Department of the Treasury – Congressional Justification FY 2007



Overview

The United States Department of Treasury’s budget 

priorities reflect the Department’s dedication to 

promoting economic 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 2007 performance 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. Treasury’s FY 2007 performance 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 far-reaching role in homeland security. The 

Department battles national security threats by 

coordinating financial intelligence, targeting and 

sanctioning supporters of terrorism and proliferators 

of WMD, improving the safeguards of our financial 

systems, and promoting international relationships 

that attack the financial underpinnings of terrorist 

and other criminal networks. 

The Department administers America’s tax laws 

and collects revenues that fund most government 

operations and public services. 

•

•

•

FY 2007 President’s Budget by Function

( D o l l a r s i n T h o u s a n d s ) FY 2005 FY 2006 FY 2007

Enacted Enacted

President’s 

Budget

Increase/

Decrease % Change

Management & Financial $574,411 $597,759 $601,946 $4,187 0.7%

Departmental Offices Salaries and Expenses 178,411 194,626 223,874 29,248 15.0%

Expanded Access* (4,000) 0 0 0 0

Treas Building & Annex Repair & Restoration 12,217 9,900 0 (9,900) -100.0%

Dept-wide Systems & Capital Invest. Program 32,002 24,168 34,032 9,864 40.8%

Air Transportation Stabilization Program 1,984 2,723 0 (2,723) -100.0%

Financial Crimes Enforcement Network 71,922 72,894 89,794 16,900 23.2%

Alcohol & Tobacco Tax and Trade Bureau ** 82,336 90,215 92,604 2,389 2.6%

Office of Inspector General 16,368 16,830 17,352 522 3.1%

Treasury IG for Tax Administration 128,093 131,953 136,469 4,516 3.4%

Community Development Financial Institutions Fund 55,078 54,450 7,821 (46,629) -85.6%

Tax Administration *** $10,236,087 $10,573,706 $10,591,837 $18,131 0.2%

IRS Processing, Assistance and Management 4,056,857 4,095,212 4,045,122 (50,090) -1.2%

IRS Tax Law Enforcement 4,363,539 4,678,498 4,762,327 83,829 1.8%

IRS Information Systems 1,577,768 1,582,977 1,602,232 19,255 1.2%

IRS Business Systems Modernization 203,360 197,010 167,310 (29,700) -15.1%

IRS HITCA 34,562 20,008 14,846 (5,162) -25.8%

Fiscal Service Operations $402,848 $409,035 $411,443 $2,408 0.6%

Financial Management Service 229,083 233,881 233,654 (227) -0.1%

Bureau of the Public Debt 173,765 175,154 177,789 2,635 1.5%

Total, Treasury Appropriations Committee $11,213,346 $11,580,500 $11,605,226 $24,726 0.2%

Treasury International Programs $1,337,247 $1,361,385 $1,535,467 $174,082 12.8%

International Financial Institutions 1,219,199 1,277,235 1,328,968 51,733 4.1%

Technical Assistance 18,848 19,800 23,700 3,900 19.7%

Debt Restructuring 99,200 64,350 182,799 118,449 184.1%

Total $12,550,593 $12,941,885 $13,140,693 $198,808 1.5%

* Unobligated balances prior to FY 2005.

** TTB President’s Budget does not include user fee proposal of $28,640 thousand. Net request is $63,964 thousand including user fee proposal.

*** The IRS FY 2006 enacted level includes a1% across the board rescission and excludes rescission of unobligated balances ($20 Million from PAM and $9 Million from 

HITCA). In FY 2007, the IRS request is supplemented by $135 million in new user fees for a total operating level of $10,726,8 37 thousand.
Department of the Treasury – Congressional Justification FY 2007

FY 2007 President’s Budget by Strategic Goal

( D o l l a r s i n T h o u s a n d s ) Promote Prosperous 

U.S./World 

Economies

(E1

Promote Stable U.S./

World Economies

(E2)

Promote Integrity of 

Financial Systems

(F3)

Manage U.S. Gov

Finances Effectively

(F4)

Management 

Excellence & 

Accountability

(M5) Total

Treasury Goal/Objective Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $ Direct $ Reimb. $

Management & Financial $63,952 $3,281 $77,221 $4,144 $174,930 $6,145 $66,077 $3,927 $219,766 $9,086 $601,946 $26,583 

Departmental Offices Salaries and Expenses 56,131 3,281 29,993 3,277 85,136 4,604 20,701 3,094 31,913 5,544 223,874 19,800 Dept-wide Systems & Capital Invest. Program 0 0 0 0 0 0 0 0 34,032 0 34,032 0 Financial Crimes Enforcement Network 0 0 0 0 89,794 1,541 0 0 0 0 89,794 1,541 Alcohol & Tobacco Tax and Trade Bureau 0 0 47,228 867 0 0 45,376 833 0 0 92,604 1,700 Office of Inspector General 0 0 0 0 0 0 0 0 17,352 2,342 17,352 2,342 Treasury IG for Tax Administration 0 0 0 0 0 0 0 0 136,469 1,200 136,469 1,200 Community Development Financial Institutions Fund

7,821 0 0 0 0 0 0 0 0 0 7,821 0 

Tax Administration $0 $0 $0 $0 $213,722 $15,099 $10,378,115 $267,171 $0 $0 $10,591,837 $282,270 

IRS Processing, Assistance and Management 0 0 0 0 0 0 4,045,122 101,702 0 0 4,045,122 101,702 IRS Tax Law Enforcement 0 0 0 0 213,722 15,099 4,548,605 84,571 0 0 4,762,327 99,6710IRS Information Systems 0 0 0 0 0 0 1,602,232 80,898 0 0 1,602,232 80,898 Business Systems Modernization 0 0 0 0 0 0 167,310 0 0 0 167,310 0 Health Insurance Tax Credit Administration 0 0 0 0 0 0 14,846 0 0 0 14,846 0 

Fiscal Service Operations $0 $0 $0 $0 $0 $0 $411,443 $213,201 $0 $0 $411,443 $213,201 

Financial Management Service 0 0 0 0 0 0 233,654 196,282 0 0 233,654 196,282 Bureau of the Public Debt 0 0 0 0 0 0 177,789 16,919 0 0 177,789 16,919 

Total, Treasury Appropriations Committee $63,952 $3,281 $77,221 $4,144 $388,652 $21,244 $10,855,635 $484,300 $219,766 $9,086 $11,605,226 $522,054 

Treasury International Programs 1,535,467 0 0 0 0 0 0 0 0 0 1,535,467 0 

Total, Appropriated Level $1,599,419 $3,281 $77,221 $4,144 $388,652 $21,244 $10,855,635 $484,300 $219,766 $9,086 $13,140,693 $522,0554Non Appropriated Bureaus $0 $117,166 $0 $0 $0 $3,226,883 $0 $0 $0 $983,342 $0 $4,327,391 

Treasury Franchise Fund 0 0 0 0 0 0 0 0 0 983,342 0 983,342 U.S. Mint 0 0 0 0 0 1,961,915 0 0 0 0 0 1,961,915 Bureau of Engraving and Printing 0 0 0 0 0 556,000 0 0 0 0 0 556,000 Office of the Comptroller of the Currency 0 95,077 0 0 0 510,169 0 0 0 0 0 605,246 Office of Thrift Supervision 0 22,089 0 0 0 198,799 0 0 0 0 0 220,888 

Subtotal, Direct $ $1,599,419 $77,221 $388,652 $10,855,635 $219,766 $13,140,693 $0 Subtotal, Reimbursable $ $120,447 $4,144 $3,248,127 $484,300 $0 $0 $3,857,018 Total, Treasury Level $1,719,866 $81,365 $3,636,779 $11,339,935 $219,766 $16,997,7110
Department of the Treasury – Congressional Justification FY 2007

FY 2007 Budget Request by Function

FY 2007 Budget Request

The Department of Treasury’s FY 2007 budget 

request of $11.61 billion focuses resources on key 

programs necessary to fight the war on terror 

and to promote economic growth. The request is 

$24.7 million above the FY 2006 level, reflecting 

Treasury’s commitment to the fiscal restraint 

necessary to achieve the President’s goal of reducing 

the nation’s deficit in half by FY 2009. While the 

majority of the Department’s budget is funded each 

fiscal year through the Department of the Treasury 

Appropriations Act, $1.5 billion for the Department’s 

international programs is funded through the 

Foreign Operations, Export Financing, and Related 

Programs Appropriations Act.

Promoting Economic Growth and Security

The Secretary of the Treasury is the Administration’s 

principal economic spokesman. Treasury’s 

Departmental Offices, including the Offices of 

International Affairs, Tax Policy, Economic Policy, 

Domestic Finance and Financial Education, 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. 

Treasury’s FY 2007 budget request provides the 

Office of Tax Policy with an additional $.5 million, 

the necessary resources to enable the Department 

to build effective models for the dynamic analysis 

of revenue proposals. Better models that accurately 

capture the full effect of tax policies on economic 

growth will lead to improved information for 

decision makers. 

