – In recent years, there has been an 

increased demand for numismatic products – much of it because of the popularity of 

the 50 State Quarters products. However, this numismatic product line will cease 

when the 50 State Quarters Program ends in December 2008. 

• Volatility in Short-Term Coin Production Requirements – With the introduction of 

the 24-Karat gold bullion program in 2006 and the upcoming Presidential $1 Coin 

Program in 2007, the United States Mint is investing in production and packaging 

equipment in its coin production facilities. However, these production increases will 

likely be followed by a decline in 2009 – when the 50 State Quarters Program ends. 

Plans for FY 2007 and FY 2008 include items that address these challenges: 

Increases in Efficiency 

The United States Mint continually tries to improve production and administrative 

efficiencies. Also, with new product designs such as the Presidential $1 Coin products, 

it is necessary to have a quick timeframe to take a product from authorizing legislation to 

finished product for sale. This also maximizes the availability of products for purchase 

by the public. 

• The United States Mint is researching and developing new technologies and new 

materials to achieve greater capabilities and efficiencies in the design and 

manufacturing processes. Initiatives include establishing a technology center at the 

United States Mint at Philadelphia, assessing new technologies in digital engraving, 

and developing a plan to improve the response and capability of die manufacturing 

operations. 

• In FY 2006, the United States Mint transferred some of its human resource, 

procurement, and e-travel functions to the Bureau of the Public Debt’s Administrative 

Resource Center (ARC). This takes advantage of economies of scale and other 

business improvements resulting from increased standardization and transparencies of 

a shared services environment. In FY 2007, many of the finance and accounting 

functions will be transferred to ARC along with the operation of its Enterprise 

Resource Planning system. 

Increase Accessibility and Awareness of United States Mint Products and Programs 

The United States Mint sees a future in which the demand for circulating coinage is flat 

to declining. However, there is opportunity with numismatic coins, as evidenced by the 

popularity of circulating commemorative programs such as the 50 State Quarters 

Program and the Westward Journey Nickel SeriesTM. To position operations to 

Mint - 4 
accommodate new designs and new products, it is necessary to analyze the market and 

communicate with the public, in addition to developing the production techniques and 

capacity. 

• In FY 2007, the United States Mint will introduce a Presidential $1 Coin. This 

program will increase dollar coin production and result in the production of additional 

numismatic products. A public awareness and educational outreach effort, consistent 

with the statutory requirements, will be conducted. 

• Investments in equipment during FY 2007 and FY 2008 will allow for new coin 

designs and new product capabilities, paving the way for growth in revenue by 

offering new products for the numismatic community. Examples of equipment 

related to these needs are edge-lettering equipment to comply with certain provisions 

in the Presidential $1 Coin Act and to develop other new products; automated 

packaging equipment; digital engraving to shorten the design process time; die 

coating equipment to improve die life and meet environmental goals; and laser 

frosting and automated die polishing equipment to develop new products. 

A Commitment To Its Workforce 

In 2006, the United States Mint began to plan to better position itself to meet future 

challenges. Underlying the challenges and efforts listed above, a transition will be 

necessary to achieve an organization that can handle the circulating coinage needs 

efficiently, while offering new products and the capability to grow the numismatic 

operations. As part of this effort, workforce plans began to be developed to successfully 

position the organization for the future. 

• The United States Mint remains committed to communicating with all employees to 

ensure that employees are treated fairly and with respect during this time of 

transformation. Included in plans for FY 2007 and FY 2008 are initiatives to address 

skill gaps and training needs within functional units and to organize the approach to 

address any identified changes. 

• The United States Mint has had success in focusing the organization on safety and 

health improvements. This is shown by the reduction in the Lost Time Accident rate 

per 200,000 hours worked, which improved to 0.79 through September 2006, 

compared with 0.94 during FY 2005 and 1.36 during FY 2004. 

Projected Full Time Equivalent (FTE) levels for both FY 2007 and FY 2008 are 

increasing slightly to 1,975 from actual usage of 1,927 in FY 2006. This reflects a 

reduction at Headquarters, which is offset by increases at the manufacturing plants to 

keep up with increased demand, especially for numismatic products and the new 

Presidential $1 coins. 

Mint - 5 
Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands 

Account Title: United States Mint FY 2006

Obligated

FY 2007

Estimated

FY 2008

Estimated

FTE 1,927 1,975 1,975

Object Classification:

11.1 Full-Time Permanent Positions...................... $ 119,009 $ 125,587 $ 129,274

11.1 Other than Full-Time Permanent Positions..... 1,447 55 55

11.5 Other Personnel Compensation..................... 11,966 15,098 15,416

11.8 Special Personal Services Payments............. - - -

11.9 Personnel Compensation (Total).................... - - -

12.0 Personnel Benefits......................................... 36,525 43,233 44,290

13.0 Benefits to Former Personnel......................... 137 1,581 956

21.0 Travel............................................................. 1,276 4,583 3,772

22.0 Transportation of Things................................ 42,364 28,169 28,072

23.1 Rental Payments to GSA............................... 802 30 28

23.2 Rent Payments to Others............................... 19,077 28,169 25,070

23.3 Communications, Utilities, & Misc.................. 15,636 26,050 24,569

24.0 Printing and Reproduction.............................. 2,504 7,774 7,121

25.1 Advisory & Assistance Services..................... 60,949 84,954 65,419

25.2 Other Services............................................... 63,215 93,077 39,264

25.3 Purchase of Goods/Serv. from Govt. Accts... - - -

25.4 Operation & Maintenance of Facilities............ - - -

25.5 Research & Development Contracts.............. - - -

25.6 Medical Care.................................................. - - -

25.7 Operation & Maintenance of Equipment......... 15,321 28,989 64,021

25.8 Subsistence & Support of Persons................. - - -

26.0 Supplies and Materials................................... 40,885 58,550 54,398

26.0 Metal and Fabrication..................................... 1,072,665 1,401,707 1,395,521

31.0 Non-Capital Equipment.................................. 2,219 1,798 1,646

33.0 Investments & Loans...................................... - - -

41.0 Grants, Subsidies........................................... - - -

42.0 Insurance Claims & Indemn........................... 20 156 143

43.0 Interest and Dividends.............................. - - -

44.0 Refunds.......................................................... - - -

 Depreciation 0 0 0

Total Operating................................................ $1,506,017 $1,949,560 $1,899,035

Object Classification

31.0 Capital Equipment.......................................... 16,249 25,296 26,734

32.0 Land and Structures....................................... 5,035 14,188 11,735

Total Capital..................................................... $21,284 $39,484 $38,469

Budget Activities:

Manufacturing and Sales 1,469,100 1,911,439 1,859,892

Protection 36,917 38,121 39,143

Total Budget Authority....................................... $1,506,017 $1,949,560 $1,899,035

Mint - 6 
2B – Appropriations Language 

Appropriations Language Explanation of Changes 

DEPARTMENT OF THE TREASURY 

UNITED STATES MINT PUBLIC ENTERPRISE 

FUND 

Federal Funds 

Pursuant to section 5136 of title 31, United States Code, 

the United States Mint is provided funding through the 

United States Mint Public Enterprise Fund for costs 

associated with the production of circulating coins, 

numismatic coins, and protective services, including 

both operating expenses and capital investments. The 

aggregate amount of new liabilities and obligations 

incurred during fiscal year 2008 under such section 

5136 for circulating coinage and protective service 

capital investments of the United States Mint shall not 

exceed $33,200,000. 

2C – Legislative Proposals 

The United States Mint has no legislative proposals for FY 2008. 

Mint - 7 
Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands 

FTE Actual FTE Estimated FTE Estimated %

Revenue:

 Circulating 520,102 980,016 837,587 -14.53%

 Comm. Quarters 751,756 680,225 686,575 0.93%

 Numismatic 1,051,593 1,050,000 1,050,000 0.00%

Total Revenue $2,323,451 $2,710,241 $2,574,162 -5.02%

Expenses:

 Manufacturing and Sales

 Circulating 326,463 453,642 408,145 -10.03%

 Comm. Quarters 269,206 413,771 410,441 -0.80%

 Numismatic 873,431 1,044,026 1,041,306 -0.26%

 Subtotal Manufacturing and Sales 1,547 $1,469,100 1,592 $1,911,439 1,592 $1,859,892 0.00% -2.70%

 Protection 380 36,917 383 38,121 383 39,143 0.00% 2.68%

 Capital Investments 21,284 39,484 38,469 -2.57%

Total Operating Expenses + Capital 1,927 $1,527,301 1,975 $1,989,044 1,975 $1,937,504 0.00% -2.59%

 Net Results $796,150 $721,197 $636,658 -11.72%

Coin Shipments (in Millions)

 Circulating:

Pennies 8,553 7,658 7,599 -0.77%

Nickels 1,461 1,558 1,541 -1.09%

Dimes 3,023 2,754 2,850 3.49%

Quarters 3,007 2,721 2,746 0.92%

Half Dollars 2 - - 0.00%

Dollars 60 550 400 -27.27%

Total Circulating 16,106 15,241 15,136 -22.87%

Numismatic 13 13 13 0.00%

Bullion 11 11 11 0.00%

% Change

FY 2006 to FY 2008

FY 2007

FY 2007 FY 2008

3A – Manufacturing ($1,859,892,000 from reimbursable programs): The United States 

Mint manufactures and sells coin products. For budget reporting purposes, these 

products are grouped into three programs: Circulating Coinage, 50 State Quarters, and 

Numismatic. 

Circulating Coinage includes the one-cent coin, five-cent coin, dime, half-dollar and 

dollar used to conduct trade and commerce. The focus of this program is to produce and 

deliver coins for circulation to meet the needs of the United States in a cost efficient and 

safe manner with state-of-the-art manufacturing technology and equipment. The United 

States Mint delivers the circulating coinage to the Federal Reserve Banks for distribution 

as demanded by commerce. 

The Resource Detail Table includes metal and manufacturing costs for the forecasted 

units plus administrative overhead and other non-production costs. These estimates are 

revised accordingly as economic conditions change and the plan year approaches. The 

current FY 2008 budget estimate includes resource needs of $408 million to produce and 

ship 12.4 billion coins and generate $838 million in face value. 

Mint - 8 
By spending $408 million on circulating coinage in FY 2008, the United States Mint will 

produce and ship approximately: 

• 7.6 billion one-cent coins, generating face value of $76 million. 

• 1.5 billion five-cent coins generating face value of $77 million. 

• 2.8 billion dimes, generating face value of $285 million. 

• 400 million dollar coins, generating face value of $400 million. 

In FY 2007, the United States Mint will introduce the Presidential $1 Coin program

which commemorates the service of former Presidents of the United States in the order in 

which they served the nation. Four different coin designs will be minted each year. The 

year 2007 will feature Presidents Washington, Adams, Jefferson and Madison. The year 

2008 will feature Presidents Monroe, (John Quincy) Adams, Jackson and Van Buren. 

50 State Quarters Program 

The 50 State Quarters Program began in 1999 to commemorate and honor each of the 50 

states over a ten-year period. Five new commemorative quarter-dollar coins are 

produced each year. Each quarter’s reverse celebrates one of the 50 states with a design 

honoring that state’s unique history, traditions, and symbols. The quarters are released in 

the same order that the states ratified the United States Constitution or were admitted into 

the Union. The releases for 2007 are Montana, Washington, Idaho, Wyoming, and Utah. 

The 2008 quarters will depict designs for Oklahoma, New Mexico, Arizona, Alaska and 

Hawaii. The quarters are circulating coins; however, by statute, the revenue from this 

program is considered numismatic for budgetary reporting purposes. The program is 

displayed separately in the narrative and the financial schedules to present a clearer 

picture of its impact. The United States Mint plans to spend $410 million to produce and 

ship approximately 2.7 billion quarters, generating revenues of $687 million in FY 2008. 

Numismatic Program 

The Numismatic Program includes six types of coin products, which the United States 

Mint markets and sells to the public, including: 1) Bullion Coins, 2) American Eagle 

Proof Coins, 3) 24-karat Proof Program, 4) Recurring Coin Programs, 5) 

Commemorative Coins, and 6) Medals. The program focuses on providing quality 

products and services, expanding markets and supporting the long-term objectives. The 

current FY 2008 budget estimate includes resource needs of $1,041 million to generate 

$1,050 million in revenues from the sale of these products. 

Bullion coins are largely bought by precious metal dealers and sold to consumers who 

desire precious metals as part of an investment portfolio. Gold and platinum bullion 

coins are issued with one-tenth, one-quarter, one-half or one ounce precious metal 

content. Silver bullion coins are issued with one ounce of silver metal content. The 

Mint - 9 
demand for bullion coins can be greatly affected by the performance of other investment 

options such as equities or currency markets, and therefore is highly unpredictable. As 

required by law in 2006, new 24-karat gold bullion coins were introduced, the American 

Buffalo Gold Coin Program, which complement the popular 22-karat gold bullion coins. 

24-karat (99.99 percent fineness) has become the global standard for gold investment 

coins. The new coins give investors a second option backed by the United States 

Government in the global precious metal market. 

American Eagle Proof coins are the United States Mint’s premier collectible products. 

These coins contain platinum, gold, and silver and are issued in proof quality. Gold and 

platinum proof coins are issued with one-tenth, one-quarter, one-half or one ounce 

precious metal content. Silver proof coins are issued with one ounce of silver metal 

content. The proof quality coins are considered numismatic products and are sold 

directly to consumers from the United States Mint, either as individual coins or in sets. 

Recurring products are circulating-derived products, such as proof sets; uncirculated sets; 

silver proof sets; and rolls and bags of quarter-dollars, half-dollars, and dollars designed 

for mass appeal. 

Commemorative coins are authorized by Congress to celebrate and honor American 

people, places, events, and institutions. Each commemorative program is produced by 

the United States Mint in limited quantity and is available only for a limited time. 

Included in the price of commemorative coins is a surcharge that is authorized to be paid 

to the designated recipient organizations for projects that benefit the community. In FY 

2007, the United States Mint will offer the Jamestown 400th Anniversary 

Commemorative Coin and the Little Rock Central High School Desegregation 50th

Anniversary Commemorative Coin Program. Public Law 108-289, dated August 6, 

2004, authorizes the production of a gold $5 coin and a silver $1 coin for the Jamestown 

Commemorative Coin. Public Law 108-146, dated December 22, 2005, authorizes the 

production of a silver dollar coin for the Little Rock Central High School Desegregation 

50th Anniversary Commemorative Coin Program. In FY 2008, the United States Mint 

will offer the American Bald Eagle Recovery and National Emblem Commemorative 

Coin Program. Public Law 108-486, dated December 23, 2004, authorizes the production 

of three coins for this program, one gold, one silver and one clad coin. 

Mint - 10 
3.2.1 – Manufacturing Budget and Performance Plan 

Manufacturing Budget Activity Includes Strategic Objective F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 956,173 979,159 1,469,100 1,911,439 1,859,892

Total Operating Level $956,173 $979,159 $1,469,100 $1,911,439 $1,859,892

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 1,764 1,681 1,547 1,592 1,592

Total FTE (direct and reimbursable) 1,764 1,681 1,547 1,592 1,592

Manufacturing Budget Activity Includes Strategic Objective F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target $9.78 $7.03 $6.62 $7.27 $7.15

Actual $7.93 $7.42 $7.55

Cost per 1,000 Coin Equivalents ($)(E) 

Met Yes No No

Target 53 53 67 75 67

Actual 85 69 72

Cycle Time 

Met No No No

Target Baseline 0% 95% 96% 96%

Actual 0% 94% 95%

Order Fulfillment (%)(Oe)

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Cost per 1000 Coin Equivalents 

The United States Mint’s costs vary by product, and the product mix has been variable 

over time. This makes it difficult to compare operating results from year to year. The 

coin equivalent calculation converts the production output to a common denominator 

based on the circulating quarter. Production costs, excluding metal and fabrication, are 

then divided by this standardized production level, thus resulting in “conversion costs per 

1,000 coin equivalents.” This allows comparison of performance over time by negating 

the effects of changes in the product mix. The Cost per 1,000 Coin Equivalents for FY 

2006 is 7.55, a slight increase from $7.42 in FY 2005. The performance did not meet the 

target of $6.62. This ambitious target was a stretch goal, an 11 percent drop from the FY 

2005 actual result, and was set based upon forecasted volume, product mix, and cost 

estimates. Differences in the actual volumes or the product mix from forecast affects the 

achievement of specific targets in any given year. 