Treasury supports the President’s domestic economic 

priorities of promoting financial literacy and 

stimulating economic growth through a variety of 

programs. The MyMoney.gov website and a toll-free 

hotline give all Americans access to basic financial 

literacy tools. Treasury also directed more than 100 

financial education events in the last 12 months. 

Treasury administers the New Markets Tax Credit 

program, which stimulates growth in economically 

distressed communities within the U.S. By providing 

tax credits to private investors in exchange for 

investments in Community Development Entities, 

the program harnesses the power of the private 

sector to lift Americans out of poverty. 

The FY 2007 budget request funds Treasury’s 

efforts to promote international economic growth 

through financial diplomacy. Treasury stimulates 

international 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. Cumulative budget savings from these 

arrangements are estimated at over $10 billion since 

1991.

Treasury, through the Office of International Affairs, 

monitors the economies of more than 160 countries 

Management

and Financial 

(includes CDFI)

$601,946

Tax Administration

$10,591,837

Fiscal Service 

Operations

$411,443

Treasury

International

Programs

$1,535,467
Department of the Treasury – Congressional Justification FY 2007

worldwide to ensure stability and transparency in 

the global marketplace and works with more than 20 

International Financial Institutions and organizations 

to target development assistance. Treasury’s efforts 

include the development and negotiation of the 

Multilateral Debt Relief Initiative, endorsed by 

President Bush and other G8 leaders, providing 

100 percent debt relief for Highly Indebted Poor 

Countries. Treasury’s efforts also include continuing 

dialogue and cooperation with Chinese leaders to 

achieve the goal of greater Chinese exchange rate 

flexibility. 

The $9.4 million requested to increase Treasury’s 

overseas presence will enable the Department to 

more effectively meet its international mission in the 

global economy. While supporting the war on terror, 

attaches will also develop close relationships with 

international financial institutions and acquire ‘on 

the ground’ knowledge of the financial markets. 

Strengthening National Security

The Office of Terrorism and Financial Intelligence 

(TFI) supports Treasury’s national security efforts 

by safeguarding the U.S. financial systems against 

illicit use. TFI provides financial intelligence 

analysis, develops and implements anti-money 

laundering measures, administers the Bank Secrecy 

Act, conducts criminal investigations and enforces 

sanctions.

Financial intelligence exposes the infrastructure of 

terrorist and criminal organizations. It provides a 

roadmap to those who facilitate criminal activity, 

such as broker-dealers, bankers, lawyers, and 

accountants. These investigations lead to the 

recovery and forfeiture of illegally obtained assets 

and create broad deterrence against criminal 

activity. Treasury plays a unique role of linking 

law enforcement and intelligence communities with 

financial institutions and regulators. To support 

these efforts, Treasury requests an increase of 

$12.5 million for the Financial Crimes Enforcement 

Network to enhance its regulatory outreach and 

strengthen analytical capabilities, upgrade the BSA 

Direct reporting and retrieval component, and, 

pending the Treasury Secretary’s approval of the 

feasibility study, begin development of a crossborder wire transfer reporting system.

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 

(WMD), rogue regimes and international narcotraffickers, 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, drug kingpins, 

and support networks

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 2007 President’s Budget requests an increase 

of $7.8 million to enable Treasury to continue 

to enhance its abilities to identify, disrupt, and 

dismantle the financial infrastructure of networks 

of terrorists, proliferators of WMD, narco-traffickers, 

criminals, and other threats. Treasury will also 

improve its analytical capabilities, to provide 

actionable intelligence and to target, designate and 

implement sanctions against the financiers of WMD 

proliferation.

This budget request funds Treasury’s national 

and homeland security mission at a level that 

provides increasingly effective support to the war 

on terror. This support will be further enhanced 

by the increased international presence funded in 

•

•

•

•

•
Department of the Treasury – Congressional Justification FY 2007

this request. Treasury attachés located at critical 

embassies throughout the world will enable close 

liaison with the international financial institutions 

and foreign government to promote the national and 

economic security interests of the U.S. 

Collecting Taxes

Collecting taxes in a fair and consistent manner is a 

core mission of the Treasury. This past year, Treasury 

collected $2.267 trillion in federal tax revenue from 

individual and corporate income taxes, a 12.3 percent 

increase over the previous year. An additional 

$14.71 billion in excise taxes was collected from 

producers and sellers of alcohol, tobacco, firearms, 

and ammunition. 

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. 

Treasury’s enforcement efforts resulted in the record 

level of $47.3 billion in enforcement revenue. 

Reducing the tax gap – which is the difference 

between what taxpayers should pay and what they 

actually pay on a timely basis – is at the heart of 

Treasury’s tax enforcement programs. This budget 

request includes proposed changes in the tax law 

that will improve the ability of the Internal Revenue 

Service to identify underreporting and collect 

unpaid taxes, while minimizing the burden imposed 

on compliant taxpayers. These proposals include:

Clarify the circumstances in which employee 

leasing companies and their clients can be held 

jointly liable for federal employment taxes. 

Increase information reporting on payment card 

transactions.

Expand information reporting to certain 

payments made by Federal, state and local 

governments to procure property and services. 

Amend Collection Due Process procedures for 

employment tax liabilities. 

Expand to non-income tax returns the requirement 

•

•

•

•

•

that paid return preparers identify themselves 

on such returns and expand the related penalty 

provision. 

Maintaining an appropriate balance between 

enforcement and taxpayer service is critical to fair 

administration of the tax code. Treasury approaches 

this challenge by expanding outreach efforts to 

bring more taxpayers into the system, increasing 

voluntary compliance levels and tax revenue, 

and improving service to compliant taxpayers. In 

FY 2007, Treasury will focus its taxpayer service 

efforts on providing service through more efficient 

automated methods. 

Treasury also dedicates resources to educating 

taxpayers and stakeholders on the benefits of 

electronic filing. These efforts resulted in an 

electronic filing rate for individuals in 2005 above 

50 percent for the first time, significant progress 

toward Treasury’s goal of receiving 80 percent of 

returns via e-file by 2007. Higher electronic filing 

rates greatly reduce the resources necessary to 

process tax returns. 

The FY 2007 budget request includes funding 

necessary to continue to meet the challenge of 

balancing both the enforcement and taxpayer service 

elements in tax collection. Treasury requests an 

increase of $137 million for tax law enforcement 

activities.

Treasury 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 $14.7 billion in excise taxes and processed 

over 400,000 tax returns in 2005, at a cost of only 

one dollar for every $367 collected. The Bureau 

has audited 113 of the 200 largest taxpayers, and 

will complete audits of the remaining 87 taxpayers 

in 2007 and 2008. These 200 taxpayers account for 

98 percent of all excise taxes paid. Through 2005, 

these audits have resulted in the collection of an 

additional $4.3 million of revenue and $10.2 million 

in tax penalties and interest.
Department of the Treasury – Congressional Justification FY 2007

Managing the Government’s Finances

In the face of the fiscal pressures generated by the 

war on terror and the response to natural disasters, 

sound management of the government’s finances 

is more important than ever. The FY 2007 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, issuing debt and preparing public financial 

statements. 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 all-electronic Treasury. In FY 2005, 

Treasury issued 725 million electronic payments 

including income tax refunds, Social Security 

benefits, and veterans’ benefits. Another step 

toward an all electronic Treasury is the Department’s 

Go Direct Campaign. This campaign encourages 

Social Security and Supplemental Security Income 

recipients to switch to direct deposit. Direct Deposit 

represents a cost savings to the taxpayer of 75 cents 

per transaction. The percentage of Treasury’s 

electronic collections increased 10.2 percent in FY 

2005 from the previous year.

Treasury manages more than $7.9 trillion of public 

debt. The 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, 

web-based system that electronically issues securities 

to retail customers and enables investors to manage 

their accounts on-line. A major initiative this past 

year encouraged investors to convert paper savings 

bonds into electronic form making their investments 

easier to manage and to avoid potential loss or theft 

of the paper bonds. More than 700 million paper 

savings bonds are currently outstanding and could 

eventually be converted.

Treasury assisted the victims of hurricane Katrina 

by providing financial relief to disaster victims. 

Treasury issued 1,267,000 FEMA disaster assistance 

payments valued at $2.6 billion. Treasury also 

established a debit card program that issued 11,374 

FEMA Assistance Cards valued at $22.7 million to 

evacuees in three Texas cities.

Treasury’s 2007 budget request includes an increase 

of $2.4 million necessary to manage the government’s 

finances more effectively and efficiently. The 

activities included in this funding are:

Improving the efficiency of the securities services 

to retail customers,

Integrating e-commerce technologies to 

streamline collections and payments processes 

to move toward an all-electronic Treasury,

Improving forecasting accuracy to reduce 

borrowing cost and increase return on 

investments,

Enhancing business processes and systems, 

including producing daily financial statements, 

to support public investors in Treasury securities 

and government agencies, and

Strengthening accounting operations through 

the continued rollout of the Government-wide 

accounting system, and implementation of 

FedDebt and Debt Check

Strengthening Financial Institutions

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 2005, OCC and OTS oversaw financial assets 

held by these financial institutions totaling $7.3 

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 2005, the Mint 

and BEP produced 14.2 billion coins and 8.6 billion 

•

•

•

•

•
Department of the Treasury – Congressional Justification FY 2007

paper currency notes, respectively. Also during 

2005, these agencies introduced new designs for 

both coins and currency. The Mint issued five new 

quarters from the 50 State Quarters® program and 

the two new nickels as part of the Westward Journey 

Nickel SeriesTM. BEP introduced a new $10 currency 

note, representing the third denomination in a new 

currency series that incorporates state-of-the-art 

anti-counterfeiting technology.

The Mint has streamlined processes and leveraged 

technology to produce the nation’s coin and currency 

at significant cost savings. The Mint was able to 

increase margins by shipping more coins, improving 

time to market and reducing manufacturing and 

selling, general and administrative costs. Because 

of improved operating results and profits, the Mint 

returned $775 million to the Treasury General Fund 

in FY 2005. 

Funding for OCC, OTS, Mint, and BEP is not included 

in the Department’s annual budget request, 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.

Managing Treasury Effectively

Treasury is committed to using the resources 

provided by taxpayers in the most efficient 

manner possible. Funding requested in Treasury’s 

Departmental Offices and Department-wide 

Systems and Capital Investments Program (DSCIP) 

seeks to build a strong management infrastructure, 

including critical national security investments 

such as the Treasury Foreign Intelligence Network. 

These investments ensure that Treasury remains a 

world-class organization that meets the President’s 

standard of a citizen-centered, results-oriented 

government. 

In FY 2006, Treasury plans to complete a comprehensive 

investment in the repair and restoration of its historic 

facilities, including the Treasury building located 

at 1500 Pennsylvania Avenue, NW. To protect and 

maintain this investment, the FY 2007 budget request 

includes $1 million in the Departmental Offices 

budget for ongoing facilities repair and restoration 

projects. 

In FY 2007, Treasury requests $1.8 million to fund 

Department-wide performance management 

training. This training will provide Treasury 

leadership with the tools to link accomplishments in 

achieving the goals of the Department to individual 

performance. 

The DSCIP account funds technology investments to 

modernize business processes throughout Treasury, 

helping the Department improve efficiency. In FY 

2007, Treasury requests $34 million 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:

Upgrading and enhancing the Treasury Foreign 

Intelligence Network (TFIN) and the Treasury 

Secure Data Network (TSDN). TFIN and TSDN 

are classified systems that are critical to support 

Treasury’s expanding financial intelligence 

mission and leadership role in the financial war 

on terror,

Continuing modernization of the DO IT 

infrastructure which will provide enhanced 

•

•
Department of the Treasury – Congressional Justification FY 2007



functionality, performance, and security for DO 

customers,

Continuing to improve Treasury’s Federal 

Information Security Management Act (FISMA) 

performance and strengthen the Department’s 

overall security posture, and 

Completing required milestones as part 

of Treasury’s Presidential E-Government 

Implementation Plan.

This 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.

President’s Management Agenda (PMA)

Treasury is meeting the President’s challenge to 

improve the management of the Department’s 

people and resources. On the most recent PMA 

scorecard, the Department achieved a Green progress 

score in five out of six initiative areas, indicating 

that plans are in place and implementation is 

progressing to accomplish the PMA objectives. The 

PMA originally identified five key governmentwide areas. In FY 2005, the Administration added 

an initiative on eliminating improper payments 

that applies to a more limited number of agencies 

including Treasury.

Human Capital Treasury received a Green status 

rating in Human Capital for the first quarter of FY 

2006. The Office of Personnel Management and Office 

of Management and Budget recognized Treasury 

Human Capital for its accountability system, and 

how Treasury uses it to gather and analyze data and 

lead policy and program improvements. 

Competitive Sourcing Treasury’s Competitive Sourcing 

score remained Green for both status and progress 

in the first quarter of FY 2006. The Department 

maintained its green status by completing studies 

on time, establishing the process, procedures, and 

framework for Most Efficient Organization (MEO) 

•

•

use of sub-contracts, and managing and monitoring 

post-implementation of competitive sourcing 

studies

Improved Financial Performance Treasury’s score for 

Financial Performance was red in FY 2005 but Green 

for progress. Treasury continues to implement 

corrective actions to resolve material weaknesses. 

Treasury has an established schedule of planned 

actions in place to address its material weaknesses.

Expanded E-Government Progress in Treasury’s 

process and policy initiatives allowed it to move 

to Yellow in status and Green in progress for Egovernment in the first quarter of FY 2006. The 

Department continues to stress performance in 

complying with the Federal Information Security 

Management Act, continue to integrate and utilize 

the Treasury Enterprise Architecture and, most 

importantly, standardize implementation of Earned 

Value Management analysis within the IT capital 

planning process.

Budget and Performance Integration Treasury’s Budget 

and Performance Integration initiative is yellow in 

status and green in progress. Treasury will get to 

Green during FY 2006 by developing marginal cost 

measures for the remaining four core mission areas 

Status Q1 FY 200

Initiative FY 2004 FY 2005 Status Progress

Human 

Capital Y Y G G

Competitive 

Sourcing Y G G G

Financial 

Performance R R R G

EGovernment R Y Y G

BudgetPerformance 

Integration

Y Y Y G

Improper 

Payments n/a R R Y

Green for 

Success

Yellow for 

Mixed Results

Red for 

Unsatisfactory

President’s Management Agenda 
Department of the Treasury – Congressional Justification FY 2007



of Treasury and resolving past PART evaluations 

that were scored “Results Not Demonstrated.” 

Treasury’s efforts to achieve a Green status score will 

be supported by the comprehensive performance 

framework implemented this year. The framework 

will guide future budget and performance integration 

efforts. Treasury will also implement marginal cost 

metrics for the remaining mission areas.

Eliminating Improper Payments Treasury’s score is Red 

in status and Yellow in progress. This PMA initiative 

is tied to the Improper Payments Information Act of 

2002. Treasury is committed to ensuring accurate 

and appropriate federal payments. Accordingly, 

Treasury sets performance targets to track progress 

on eliminating improper payments. Treasury 

is working with the Office of Management and 

Budget to develop a risk assessment plan to identify 

vulnerable programs and create measurement 

systems and corrective action plans that include 

aggressive, yet feasible, reduction targets across the 

Department.

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.

While some results are still pending, Treasury 

expects a 36 percent increase in its score compared 

to last year’s aggregate result. Treasury’s improved 

PART scores in 2005 were a result of: (1) significant 

improvements in goals and measures; (2) training 

that included an exchange of lessons learned across 

bureaus; and (3) solid evidentiary procedures. All 

seven PART programs evaluated in 2005 (for the 2007 

budget year) received effective or moderately effective 

ratings, demonstrating Treasury’s commitment to 

focusing on program results. Treasury’s progress 

in improved program performance is indicated in 

the two charts below.

FY 2002

FY 2003

FY 2004

FY 2005

0% 20% 40% 60% 80% 100%

Results not Demonstrated

Ineffective

Adequate

Moderately Effective

Effective

PART Scoring History 

FY 2002

FY 2003

FY 2004

FY 2005

0% 20% 40% 60% 80% 100%

Percent Passing

Percentage Treasury Programs Passing PART 

Evaluations (adequate or better score) 
Department of the Treasury – Congressional Justification FY 2007

1

Conclusion

Treasury’s FY 2007 budget request reflects the 

Department’s commitment to fiscal discipline 

and sound management while supporting the 

Administration’s security, economic, and financial 

policy goals. 

The tables that follow show a summary of program 

changes for FY 2007, a summary of budget increases 

and decreases for FY 2007, a fiscal year comparison 

for FTEs, and total funding levels for the FY 2007 

budget.