3B – Protection ($39,143,000 from reimbursable programs): The United States Mint 

secures over $100 billion in market value of the nation’s gold reserves, silver, and other 

assets. The United States Mint Police protects assets while safeguarding United States 

Mint employees against potential threats at its facilities across the country. The United 

States Mint Police addresses possible threats by ensuring good perimeter security at all 

sites, and increasing coordination with various federal, state and local law enforcement 

agencies. It also ensures that proper policies are in place, and procedures followed, in 

handling the assets used to produce and transport coinage. 

Mint - 11 
Plans include efforts to leverage new technology to automate entry and exit procedures at 

United States Mint facilities. Innovative threat assessment strategies will continue to be 

pursued to effectively prevent and counteract any security threats against its operations. 

3.2.2 – Protection Budget and Performance Plan 

Protection Budget Activity Includes Strategic Objective F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Appropriated Resources $0 $0 $0 $0 $0

 Other Resources 38,975 34,984 36,917 38,121 39,143

Total Operating Level $38,975 $34,984 $36,917 $38,121 $39,143

Human Resources

 Appropriated FTE 0 0 0 0 0

 Other FTE 351 335 380 383 383

Total FTE (direct and reimbursable) 351 335 380 383 383

Protection Budget Activity Includes Strategic Objective F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target Baseline $31.86 $32 $32.99 $32.5

Actual $32.51 $32.43 $32.49

Protection Cost Per Square Foot ($) (E) 

Met Yes No No

Target Baseline $250,000 $15,000 $10,000 $5,000

Actual $3,109 $1,135 $0

Total Losses ($) (Oe) 

Met Yes Yes Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: Total losses through the third quarter FY 2006 were $0 

(zero) compared with $1,135 in FY 2005. This exceeds the target of $15,000. This 

measures the results of fraud cases (e.g., credit card fraud during the purchase of United 

States Mint products by the public), theft cases, or intrusions that cause damage to the 

bureau’s property. Cases that have been investigated and closed during the fiscal year are 

measured. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

Mint - 12 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Reimbursable FTE FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 2,015 1,927 1,975

Increases:

Reason #1: New Numismatic Production 48

Subtotal, Increases 0 48

Decreases:

Reason #1: Normal Attrition -88 0 0

Subtotal, Decreases -8800

Year-end Actual/Estimated FTEs 1,927 1,975 1,975

Budgeted FTEs 1,927 1,975 1,975

Net Change from prior year SOY to budget year EOY 48

0

4A – Human Capital Strategy Description 

To best position the United States Mint for the future, it created a Workforce Planning 

Steering Committee which led a major workforce planning effort that included senior 

leaders and managers to identify human capital needs and workforce levels over the next 

five years. Workforce planning is on-going, however, the initial results include: 

• Identification of human capital needs and workforce levels over the next five years in 

the context of the strategic plan and projected business environment and direction. 

• Comparison of current skill profile to future skill needs and identified skill gaps. 

 

• Recommended strategies to overcome identified skill gaps. 

• A forward-looking analysis of factors and expected trends impacting United States 

Mint specific occupations and the likely affect on employee recruitment, development 

and retention. 

Mint - 13 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments

FY 2006 FY 2007 

Major IT Investments Budget Activity Operating Plan Obligations

Operating

Plan

Operating

Plan 

RS2 (ESPII - Electronic Commerce)

Manufacturing and Sales 11.6 10.5 4.8 -54.3% 4.8 0.0% 

Total Major IT Investments $11.6 $10.5 $4.8 -54.3% $4.8 0.0% Non-Major IT Investments $4.2 $3.8 $4.6 21.1% 5.5 19.0% Infrastructure Investments $36.3 $33.8 $37.0 9.5% $38.7 4.4% Enterprise Architecture $1.0 $1.0 $1.6 60.0% $1.3 -18.8% Total IT Investments $53.1 $49.1 $48.0 -2.2% $50.2 4.6% 

FY 2005 % Change 

from FY05 

Actuals to

FY06

% Change 

from FY06 to 

FY07

Mint - 14 
4B – Information Technology Strategy 

The United States Mint’s capital projects are focused on improving processes, developing 

new coin design capabilities, and expanding information handling. These investments 

are planned to reduce costs, shorten the overall time from product concept to production, 

and achieve greater flexibility to respond to shifts in market demands. The following 

major IT investment is planned for 2008: 

Retail Sales System 

The Retail Sales System (RS2), formerly reported as the e-Business Solution Project 

(eSP), was developed in response to a growing need to meet the rapidly expanding 

numismatic market and to take advantage of new technology that would better support 

business requirements. RS2 was designed to meet high public demand for E-Government 

services and provide an easy and secure way for customers to order products directly 

from the United States Mint. An integrated mail order and cataloging system supports 

both the United States Mint's core mission. 

FY 2006

Obligations

FY 2007

Estimated

FY 2008

Estimated

Circulating & Protection Capital Investments

Circulating Information Technology $1.722 2.215 1.264

Circulating Building Improvements $1.669 7.080 6.196

Circulating Equipment $2.621 7.670 8.555

Protection $3.070 9.555 8.940

Total Circulating and Protection $9.082 26.520 24.955

Numismatic Capital Investments

Numismatic Information Technology $0.458 2.215 1.264

Numismatic Building Improvements $0.478 2.153 2.050

Numismatic Equipment $11.266 8.596 10.200

Total Numismatic $12.202 12.964 13.514

Total Capital Investments $21.284 39.484 38.469

The above FY 2006 totals by budget activity are different than those reflected in the President's Budget due to a

data entry error in the MAX system (numbers were transposed). The capital investment obligations reflected in this

table are correct.

Major Investments

The United States Mint’s FY 2008 total circulating and protection capital estimate is 

$25.0 million, which is $8.2 million below the total projected circulation and protection 

depreciation (capital limit) amount of $33.2 million. Therefore, no additional budget 

authority for capital investments is needed in FY 2008. 

Each year, the United States Mint commits funds for capital projects to maintain, upgrade 

or acquire physical structures, equipment, physical security, and information technology 

systems. Total capital projects are estimated to be $38.5 million in FY 2008. This 

includes approximately $16.1 million for circulating projects, $8.9 million for security 

improvement projects, and $13.5 million for numismatic projects. 

Mint - 15 
4.3 – PART Evaluation Table 

PART Name: Coin Production

Year PARTed: 2002

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. The Mint has established performance measures focused on customer satisfaction and improving cost

efficiencies. For instance, the Mint reports the results of a Federal Reserve Board Customer Satisfaction

survey.

2. The Mint needs to improve customer satisfaction survey scores.

3. Establishing a performance target to reduce the time rquired to process raw materials into produce coins.

2. Competing customer service and order mailing staff to determine if contractors could handle these

functions more efficiently.

3. The Mint has shown some efficiency improvements in achieving reduced manufacturing costs. The Mint 

has achieved a 19 percent reduction in manufacturing costs since 1997.

1. Reducing the maintenance down time of coin manufacturing machinery.

PART Name: Numismatic Program

Year PARTed: 2004

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

2. Continuing to streamline the production of numismatic products in order to reduce costs and improve

efficiency.

1. The program has made enormous strides over the past several years to streamline the production of 

numismatic products. Between 1999 and 2003, the Mint reduced costs by 38 percent and reduced 

workforce by 50 percent. During that same time period, production levels increased by 46 percent.

2. The Mint has an excellent internal management structure that is able to receive and analyze real-time

financial, production, and other operating data on a daily basis. This enables the Mint to respond quickly to

changing production and customer demand.

3. The Mint is making significant progress toward meeting its inventory turnover target of 4.2 in 2005, which 

reflects the number of times per year the Mint works through its inventory. This measure improved 27

percent from 1.96 in 2003 to 2.48 in 2004. By improving performance, the Mint reduces costs associated

with inventory and the production planning process runs more efficiently.

1. Continuing substantial progress toward reaching the Mint's target goal for inventory turnover.

PART Name: Protection Program

Year PARTed: 2005

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

2. Continue to improve employee confidence in the United States Mint protection program.

2. The United States Mint's Protection program has a clear purpose, is well planned, and managed 

effectively. However, it is somewhat duplicative of other Federal efforts aimed at protecting money, such as 

the Bureau of Engraving and Printing, and the Federal Reserve Police forces.

3. The United States Mint regularly achieves its annual performance goals and works with other law 

enforcement partners to assess threat levels and assist in achieving future goals. The United States Mint is 

a participant in the multi-agency Counter-Terrorism Program.

1. The United States Mint has developed adequate long-term measures with ambitous targets and 

timeframes. The target for total losses is $250,000 in 2005 and $0 in 2010

1. Continue to assess and implement ways in which the cost of protection per square foot can be 

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

Mint - 16 
Office of Comptroller of the Currency 

Mission Statement 

To charter national banks, to oversee a nationwide system of banking institutions, and to 

assure that national banks are safe and sound, competitive and profitable, and capable of 

serving in the best possible manner the banking needs of their customers. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Supervise $471,882 $569,137 $597,600 $28,463 5.00%

Regulate 70,992 81,508 87,000 5,492 6.74%

Charter 13,952 20,544 21,200 656 3.19%

Total Resources $556,826 $671,189 $705,800 $34,611 5.16%

Capital Investments $6,360 $7,389 $6,137 ($1,252) (16.9%) 

(Included in Total Resources above) 

FY 2007 Priorities 

• Regulate and supervise approximately 1,830 institutions with national bank charters 

and 49 federal branches of foreign banks with total assets of approximately $6.5 

trillion; 

• Conduct examinations based on the risk profile of individual national banks to ensure 

they are safe and sound, sufficiently capitalized, and comply with consumer 

protection laws and regulations; 

• Address potential adverse changes in national bank asset quality and risk profiles; 

• Fill key experienced and specialty examiner and bank supervision policy analyst 

positions; enhance retention of entry-level examiners at the critical three/four year 

point of their careers; develop the next generation of bank supervision leadership; 

• Work with other federal banking regulators on proposed revisions to the banking 

agencies’ risk-based capital standards (often referred to as the Basel II and Basel IA 

proposals);

• Combat fraud and money laundering and protect the integrity of the financial system 

through national banks’ compliance with the Bank Secrecy Act, anti-money 

laundering, and USA PATRIOT Act laws and regulations;

• Address sound underwriting, risk management systems, and consumer issues 

presented in connection with retail banking products offered by national banks; and

• Continue to support and defend the attributes and benefits of the national bank 

charter.
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 3 

1C – Industry Outlook .................................................................................................... 9 

Section 2 – Budget Adjustments and Appropriations Language ............................... 10

2.2 – Operating Levels Table........................................................................................ 10 

2B – Appropriations Language..................................................................................... 10 

2C – Legislative Proposals............................................................................................ 10 

Section 3 – Budget and Performance Plan ................................................................... 11

3.1 – Resource Detail Table.......................................................................................... 11 

3A – Supervise.............................................................................................................. 11 

3.2.1 – Supervise Budget and Performance Plan.......................................................... 11 

3B – Regulate................................................................................................................ 14 

3.2.2 – Regulate Budget and Performance Plan ........................................................... 14 

3C – Charter.................................................................................................................. 14 

3.2.3 – Charter Budget and Performance Plan.............................................................. 14 

Section 4 – Supporting Materials.................................................................................. 16

4.1 – Human Resources Table ...................................................................................... 16 

4A – Human Capital Strategy Description ................................................................... 16 

4.2 – Summary of IT Resources Table ......................................................................... 18 

4B – Information Technology Strategy ........................................................................ 19 

4.3 – PART Evaluation Table....................................................................................... 20 

OCC - 1 
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

The Office of the Comptroller of the Currency (OCC) was created by Congress to charter 

national banks, to oversee a nationwide system of banking institutions, and to assure that 

national banks are safe and sound, competitive and profitable, and capable of serving in 

the best possible manner the banking needs of their customers. 

The OCC supervises approximately 1,830 institutions with national bank charters and 49 

federal branches of foreign banks in the United States (U.S.). Total assets under OCC 

supervision are nearly $6.5 trillion or 67 percent of total U.S. commercial banking assets. 

The average size and complexity of the institutions in the national banking system

continue to grow, creating increasing and diverse challenges for the OCC. 

The OCC has its headquarters in Washington, DC, and operates four district offices in 

Chicago, Dallas, Denver, and New York, and field and satellite offices throughout the 

U.S. Resident examiner teams are located in the largest banking companies, and there is 

an examining office in London, England. 

The OCC’s operations are funded primarily (more than 96 percent) from semiannual 

assessments levied on national banks. Revenue from investments in U.S. Treasury 

securities and licensing and other fees comprises the remaining three percent of the 

OCC’s funding. The OCC does not receive congressional appropriations to fund any 

portion of its operations. 

As the regulator of national banks, the OCC has established four strategic goals that help 

to support a strong economy for the American public: 1) a safe and sound national 

banking system, 2) fair access to financial services and fair treatment of bank customers, 

3) a flexible legal and regulatory framework that enables the national banking system to 

provide a full competitive array of financial services, and 4) an expert, highly motivated, 

and diverse workforce that makes effective use of OCC resources. The OCC organizes 

its activities under three programs: Supervise, Regulate, and Charter, to achieve the goals 

and objectives outlined in its strategic plan. 

The OCC’s FY 2007 priorities include supervisory issues related to potential adverse 

changes in national bank asset quality and risk profiles, continued work on proposed 

revisions to the federal banking agencies’ risk-based capital standards, compliance with 

Bank Secrecy Act/anti-money laundering (BSA/AML) and USA PATRIOT Act 

(USAPA) requirements, and addressing issues raised by the range of retail banking 

products offered by national banks. Critical issues concerning national bank powers and 

preemption of state laws will continue to be significant for the agency and the industry. 

Filling key experienced and specialty examiner and bank supervision policy analyst 

positions, enhancing retention of entry-level examiners at the critical three/four year point 

of their careers, and developing the next generation of bank supervision leadership are 

also critical initiatives for the OCC. 

OCC - 2 
1B – Program History and Future Outlook 

Demands on OCC resources, especially those created by large, highly complex national 

banks, require that OCC set priorities that maximize the efficient use and allocation of

those resources. OCC bank supervision needs to be flexible and proactive in nature to 

adapt to changing priorities and unexpected supervisory issues. Uncertainties in the 

financial and commodities markets and in the global political landscape are likely to 

continue and may result in a more volatile operating environment for the banking 

industry. Risks facing the banking industry and the OCC are increasingly interdependent, 

cutting across traditional disciplines and business lines. Operational and compliance 

risks are becoming more prominent; traditional distinctions between credit and capital 

markets activities are eroding. Corporate governance, accounting, compliance, and 

customer information security continue to be high visibility issues for the banking 

industry. The rapid pace of financial innovation and growing concentrations, both within 

bank’s portfolios and across industry segments, pose additional challenges and require 

improved risk management and information systems. Quantitative risk measurement 

systems will continue to become more prominent in banks’ risk management processes. 

The following are highlights of OCC FY 2006 accomplishments and specific FY 2007 

challenges. 

Supervisory Activities

The OCC continously supervises banks in its community bank, midsize and credit card 

bank, and large bank programs. A supervisory strategy is developed based on each 

banking institution’s risk profile and condition. The strategy includes a variety of 

supervisory activities, including examinations and off-site analyses, to be completed 

during a supervisory cycle. Examination activities focus on safety and soundness, 

consumer compliance, BSA/AML/USAPA, fair lending, asset management, bank 

information technology, and the Community Reinvestment Act (CRA). 

Areas of emphasis during the OCC’s FY 2006 supervisory strategies included 

compliance with the BSA/AML (as discussed more fully below), follow up on Home

Mortgage Disclosure Act (HMDA) data, asset quality, risk management practices, audit 

and internal controls, integrity of financial statements and conformance with accounting 

changes/practices, reliance on noninterest income, outsourcing and vendor activities, 

interest rate risk models and controls, liquidity and investment portfolio practices and 

holdings, concentration risk, Basel II implementation, allowance for loan and lease loss 

methodology and adequacy, and corporate governance. Credit quality and the risk 

management of concentrations will continue to be areas of emphasis in FY 2007 

strategies. 

Throughout FY 2006, the OCC continued to help bankers and their customers and 

communities respond to the aftermath of Hurricane Katrina. These efforts included 

public service announcements in major U.S. media markets to encourage individuals 

adversely affected by the hurricane to contact their lenders to discuss options that may be 

available to assist them. In March 2006, the OCC and other federal banking agencies 

OCC - 3 
hosted a forum in New Orleans that brought together financial institutions from within 

and outside the Gulf Coast region to discuss the challenges facing financial institutions in 

areas affected by the hurricane and on ways of helping to meet the needs of the local 

affected communities. In June 2006, OCC Bulletin 2006-26 transmitted the booklet 

Lessons Learned from Hurricane Katrina: Preparing Your Institution for a Catastrophic 

Event, developed by the Federal Financial Institutions Examination Council (FFIEC) and 

the Conference of State Bank Supervisors, to assist institutions in evaluating their 

readiness for a catastrophic event. 

The OCC also monitors and responds to systemic trends and emerging risks in the 

banking industry. During FY 2006, the OCC worked with other federal bank regulators 

to develop and issue for comment, proposed risk management guidance on nontraditional mortgage products, concentrations in commercial real estate lending, and 

complex structured finance transactions. Final action on these guidelines is expected in 

the coming months. 

Basel II and Basel IA

The OCC continues its efforts, along with the other federal bank and thrift regulators, 

with respect to the U.S. implementation of the “International Convergence of Capital 

Measurement and Capital Standards: A Revised Framework,” generally known as Basel 

II. The major focus in FY 2006 was the development of the notice of proposed 

rulemaking (NPR) that will provide the industry and others with detailed information 

about the U.S. implementation of Basel II. The OCC received clearance from OMB in 

June 2006 to publish the NPR, which will provide a formal 120-day comment period. In 

addition to the NPR, the agencies have been working on a package of related supervisory 

reporting templates and supervisory guidance that also will be published for comment. 

During FY 2007, the OCC will continue to work with the other federal banking agencies 

on the Basel II proposals and consult with banks on their implementation efforts. 

Work also continues on potential revisions to the risk-based capital standards that would 

apply to non-Basel II banks (referred to as Basel IA). In December 2006, OCC and other 

federal banking agencies issued an NPR built upon the evaluation of comments obtained 

from the advanced notice of proposed rulemaking issued in October of 2005. 

As in previous years, the goal is that any changes to capital adequacy rules are consistent 

with safety and soundness, good risk management practices, and the continued 

competitive strength of the U.S. banking system. 

Bank Secrecy Act/Anti-Money Laundering 

During the first part of FY 2006 the OCC incorporated a set of comprehensive initiatives 

to strengthen OCC BSA/AML examinations, to enhance OCC resources and expertise 

devoted to BSA/AML supervision, and to provide clear and consistent expectations about 

OCC - 4 
BSA/AML supervision to the industry. The OCC continued, throughout FY 2006, to 

address BSA/AML compliance, identified as one of the five challenges facing the 

Treasury Department by the Treasury Office of Inspector General in October 2005, as 

follows: publication of the revised FFIEC BSA/AML Examination Manual in the 

summer of 2006; completion of compliance exams for all large banks, 100 percent 

completion in midsize and high risk community banks, and 90 percent completion for the 

remaining community banks by the end of FY 2006; and, development of a national pool 

of BSA/AML examiners, including 20 OCC employees, who as of June 2006, have 

attained the Certified Anti-Money Laundering Specialist certification, delivery of 

BSA/AML training to Large Bank Supervision (LBS) Examiners-in-Charge and 

compliance specialists and an increase in the number of AML schools from four in 2005 

to eight in 2006. 

OCC will commit to ongoing BSA/AML challenges by ensuring, via FY 2007 bank 

supervision examination strategies, that banks have adequate and effective BSA/AML 

programs in place, and by conducting OCC BSA/AML supervisory actions in a fair and 

consistent manner. 

Fair Access to Financial Services and Fair Treatment of Bank Customers

The OCC fulfills its strategic goal of fair access to financial services and fair treatment of 

bank customers through its ongoing supervisory programs for national banks and their 

operating subsidiaries. These programs include ongoing supervisory examinations to 

ensure compliance with fair lending laws, CRA, and other consumer laws and 

regulations. In addition to supervisory activities, the OCC issues guidance and 

handbooks and offers training to bankers and bank directors to help them understand and 

meet their compliance and CRA obligations. The OCC also conducts outreach with a 

variety of organizations, including advocacy groups, research organizations, community 

development practitioners, and community development membership organizations 

whose constituencies include or affect low- and moderate-income consumers, distressed 

communities, and small and minority-owned businesses. 

During FY 2006, the OCC and other federal banking agencies issued interagency 

questions and answers that address topics related to changes made in the agencies’ 2005 

revisions to their CRA regulations; updated lists of distressed or underserved nonmetropolitan middle-income geographies in which bank revitalization or stabilization

activities will receive CRA consideration; and updated median family income levels that 

are used in CRA performance evaluations. Updated examination procedures for large, 

small, limited purpose or wholesale banks that incorporate the 2005 CRA regulatory 

revisions were also published by the agencies. 

 

The OCC, other federal banking agencies and the U.S. Department of Housing and Urban 

Development released updated answers to frequently asked questions to aid in the 

interpretation of 2005 home loan data to be disclosed under HMDA. The OCC also 

issued an updated version of its consumer compliance booklet, Fair Lending Examination 

OCC - 5 
Procedures, also published to incorporate several changes in Regulation B (123 CFR 

202) and the “Interagency Fair Lending Procedures” issued in 2004. 

The OCC actively supports the efforts of national banks to engage in sound and 

successful community development activities. To assist in these efforts, the OCC 

publishes periodic Community Development Insights papers on products, services, and 

initiatives that are relevant to community development and consumer banking activities. 

During FY 2006, papers on commercial lending in Indian Country and on the Small 

Business Administration’s 504 loan programs were published. In June 2006, the 

Comptroller of the Currency urged Congress to provide increased authority, via Part 24 

legislation revisions, for banks and thrifts to invest in low- and moderate-income 

communities. 

 

During FY 2006, the OCC continued its work with the other federal banking agencies to 

improve financial disclosures to consumers. The proposed risk management guidance 

on non-traditional mortgage products issued in late 2005 extensively discussed consumer 

protection concerns that may be raised by these products in addition to addressing the 

traditional areas of safety and soundness. In March 2006, the agencies released Evolution 

of a Prototype Financial Privacy Notice, a report summarizing consumer research 

contributing to improved financial privacy notices. In August 2006, the OCC issued 

guidance on disclosure and marketing issues associated with gift cards, which focused on 

the need for national banks that issue gift cards to do so in a manner in which both 

purchasers and recipients are fully informed of the product’s terms and conditions. This 

work will continue in FY 2007. 

Supervision Staffing 

OCC designated recruitment activities in the Chief National Bank Examiner’s (CNBE) 

office and LBS examiner positions as high priorities during FY 2006. To attract internal 

candidates to these positions, the OCC implemented rotational assignments, pay, and 

relocation and transitional cost of living incentives. Simultaneously, the OCC focused its 

external recruitment on candidates with expertise in compliance, complex capital market 

activities, and mortgage banking and authorized referral bonuses to current employees to 

attract externally hired examiners. During 2006, LBS exceeded expectations by hiring

more than 30 individuals from outside the OCC, including nine with compliance 

expertise. In addition, CNBE filled six critical managerial and group leader positions and 

hired two individuals from outside the OCC with accounting expertise. The OCC also 

continued its nationwide recruitment and training program for entry-level bank 

examiners. Since the program’s inception in FY 2003, approximately 430 examiners 

have been hired, including over 160 in FY 2006. 

To ensure that OCC’s bank supervision organizations have a steady and deep pipeline of 

qualified employees to meet future leadership needs, the OCC introduced the 

LeaderTRACK initiative. The program, which will be piloted for 18 months beginning 

in FY 2007, offers participants three six-month assignments, with significant managerial 

OCC - 6 
and supervisory roles, that will develop leadership rather than prepare them for a specific 

position. 

Customer Assistance

The OCC’s Customer Assistance Group (CAG) assists consumers who have questions or 

complaints about national banks and their operating subsidiaries. During the last twelve 

months, the CAG received nearly 70,000 telephone calls and also published an 

informational brochure to assist those who are Spanish-speaking. Also, during FY 2006 

the OCC achieved resource efficiencies by outsourcing initial calls. The Government

Accountability Office (GAO) released a favorable report in 2006 regarding CAG. 

CAG goals for FY 2007 include a CAG customer survey, CAG outreach with state 

regulators, and expanded CAG hours of operation. 

 

Regulation

During FY 2006, the OCC, with other federal banking agencies, conducted the regulatory 

burden reduction review process, as required by the Economic Growth and Regulatory 

Paperwork Reduction Act of 1996 (EGRPRA). In FY 2007 OCC is planning to propose 

an NPR that eliminates or streamlines existing requirements or procedures and enhances 

national banks’ flexibility in conducting authorized activities, either by revising 

provisions currently contained in OCC regulations or by codifying, and thus making 

generally applicable, conclusions that the OCC has reached in case-by-case

determinations. In addition, the OCC will continue to 1) provide legal analysis of and 

support for federal preemption and agency visitorial authority under national bank law, in 

order for national banks to operate efficiently under uniform national standards, and 2) 

develop and communicate additional guidance regarding principles determining the 

application of state consumer protection laws to national banks. 

SNC Modernization

The Shared National Credit (SNC) is a collaborative review and assessment by the OCC, 

Federal Reserve System, Federal Deposit Insurance Corporation and Office of Thrift 

Supervision of the largest and most complex credits that are held by multiple financial 

institutions. The OCC assumed the lead in FY 2006 of an interagency initiative, which 

will continue throughout FY 2007, to improve SNC data collection/analysis. 

 

OMB Circular A-123, Management’s Responsibility for Internal Control, Appendix A

In FY 2006, the OCC undertook a risk assessment of all business processes related to 

financial reporting in compliance with OMB Circular A-123, Appendix A. Based on this 

assessment, the OCC documented 81 business processes and developed and carried out 

36 test plans, including coverage of the information systems that support financial 

reporting. The testing showed no material internal control weaknesses. During FY 2007, 

OCC - 7 
another risk assessment will be conducted, documentation will be developed or revised as 

needed, and test plans will be carried out to support the FY 2007 assessment over 

financial reporting. 

Homeland Security Presidential Directive 12 (HSPD-12) and Federal Information 

Security Management Act (FISMA)

During the first quarter of FY 2006, the OCC successfully implemented an integrated 

Personal Identity Verification (PIV) process which ensured compliance with the PIV-1 

requirements of HSPD-12. The OCC implementation strategy included utilizing new 

technology such as digital fingerprinting machines, document verification software and 

several new applications providing a secure means of exchanging information on a real 

time basis with the Office of Personnel Management. In FY 2007 the primary focus 

under HSPD-12 will be designing, developing and implementing the systems necessary 

to create and use smartcard IDs which control both physical access to Treasury facilities 

and logical access to Treasury information systems. The challenge for the OCC will be 

developing a strategy for enrolling over 3000 existing employees and contractors into a 

new identity management system and conducting the required identity proofing without 

adversely impacting the day-to-day operations of the OCC. The challenges will continue 

with adapting existing processes, procedures and IT infrastructure to work with the new 

smartcard IDs. The wide geographical distribution of OCC offices and the unique 

mission of the OCC will require an innovative approach to implementing any HSPD-12 

PIV-2 solutions.

The OCC has also made improvements in computer security via policy and technical 

changes. New rules instituted in FY 2006 on the use of OCC computer equipment and 

networks include: prohibiting the attachment of unauthorized non-OCC equipment to the 

OCC network, clarifying procedures for reporting lost or stolen IT equipment, and 

prohibiting all use of "instant messaging”. Technical changes include: encrypting all 

OCC network traffic among sites, implementing firewall and intrusion detection software 

on all laptops and workstations, implementing additional technical controls on all 

BlackBerry devices, enhancing network intrusion detection, and upgrading both server 

and workstation/laptop operating systems to versions with better security capabilities. On 

the compliance side, the OCC continues to refine its approach to documentation, training, 

and certification and accreditation activities required by the FISMA as well as evolving 

Treasury and government-wide standards. Employees and contractors in the OCC’s 

Chief Information Officer's and Acquisitions Management offices with special security 

responsibility took additional training to underscore and reinforce their security duties. 

OCC - 8 
1C – Industry Outlook 

Bank earnings have been strong for the last 15 years, and strong earnings have in turn 

contributed to healthy capital ratios. Banks have successfully expanded their product 

range, and this expansion has been an important factor in maintaining robust earnings 

growth. Along with the greater range of products has come the growing importance of 

off-balance sheet income, and noninterest income. These have been especially important 

at the largest banks, and are now becoming important for smaller institutions as well.

These trends are expected to continue. There is more uncertainty about banks’ ability to 

continue to rely on the real estate sector to drive asset and earnings growth. 

 

In the following projections, bank assets are assumed to grow 1.5 percentage points faster 

than nominal GDP each year over the next five years, consistent with experience of the 

recent past. Assuming annual real GDP growth at 3 percent, and inflation at 2 

this gives nominal GDP growth of 5 percent and growth of bank assets at 6.5 percent. 

percent, 

 Banking system assets: 2005 and 2010 projected 

Commercial National Share of total

banks banks system assets in

Assets ($tr) Assets ($tr) banks over $10 billion

2005 9.04 6.00 75.1

2010e 12.39 8.22 75.1

 The number of banks has fallen steadily for at least two decades. The projection assumes 

that the long-term trend of banks consolidation will continue, both for national banks and 

all commercial banks, and that for all but the largest banks, the rate of decline over the

next five years will equal the rate of decline experienced over the last five years. In 2005, 

84 commercial banks had assets exceeding $10 billion, while about 3,400 banks had 

assets under $100 million. By 2010, the number of banks over $10 billion is expected to 

remain about the same, while the number of banks under $100 million is expected to 

continue to decline, to around 2, 500.

 

Large banks will continue to dominate the industry. Banks with over $10 billion in assets

now account for 75.1 percent of system assets, and should be able to maintain if not 

increase that share. 