Program Bureau Rating

IRS Advocate IRS Moderately Effective

IRS Service IRS Adequate

Financial and Technical 

Assistance

CDFI Adequate

FMS Collections FMS Effective

Mint Numismatic Mint Effective

New Markets Tax Credits CDFI Adequate

Programs evaluated for the FY 2007 budget cycle 

include:

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 2006 budget cycle 

include:
Department of the Treasury – Congressional Justification FY 2007

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

( D i r e c t a n d R e i m b u r s a b l e )

FY 2005 Actual FY 2006 Estimated FY 2007 President’s Budget

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

Departmental Offices Salaries and Expenses 858 283 1,141 1,004 316 1,320 1,058 320 1,378

Treas Building & Annex Repair & Restoration 7 0 7 9 0 9 0 0 0

Air Transportation Stabilization Program 3 0 3 6 0 6 0 0 0

Financial Crimes Enforcement Network 267 1 268 330 1 331 352 1 353

Alcohol & Tobacco Tax and Trade Bureau 510 13 523 544 15 559 544 15 559

Office of Inspector General 101 6 107 115 5 120 115 5 120

Treasury IG for Tax Administration 846 9 855 850 3 853 850 3 853

Internal Revenue Service 94,282 1,017 95,299 95,386 1,350 96,736 92,992 1,503 94,495

Financial Management Service 1,645 356 2,001 1,818 320 2,138 1,761 370 2,131

Bureau of the Public Debt 1,206 14 1,220 1,390 64 1,454 1,390 64 1,454

Community Development Financial 

Institutions Fund

50 0 50 68 0 68 35 0 35

Subtotal, Treasury Appropriated Level 99,775 1,699 101,474 101,520 2,074 103,594 99,097 2,281 101,378

Treasury Franchise Fund 0 686 686 0 762 762 0 820 820

U.S. Mint 0 2,015 2,015 0 2,003 2,003 0 1,902 1,902

Bureau of Engraving and Printing 0 2,282 2,282 0 2,300 2,300 0 2,300 2,300

Office of the Comptroller of the Currency 0 2,686 2,686 0 2,886 2,886 0 2,886 2,886

Office of Thrift Supervision 0 885 885 0 965 965 0 965 965

Sallie Mae Assessments 3 0 3 0 0 0 0 0 0

Terrorism Insurance Program 9 0 9 10 0 10 10 0 10

Total 99,787 10,253 110,040 101,530 10,990 112,520 99,107 11,154 110,261
Department of the Treasury – Congressional Justification FY 2007

1

Summary of FY 2007 Program Changes

( D o l l a r s i n T h o u s a n d s )

Amount Direct FTEs

FY 2006 Consolidated Appropriations (P.L. 109-115) $11,700,474 103,151 

Rescission (P.L. 109-148) (116,974) (612)

FY 2006 Enacted $11,583,500 102,539 

Maintaining Current Levels

Annualization of FY 2006 Initiatives 5,009 31 

Non-Pay Inflation 68,575 

Pay Annualization 66,659 

Proposed Pay Raise 162,299 

Total Maintaining Current Levels $302,542 31 

Base Realignment

IRS FTE Adjustment 0 (1,019)

Total Base Realignment $0 (1,019)

Non-Recurring Costs

DO Currency Manipulation (990)

DO Public key Infrastructure (248)

DO e-Cavern (1,485)

TBARR TBARR Completed (8,900) (9)

ATSP ATSP Completion (2,723) (6)

DSCIP DSCIP Base (24,168)

FMS FY 2005 Accounting Architecture Investments (840)

FMS FY 2006 Mail Presort Equipment (379)

BPD Miscellaneous Printing (1,370)

BPD Litigation Support (3,743)

Total Non-Recurring Costs ($44,846) (15)

Base Reinvestments

IRS Increase Returns Processing Efficiencies 12,237 11 

BPD BPD Base Reinvestments 5,113 

FinCEN Enhancements to Strengthen Critical Operations 3,211 23 

FinCEN Strengthen Regulatory Compliance and Oversight 2,538 19 

TTB BPD Administrative Resource Center Cost Increases 340 

TTB Permit Applications 308 

TTB Working Capital Fund for TCS and DTS (Telecommunications) 503 

TTB Wine, Distilled Spirits, Tobacco/Tax Processing 425 

Total Base Reinvestments $24,675 53 

Transfers

IRS Transfer to TIGTA (941)

DO Transfer into DO S&E to Re-estab Repair & Improvements (R&I) Account 1,000 

DO Transfer in for Secretary’s Security Detail 4,200 

T-BARR Transfer out to DO S&E for Repairs and Improvements Account (1,000)

TIGTA Transfer from IRS for WCF 941 

Total Transfers $4,200 

Program Reductions

IRS Business Systems Modernization Program Reduction (29,700)

BPD Adoption of Revised Customer Service Standards (2,027)

FinCEN Realignments to Enhance Critical Operations (3,211) (19)
Department of the Treasury – Congressional Justification FY 2007

1

Amount Direct FTEs

FinCEN Realignments to Strengthen Regulatory Compliance Oversight (2,538) (19)

TTB Tax Services-SOT Suspension/Quarterly Tax Filings (1,600)

CDFI Transfer program (46,843) (33)

Total Program Reductions ($85,919) (71)

Program Cost Savings

IRS Competitive Sourcing Savings (17,000)

IRS E-File Savings (6,760) (174)

IRS Improvement Project Savings (8,216) (135)

IRS Program Efficiencies (84,120) (2,096)

IRS HITCA Program Efficiencies (5,500)

FMS Debt Fee Revenue (5,311) (57)

FMS Realize Mail Presort Eficiencies (384)

DO Accross the Board Program Reduction (269)

DO Savings from FY 2005 Closure of Overseas Posts (293)

Total Program Cost Savings ($127,853) (2,462)

FY 2007 Base $11,656,300 99,056 

Program Adjustments

IRS Consolidate Philadelphia Campus 20,900 

FMS Federal Accounting Standards Advisory Board (FASAB) Increases 44 

DO Economic Sanctions Against Weapons of Mass Destruction (WMD) Proliferation 946 5 

DO Economic Sanctions Against Terrorist Networks 1,483 8 

DO Support of OFAC 492 3 

DO Support of TFI 542 3 

DO Expanded Treasury Presence Overseas 9,352 10 

DO Additional Secure Workspace 1,000 

DO Intelligence Analysts 1,261 7 

DO Iraq Threat Finance Cell (ITFC) 2,050 2 

DO Dynamic Analysis Division 513 3 

DO Treasury-wide Performance Management Training 1,838 

DSCIP Back-up Disaster Recovery Capacity 1,656 

DSCIP OFAC Enterprise Content Management (ECM) 627 

DSCIP Treasury Foreign Intelligence Network (TFIN) 21,200 

DSCIP Treasury Secure Data Network (TSDN) 4,003 

DSCIP Critical Infrastructure Protection (Financial Institutions) 2,093 

DSCIP Cyber Security 2,244 

DSCIP E-Government Initiatives 2,209 

FinCEN Cross-Border Initiative 10,000 

FinCEN Enhance BSA Direct 2,473 

Total Program Increases $86,926 41 

FY 2007 Operating Level $11,743,226 99,097 

Offsetting Fees

IRS User Fees (135,000)

BPD User Fees (3,000)

Total Offsetting Fees ($138,000)

FY 2007 President’s Budget Request $11,605,226 99,097 
Department of the Treasury – Congressional Justification FY 2007

1

Summary of FY 2007 Increases and Decreases

( D o l l a r s i n T h o u s a n d s )

DO* ATSP FINCEN TTB** OIG TIGTA IRS FMS BPD CDFI Total

FY 2006 Consolidated 

Appropriations (P.L. 

109-115)

$231,004 $2,750 $73,630 $91,126 $17,000 $133,286 $10,680,511 $236,243 $179,923 $55,000 $11,700,473 

Rescission (P.L. 109-

148)

(2,310) (27) (736) (911) (170) (1,333) (106,805) (2,362) (1,769) (550) (116,973)

FY 2006 Enacted $228,694 $2,723 $72,894 $90,215 $16,830 $131,953 $10,573,706 $233,881 $178,154 $54,450 $11,583,500 

Pay Inflation 

Adjustments

3,266 0 1,064 1,504 412 2,965 211,813 4,679 3,117 138 228,958 

Non-Pay Inflation 

Adjustments

2,078 0 865 909 110 610 60,418 1,964 1,545 76 68,575 

Annualization of FY 

2006 Initiatives

2,511 0 2,498 0 0 0 0 0 0 0 5,009 

Maintaining Current 

Levels

$7,855 $0 $4,427 $2,413 $522 $3,575 $272,231 $6,643 $4,662 $214 $302,542 

Non-Recurring Costs (35,791) 2,723 0 0 0 0 0 (1,219) (5,113) 0 (44,486)

Base Reinvestment 0 0 5,749 1,576 0 0 12,237 0 5,113 0 24,675 

Transfers 4,200 0 0 0 0 941 (941) 0 0 0 4,200 

Program Reductions (0) (0) (5,749) (1,600) 0 0 (29,700) 0 (2,027) (46,843) (85,919)

Program Cost Savings (562) 0 0 0 0 0 (121,596) (5,695) 0 0 (127,853)

Adjustments to FY 

2006 Enacted

($32,153) ($2,723) $0 ($24) $0 $941 ($140,000) ($6,914) ($2,027) ($46,843) ($229,743)

FY 2007 Base $204,397 $0 $77,321 $92,604 $17,352 $136,469 $10,705,937 $233,610 $180,789 $7,821 $11,656,300 

Program Increases 53,509 0 12,473 0 0 0 20,900 44 0 0 86,926 

FY 2007 Operating 

Level

$257,906 $0 $89,794 $92,604 $17,352 $136,469 $10,726,837 $233,654 $180,789 $7,821 $11,743,226 

Offsetting Fees 0 0 0 0 0 0 (135,000) 0 (3,000) 0 (138,000)