 

Until about five years ago, national banks consistently accounted for about 57 percent of 

all commercial bank assets. Since then, a series of mergers has increased the national 

bank share to about 67 percent of commercial bank assets.

 

Risks to the banking system include an economic slowdown, and deterioration in real 

estate markets, which as noted above have accounted for much of the growth in bank

income and assets over the last several years.

OCC - 9 
Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands

FY 2006

Obligated

FY 2007

Estimated

FY 2008

Estimated

FTE 2,812 2,977 3,041

Object Classification:

11.1 Full-Time Permanent Positions...................... $274,159 $320,750 $342,900

11.1 Other than Full-Time Permanent Positions..... 7,130 7,974 8,500

11.5 Other Personnel Compensation..................... 949 1,813 1,800

11.8 Special Personal Services Payments............. 0 0 0

11.9 Personnel Compensation (Total).................... 282,238 330,537 353,200

12.0 Personnel Benefits......................................... 95,182 106,356 115,150

13.0 Benefits to Former Personnel......................... 215 169 200

21.0 Travel............................................................. 35,619 42,259 45,600

22.0 Transportation of Things................................ 2,319 2,603 1,800

23.1 Rental Payments to GSA............................... 196 2,360 2,700

23.2 Rent Payments to Others............................... 24,284 28,873 30,400

23.3 Communications, Utilities, & Misc.................. 8,922 12,572 13,300

24.0 Printing and Reproduction.............................. 1,158 1,188 1,100

25.1 Advisory & Assistance Services..................... 70,018 105,737 101,900

25.2 Other Services............................................... 0 0 0

25.3 Purchase of Goods/Serv. from Govt. Accts... 0 0 0

25.4 Operation & Maintenance of Facilities............ 0 0 0

25.5 Research & Development Contracts.............. 0 0 0

25.6 Medical Care.................................................. 0 0 0

25.7 Operation & Maintenance of Equipment......... 000

25.8 Subsistence & Support of Persons................. 000

26.0 Supplies and Materials................................... 5,139 6,301 6,300

26.0 Metal and Fabrication..................................... 000

31.0 Non-Capital Equipment.................................. 27,221 14,030 15,300

32.0 Land and Structures....................................... 3,893 18,154 18,800

41.0 Grants, Subsidies........................................... 000

42.0 Insurance Claims & Indemn........................... 422 50 50

43.0 Interest and Dividends.............................. 0 0 0

44.0 Refunds.......................................................... 000

Total Operating................................................ $556,826 $671,189 $705,800

Budget Activities:

Supervision $471,882 $569,137 $597,600

Regulate 70,992 81,508 87,000

Charter 13,952 20,544 21,200

Total Budget Authority....................................... $556,826 $671,189 $705,800

2B – Appropriations Language 

OCC receives no appropriated funds from Congress. 

2C – Legislative Proposals 

OCC currently has no legislative proposals. 

OCC - 10 
Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Revenue:

Assessments $622,278 $661,900 $703,900 6.35%

Interest 21,938 22,300 23,900 7.17%

Other Income 3,759 3,000 3,100 3.33%

Total Revenue $647,975 $687,200 $730,900 6.36%

Obligations Incurred:

Supervision 2,375 $471,882 2,545 $569,137 2,603 $597,600 2.28% 5.00%

Regulate 364 70,992 344 81,508 350 87,000 1.74% 6.74%

Charter 73 13,952 88 20,544 88 21,200 0.00% 3.19%

 Total Obligations Incurred 2,812 $556,826 2,977 $671,189 3,041 $705,800 2.15% 5.16%

Total Reserve Contribution $91,149 $16,011 $25,100 56.77%

Actual Estimated Estimated to FY 2008

FY 2007

Description

FY 2006 FY 2007 FY 2008

% Change

3A – Supervise ($569,137,000): The Supervise program consists of those ongoing 

supervision and enforcement activities undertaken to assure that each national bank is 

operating in a safe and sound manner and is complying with applicable laws, rules, and 

regulations relative to the bank and the customers and communities it serves. This 

program includes bank examinations and enforcement activities; resolution of disputes

through the National Bank Appeals process; ongoing monitoring of banks; and analysis 

of systemic risks and market trends in the national banking system or groups of national 

banks, the financial services industry, and the economic and regulatory environment. 

3.2.1 – Supervise Budget and Performance Plan 

Dollars in Thousands

Supervise Budget Activity Includes Strategic Objective F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Other Resources 371,252 408,091 471,882 569,137 597,600

Total Operating Level $371,252 $408,091 $471,882 $569,137 $597,600

Human Resources

 Other FTE 2,212 2,250 2,375 2,545 2,603

Total FTE (reimbursable) 2,212 2,250 2,375 2,545 2,603

OCC - 11 
Supervise Budget Activity Includes Strategic Objective F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 95% 95% 95% 95% 95%

Actual 99% 99% 99%

Percentage of national banks that are well 

capitalized (%) (Oe) 

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 94% 94% 95%

Percentage of national banks with composite 

CAMELS rating 1 or 2 (%) (Oe) 

Met Yes Yes Yes

Target 94% 94% 94% 94% 94%

Actual 96% 94% 94%

Percentage of national banks with consumer 

compliance rating of 1 or 2 (%) (Oe) 

Met Yes Yes Yes

Target 40% 40% 40% 40% 40%

Actual 40% 44% 46%

Rehabilitated problem national banks as a 

percentage of the problem national banks one 

year ago (CAMELS 3, 4 or 5) (%) (Oe) Met Yes Yes Yes

Target Baseline $9.55 $9.55

Actual $8.84

Total OCC costs relative to every $100,000 in 

bank assets regulated ($) (E) 

Met Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

Description of Performance: 

Well Capitalized National Banks 

The Federal Deposit Insurance Act established a system of prompt corrective action 

(PCA) that classifies insured depository institutions into five categories (well capitalized; 

adequately capitalized; undercapitalized, significantly undercapitalized; and critically 

undercapitalized) based on their capital levels relative to their risks. At the fiscal yearend, 99 percent of national banks were classified as well capitalized. National banks’ 

capital has remained at this consistently high level for the past several years. 

National Banks with Composite CAMELS Rating of 1 or 2 

The composite CAMELS rating reflects the overall condition of a bank. Bank regulatory 

agencies use the Uniform Financial Institutions Rating System, CAMELS, to provide a 

general framework for evaluating all significant financial, operational and compliance 

factors inherent in a bank. Evaluations are made on: Capital adequacy, Asset quality, 

Management, Earnings, Liquidity, and Sensitivity to market risk. The rating scale is 1 

through 5 where 1 is the highest rating granted. CAMELS ratings are assigned at the 

completion of every supervisory cycle or when there is a significant event leading to a 

change in CAMELS. In FY 2006, 95 percent of national banks earned a composite 

CAMELS rating of either 1 or 2, signifying an overall safe and sound national banking 

system and a foundation for a strong U.S. economy. 

Rehabilitated National Banks

Problem banks can ultimately reach a point where rehabilitation is no longer feasible. 

OCC’s early identification of, and intervention with, problem banks can lead to 

successful remediation of these banks. The OCC recommends corrective actions to

problem banks for improving their operations and as a result, 46 percent of banks with 

composite CAMELS rating of 3, 4 or 5 one year ago have improved their ratings to either 

1 or 2 this year. This is an improvement from 44 percent achieved in FY 2005 and the 40 

percent achieved in FY 2004. 

 

OCC - 12 
National Banks with Consumer Compliance Rating of 1 or 2 

To ensure fair access to financial services and fair treatment of bank customers, the OCC 

evaluates a bank’s compliance with consumer laws and regulations. Bank regulatory 

agencies use the Uniform Financial Institutions Rating System, Interagency Consumer 

Compliance Rating, to provide a general framework for assimilating and evaluating 

significant consumer compliance factors inherent in a bank. Each bank is assigned a 

consumer compliance rating based on an evaluation of its present compliance with 

consumer protection and civil rights statutes and regulations, and the adequacy of its 

operating systems designed to ensure continuing compliance. Ratings are on a scale of 1 

through 5 in increasing order of supervisory concern. National banks continue to show 

strong compliance with consumer protection regulations with 94 percent earning a 

consumer compliance rating of either 1 or 2.

Total OCC Costs Relative to Every $100,000 in Bank Assets Regulated 

Beginning in FY 2006, the OCC implemented a performance measure—Total OCC Costs 

Relative to Every $100,000 in Bank Assets Regulated—that reflects the efficiency of its 

operations while meeting the increasing supervisory demands of a growing and more 

complex national banking system. OCC costs are those reported as total program costs 

on the annual audited Statement of Net Cost. Bank assets are those reported quarterly by 

national banks on their Reports of Condition and Income. Total bank assets represent the 

growth and complexity of the national banking system. This measure supports the 

OCC’s strategic goal of efficient use of agency resources. The OCC’s ability to control 

its costs while ensuring the safety and soundness of the banking system benefits all 

national bank customers. 

OCC - 13 
3B – Regulate ($81,508,000): The Regulate program consists of those ongoing activities 

that result in the establishment of regulations, policies, operating guidance, and 

interpretations of general applicability to national banks. These regulations, policies, and 

interpretations may establish system-wide standards, define acceptable banking practices, 

provide guidance on risks and responsibilities facing national banks, or prohibit (or 

restrict) banking practices deemed to be imprudent or unsafe. The program also provides 

analysis and legal opinions on federal preemption of state law. This program includes the 

establishment of examination policies, handbooks, and interpretations for examiners as 

well as representing the OCC’s regulatory authorities and interpretations in 

administrative, judicial, and congressional hearings. 

3.2.2 – Regulate Budget and Performance Plan 

Dollars in Thousands

Regulate Budget Activity Includes Strategic Objective E1B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Other Resources 61,763 64,011 70,992 81,508 87,000

Total Operating Level $61,763 $64,011 $70,992 $81,508 $87,000

Human Resources

 Other FTE 368 353 364 344 350

Total FTE (reimbursable) 368 353 364 344 350

3C – Charter ($20,544,000): The Charter program involves those ongoing activities that 

result in the chartering of national banks as well as the evaluation of the permissibility of 

structures and activities of national banks and their subsidiaries. This includes the review 

and approval of new national bank charters, federal branches and agencies, mergers, 

acquisitions, conversions, business combinations, corporate reorganizations, changes in 

control, operating subsidiaries, branches, relocations, and subordinated debt issues. 

3.2.3 – Charter Budget and Performance Plan

Dollars in Thousands

Charter Budget Activity Includes Strategic Objective E1B

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Other Resources 16,448 15,011 13,952 20,544 21,200

Total Operating Level $16,448 $15,011 $13,952 $20,544 $21,200

Human Resources

 Other FTE 98 83 73 88 88

Total FTE (reimbursable) 98 83 73 88 88

Charter Budget Activity Includes Strategic Objective E1B

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 95% 95% 95% 95% 95%

Actual 96% 96% 94%

Percentage of licensing applications and notices 

completed within established timeframes. (%) 

(Oe) Met Yes Yes No

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

OCC - 14 
Description of Performance: 

Licensing Applications and Notices Completed within Time Frames 

The OCC’s timely and effective approval of corporate applications contributes to the 

nation’s economy by enabling national banks to complete various corporate transactions 

and introduce new financial products and services. Delays in providing prompt decisions 

on applications and notices can deprive a bank of a competitive or business opportunity, 

create business uncertainties, or diminish financial results. Time frames have been 

established for completing each type of application and notice. The OCC completed 94 

percent of applications and notices within the time standard during FY 2006. The target 

of 95 percent wasn’t met as the result of several applications that initially appeared to be 

routine in nature requiring additional time due to unique circumstances. Institutions

receiving decisions on their corporate applications and notices rated the OCC’s overall 

licensing services an average of 1.2. The licensing survey is based on a five-point rating 

scale, in which 1 indicates outstanding and 5 indicates significantly deficient. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

OCC - 15 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

Direct and Reimbursable FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 2,686 2,812 2,977

Increases:

Hiring:

Recruitment for supervision for large

banks subject to increasing complexity, 

maintaining community bank oversight, 

and replacement of losses in other

areas due to normal turnover.

366 355 254

Subtotal, Increases 366 355 254

Decreases:

Normal Attrition:

Separations anticipated as a result of 

resignations or retirements of 

permanent staff and termination of 

temporary appointments.

-240 -190 -190

Subtotal, Decreases -240 -190 -190

Year-end Actual/Estimated FTEs 2,812 2,977 3,041

Budgeted FTEs 2,812 2,977 3,041

Actual FTEs Utilized

Net Change from prior year SOY to budget year EOY 229

4A – Human Capital Strategy Description 

The OCC has developed bureau-specific human capital goals to meet its overall strategic 

goal of maintaining an expert, highly motivated, and diverse workforce. The first is to 

align and employ OCC workforce resources consistent with current and projected agency 

priorities. To help achieve this goal, on an annual basis, OCC will identify high priority 

recruitment needs and approve incentives specifically designed to address those 

priorities. Other strategies include: 1) using all qualified personnel on priority 

assignments, realizing the increasing dependence and need for “fungibility” among and 

within various disciplines; 2) using the midsize/community banks area as the primary 

entry-level recruitment, training, and development vehicle to provide a diverse bank 

examiner selection pool for many departments and divisions in the bureau; 3) continuing 

to implement OCC’s Strategic Plan for Active Recruitment, Retention, and Career 

OCC - 16 
Development (SPARC); 4) building a more inclusive, accepting environment for 

differences and better assist employees in effectively navigating in OCC’s work 

environment; and 5) identifying skill gaps and using them to establish recruitment and 

training priorities as part of OCC’s ongoing strategic planning process.

SPARC is the bureau’s five-year diversity strategy that includes goals, objectives, and 

activities for the recruitment, hiring, and development of all OCC employees, including 

women, minorities, and individuals with disabilities. It has been used successfully to 

attract, hire, and retain a diverse pool of applicants with superior qualifications. 

Recruiting has been very successful in meeting the OCC’s targeted hiring numbers and 

diversity objectives. Since June 2003, OCC has hired 430 new entry-level examiners, of 

which 54.7 percent are women and 38.1 percent are minorities.

A second human capital goal is to develop current and future leaders who demonstrate 

strong strategic, people management, and technical skills. To achieve this goal, the OCC 

is piloting a leadership development program based upon identified competencies. The 

OCC also will focus on aligning leadership performance expectations with organizational 

goals; preparing leaders to create and sustain a productive work environment and assume

responsibility for developing staff. The implementation of five new internal leadership 

courses will take place in FY 2007.

A third human capital goal is to maintain strategic compensation/benefit programs and 

performance systems that link with organizational goals and mission accomplishment, 

enable the OCC to recruit and retain critical positions, and reward high performers. To 

accomplish this goal, the OCC regularly reviews and adjusts compensation and benefits 

and performance management programs to ensure that they continue to support OCC 

objectives. The OCC operates under a merit-based performance system. Annual acrossthe-board increases are not granted; rather salary increases are awarded based on merit to 

reward employee performance, employee development that is relevant to OCC needs and 

employee contributions to OCC’s priorities. The OCC continually evaluates its programs

to ensure that there is an appropriate correlation between pay and performance.

OCC - 17 
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 FY Major IT Investments Budget Activity/Funding Source

Operating 

Plan Obligations

Operating 

Plan

Estimated 

Budget

Es

B

SIS OCC - Supervise $6.295 $6.295 $1.000

LIS OCC - Charter 3.036 3.036 3.732

Management and Accountability Reporting Tools ($MART) OCC - Supervise 1.668 1.668 1.628Total - Major $10.999 $10.999 $6.360 -42.2%Non-Major IT InvestmentsCAR & FINDRS Redesign Requirements OCC - Supervise $0.000 $0.117

Conference Office Scheduling and Booking System OCC - Manage 0.029 0.024

Core Knowledge Datamart - 03 OCC - Supervise 0.042 0.004Enforcement Action Metasearch OCC - Charter, Supervise, Regulate 0.207 0.000E-Time OCC - Manage 0.993 0.384Examination Survey Program OCC - Supervise 0.058 0.012Large Bank Datamart OCC - Supervise 0.089 0.004Manager Data Mart Enhancement OCC - Manage 0.071 0.004Next Gen CAG Reports/Reporting and Application Migration OCC - Supervise 0.190 0.000OCC - CCORe OCC - Charter, Supervise, Regulate 0.000 0.350OCC - ePublishing OCC - Charter, Supervise, Regulate, Manage 0.000 0.350OCC - SIS-DM OCC - Supervise 0.000 0.500Operational Data Store - 03 OCC - Manage 0.344 0.234Supervisory Reports Repository OCC - Supervise 0.000 0.050Suspicious Activity Reports (SARS) OCC - Supervise 0.193 0.201Total - Non-Major $2.216 $2.234Infrastructure InvestmentsOCC - FY06 Infrastructure $8.161 $8.182 $11.267OCC - FY06 Office Automation 13.822 22.135 18.637OCC - FY06 Security 2.772 2.916 4.096OCC - FY06 Telecommunications 8.199 11.299 15.071Total - Infrastructure Investments $32.954 $44.532 $49.071 10.2%Enterprise Architecture $0.323 $0.329 $0.335 1.8%Sub-total - OCC IT Investments $46.492 $53.455 $49.406 -7.6%FY07 OCC FISMA/CPIC PORTFOLIOFISMA Major InvestmentsChief Counsel OCC - Charter, Supervise, Regulate $0.750 

Enterprise Services OCC - Charter, Supervise, Regulate, Manage $4.177 1.909 

Examinations OCC - Supervise 4.730 

Fiscal Management OCC - Manage N/A 

Total - FISMA Major Investments $4.177 $7.389 FISMA Non-Major IT InvestmentsEmployee Security OCC - Manage $0.565 

International Economic OCC - Supervise 0.050 

Ombudsman OCC - Supervise 0.796 Workforce Operations OCC - Manage 0.005 Total - FISMA Non-Major Investments $1.416 TOTAL OCC IT INVESTMENTS $46.492 $4.177 $53.455 $58.211 

FY 2005 % Change 

from FY05

Obligations to 

FY06

% Change

from FY06 to

FY07

OCC - 18 
4B – Information Technology Strategy 

At the end of FY 2005, the OCC’s Investment Review Board (IRB) and Technology and 

Systems Subcommittee (TSS), which is comprised of executive level members and 

chaired by the Chief Information Officer (CIO), moved from an annual selection process 

to a year round process in which new projects could be selected to the portfolio quarterly 

or monthly (emergency request). All new investments are subject to business case 

scoring, enterprise architecture and security alignment, and appropriate systems 

development lifecycle documentation. New investments are funded through the IRB 

Portfolio Reserve account which acts as a discretionary account managed by the IRB to 

fund new or provide additional funding to existing investments. 

Linkage to OCC programs and strategic goals are documented in each 

project business case and prioritized by the IRB and TSS. Performance metrics are 

linked to the delivery, alignment, and achievement of OCC strategic program objectives. 

Investments are monitored on a quarterly basis by the IRB and TSS. OCC's IT 

investments are also subject to Quarterly Control reviews conducted by Treasury’s CIO 

Council. OCC is in the process of developing an IT strategic plan. The plan will link IT 

strategic goals and objectives with OCC strategic business goals and objectives. 

Publication of the plan is scheduled for the end of calendar year 2006. The plan will 

contain measurable objectives for each goal identified in the strategic plan. 

OCC - 19 
4.3 – PART Evaluation Table 

PART Name: Bank Supervision

Strategic Goals: Preserve the integrity of financial systems (F3)

Promote prosperous U.S. and World economies (E1)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. Regulatory agencies that include the OCC, OTS, NCUA, FDIC, Federal Reserve, Office of Federal Housing

Enterprise Oversight (OFHEO), Securities and Exchange Commission (SEC), and the Federal Housing Finance

Board (FHFB) continue to share their strategic plans, performance plans, and performance measures on a regular 

basis. This allows each agency to consider the approaches used by the other agencies when developing or 

revising their goals and measures. The OCC and OTS, as bureaus in the Department of the Treasury, continue to

work together to maintain alignment of their performance measures. 

1. The FY 2003 assessment of the OCC's Bank Supervision found that the program purpose is clear, goals are 

outcome-oriented, program measurements are clear, program is efficiently and effectively managed, but the

program is not unique in that other agencies perform similar types of regulatory functions in the banking

industry.

2. Federal banking regulatory agencies, including the OCC, the Office of Thrift Supervision (OTS), the National 

Credit Union Administration (NCUA), the Federal Reserve, and the Federal Deposit Insurance Corporation 

(FDIC), should work together to align outcome goals and related measures to allow for greater comparison of 

program performance in the industry.

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

OCC - 20 
Office of Thrift Supervision 

Mission Statement 

To supervise savings associations and their holding companies in order to maintain their 

safety and soundness and compliance with consumer laws and to encourage a competitive 

industry that meets America’s financial services needs. 

Program Summary by Account Dollars in Thousands 

FY 2006 FY 2007 FY 2008

Obligated Estimated Estimated $ Change % Change 

Supervision of the Thrift Industry $199,497 $232,500 $238,313 $5,813 2.50%

Total Resources $199,497 $232,500 $238,313 $5,813 2.50%

FY 2007 Priorities 

OTS’s FY 2007 Priorities are set forth below: 

• Examine, supervise, and regulate 853 savings associations with total assets of 

$1.63 trillion, 

• Examine and regulate 481 registered holding company enterprises with total 

assets of $7.7 trillion, 

• Tailor examinations to the risk profile of the institution and streamline the 

examination of smaller institutions, 

• Conduct safety and soundness examinations of savings associations every 12-18 

months that also incorporate an assessment of compliance with consumer 

protection laws and regulations, 

• Promote the reduction of regulatory burden, 

• Coordinate supervisory and policy development activities with relevant domestic 

and foreign financial regulators, 

• Abate money laundering and terrorist financing by examining savings 

associations for compliance with the Bank Secrecy Act, the USA PATRIOT Act, 

and other anti-money laundering laws, 

• Promote the benefits of the thrift charter and the important role of communitybased thrifts, 

• Continue efforts to implement the international Basel II risk-based capital 

framework, and 

• Address succession planning.
Table of Contents 

Section 1 – Purpose ........................................................................................................... 2

1A – Description of Bureau Vision and Priorities.......................................................... 2 

1B – Program History and Future Outlook..................................................................... 4 

1C – Industry Outlook .................................................................................................... 9 

Section 2 – Budget Adjustments and Appropriations Language ............................... 10

2.2 – Operating Levels Table........................................................................................ 10 

2B – Appropriations Language..................................................................................... 10 

2C – Legislative Proposals............................................................................................ 10 

Section 3 – Budget and Performance Plan ................................................................... 11

3.1 – Resource Detail Table.......................................................................................... 11 

3A – Supervision of the Thrift Industry........................................................................ 11 

3.2.1 – Supervision of the Thrift Industry Budget and Performance Plan.................... 13 

Section 4 – Supporting Materials.................................................................................. 16

4.1 – Human Resources Table ...................................................................................... 16 

4A – Human Capital Strategy Description ................................................................... 16 

4.2 – Summary of IT Resources Table ......................................................................... 18 

4B – Information Technology Strategy ........................................................................ 19 

4.3 – PART Evaluation Table....................................................................................... 20 

 OTS - 1
Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

Established by Congress as a bureau of the Department of the Treasury on August 9, 

1989, the Office of Thrift Supervision (OTS) charters, examines, supervises, and 

regulates federal savings associations insured by the Federal Deposit Insurance 

Corporation (FDIC). OTS’s primary statutory authority is the Home Owners’ Loan 

Act originally enacted in 1933. OTS also examines, supervises, and regulates statechartered savings associations insured by the FDIC and provides for the registration, 

examination, and regulation of savings and loan holding companies (SLHCs) and other 

affiliates. 

The thrift charter has several unique characteristics including nationwide branching under 

a single charter; a holding company structure offering a single regulator for the holding 

company and its subsidiary depository institution; and preemption authority. OTS is the 

only federal-banking agency that both charters depository institutions and supervises their 

holding companies. The holding companies are diverse, ranging from large, 

multinational corporations to small companies with few assets other than their thrift

charter. 

The thrift industry is strong and operating safely. As of September 2006, OTS regulated 

853 savings associations with total assets of $1.63 trillion. Savings associations operate 

in a safe and sound manner with 93 percent achieving an overall composite CAMELS 

rating of 1 or 2. The CAMELS rating reflects OTS’s evaluation of an institution’s 

Capital, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to market risk. 

The industry’s capital position remains strong with over 99 percent of savings 

associations meeting the well-capitalized standards. 

As of September 2006, OTS supervised 481 holding company enterprises with 

approximately $7.7 trillion in consolidated assets. Over half of all savings associations 

and 78 percent of total savings association assets are owned by OTS-regulated holding 

companies. 

OTS is headquartered in Washington, D.C. with four regional offices located in Jersey 

City, Atlanta, Dallas, and San Francisco. The headquarters office develops nationwide 

policies and programs for the agency and coordinates the operations of OTS. The 

regional offices examine and supervise institutions and process most applications. 

Approximately 75 percent of OTS’s staff of 965 employees work in regional offices. 

The President, with Senate confirmation, appoints OTS’s Director for a 5-year term. 

OTS’s Director also serves as a member of the Board of Directors of the Federal Deposit 

Insurance Corporation (FDIC), a member of the Federal Financial Institutions 

Examination Council (FFIEC), and a director of NeighborWorks® America. 

 OTS - 2
OTS Strategic Goals and Vision 

For this year’s budget submission, OTS used the four strategic goals outlined in its 2003-

2008 Strategic Plan. 

• A safe and sound thrift industry, 

• A flexible legal and regulatory framework that enables the thrift industry to 

provide a full competitive array of financial services, 

• Fair access to financial services and fair treatment of thrift customers, and 

• A professional and motivated workforce that provides exceptional service to its 

customers and supports achievement of OTS business goals.

OTS’s Strategic Plan will be updated during FY 2007 to incorporate revised strategies 

and goals. OTS adopted the following vision statement as its initial step for the new 

plan: 

To perform, and to be recognized, as the premier regulator of financial institutions and 

holding companies. 

OTS Strategic Priorities 

OTS’s FY 2007 budget of $232.5 million supports OTS’s strategic and performance 

goals that provide for proactive supervision of the industry, reduced regulatory burden, 

and improved credit availability. The FY 2007 budget enables OTS to tailor supervisory 

examinations to the risk profile of the institutions, while effectively allocating resources 

to oversee and assess the safety and soundness and consumer compliance record of the 

thrift industry. 

OTS’s budget supports the supervision program. OTS receives no appropriated funds 

from Congress; the income of the bureau is derived principally from assessments on 

savings associations and savings and loan holding companies. 

OTS’s FY 2007 budget finances OTS’s efforts to address these key strategic issues and 

challenges: 

• Comprehensive and Risk-Focused Examinations, 

• Interest Rate and Credit Risks, 

• Compliance Risks, Financial Crimes, and Data Breaches, 

• Disaster and Emergency Preparedness, 

• Global Financial Services, 

• Regulatory Burden Reduction, 

• Promotion of the Thrift Charter, and 

• Succession Planning and Management of OTS Resources. 

 OTS - 3
1B – Program History and Future Outlook 

OTS examines savings associations every 12-18 months for safety and soundness and 

compliance with consumer protection laws and regulations. During these exams, the 

association’s ability to identify, measure, monitor, and control risk is evaluated, including 

the risk posed by other entities within the corporate structure. When weaknesses are 

identified, supervisory action is taken. 

The following activities highlight FY 2006 OTS accomplishments and strategic FY 2007 

challenges. 

Comprehensive Examination Approach 

OTS conducts a comprehensive examination combining safety and soundness and 

compliance reviews to eliminate multiple reviews of the same area for different purposes. 

OTS examination teams issue one report of examination that covers both compliance and 

safety and soundness. This approach allows OTS to comprehensively assess an 

institution’s risk management programs, business strategy, and operations. OTS is also 

able to evaluate compliance management programs and compliance with the Bank 

Secrecy Act, Fair Lending, and other requirements on a more frequent basis. 

OTS is more efficient and has reduced regulatory burden due to its comprehensive 

examination approach. It issues one information request package at the start of each 

examination and examines lending portfolios from both compliance and safety and 

soundness perspectives at the same time. OTS also prepares one comprehensive 

examination report that details all examination findings. Over time, OTS expects this 

comprehensive approach will reduce savings association cost and burden while 

promoting efficient, risk-focused examinations. The majority of OTS-regulated 

institutions indicate a favorable response to the comprehensive examination approach.

To maintain its rigorous staff accreditation standards, OTS requires that its examiners: 1) 

undergo formal, informal, and independent training, 2) pass proficiency tests, 3) receive 

on-the-job training to become proficient in both disciplines and 4) serve as examiner-incharge of at least two comprehensive examinations prior to accreditation. OTS also 

recognizes that there are very complex and highly technical issues that arise in 

connection with our comprehensive examination approach. For this reason, OTS 

continues to maintain compliance, lending, capital markets, trust, and information 

technology specialists to assist examiners in addressing these matters. 

Interest Rate and Credit Risks

As community-based lenders, thrifts remain focused on residential mortgage lending, 

with 55 percent of assets invested in 1-4 family mortgage loans as of September 30, 

2006. Direct loans to consumers, including single-family mortgages, made up 60 percent 

of thrift assets. Given this concentration, thrift asset quality is dependent on stable real 

estate values and consumers’ continued employment and ability to service their debt. 

 OTS - 4
The thrift industry’s current sound financial condition permits it to address potential 

credit quality problems from a position of strength. Due to the resilience of the housing 

market, single-family residential loan delinquencies and charge-offs remained at low 

levels through much of 2006. 

OTS closely monitors interest rate risk due to the thrift industry’s natural concentration in 

longer-term mortgage loans, which are generally funded with shorter-term deposits and 

borrowings. OTS maintains an interest rate risk sensitivity model that stress-tests savings 

association portfolios to evaluate potential exposure to changing interest rates. OTS 

remains cautious of the potential impact of a rapid increase in market interest rates and

will remain vigilant in monitoring savings associations for adverse trends. On November 

6, 2006, OTS announced that it is enhancing its state of the art Net Portfolio Value (NPV) 

Model. The Enhanced NPV Model will expand OTS’s off-site interest rate risk 

monitoring capability and improve the efficiency and effectiveness of on-site 

examinations. It will also improve the agency’s unique ability to provide OTS regulated 

institutions with quarterly estimates of their interest rate risk exposures.

Alternative or nontraditional mortgage lending products present a unique hybrid of credit 

and interest rate risks. Credit risk in mortgage lending, typically managed by sound 

underwriting criteria, is more complex with nontraditional lending products. Aggressive 

pricing and variable underwriting standards may heighten risks. On September 29, 2006, 

the federal financial regulatory agencies issued final guidance to address the risks posed 

by these types of loans, recommending that management recognize these products require 

strong risk management standards, capital levels commensurate with the risk, and a loan 

loss allowance reflective of the portfolio collectibility. OTS expects its institutions to 

approach innovation in the mortgage market with caution and due diligence. 