FY 2007 President’s 

Budget

$257,906 $0 $89,794 $92,604 $17,352 $136,469 $10,591,837 $233,654 $177,789 $7,821 $11,605,226 

* Includes S&E, DSCIP, TBARR 

**TTB President’s Budget does not include user fee proposal of $28,640 thousand. Net request is $63,964 thousand including user fee proposal.
Department of the Treasury – Congressional Justification FY 2007

1

Total Funding Levels for the FY 2007 President’s Budget

( D o l l a r s i n M i l l i o n s )

FY 2005 FY 2006 FY 2007

Enacted Estimate Estimate Change % Change

Annual Appropriations $11,217 $11,580 $11,605 $25 0.2%

Interest Payments:

Interest on Public Debt 352,350 398,744 440,412 41,668 10.4%

Refunding Internal Revenue Collections, Interest 6,112 3,662 3,877 215 5.9%

Interest on Uninvested Funds 7 8 8 0 0.0%

Interest Paid To Credit Financing Accounts 4,418 4,610 4,968 358 7.8%

Restitution of Foregone Interest 142 0 0 0 0.0%

Fed. Interest Liabilities to States 0 1 2 1 100.0%

 Subtotal, Interest Payments $363,029 $407,025 $449,267 $42,242 10.4%

Trust Funds and Other Funds:

Federal Financing Bank -454 0 0 0 0.0%

Payment to Resolution Funding Corp 2,130 2,104 2,140 36 1.7%

Check Forgery Insurance Fund 0 3 3 0 0.0%

Payment to Terrestrial Wildlife Habitat Restoration Trust 

Fund

5 5 5 0 0.0%

Community Development Financial Institutions Program 

Account

1 0 0 0 0.0%

Air Transportation Stabilization Program Account 337 0 0 0 0.0%

 Subtotal, Trust Funds and Other $2,019 $2,112 $2,148 $36 1.7%

Permanent Authority Appropriations:

Pres. Election Campaign Fund 53 55 55 0 0.0%

Biomass Energy Development -1 -8 -5 3 -37.5%

Government Losses in Shipment 4 2 0 -2 -100.0%

Terrorist Insurance Program 5 0 6 6 100.0%

Continued Dumping and Subsidy Offset 237 249 1,928 1,679 674.3%

Treasury Forfeiture Fund 321 251 251 0 0.0%

Debt Collection Special Fund 49 40 60 20 50.0%

Claims, Judgments & Relief Acts 973 904 873 -31 -3.4%

Federal Reserve Bank Reimbursement by –

 FMS 258 220 245 25 11.4%

 BPD 131 100 123 23 23.0%

Financial Agent Services 365 322 311 -11 -3.4%

Internal Revenue Collections for Puerto Rico 421 441 457 16 3.6%

IRS New and Existing Fees 119 100 238 138 138.0%

IRS Informant Payments 7 4 4 0 0.0%

Private Collection Agent Program 0 3 54 51 1700.0%

Payment where Child Credit exceeds liab. for tax 14,624 14,113 13,538 -575 -4.1%

Payment where EIC exceeds liability for tax 34,559 35,098 35,457 359 1.0%

Payment where Health Care Credit exceeds liab. for tax 90 94 829 735 781.9%

 Subtotal, Permanent Auth. Approp $52,215 $51,988 $54,424 $2,436 4.7%

Offsetting Collections -18,285 -18,804 -21,649 -2,845 15.1%

Subtotal, Department of the Treasury $410,195 $453,901 $495,795 $41,894 9.2%

International Assistance Programs 1,373 1,449 1,536 87 6.0%

Total, Department of the Treasury $411,568 $455,350 $497,331 $41,981 9.2%
Department of the Treasury – Congressional Justification FY 2007

6
Departmental Offices 

Salaries and Expenses

1.1 – Appropriation Summary Table

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Executive Direction Programs $14,430 $16,329 $17,501 $1,172 7.18%

Economic Policies and Programs 31,203 31,691 41,947 10,256 32.36%

Financial Policies and Programs 25,231 26,308 25,336 (972) -3.69%

Terrorism and Financial Intelligence 34,796 39,540 45,401 5,861 14.82%

Treasury-wide Management Policies and 

Programs 16,245 16,674 20,372 3,698 22.18%

Administration Programs 56,506 63,094 73,317 10,223 16.20%

Currency Manipulation 0 990 0 (990) -100.00%

Total Appropriated Resources $178,411 $194,626 $223,874 $29,248 15.03%

FY 2007 Priorities

 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 –Treasury will use the President’s 

Management Agenda to continually improve the management of Treasury and its 

program delivery to the American taxpayer.

Mission

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

encourage prosperity and stability in the rest of the world. 
DO - 2

Table of Contents

Section 1 – Purpose...............................................................................................3

1A – Description of Bureau Mission and Priorities...................................................... 3

1B – Previous Highlights and Accomplishments ......................................................... 4

1C – Future Outlook.................................................................................................... 6

Section 2 – Explanation of Increases and Decreases....................................8

2.1 – Budget Increases and Decreases Table................................................................ 8

2A – Budget Increases and Decreases Description....................................................... 9

Section 3 – Budget and Performance Plan................................................ 13

3.1 – Appropriation Detail Table ............................................................................... 13

3A – Budget Activity Description ............................................................................. 14

3.2 – Budget and Performance Plan........................................................................... 18

3B – Description of Performance............................................................................... 22

3C – PMA Evaluation Description ............................................................................ 25

3.3 – PART Evaluation Table.................................................................................... 30

Section 4 – Supporting Materials.............................................................. 33

4.1 – Human Resources Table ................................................................................... 33

4A – Human Capital Strategy Description................................................................. 34

4.2 – Operating Levels Table..................................................................................... 37

4B – Appropriations Language.................................................................................. 38
DO - 3

Section 1 – Purpose

1A – Description of Bureau Mission and Priorities

Mission of Departmental Offices

The mission of 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 for the Department of the Treasury, provides 

leadership in 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.

Key Priorities for the Department and Its Headquarters

The FY 2007 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. Working closely with other 

agencies and with governments around the world, the Department will continue to 

lead the effort to identify, and block financial assets of terrorists, proliferators of 

weapons of mass destruction and narcotics traffickers and their support networks; 

and to impair, impede and economically isolate these individuals, organizations 

and entities.

 Maintaining a World-class Treasury – Departmental Offices effectively manages 

the resources of the Department of the Treasury to ensure that it remains a worldclass organization. This includes strengthening information technology 

capabilities and ensuring the health and safety of its employees.
DO - 4

1B – Previous Highlights and Accomplishments

In FY 2005, Departmental Offices provided leadership to achieve new breakthroughs in 

support of Treasury’s missions and strategic goals of promoting economic growth and 

security at home and abroad, strengthening national security, managing the U.S. 

government’s finances effectively and ensuring that Treasury remains a world class 

organization by continually improving the operations and management of the 

Department.

Promoting Economic Growth and Security

The complexity of the Internal Revenue Code leads to a high error rate for individual and 

corporate returns, and increases the burden of compliance for all taxpayers. In FY 2005, 

DO provided technical support for the President’s Advisory Panel on Federal Tax Reform 

and development of tax reform options and recommendations. Implementing tax reform 

will stimulate the U. S. economy through reduced compliance costs and improved 

voluntary compliance, which in turn reduces the costs of tax administration. 

In the last year, Treasury has made significant progress in making basic financial 

education available to all Americans. DO launched the MyMoney.gov website and 1-

888-MyMoney toll-free hotline to promote basic financial literacy, and directed more 

than 100 financial education events in the last 12 months. 

Treasury has also engaged emerging economies, encouraging economic stability and 

growth around the globe, engaging China in intensive economic dialogue, developing a 

central budget and revitalized banking system in Iraq, and negotiating debt relief for Iraq. 

Negotiations with China resulted in an initial movement toward a more market-oriented 

exchange rate for the Chinese currency. Treasury secured extensive debt relief for Iraq 

through work in the Paris Club, IMF, and G7 Finance Ministers’ process, and 

successfully linked U.S. commitments to the Multilateral Development Banks (MDBs) to 

the implementation of MDB reforms.

Treasury delivered to Congress a report mandated by the Terrorism Risk Insurance Act of 

2002, assessing the Terrorism Risk Insurance Program’s effectiveness in ensuring 

widespread availability and affordability, as well as insurers’ capacity to offer terrorism 

coverage after the termination of the Program at the end of 2005. The Terrorism Risk 

Insurance Extension Act of 2005 (P.L. 109-144) however, reauthorized and revised the 

program established by the Terrorism Risk Insurance Act of 2002 (P.L. 107-297). The 

Extension Act extends the Terrorism Insurance Program for two years, through 

December 31, 2007.
DO - 5

Strengthening National Security

In FY 2005, DO continued to enhance its financial intelligence capabilities, attacking the 

financial underpinnings of international terrorism and other financial crimes. Treasury 

accelerated its identification and publication of financial sanction targets in the areas of 

terrorism, international narcotics trafficking, and weapons of mass destruction

proliferation. Significant designations and blocking actions by the Office of Foreign 

Assets Control (OFAC) involved the worldwide network of the Islamic African Relief 

Agency, multiple front organizations for the Cali Cartel, that laid the foundation for the 

Colombian government’s seizure of the Drogas La Rebaja drugstore chain in a criminal 

asset forfeiture action, (according to Colombian officials quoted in news reports, was the 

“largest occupation of property linked to the drug trade in the history of the country"), 

and eight entities in North Korea, Iran, and Syria engaged in connection with the 

proliferation of weapons of mass destruction.