OTS sponsored a National Housing Forum on December 11, 2006. The forum provided 

an opportunity for industry, government, and community leaders to discuss the national 

outlook for housing, including the challenges of lending in today’s housing market and 

key consumer protection issues. Speakers included the Secretary of the Treasury, the 

Chairman of the House Financial Services Committee, the Ranking Member of the House 

Financial Services Committee, and the Director of OTS. 

Compliance Risks

An OTS-regulated institution is required to have an effective compliance management

program that is commensurate with its size, complexity, and risk profile. OTS 

examiners assess whether an institution is ensuring the privacy and security of consumer 

financial information, guarding against money laundering and terrorist financing, and 

ensuring fair and equal access to credit for all Americans. 

OTS examines for Bank Secrecy (BSA), the USA PATRIOT Act, and other Anti-money 

Laundering (AML) compliance. Between January 2005 and September 2006, OTS 

conducted 1,272 BSA examinations and cited over 262 institutions for violations. Most 

 OTS - 5
violations were remedied during the examination process and resulted in no further 

action. The others resulted in OTS initiating 40 formal and informal enforcement actions.

The Federal Financial Institutions Examination Council (FFIEC) released the revised

BSA/AML Examination Manual on July 28, 2006. The revised manual reflects the 

ongoing commitment of the federal banking agencies and the Financial Crimes 

Enforcement Network (FinCEN) to provide current and consistent guidance on risk-based 

policies, procedures, and processes for banking organizations to comply with the BSA 

and safeguard operations from money laundering and terrorist financing. The manual 

was updated to further clarify supervisory expectations and incorporate regulatory 

changes since the manual’s 2005 release. 

OTS hosted a teleconference on July 31, 2006, that provided informative briefings by 

senior OTS staff on BSA/AML compliance issues, including best practices, avoiding 

common violations, and the consequences of noncompliance. There were over 1,400 

registrants for the event. The teleconference provided a valuable opportunity for 

compliance officers, risk managers, auditors, attorneys, and senior bank and thrift 

managers to interact directly with OTS experts. 

Data security is reviewed at thrifts and third party technology service providers. The 

Gramm-Leach-Bliley Act requires that all financial institutions establish a program to 

protect their customer’s personal information. OTS, with the other financial banking 

agencies, issued guidance regarding data security, security breach notification 

requirements, and electronic authentication. A major focus of OTS’s compliance 

program is to ensure that its institutions keep credit information confidential, fight 

identity theft, and ensure the accuracy of consumers’ credit reports. 

Compliance reviews help to ensure fair and equal access to credit for all Americans. 

Thrifts provide services that encourage home ownership and affordable housing and 

contribute to economic growth. Thrifts hold over $1 trillion in housing-related loans and 

securities. On November 24, 2006, OTS published a Notice of Proposed Rulemaking 

(NPR) to revise its Community Reinvestment Act (CRA) rule to align with the rules 

adopted by the other federal banking agencies. The alignment would best serve the 

interests of insured depository institutions and their communities by providing for 

consistency in regulation and compliance. The vast majority of OTS institutions are in 

compliance with the Community Reinvestment Act. 

Emergency and Disaster Preparedness 

OTS is actively involved in initiatives to address emergency and disaster preparedness. 

The 2005 hurricane devastation in the Gulf Coast states demonstrates how quickly 

external factors can reprioritize the support that OTS and the thrift industry must provide 

to preserve the integrity of financial systems and promote a prosperous economy. The 

needs and issues resulting from the 2005 hurricanes are unprecedented and will take a 

long time to resolve. To assist affected savings associations and their customers, OTS 

provides a toll-free hotline number on its internet site for hurricane-related questions and 

 OTS - 6
information from government sponsored enterprises and trade groups, community service 

groups, and information from state agencies. 

During June 2006, the FFIEC member agencies and the Conference of State Bank 

Supervisors jointly issued "Lessons Learned From Hurricane Katrina: Preparing Your 

Institution for a Catastrophic Event." The document shares experiences and lessons 

learned by financial institutions affected by Hurricane Katrina and provides institutions 

with helpful insights for planning and improving disaster recovery and business 

continuity plans. 

For the past 20 years, OTS, in conjunction with the other FFIEC agencies, has issued 

guidance to the industry with regard to Disaster Recovery and Business Continuity 

Planning. During examinations, OTS reviews each institution’s plans for continuity of 

operations and emergency preparedness. OTS participates on the Financial and Banking 

Information Infrastructure Committee to improve the reliability and security of the 

financial industry’s infrastructure. In March 2006, OTS, along with the other FFIEC 

agencies, issued an Interagency Advisory on Influenza Pandemic Preparedness to alert 

institutions to the unique challenges a pandemic event could pose and to update their 

business continuity plans appropriately. 

Global Financial Services

OTS’s Complex and International Organization program oversees OTS’s global services. 

The European Union (EU) seeks to ensure that financial conglomerates domiciled outside 

EU member countries are subject to an equivalent level of supervision by foreign 

supervisors and to enhance coordination among relevant supervisors. OTS is the 

supervisor for U.S. thrift holding companies, including a number of financial 

conglomerates active in the EU. OTS was the first regulatory authority to be designated a 

consolidated coordinating regulator of a holding company with operations in the EU. 

The EU designation was received in December 2004 for OTS’s oversight of GE Capital 

Services and in September 2006 for Ameriprise. The equivalency designation process is 

currently underway for the American International Group, Inc. (AIG). The supervision 

and examination of GE, AIG, and Ameriprise are managed by a group solely dedicated to 

that task in Supervision.

OTS executed supervisory information sharing agreements with Australia, Canada, 

France, Germany, the United Kingdom, the Netherlands and Poland. OTS is also a 

signatory to an existing framework agreement for sharing supervisory information 

between the EU and U.S. Federal banking agencies. OTS is discussing supervisory 

information sharing agreements with banking and insurance authorities in China, Mexico, 

Brazil, and France. 

The federal banking agencies are continuing efforts to implement the international Basel 

II risk-based capital framework. They collaborated on the Basel IA and Basel II 

proposed capital rules and are evaluating issues to ensure that the new framework results 

in a safe and sound capital allocation and fair competition among all financial 

 OTS - 7
institutions. OTS is supportive of the Basel IA efforts to increase risk sensitivity in the 

existing Basel I capital rules and to mitigate competitive inequities that may arise with 

the implementation of Basel II. OTS believes that Basel II warrants close scrutiny and

refinement as the process continues. OTS is a leader among the four federal banking 

agencies in developing capital modifications to Basel I for the considerable majority of

financial institutions that will not adopt Basel II. 

Regulatory Burden Reduction

Under the Economic Growth and Regulatory Paperwork Reduction Act, enacted by 

Congress in 1996, federal banking agencies are required to review all of their regulations 

at least once every 10 years. The agencies must complete the first review under this law 

by 2006. In 2003, the agencies began a joint effort to categorize the regulations, publish 

the categories for comment, report to Congress on any significant issues raised by the 

comments, and eliminate unnecessary regulations. The review was completed in 2006. 

OTS and the other banking agencies published notices categorizing and identifying over 

125 regulations for comment and received more than 1,000 comment letters with 

suggestions for change. Banker and consumer group outreach sessions were held around 

the country and the OTS Director provided Congressional testimony. Along with the 

other federal banking agencies, OTS simplified application and reporting requirements, 

streamlined examination processes, and made changes to its regulations and internal 

procedures to reduce burden. Every new regulation, process, or procedure now includes 

a discussion among the Federal Financial Institutions Examination Council (FFIEC) 

principals about burden and how to accomplish regulatory objectives while minimizing 

regulatory burden. 

The federal banking agencies identified burdens that would require legislative changes to 

the underlying statutes before changes could be made to the regulations. These changes 

were presented to Congress as a list of consensus items that the national bank and thrift 

industries support. Congress passed the “Financial Services Regulatory Relief Act of 

2006” on September 30, 2006, and President Bush signed it into law on October 13. This 

law provides regulatory burden relief for the financial services, banking, and thrift 

industries. The law allows regulators to adjust exam cycles of healthy institutions for 

greater efficiency, modernizes record keeping requirements for regulators, and requires 

the federal banking agencies to propose within six months a simple, uniform privacy 

notice to comply with the Gramm-Leach-Bliley Act of 1999. 

Promotion of Thrift Charter

During 2006 strategic planning meetings, OTS management decided to actively promote 

the features of the thrift charter. The charter provides advantages in the delivery of 

financial services and continues to flourish as institutions change and adapt their business 

strategies and focus. OTS has a unique supervisory role in that it monitors and regulates 

all aspects of an institution’s operations and holding company affiliate activities. OTS 

regularly attends financial services industry conferences and has developed a booth that 

 OTS - 8
highlights aspects of its oversight program and details aspects of the thrift charter that set 

it apart from other charter options.

Staffing and Succession Planning

Fifty-five percent of OTS’s current staff will reach retirement eligibility by 2010 yearend. OTS is actively addressing succession planning and the corresponding training 

needs. Over 80 new examiners were hired in 2006. 

1C – Industry Outlook 

Due to favorable economic conditions, a stable industry, and the regulatory oversight that 

OTS provides, the thrift industry is operating in a safe and sound manner and performing 

extremely well. Net income for the industry was $4.29 billion during the quarter ending 

September 30 2006, the second highest on record, just below the record $4.32 billion 

earned in the fourth quarter of 2005. In addition, thrift asset quality remains strong and 

the overall level of credit quality in the industry remains good. The number of problem 

thrifts decreased from 6 to 5 from September 2005 to September 2006. Assets of 

problem thrifts decreased from $1.9 billion to $180 million during this same time period. 

Problem thrifts are defined as those with a composite examination rating of 4 or 5. 

Financial services consolidation has reduced the overall number of savings institutions, 

but industry asset growth remains strong. OTS expects this trend to continue. While 

industry consolidation can create pressure on assessment revenue, thrift asset growth and 

new charter interest has mitigated this affect. OTS has worked closely with the industry 

to maintain the profitability, integrity, and viability of the thrift charter, as the industry 

continues to adapt to the evolving nature of the financial services business and the 

demands of its customers. 

T h rift A s s e ts C ontinue to G ro w D e s p ite Indus try

C ons o lid a tio n

8 5 3

1 ,6 6 9 1 .6 3

0 .7 8

0

2 0 0

4 0 0

6 0 0

8 0 0

1 ,0 0 0

1 ,2 0 0

1 ,4 0 0

1 ,6 0 0

1 ,8 0 0

19931994199519961997199819992000200120022003200420052006

0 .0

0 .2

0 .4

0 .6

0 .8

1 .0

1 .2

1 .4

1 .6

1 .8

N o o f th rift in s titu tio n s

T h rift A s s e ts in B illio n s

 OTS - 9
Section 2 – Budget Adjustments and Appropriations Language 

2.2 – Operating Levels Table 

Dollars in Thousands

FY 2006

Obligated

FY 2007 

Estimated

FY 2008 

Estimated

FTE 918 1,046 1,046

Object Classification:

11.1 Full-Time Permanent Positions..................................... $105,997 $115,224 $118,105

11.1 Other than Full-Time Permanent Positions.............. 1,001 2,217 2,272

11.5 Other Personnel Compensation................................... 0 0 0

11.8 Special Personal Services Payments..................... 0 0 0

11.9 Personnel Compensation (Total)............................. $106,998 $117,441 $120,377

12.0 Personnel Benefits...................................................................... 55,799 67,085 68,762

13.0 Benefits to Former Personnel............................................... 217 300 308

21.0 Travel.................................................................................. 12,925 13,984 14,334

22.0 Transportation of Things........................................... 213 241 247

23.1 Rental Payments to GSA................................................ 0 0 0

23.2 Rent Payments to Others............................................... 3,605 3,944 4,043

23.3 Communications, Utilities, & Misc...................................................... 3,133 3,582 3,672

24.0 Printing and Reproduction.......................................................... 241 216 221

25.1 Advisory & Assistance Services.................................................... 1,081 2,161 2,215

25.2 Other Services.................................................................... 3,303 5,623 5,764

25.3 Purchase of Goods/Serv. from Govt. Accts...... 3,229 3,923 4,021

25.4 Operation & Maintenance of Facilities................... 3,251 5,220 5,351

25.5 Research & Development Contracts................................ 0 0 0

25.6 Medical Care............................................................................. 0 0 0

25.7 Operation & Maintenance of Equipment...................... 134 328 336

25.8 Subsistence & Support of Persons.................................... 0 0 0

26.0 Supplies and Materials.................................................... 1,214 1,669 1,711

31.0 Equipment.......................................................................... 2,767 5,544 5,683

32.0 Lands and Structures................................................... 1,343 1,239 1,270

33.0 Investments & Loans.................................................... 0 0 0

41.0 Grants, Subsidies........................................................... 0 0 0

42.0 Insurance Claims & Indemn................................................. 44 0 0

43.0 Interest and Dividends...................................................... 0 0 0

44.0 Refunds.............................................................................. 0 0 0

Total Budget Authority................................................ $199,497 $232,500 $238,313

Budget Activities:

Supervision of the thrift industry $199,497 $232,500 $238,313

Total Budget Authority................................................ $199,497 $232,500 $238,313

2B – Appropriations Language 

OTS receives no appropriated funds from Congress. 

2C – Legislative Proposals 

OTS currently has no legislative proposals. 

 OTS - 10
Section 3 – Budget and Performance Plan

3.1 – Resource Detail Table 

Dollars in Thousands

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Revenue:

Supervision

Assessments 212,290 218,100 223,553 2.50%

Rental Income 4,818 5,070 5,197 2.50%

Interest 8,841 8,500 8,713 2.50%

Fees & Other 10,599 7,330 7,513 2.50%

Total Revenue $236,548 $239,000 $244,976 2.50%

Expenses:

Supervision

Compensation & Benefits $163,014 $184,825 $189,446 2.50%

Travel & Transportation 13,138 14,225 14,581 2.50%

Facilities 10,848 14,310 14,668 2.50%

Other Services & Supplies 12,497 19,140 19,619 2.50%

Total Expenses 918 $199,497 1,046 $232,500 1,046 $238,313 0.00% 2.50%

Net Results $37,051 $6,500 $6,663 2.50%

Description Estimated

% Change

FY 2007

to FY 2008

FY 2008

Estimated

FY 2006

Obligated

FY 2007

3A – Supervision of the Thrift Industry ($232,500,000): OTS’s budget supports its 

supervision program. OTS receives no appropriated funds from Congress; the income of 

the bureau is derived principally from assessments on savings associations and savings 

and loan holding companies. OTS’s four strategic goals guide the annual budget activity. 

Strategic Goal 1: A safe and sound thrift industry. 

Through the examination process, OTS assesses the financial condition and risk profile of 

savings associations, including their ownership structure, and identifies and addresses 

unsafe and unsound practices and violations of law and regulation. Through the off-site 

monitoring process, OTS regularly monitors the financial performance of individual 

savings associations and the industry. Such monitoring enables early identification of 

emerging trends or problems. 

Strategic Goal 2: A flexible legal and regulatory framework that enables the thrift 

industry to provide a full competitive array of financial services.

OTS strives to reduce the regulatory burden on savings associations while maintaining 

effective supervision. To achieve this goal, OTS is improving the application process, 

limiting assessment rate increases and reviewing statutes and regulations of other 

governmental entities that may be burdensome. OTS reduced the amount of on-site 

examination time, redesigned regulations to make them easier to understand, and 

eliminated unnecessary restrictions. OTS tailors examinations to the risk profile of the 

individual institutions. This ensures that the examination process is responsive and 

enables the thrift industry to provide competitive financial services. 

 OTS - 11
OTS strives to manage operations to ensure that assessment rate increases do not exceed 

the inflation rate. Without compromising responsibilities, the assessment rate increases 

have not exceeded the inflation rate for the past four years. 

Strategic Goal 3: Fair access to financial services and fair treatment of thrift customers.

OTS’s Community Affairs Program supports the thrift industry's efforts to meet the 

convenience and needs of the communities they are chartered to serve; fulfill their CRA 

obligations; and provide safe and sound loans, investments and financial services for low 

and moderate income individuals, communities and other areas of greatest need. OTS's 

Community Affairs staff works with savings associations, community-based 

organizations, government officials and others to promote partnerships and other 

initiatives with savings associations at the local level to address and respond to 

community and economic development needs. In addition, OTS promotes industry 

adoption of comprehensive compliance management programs and encourages 

associations to strategically develop the diverse opportunities presented by the 

communities they are chartered to serve. 

Strategic Goal 4: A professional and motivated workforce that provides exceptional 

service to its customers and supports achievement of OTS business goals.

OTS strives to maintain a workforce that is professional and well trained to regulate the 

thrift industry and to deal with the public in a professional, informed, and responsive 

manner. OTS will continue to cross-train its examiners to fully accredit them in both the 

safety and soundness and compliance disciplines. OTS provides the public with 

statistical reports, securities filings of OTS registrants, chartering records and other 

public information. OTS assists savings association customers with inquiries and 

complaints concerning savings associations. 

In line with the President’s Management Agenda, OTS is committed to the effective,

efficient, and economic management of its resources. OTS analyzes new enterprise 

initiatives for best value.

 OTS - 12
3.2.1 – Supervision of the Thrift Industry Budget and Performance Plan 

Dollars in Thousands

Supervision of the Thrift Industry

Budget Activity

Includes Strategic Objectives E1B and F3C

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Resource Level Obligated Obligated Obligated Estimated Estimated

Financial Resources

 Other Resources 178,713 187,434 199,497 232,500 238,313

Total Operating Level $178,713 $187,434 $199,497 $232,500 $238,313

Human Resources

 Other FTE 886 885 918 1,046 1,046

Total FTE (reimbursable) 886 885 918 1,046 1,046

Supervision of the Thrift Industry Budget 

Activity

Includes Strategic Objectives E1B and F3C

Measure FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Target 0% 0% 0% 0% 0%

Actual 0% 0% 0%

Difference between the inflation rate and the 

OTS assessment rate increase (%) (E) 

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 94% 93% 94%

Percent of safety and soundness exams started 

as scheduled (%) (Ot) 

Met Yes Yes Yes

Target 95% 95% 95% 95% 95%

Actual 99.4% 99.5% 99.9%

Percent of thrifts that are well capitalized (%) 

(Oe)

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 94% 94% 93%

Percent of thrifts with compliance examination 

ratings of 1 or 2 (%) (Oe)

Met Yes Yes Yes

Target 90% 90% 90% 90% 90%

Actual 93% 94% 93%

Percent of thrifts with composite CAMELS 

ratings of 1 or 2 (%) (Oe)

Met Yes Yes Yes

Target Baseline $14.33 $14.33

Actual $13.46

Total OTS costs relative to every $100,000 in 

savings association assets regulated ($) (E) 

Met Yes

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Cust. 

Satisfaction 

As highlighted in the charts, OTS met all of its performance measures in 2006. 

Following is a brief description of each performance measure: 

Percent of safety and soundness exams started as scheduled 

OTS examines savings associations every 12-18 months for safety and soundness, 

compliance and consumer protection laws. OTS performs safety and soundness 

examinations of its regulated savings associations consistent with the requirements in the 

Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) as amended 

by the Riegle Community Development and Regulatory Improvement Act of 1994. 

When safety and soundness or compliance issues are identified during its risk-focused 

examinations, OTS acts promptly to ensure association management and directors 

institute corrective actions to address supervisory concerns. OTS staff often meets with 

the savings association’s board of directors after delivery of the Report of Examination to 

discuss findings and recommendations. 

 OTS - 13
Total OTS Costs Relative to Every $100,000 in Savings Association Assets Regulated 

Beginning in FY 2006, OTS included a performance measure that reflects the efficiency 

of its operations while meeting the increasing supervisory demands of a growing and 

more complex thrift industry. This measure supports OTS’s ongoing efforts to efficiently 

use agency resources. The efficiency measure is impacted by the relative size of the 

savings associations regulated. Approximately 60 percent of all savings associations 

have total assets of less than $250 million and are generally community-based 

organizations that provide retail financial services in their local markets. The measure 

does not include over $7 trillion in assets of holding company enterprises regulated by 

OTS. 

Percent of thrifts with composite CAMELS ratings of 1 or 2. 

On December 9, 1996, the Federal Financial Institutions Examination Council (FFIEC) 

adopted the CAMELS rating system as the internal rating system to be used by the 

federal and state regulators for assessing the safety and soundness of financial institutions 

on a uniform basis. The CAMELS rating system puts increased emphasis on the quality 

of risk management practices. “CAMELS” stands for Capital adequacy, Asset quality, 

Management, Earnings, Liquidity and Sensitivity to market risk. OTS assigns a 

composite CAMELS rating to savings associations at each examination. OTS adjusts the 

level of supervisory resources devoted to an association based on the composite rating. 

The CAMELS rating is based upon a scale of 1 through 5 in increasing order of 

supervisory concern. 

Percent of thrifts with compliance examination ratings of 1 or 2. 

A uniform, interagency compliance rating system was first approved by the FFIEC in 

1980. The FFIEC rating system was designed to reflect, in a comprehensive and uniform

fashion, the nature and extent of a savings association’s compliance with consumer 

protection statutes, regulations and requirements. The Compliance Rating System is 

based upon a scale of 1 through 5 in increasing order of supervisory concern. 

OTS began to combine safety and soundness and compliance examinations in 2002 to 

attain exam efficiencies and to improve risk assessment. Using comprehensive exam

procedures, compliance with consumer protection laws is reviewed at more frequent 

intervals, which has improved the quality of the examination process. 

Percent of thrifts that are well capitalized. 

Capital absorbs losses, promotes public confidence and provides protection to depositors 

and the FDIC insurance fund. It provides a financial cushion that can allow a savings 

association to continue operating during periods of loss or other adverse conditions. The 

Federal Deposit Insurance Act established a system of prompt corrective action (PCA) 

that classifies insured depository institutions into five categories (well-capitalized; 

adequately capitalized; undercapitalized, significantly undercapitalized; and critically 

 OTS - 14
undercapitalized) based on their relative capital levels. The purpose of PCA is to resolve 

the problems of insured depository institutions at the least possible long-term cost to the 

deposit insurance fund. 

Difference between the inflation rate and the OTS assessment rate increase. 

Without compromising responsibilities and the risk-based examination approach, OTS 

strives to efficiently manage its operations and budget to ensure that assessment rate 

increases do not exceed the inflation rate. However, if OTS believes that events require 

more personnel or other expenditures, OTS may increase assessments to raise the 

required resources. Annually, OTS analyzes its operating costs and compares them to the 

assessments it charges savings associations and holding companies in order to achieve a 

structure that keeps assessment rates as low as possible while providing OTS with the 

resources necessary for effective supervision. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treas.gov/offices/management/dcfo/accountability-reports/2006-

par/Part_IV_Appendices.pdf

 OTS - 15
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Changes in Full Time Equivalents

FY 2006 FY 2007 FY 2008

Base: Year-end Actual from Prior Year 885 918 1,046

Increases:

Reason #1

Continued recruitment priority in 

the examiner ranks for 

succession palnning as well as 

to address increasing holding 

company needs.

Subtotal, Increases 33 128 0

Decreases:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 918 1,046 1,046

Net Change from prior year SOY to budget year EOY 33 128 0

4A – Human Capital Strategy Description 

Human capital represents OTS’s primary resource to meet its strategic objectives. 

Sustaining and nurturing human capital resources requires a blend of competitive 

compensation, strategic and innovative training, and a supportive work environment. 

OTS developed its Human Capital Strategic Plan in response to the President’s 

Management Agenda. The Plan follows the Department of the Treasury’s Human 

Capital Strategic Plan for Fiscal Years 2004-2008 and incorporates strategies and 

practices to ensure that OTS has sufficient staff with the right skills to accomplish its 

mission presently and in the future. The Plan consists of four main strategic goals: 

Organizational Effectiveness, Recruitment and Diversity, Employee Retention and 

Satisfaction, and Technology Skills. 

Fifty-five percent of OTS’s current staff will reach retirement eligibility by year-end 

2010. OTS is developing a revitalized succession planning program to analyze specific 

positions and categories of positions, identify internal and external pools of available and 

projected candidates, and design professional development programs to match these 

needs. Over 80 new examiners were hired during 2006. OTS’s compensation program 

 OTS - 16
enables OTS to attract, retain, and reward staff comparable to the other federal banking 

agencies. 

OTS is working to cross train its examination staff to create a work force capable of 

performing multiple examination types (e.g., safety and soundness examinations and 

compliance examinations), as well as designing training programs to meet the challenges 

OTS faces with anticipated retirements as part of its overall succession planning program.

To meet the needs of a thriving thrift industry, OTS seeks qualified experienced and entry 

level candidates with diverse backgrounds. OTS is developing recruiting materials, 

attending job fairs including events targeting minority and women’s groups, and working 

to provide both centralized and regional recruitment support to meet its various 

recruitment needs.

 OTS - 17
4.2 – Summary of IT Resources Table 

Dollars in Millions

Information Technology Investments(in $ Millions) FY 2006 FY 2007 Major IT Investments

Budget 

Activity/Funding

Source

Operating

Plan Obligations

Operating

Plan

Estimated 

Budget

Total - Major $0.0 $0.0 $0.0 $0.0 Non-Major IT InvestmentsAdministrative - Mixed Supervision $1.0 $0.8 $0.9 8.5% $0.9 -3.1% Examinations Supervision 1.8 1.7 2.2 30.2% 1.9 -11.1% Thrift Financial Data Supervision 2.8 2.5 2.8 12.8% 3.9 38.6% TFR Validation Supervision 1.6 1.5 1.8 20.5% 1.6 -12.8% Industry Structure and Tracking Supervision 1.8 1.7 2.0 19.3% 1.6 -20.7% CIO Planning Supervision 1.8 1.9 2.5 36.7% 2.5 0.7% Total - Non-Major $10.7 $10.0 $12.2 22.0% $12.4 1.5% Infrastructure InvestmentsTreasury Consolidated Infrastructure $3.6 $2.9 $4.0 37.5% $4.4 10.6% Treasury Consolidated Telecommunications 1.4 1.1 1.5 41.4% 1.1 -27.5% Treasury Consolidated Office Automation 2.7 2.7 3.1 15.9% 2.8 -11.1% Treasury Consolidated Security 0.6 0.5 0.6 17.5% 1.8 194.8% Total - Infrastructure Investments $8.2 $7.2 $9.2 28.6% $10.1 9.4% Enterprise Architecture $0.2 $0.2 $0.2 8.5% $0.2 -3.1% TOTAL IT INVESTMENTS $19.1 $17.4 $21.6 24.6% $22.7 4.9% 

FY 2005 % Change

from FY05

Obligations to

FY06

% Change

from FY06 to

FY07

 OTS - 18
4B – Information Technology Strategy 

The OTS Information Technology Investment Review Board (IRB) provides overall 

direction and vision for how OTS’s information technology should contribute to OTS’s 

goals and objectives. It serves as the forum for senior OTS executives to make decisions 

regarding IT expenditures and investments. 

OTS’s Chief Information Officer is responsible for the policy, oversight and 

improvement of all information systems, information management and data 

communications used by OTS to carry out its mission; he serves as the Executive 

Director of the IRB. OTS’s Director serves as the IRB Chair.

The IRB meetings are incorporated into the Regional Managers meetings to ensure that 

all senior staff participates in the discussion of the IT program, its budget, projects, 

strategies, and priorities. Projects are evaluated annually during the budget cycle and can 

be terminated or funded for further development. 

OTS successfully implemented the Personal Identity Verification (PIV) process in 2006 

to comply with the PIV-1 requirements of Homeland Security Presidential Directive 12 

(HSPD-12). In FY 2007, OTS will work with Treasury’s team to implement a new 

identity management program and to issue new smartcard badges. 

OTS continues to implement encryption and information protection controls across its 

environment. During 2005, OTS implemented the use of an encrypted folder to store 

sensitive documents on all client machines. In the fall of 2006, OTS implemented full 

disk encryption on all regional client machines. During FY 2007, OTS plans to address 

and conform with new OMB standards for two-factor authentication and the encryption 

of all mobile media including notebook computers, personal digital assistants, diskettes, 

compact discs, DVDs, flash memory devices, or other mobile media leaving physical 

government locations. 

OTS is working to develop a security program that adequately addresses the National 

Institute of Standards and Technology (NIST) requirements while being manageable for a 

small agency. OTS strengthened its IT Security program during FY 2006 and hired five 

new security professionals who are dedicated to addressing operational and regulatory 

security requirements. OTS also separated Operational Security into a distinct team to 

address day-to-day security concerns and activities. During FY 2007, OTS will strive to 

improve the Federal Information Security Management Act (FISMA) posture by 

implementing new processes compliant with the NIST standards and by recertifying its 

national systems. 

OTS has no major IT investments planned for FY 2007.

 OTS - 19
4.3 – PART Evaluation Table 

PART Name: Thrift Supervision

 Goal: Increase the reliability of the U.S. financial system (F3)

ting: Effective

jor Findings

MB Recommendations

ctions Taken

ctions Planned or Underway

2. Based on feedback received over the past two years, the vast majority of the industry prefers the efficiency and effectiveness of a 

joint examination. OTS eliminated much of the redundancy of two separate exams. OTS will fulfill its statutory examination

responsibilities with less FTEs as a result of this change.

2. The program developed new goals that are outcome-oriented and program measurements which are clear.

3. The program is efficiently and effectively managed.

1. The program purpose is clear.

1. OCC and OTS worked together throughout the strategic and performance planning efforts to ensure that their strategic goals were

closely aligned. The banking regulatory agencies share their strategic and performance plans with each other and meet quarterly to

discuss strategic and performance planning.

1. Federal banking regulatory agencies, including the OTS, the OCC, the NCUA, and the FDIC, work together

to align outcome goals and related measures to allow for greater comparison of program performance in the 

industry.

2. The OTS evaluates the efficiency and effectiveness of a single examination for both Safety and Soundness 

and Compliance functions.

3. The OTS take steps to examine long-term systemic risks in the industry.

3. OTS will continue to examine and address systemic risks.

3. During the 2004 strategic planning process, systemic risks were examined and addressed in the Plan.

1. OTS will continue to work with the OCC to ensure that strategic goals are closely aligned. OTS will continue 

to share its strategic and performance plans with the other banking regulatory agencies and meet to discuss 

strategic and performance planning.