DO coordinates intelligence throughout the Department, including the intelligence 

analysis in the Office of Foreign Asset Control (OFAC) and the Financial Crimes 

Enforcement Network (FinCEN). In FY 2005, intelligence analysts were forwarddeployed to military commands and the National Counterterrorism Center, providing 

more efficient use of personnel. 

Since March 2003, Treasury has led efforts to identify and freeze over $2 billion in Iraqi 

assets outside the U.S., and facilitated the transfer of over $2.8 billion back to Iraq from 

U.S. and foreign sources. 

Treasury works with allies around the world to improve coordination of intelligence and 

investigations of financial crimes. DO led the successful effort of the Financial Action 

Task Force on Money Laundering in FY 2005 to adopt an international standard to 

identify and target cash couriers, requiring some 120 countries to interdict and confiscate 

cross-border funds related to terrorist financing and money laundering. Also in the last 

year, DO created two regional organizations to combat terrorist financing in vulnerable 

regions of the world, and invoked Section 311 authorities of the USA Patriot Act against 

seven foreign banks designated as “primary money laundering concerns.”

Managing the Government’s Finances

Treasury’s management of the federal government’s finances includes making payments, 

collecting revenue, issuing debt and preparing public financial statements. In FY 2005, 

the Department introduced five-year and 20-year TIPS securities (inflation-indexed 

Treasury notes), resulting in improved liquidity, increased investor interest, and greater 

demand - approximately $140 billion in TIPS were auctioned in FY 2004 and FY 2005.

Treasury improved forecasting and reporting, and produced an improved U.S. corporate 

bond yield curve. Average same-day cash balance projections improved more than 15 

percent from FY 2004. Treasury met and exceeded its FY 2005 performance target for 

one-month-ahead forecast of budget receipts and released the FY 2004 U.S. Government 
DO - 6

Consolidated Financial Statement 2 1/2 months before the statutory due date of March 

31. The revised U.S. corporate bond yield curve will provide a more accurate measure of 

funding requirements for corporate defined-benefit pension plans covered by the Pension 

Benefit Guarantee Corporation. 

Maintaining a World-class Treasury

DO continues to improve the management and operations of the Treasury Department, 

meeting the President’s standard of a results-oriented, citizen-centered government.

Treasury reduced its backlog of Freedom of Information Act requests by 20 percent, 

implemented an SES performance management system, became the first Federal agency 

to achieve the three day close and accelerate closing to November 15, and reduced 

material weaknesses from 32 to eight over the last four years.

The Department made significant improvements in the President’s Management Agenda 

(PMA) Scorecard. It has consistently kept a “Green” for Status for Competitive 

Sourcing, and achieved three consecutive quarters of ‘Green’ for Progress on the for EGovernment. For example, Treasury institutionalized the restructuring and information 

technology (IT) governance entities and processes (Treasury Chief Information Officers 

Council and Sub-Councils, Technical Investment Review Board, Executive Investment 

Review Board) to ensure comprehensive integration of the major IT management 

disciplines at the Departmental level.

1C – Future Outlook

Treasury’s FY 2007 budget priorities reflect the Department’s response to two significant 

factors: the global trend toward increasingly connected, complex and interdependent 

economies, and the national security priority to dismantle the financial infrastructure of 

international criminals. 

Economic globalization has expanded U.S. engagement in foreign economic policy, 

financial interdependence, and vulnerability to economic crises and terrorism from 

abroad. The FY 2007 budget request includes funding to enhance Treasury’s overseas 

presence to improve the U.S. Government’s ability to engage emerging economies and to 

international crises. Treasury’s international presence has dwindled from a high of nearly 

40 attaches in the 1970s to three in 2005.

Fully funding Terrorism and Financial Intelligence in FY 2007 will provide DO with the 

tools necessary to support Treasury’s National Security mission. TFI will more 

effectively administer and enforce economic and trade sanctions, provide timely, accurate 

and actionable intelligence that supports the formulation of policy and the execution of 

Treasury authorities, and develop policies and implement strategies to safeguard the U.S. 

and international financial systems from national security threats.
DO - 7

DO requires resources to address infrastructure issues that continue to hamper primary 

missions. To prevent deterioration of the Main Treasury and the Annex buildings, DO 

requests funds to re-establish its Repair and Improvements Account, so that it has the 

resources to address routine and recurring repair and maintenance issues
DO - 8

.

Section 2 – Explanation of Increases and Decreases

2.1 – Budget Increases and Decreases Table

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 960 $179,850

Rescission (P.L. 108-447) (1,438)

FY 2005 Enacted 960 178,412

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

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

FY 2006 Enacted 1,004 194,626

Changes to Base

Maintaining Current Levels (MCLs)

FY 2007 Pay Raise 0 2,320

FY 2007 Non-Pay Inflation 0 1,663

Pay Annualization of FY 2006 Pay Raise 0 946

Capital Security Cost Sharing -- Charge from Dept. of State 0 415

MCLs 0 5,344

Inter-Appropriation Transfers

Transfer in to Fund Secretary's Security Detail 0 4,200

Transfer in to Re-establish R&I account 0 1,000

Transfers 0 5,200

Non-Recurring Costs

Non-Recur of Currency Manipulation 0 (990)

Non-Recur of e-Cavern 0 (1,485)

Non-Recur of Public Key Infrastructure 0 (248)

Non-Recurs 0 (2,723)

Program Cost Savings

FY2007 savings from FY2005 closure of 3 overseas posts 0 (293)

FY2007 across the board management savings 0 (269)

Savings 0 (562)

Annualizations of FY 2006 Initiatives

2 587

0 81

Annualization of FY 2006 OIA FTE 11 1,843

Annualizations 13 2,511

13 9,771

Total FY 2007 Base 1,017 204,397

Program Changes (not in priority order)

Increases:

Expanded Treasury Presence Overseas 10 9,352 Econ. Policy & Prog. E1A, E2A

Dynamic Analysis Division 3 513 Fin. Policy & Prog. E1C

Intelligence Analysts 7 1,261 Terrorism/Fin. Intel. F3A

Iraq Threat Finance Cell 2 2,050 Terrorism/Fin. Intel. F3A

Additional Secure Workspace 0 1,000 Terrorism/Fin. Intel. M5B

Economic Sanctions Against Terrorist Networks 8 1,483 Terrorism/Fin. Intel. F3A

Economic Sanctions Against Weapons of Mass Destruction 5 946 Terrorism/Fin. Intel. F3A

General Counsel Support of TFI 3 542 Executive Direction F3A

Chief Counsel Support of the Office Foreign Assets Control 3 492 Executive Direction F3A

Treasury-wide Performance Management Training 0 1,838 Treasury-wide Mgmt. M5B

Subtotal FY 2007 Program Changes 41 19,477

Total FY 2007 Request 1,058 $223,874

 Annualization of FY 2006 TFFC FTE

 Annualization of FY 2006 Cuba Sanctions FTE

Subtotal, Changes to Base

Appropriation: DO Salaries and Expenses
DO - 9

2A – Budget Increases and Decreases Description

Changes to Base............................................................................... +$9,771,000/13FTE

Adjustments to Maintain Current Levels +$5,344,000/0FTE Funds are requested for: the 

FY 2007 cost of the January 2006 pay increase of $946,000; the proposed January 2007 

pay raise and benefits of $2,320,000; non-labor related items such as contracts, travel, 

supplies, equipment, and GSA rent adjustments of $1,663,000; and Department of State 

overseas Capital Security Cost Sharing of $415,000.

Inter-Appropriation Transfers +$5,200,000/0FTE Transfer in of $1,000,000 and 0 FTE 

from TBARR 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 

Treasury Building and Annex Repair and Restoration account, DO had a no-year account 

for this purpose. 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.

Non-Recurring Costs -$2,723,000/0FTE FY 2007 savings achieved from non-recurring 

costs associated with the FY 2006 DO S&E appropriation bill are -$990,000 and 0 FTE 

for Currency Manipulation, -$1,485,000 and 0 FTE for e-Cavern, and -$248,000 and 0 

FTE for Public Key Infrastructure.

Program Cost Savings -$562,000/0FTE FY 2007 program cost savings of -$293,000 

and 0 FTE from closure of three International Affairs overseas posts during FY 2005 and 

-$269,000 and 0 FTE from across-the-board management savings.