2. OTS will continue to perform a joint examination.

Strategic

Ra

OMB Ma

O

OTS A

OTS A

For a complete list of PART results visit the following website: 

http://www.whitehouse.gov/omb/expectmore/all.html

 OTS - 20
INTERNATIONAL PROGRAMS 

The Department of the Treasury’s FY 2008 budget request for International Programs is 

included in the State, Foreign Operations, and Other Related Programs Appropriation. 
E-Government Initiatives 

Introduction 

The primary purpose of the E-Government and Line of Business initiatives are to 

improve services to U.S. citizens and promote increases in the efficiency and 

effectiveness of government operations so that they provide savings to the taxpayer. The 

U.S. Department of the Treasury has made significant progress toward these goals by 

providing funding for 12 of the 25 E-Government initiatives and six of the nine EGovernment Lines of Business. By facilitating discussions between Departmental EGovernment representatives and the federal Managing Partners, the Department of the 

Treasury has improved the efficiency of many of its activities and has begun to identify 

and eliminate duplicative systems. For example, as managing partner of the Internal 

Revenue Service Free File program, the Department of the Treasury made it possible for 

3.97 million tax payers to file electronically in tax year 2005, producing a cost savings 

for the government of $9.9 million. The Treasury Department’s participation in the ETravel initiative allowed the Department to save $340,000 in travel management fees in 

FY 2006. In addition to these examples, the Treasury Department also saved $161,000 in 

FY 2005 by retiring an acquisition data system as result of its work with the Integrated 

Acquisition Environment effort. Further specifics on the benefits, level of funding, and 

source of funding for each of Department of the Treasury’s E-Government initiatives are 

laid out in this chapter. 

Program Summary by Funding Source 

Dollars in Thousands 

Funding Source FY 2007 FY 2008 $ Change % Change

FY 2007 FY 2007

To FY 2008 To FY 2008

Working Capital Fund (WCF) $19,446 $19,925 $480 2.47%

Department-wide Systems and Capital Investment Program (DSCIP) $2,366 $2,074 ($292) -12.33%

Bureau Specific Funding $5,623 $5,695 $72 1.28%

Grand Total Financial Plan Requirements $27,434 $27,695 $260 0.95%
Table of Contents

Section 1 – Program Benefits........................................................................................... 2 

1.1 – Description and Benefits of E-Government Initiatives.............................................. 2 

Government to Citizen.................................................................................................... 2 

IRS Free File ............................................................................................................... 2 

Gov Benefits.gov ........................................................................................................ 2 

Government to Business................................................................................................. 2 

Business Gateway ....................................................................................................... 2 

E-Rulemaking ............................................................................................................. 2 

Government to Government ........................................................................................... 2 

Grants.gov................................................................................................................... 2 

Recruitment One-Stop ................................................................................................ 3 

E-Payroll ..................................................................................................................... 3 

E-Travel ...................................................................................................................... 3 

Enterprise Human Recourses Integration ................................................................... 3 

E-Training................................................................................................................... 4 

Integrated Acquisition Environment........................................................................... 4 

Lines of Business............................................................................................................ 4 

Case Management....................................................................................................... 4 

Human Resources Management ................................................................................. 4 

Financial Management................................................................................................ 4 

Grants Management.................................................................................................... 4 

Budget Formulation and Execution ............................................................................ 5 

Geospatial ................................................................................................................... 5 

Information Technology Optimization Initiative........................................................ 5 

Cross-Cutting .................................................................................................................. 5 

E-Authentication......................................................................................................... 5 

Section 2 – Budget............................................................................................................. 7 

2.1 – Funding by Program .................................................................................................. 7 

E-Government - 1 
 Section 1 – Program Benefits

1.1 – Description and Benefits of E-Government Initiatives 

Government to Citizen.........................................................................................$383,799 

IRS Free File $70,000 The Internal Revenue Service’s (IRS) Free File program allows 

eligible taxpayers to prepare and electronically file their tax returns over the Internet 

using commercial software for free. This free filing service is available at www.irs.gov 

and is made possible through a partnership between the government and the Free File 

Alliance, a coalition of tax preparation software manufacturers. For the 2005 tax year, 

the IRS reached out to 70 percent of the tax filing public and received 3.97 million e-filed 

tax returns through Free File services representing a cost-savings to the government of 

approximately $9.9 million. Since inception in 2003, IRS Free File has realized cost 

savings of $38 million.

Gov Benefits.gov $313,799 GovBenefits.gov supports the Department of the Treasury’s 

mission by increasing public awareness of valuable tax benefit programs that allow 

businesses and individuals to grow and prosper without being limited by unnecessary or 

obsolete rules and regulations. For the year ending September 2006, over 93,000 citizens 

viewed Treasury Department benefit program pages which generated over 9,800 referrals 

to Department of the Treasury program pages. 

Government to Business..................................................................$970,000 

Business Gateway $435,000 Business Gateway (BG) is a convenient portal for 

businesses to access a wide range of applicable forms online. BG reduces costs 

associated with forms printing, duplication, and distribution through the 

www.business.gov website and benefits the Department of the Treasury by supporting 

the Treasury Department’s desire to help businesses succeed. BG supports the Alcohol 

and Tobacco Tax and Trade Bureau (TTB) by providing citizens greater access to 

compliance tools and documents including 59 links to guidance resources/forms. BG 

also benefits the IRS by providing links to 674 tax guidance resources/forms/tools and 

provides a centralized location for sharing changes in tax regulations or in the tax code 

and providing a forum to solicit feedback on such issues.

E-Rulemaking $535,000 The Department of the Treasury is scheduled to migrate all of 

its rulemaking processes to the Federal Docket Management System (FDMS), ERulemaking’s government-wide solution by the end of the second quarter of Fiscal Year 

(FY) 2007. The Treasury Department currently uses a manual process to publish 

approximately 200 proposed federal regulations on an annual basis. This initiative will 

enable the Treasury Department to streamline and automate the rulemaking process, 

improve citizen participation in the comment phases, and enhance information 

management processes within the Department of the Treasury. 

Government to Government...............................................................$77,250 

Grants.gov $77,250 Grants.gov benefits the Department of the Treasury by providing a 

E-Government - 2 
single location for citizens to find and apply for Treasury Department grant opportunities. 

The Department of the Treasury uses government-wide forms in 100 percent of its grant 

application packages. The Treasury Department has three grant-making programs: IRS 

Low Income Taxpayer Clinic, IRS Tax Counseling for the Elderly, and Community 

Development Financial Institutions (CDFI) Fund. The Department of the Treasury is 

meeting its targeted goals regarding posting of grant opportunities and applications on the 

Grants.gov portal. The Treasury Department has posted five funding opportunities and 

five application packages on Grants.gov. The Department of the Treasury received 293 

electronic applications and expects to report a total cost avoidance of $95,000 in FY 

2007. 

Internal Efficiency and Effectiveness..............................................$25,573,473

Recruitment One-Stop $738,830 The USAJOBS.GOV web-portal allows the Treasury 

Department to announce position openings and attract qualified candidates from a larger 

and diversified pool. This expedites the Department of the Treasury’s ability to fill 

mission critical positions and reduce paper applications and processing time, thus 

improving access to top candidates and the efficiency of the hiring process. The Treasury 

Department also leverages the USAJOBS resume function by uploading into its 

automated system, CareerConnector. 

E-Payroll $18,014,954 As a participant in the E-Payroll initiative, the Department of the 

Treasury leverages economies of scale through the use of the National Finance Center 

(NFC). E-Payroll creates standardized services and provides full payroll services to the 

Treasury Department.

E-Travel $5,472,652 The Department of the Treasury is in the process of migrating all 

of its travel services to GovTrip, one of the designated E-Travel Service (ETS) providers. 

Eleven of 14 Treasury Department bureaus have fully deployed GovTrip and are 

realizing the following benefits. Through a combination of advantageous Travel 

Management Center (TMC) pricing and a substantially higher degree of On-Line 

Booking Engine (OBE) usage (80 percent), the Treasury Department saved over 

$340,000 in travel management service fees for reservations in FY 2006. By utilizing 

ETS, the Department of the Treasury reduced manual post travel audit by 30 percent. 

The Treasury Department continues to process vouchers through the ETS and processed 

over 4,000 in September 2006. The Department of the Treasury decommissioned costly 

stovepipe legacy systems further supporting the Presidential Management Agenda (PMA) 

goals and objectives.

Enterprise Human Recourses Integration $241,119 Enterprise Human Recourses 

Integration (EHRI) provides a standard Department-wide approach to gathering, 

maintaining, and analyzing personnel data across its 11 bureaus. Data warehouse and 

data-mining tools assist with forecast projections for strategic hiring, trend analysis, and 

succession planning. 

E-Government - 3 
E-Training $750,000 The Department of the Treasury currently has five separate 

Learning Management Systems (LMS) servicing over 110,000 employees and is 

consolidating these disparate LMSs to one system by the third quarter of Fiscal Year 

2007. This consolidation will eliminate redundant software and hardware, thereby 

decreasing maintenance costs. Additionally, the Treasury Department will leverage its 

buying power to lower the cost of future upgrades and enhancements. Upon completion, 

the Department of the Treasury will electronically collect, maintain, and report training 

information and monitor professional development Department-wide. 

Integrated Acquisition Environment $355,918 Through adoption of Integrated 

Acquisition Environment (IAE) tools and services, the Department of the Treasury is 

improving its ability to make informed and efficient purchasing decisions and automate 

manual processes. IAE will provide a common data warehouse to facilitate trend analysis 

and provide acquisition information across the Treasury Department. IAE has allowed 

the Department of the Treasury to automate manual and paper-based processes as well as 

retire legacy systems. For example, the Treasury Department retired an acquisition data 

system in FY 2005 for a savings of $161,000. 

Lines of Business........................................................................$624,780 

Case Management $0 The Case Management (CM) Line of Business (LoB) is defined 

as activities associated with the collection, qualification, analysis, and use of information 

for law enforcement purposes to prevent acts of terrorism or to defend the government 

(including its officers and agents) against legal challenges. CM LoB helped Treasury 

move their case management programs forward. The Treasury Department will use the 

Department of Justice’s business case to build the case for its own Enterprise Content 

Management (ECM) consolidation efforts. CM LoB shares best practices/lessons learned 

with the Department of the Treasury. The Department has no dedicated funding for this 

initiative in 2008.

Human Resources Management $260,870 The Department of the Treasury operates HR 

Connect, an approved HR LoB service provider. This initiative allows the Treasury 

Department to spread the cost of managing HR systems and processes across a larger 

customer base, reducing agency costs to operate these systems and processes. 

Financial Management $75,000 The Treasury Department’s Bureau of Public Debt is 

one of four Financial Management (FM) LoB shared service providers. The Department 

of the Treasury hosts financial systems and business operations for over 30 Government 

organizations, including most Treasury Department bureaus and 15 non-Treasury 

Department related organizations. The increased customer base reduces duplicative 

financial management systems within the Department of the Treasury and lowers overall 

operation and maintenance costs. The Treasury Department leverages its IT and financial 

processing expertise to realize cost savings and avoidance through the standardization of 

business processes and a common business language at the agency and bureau levels. 

Grants Management $28,460 By relying on shared service centers for the processing of 

E-Government - 4 
grants, the Department of the Treasury will benefit from improved delivery of services to 

grant recipients, improved decision-making and decreased costs associated with building 

and maintaining grants management IT systems. IRS, one of two grant making entities 

within the Treasury Department, will continue to rely on the Department of Health and 

Human Services (HHS) for grants processing. CDFI, the second grant making entity 

within the Treasury Department, has signed an Interagency Agreement (IAA) to migrate 

its grants processing functions to HHS and expects to report cost savings/avoidance as 

these functions migrate. 

Budget Formulation and Execution $85,000 The Budget Formulation and Execution 

(BFE) LoB is a cross-agency effort to find common solutions that produce efficiencies in 

budget formulation and execution activities across the federal government. In working 

toward this goal, the BFE LoB developed seven technology-based capabilities solutions. 

One of these solutions includes “Agency Budgeting Tools,” which is intended to make 

software applications already developed by some agencies available to the overall federal 

budget community. The Department of the Treasury volunteered to head this effort by 

working to make the Budget Formulation and Execution Manager (BFEM) available to 

any agency who wishes to use the tool. Using funds provided by the BFE LoB, the 

Treasury Department is standing up a BFEM service that other agencies may subscribe to 

and is also creating a compact disk and developing system administrator guides that will 

allow agencies to install the software on their own systems. Aside from benefiting the 

overall federal government by eliminating costs agencies must incur for independent 

development efforts, this effort has a direct benefit for the Treasury Department since it 

spreads the cost of future BFEM development work. By creating a pool of funds 

contributed to by a wide range of agencies, the Treasury Department no longer has to 

fund BFEM development itself and can share those costs with other agencies. 

Geospatial $15,450 The Department of the Treasury uses geospatial data to assist 

enforcement efforts and financial forecasting. The Geospatial LoB identifies 

opportunities for optimizing and consolidating federal geospatial-related investments to 

reduce the cost of government and improve services to citizens. The LoB also facilitates a 

more coordinated approach to producing, maintaining, and using geospatial data, and will 

ensure sustainable participation from federal partners to establish a collaborative model 

for geospatial-related activities and investments. 

Information Technology Infrastructure $160,000 The Information Technology 

Infrastructure LoB will complement and greatly advance the Treasury Department’s 

ongoing efforts to consolidate and optimize its IT infrastructure assets at the enterprise 

level. In FY 2007, the Department of the Treasury expects to make great strides in 

establishing solid baselines and targets with standard and defensible metrics, identifying 

optimization opportunities, and implementing plans. 

Cross-Cutting................................................................................$65,217 

E-Authentication $65,217 The E-Authentication initiative allows the Department of the 

E-Government - 5 
Treasury and its bureaus to use identity credentials issued and managed by organizations 

internal and external to the federal government, thereby relieving the Treasury 

Department of the cost of providing its own identity management solutions. 

Exhibit 300s for each of the E-Government initiatives can be found at 

http://www.treas.gov/exhibit300/ . 

E-Government - 6 
Section 2 – Budget

2.1 – Funding by Program 

Funding by Program Managing Agency Funding Source FY 2007 FY 2008

Government to Citizen

IRS Free File Department of the Treasury Bureau Specific Funding $70,000 $70,000

GovBenefits.gov Department of Labor WCF $315,000 $313,799

Government to Citizen (Total) $385,000 $383,799

Government to Business

Business Gateway Small Business Administration DSCIP $720,767 $435,000

E-Rulemaking Environmental Protection Agency DSCIP $615,000 $535,000

Government to Business (Total) $1,335,767 $970,000

Government to Government

Grants.gov Health and Human Services Bureau Specific Funding $75,000 $77,250

Government to Government (Total) $75,000 $77,250

Internal Efficiency and Effectiveness

Recruitment One-Stop Office of Personnel Management WCF $717,311 $738,830

E-Payroll Office of Personnel Management WCF $17,490,247 $18,014,954

E-Travel General Services Administration Bureau Specific Funding $5,394,392 $5,472,652

EHRI Office of Personnel Management WCF $231,623 $241,119

E-Training Office of Personnel Management DSCIP $750,000 $750,000

Integrated Acquisition Environment General Services Administration WCF $430,840 $355,918

Internal Efficiency and Effectiveness (Total) $25,014,413 $25,573,473

Lines of Business

Case Management Department of Justice $0 $0

Human Resources Office of Personnel Management WCF $260,870 $260,870

Financial Management

 Department of Energy / Department

of Labor Bureau Specific Funding $83,333 $75,000

Grants Management

 National Science Foundation /

Department of Energy DSCIP $30,074 $28,460

Budget Formulation and Execution Department of Education DSCIP $75,000 $85,000

Geospatial Department of Interior DSCIP $15,000 $15,450

Information Technology Infrastructure Optimization Initiative General Services Administration DSCIP $160,000 $160,000

Lines of Business (Total) $624,277 $624,780

Cross-Cutting

E-Authentication General Services Administration DSCIP $0 $65,217

Cross Cutting (Total) $0 $65,217

Grand Total $27,434,457 $27,694,519

E-Government - 7