Annualizations of FY 2006 Initiatives +$2,511,000/13FTE Funding is requested for 

completing the full-year cost and FTE realization from initiatives enacted for FY 2006 

which support Terrorism and Financial Intelligence.
DO - 10

Program Increases (total) ............................................................. +$19,477,000/41FTE

Note: Due to the timing lag in implementing most of these initiatives, the FTE requested 

is lower than the number of actual positions needed. The actual number of positions 

requested is noted and the FTE balance will be requested for any approved initiatives as 

an annualization in the FY 2008 budget. 

Priority: Promoting Economic Growth and Security

Office of International Affairs +$9,352,000/10FTE

 Expanded Treasury Presence Overseas +9,352,000/10FTE 19 Treasury attachés 

will work in tandem with the Office of 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 will also provide much needed intelligence and expertise to 

U.S. officials in Washington D.C. formulating policy on international economics, 

trade, finance, and terrorist finance. This initiative includes a request of $1 

million for travel of Washington, D.C. based staff to attend meetings with foreign 

and domestic counterparts and to allow desk officers to travel on official business 

to access the regions they cover. 

Office of Tax Policy +$513,000/3FTE

 Dynamic Analysis Division +$513,000/3FTE The Office of Tax Policy presently 

has only limited capability to produce dynamic analyses for a narrow range of tax 

policy changes. Dynamic analysis recognizes the full range of behavioral 

responses to tax changes, including how tax changes affect the size of the 

economy. This type of analysis emphasizes the economic benefits of tax changes 

and will assist in measuring progress toward achieving the Department’s objective 

of increasing and promoting economic growth. Dynamic analysis will also make 

available to decision makers estimates of the full effect of tax policy changes, 

including their macroeconomic impacts, to inform tax policy determinations. 

Resources are requested to add a Dynamic Analysis Division (six additional 

positions: an SES division director and five staff economists) to facilitate 

production of these estimates for proposed Federal tax legislation.

Priority: Strengthening National Security

Office of Intelligence and Analysis +4,311,000/9FTE

 Intelligence Analysts +$1,261,000/7FTE Thirteen additional analyst positions 

are requested to effectively address transnational terrorist and illicit finance 

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

groups, counter-proliferation, kleptocracy, 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 
DO - 11

Intelligence Reform and Terrorism Prevention Act of 2005. This request includes 

$200,000 required by the Office of the Director of National Intelligence for 

training, travel, and professional development of intelligence analysts to enhance 

analytical capability.

 Iraq Threat Finance Cell (ITFC) +$2,050,000/2FTE Treasury and the 

Department of Defense are co-chairing the Iraq Threat Finance Cell in support of 

the Global War on Terrorism. This unit’s mission is to enhance the collection, 

analysis, and dissemination of intelligence to combat the Iraqi insurgency. 

Enhanced intelligence efforts against financiers, facilitators, and financial 

networks supporting the Iraqi insurgency is required to support and strengthen 

U.S., Iraqi, and Coalition efforts to disrupt and eliminate financial and other 

material support to the insurgency.

 Additional Secure Workplace +$1,000,000/0FTE The addition of staff in the 

Office of Terrorism and Financial Intelligence has led to a need for additional 

secure workspace where classified work can be performed.

Office of Foreign Assets Control (OFAC) +$2,429,000/13FTE

 Economic Sanctions Against Terrorist Networks +$1,483,000/8FTE Specially 

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 OFAC in its responsibility to administer and enforce 

economic sanctions. Fifteen additional positions are requested for OFAC to 

monitor and update existing designations to capture these evasions and track the 

development of new support structures and funding sources. 

 Economic Sanctions Against Weapons of Mass Destruction (WMD) Proliferation 

+$946,000/5FTE Ten additional positions are requested to implement and 

administer the new WMD Executive Order signed by the President on June 28, 

2005. 

Office of the General Counsel +$1,034,000/6FTE

 General Counsel Support of TFI +$542,000/3FTE Following the creation of the 

Office of Terrorism and Financial Intelligence (TFI), Treasury established an 

Assistant General Counsel for Enforcement & Intelligence (AGC(E&I)) which 

presently has four attorneys that assist TFI and its five components: the Office of 

Terrorist Financing, the Office of Intelligence and Analysis, the Financial Crimes 

Enforcement Network, the Office of Foreign Assets Control, and the Executive 

Office of Asset Forfeiture. Funds are requested for an additional five attorneys 

and one support person to address the growing workload and to enable AGC(E&I) 

to provide adequate counsel to Treasury and other government officials on all 

aspects of TFI’s operations. Increased legal support is critical to the 

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

Weapons of Mass Destruction proliferation programs and to assist with a wide 
DO - 12

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

success of those programs.

 General Counsel Support of the Office of Foreign Assets Control 

+$492,000/3FTE A component of the General Counsel’s Office provides 

essential legal support to the Office of Foreign Assets Control (OFAC) in 

combating terrorism, narco-trafficking, and weapons proliferation and in 

implementing other important economic sanctions programs that target persons 

and countries that are considered threats to U.S. national security and foreign 

policy interests. These attorneys draft Executive Orders and regulations and work 

closely with other Treasury components and other agencies to establish and 

administer sanctions programs, identify and block assets of sanctions targets, 

litigate sanctions-related matters, and respond to Congressional, media, and public 

inquiries involving sanctions. The component’s staffing has remained constant

over the past three years, while its workload has expanded significantly as the 

workload of OFAC, its principal client, has grown and as the President has

established many new sanctions programs and expanded several others. With the 

creation of a sanctions civil penalty administrative hearing program, more than

100 pending cases are being litigated by these attorneys. Funding for five 

additional positions is requested for OGC to provide these highly specialized legal 

services to OFAC.

Priority: Management Infrastructure

Office of Human Resources Strategy and Solutions +$1,838,000/0FTE

 Treasury-wide Performance Management Training +$1,838,000/0FTE

Treasury-wide performance management training will provide managers with the 

tools to link agency mission accomplishment to individual performance.
DO - 13

Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

1. Executive Direction Programs 111 $14,430 113 $16,329 119 17,501 5.31% 7.18%

2. Economic Policies and Programs 205 31,203 222 31,691 232 41,946 4.50% 32.36%

Economic Policy 31 4,829 34 4,413 34 4,522 0.00% 2.47%

International Affairs 174 26,374 188 27,278 198 37,424 5.32% 37.20%

3. Financial Policies and Programs 156 25,231 182 26,308 184 25,336 1.10% -3.69%

Tax Policy 87 13,595 97 14,080 100 14,778 3.09% 4.96%

Domestic Finance 69 11,636 85 12,228 84 10,558 -1.18% -13.66%

4. Terrorism and Financial Intelligence 150 34,796 233 39,540 264 45,401 13.30% 14.83%

U/S Terrorism & Financial Intelligence 4 1,473 8 1,978 8 1,759 0.00% -11.08%

Terrorism and Financial Crimes 19 3,644 28 4,104 30 4,404 7.14% 7.32%

Office of Intelligence and Analysis 27 5,168 72 11,646 87 14,975 20.83% 28.59%

Office of Foreign Assets Control 100 24,511 125 21,812 139 24,263 11.20% 11.24%

5. Treasury-wide Management Policies and Programs 80 16,245 94 16,674 99 20,372 5.32% 22.18%

Management and CFO Programs 80 12,879 94 11,553 99 15,258 5.32% 32.06%

Treasury-wide Financial Statement Audits 0 3,366 0 5,121 0 5,114 - -0.14%

6. Administration Programs 156 56,506 160 63,094 160 73,317 0.00% 16.20%

7. Currency Manipulation 0 0 0 990 0 0 0.00% 0.00%

Subtotal Newly Appropriated Resources 858 178,411 1,004 194,626 1,058 223,874 5.38% 15.03%

Other Resources:

Offsetting Collections - Reimbursable 89 $15,731 86 $19,800 90 $19,800 4.65% 0.00%

Subtotal Other Resources 89 15,731 86 19,800 90 19,800 0.00% 0.00%

Total Resources Available for Obligation 947 $194,142 1,090 $214,426 1,148 $243,674 5.32% 13.64%

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Resources Available for Obligation Enacted Enacted Request to FY 2007
DO - 14

The following supplemental table provides a more detailed breakdown of how each new 

initiative and base adjustment affects budget activities. Because a new initiative includes 

both direct and indirect support costs, it is important to identify the correct funding 

placement. The indirect (administration) costs have not been appropriately budgeted the 

past two years. These costs have been programmed in office budgets as direct funding, 

and this budget request corrects this technical error.

SUMMARY EXPLANATIONS OF FISCAL YEAR 2007 REQUESTED CHANGES BY ACTIVITY

(Dollars in Thousands)

Total

FTE Amount FTE Amount FTE Amount FTE Amount FTE Amount FTE Amount FTE Amount FTE Amount

PROGRAM CHANGES: (not in priority order)

1 Salaries and Expenses (SE) 6 825 10 9,352 3 399 22 5,862 0 1,838 0 1,201 0 0 41 19,477

A. Expanded Treasury Presence Overseas 0 0 10 9,352 0 0 0 0 0 0 0 0 0 0 10 9,352

B. Dynamic Analysis Division 0 0 0 0 3 399 0 0 0 0 0 114 0 0 3 513

C. Intelligence Analysts 0 0 0 0 0 0 7 968 0 0 0 293 0 0 7 1,261

D. Iraq Threat Finance Cell 0 0 0 0 0 0 2 2,050 0 0 0 0 0 0 2 2,050

E. Additional Secure Workspace 0 0 0 0 0 0 0 1,000 0 0 0 0 0 0 0 1,000

F. Economic Sanctions Against Terrorist Networks 0 0 0 0 0 0 8 1,123 0 0 0 360 0 0 8 1,483

G. Economic Sanctions Against Weapons of Mass Destruction 0 0 0 0 0 0 5 721 0 0 0 225 0 0 5 946

H. General Counsel Support of TFI 3 428 0 0 0 0 0 0 0 0 0 114 0 0 3 542

I. Chief Counsel Support of the Office Foreign Assets Control 3 397 0 0 0 0 0 0 0 0 0 95 0 0 3 492

J. Treasury-wide Performance Management Training 0 0 0 0 0 0 0 0 0 1,838 0 0 0 0 0 1,838

SUBTOTAL, PROGRAM CHANGES 6 825 10 9,352 3 399 22 5,862 0 1,838 0 1,201 0 0 41 19,477

TOTAL ADJUSTMENTS TO BASE:

Salaries and Expenses 0 347 0 904 (1) (1,371) 9 (1) 5 1,860 0 9,022 0 (990) 13 9,771

A. Adjustments Necessary to Maintain Current Levels (MCLs) 0 425 0 858 0 651 0 1,076 0 354 0 1,565 0 0 0 4,929

B. Annualization of FY 2006 Initiatives 0 0 0 0 0 0 13 1,955 0 0 0 556 0 0 13 2,511

C. Capital Security Cost Sharing Invoice from State Department 0 0 0 415 0 0 0 0 0 0 0 0 0 0 0 415

D. FY 2007 savings from FY 2005 closure of 3 overseas posts 0 0 0 (293) 0 0 0 0 0 0 0 0 0 0 0 (293)

E. Across-the-Board Program Reduction 0 (23) 0 (44) 0 (35) 0 (52) 0 (25) 0 (90) 0 0 0 (269)

F. Non-Recur of Currency Manipulation 0 0 0 0 0 0 0 0 0 0 0 0 0 (990) 0 (990)

G. Non-Recur of e-Cavern 0 0 0 0 0 (1,485) 0 0 0 0 0 0 0 0 0 (1,485)

H. Non-Recur of Public Key Infrastructure 0 0 0 0 0 (248) 0 0 0 0 0 0 0 0 0 (248)

I. Transfer in to re-establish R&I account 0 0 0 0 0 0 0 0 0 0 0 1,000 0 0 0 1,000

J. Transfer in to Fund Secretary's Security Detail 0 0 0 0 0 0 0 0 0 0 0 4,200 0 0 0 4,200

K. Transfer Administrative Charges (FY 05/06 technical error) 0 (55) 0 (32) 0 (68) 0 (1,635) 0 0 0 1,790 0 0 0 0

L. Transfer one FTE from Domestic Finance to OFAC 0 0 0 0 (1) (186) 1 186 0 0 0 0 0 0 0 0

M. Transfer Emerg. Prep. from TFI to Treas-Wide Mgmt 0 0 0 0 0 0 (5) (1,531) 5 1,531 0 0 0 0 0 0

SUBTOTAL, OTHER CHANGES 0 347 0 904 (1) (1,371) 9 (1) 5 1,860 0 9,022 0 (990) 13 9,771

TOTAL CHANGES, BUDGET AUTHORITY 6 1,172 10 10,256 2 (972) 31 5,861 5 3,698 0 10,223 0 (990) 54 29,248

Currency 

Manipulation

Executive 

Direction 

Programs

Administration 

Programs

Requested Changes

Economic 

Policies and 

Programs

Financial 

Policies and 

Programs

Terrorism and 

Financial 

Intelligence

Treasury-Wide 

Management 

Policies and 

Programs

3A – Budget Activity Description

The FY 2007 Departmental Offices (DO) performance budget is presented 

programmatically to align resources with performance. DO operations are divided into 

six budget activities: Executive Direction Programs, Economic Policies and Programs, 

Financial Policies and Programs, Terrorism and Financial Intelligence, Treasury-wide 

Management Policies and Programs, and Administration Programs. For each activity, 

budget and performance information are provided to explain historical trends and 

performance challenges and expectations. 

Executive Direction Programs ($17,501,000 in direct appropriations and $590,000 from 

reimbursements): Offices supported by Executive Direction provide direction and 

policy formulation to the Department and Departmental Offices and interact with 

Congress and the public on Departmental policy matters. These include: the Office of the 

Secretary, Deputy Secretary, Chief of Staff, Executive Secretary, Office of General 
DO - 15

Counsel, Legislative Affairs, Public Affairs, and Treasurer. Note the Office of General 

Counsel is now included in this budget activity for the FY 2007 performance budget 

request because its role is similar to other offices in this activity. Specific 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. 

Economic Policies and Programs ($41,947,000 in direct appropriations, and $3,839,000 

from reimbursements): Offices within Economic Policies and Programs monitor

domestic and international economic conditions, and developments, and collect and 

analyze financial data including foreign credits and credit guarantees. The also provide 

advice and assistance to the Secretary in the formulation and execution of U.S. and 

international economic and financial policies. Other Resources: Reimbursements 

totaling $3.5 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 of Finance. 

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 the international financial institutions; and

 Promote an open and transparent international trade and investment 

regime.

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 assisting in the determination of 

appropriate economic policies;

 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, 

financial disclosure and auditing, stock options, parallel imports, health 

insurance, retirement income security, and long-term care.

Financial Policies and Programs ($25,336,000 in direct appropriations and $4,665,000 

from reimbursements): Offices within Financial Policies and Programs monitor and 

provide advice and assistance to the Secretary in the areas of tax policy and domestic 

finance. Other Resources: Reimbursements totaling $4.3 million are collected from the 

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

personnel services rendered.
DO - 16

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

 Providing economic and legal policy analysis, including revenue estimates, 

for tax policy decisions, including development of legislative proposals 

regarding federal taxation;

 Establishing policy criteria reflected in regulations and rulings and guiding 

preparation of them with the Internal Revenue Service to implement and 

administer the Internal Revenue Code; and

 Assisting in the implementation of tax policies and programs; including 

analyzing the ability and the costs to administer and comply with tax code 

provisions.

Office of Domestic Finance. The mission of this office is to advise and assist the 

Secretary and Deputy Secretary on the domestic financial system, fiscal policy 

and operations, governmental assets and liabilities, and related economic and 

financial matters, as well as create the conditions necessary for the financial 

sector to be resilient in the event of unforeseeable future events.

Terrorism and Financial Intelligence ($45,401,000 from direct appropriations and 

$3,242,000 from reimbursements): The Office of Terrorism and Financial Intelligence 

(TFI) marshals the department's functions that strengthen national security with the twin 

aims of safeguarding financial systems against illicit use and combating rogue nations, 

terrorist facilitators, money launderers, drug kingpins, proliferators of weapons of mass 

destruction and other national security threats. Other Resources: Reimbursements 

totaling $3.1 million are collected from the Executive Office of Asset Forfeiture and the 

U.S. Department of Defense.

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, terrorists, 

international narcotics traffickers, and those engaged in activities related to the 

proliferation of Weapons of Mass Destruction. 

Office of Intelligence and Analysis (OIA). The mission of this office is to:

 Develop actionable intelligence by analyzing information collected by the 

intelligence community (IC) and other financial data in support of 

Treasury’s mission;

 Support the senior leadership’s intelligence needs on the full range of 

political and economic issues;

 Manage the Department’s relations with the intelligence community; and

 Coordinate and oversee intelligence throughout the Department, including 

OFAC’s and FinCEN’s intelligence analysis and the analysts that forward 

deployed to military commands and the National CounterTerrorism Center 

(NCTC). 

Office of Terrorist Financing and Financial Crimes (TFFC). The mission of 

TFFC is to develop policies and implement strategies to safeguard the U.S. and 

international financial systems from national security threats including terrorist 
DO - 17

financing, money laundering, kleptocracy, organized crime and proliferation 

finance.

Treasury-wide Management Policies and Programs ($20,372,000 from direct 

appropriations and $4,681,000 from reimbursements): Offices within Treasury-wide 

Policies and Programs develop and implement policies related to the internal 

management of the Department and its bureaus, including human resources, information 

technology, financial administration, and management and budget issues. The mission of 

these offices is to build a strong Treasury, which is citizen centered and results oriented, 

as well as actively promote innovation through competition, and to work effectively and 

efficiently to implement the President’s Management Agenda across Treasury while 

continually improving it’s internal business operations. 

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.

Administration Programs ($73,317,000 from direct appropriations and $2,783,000 from 

reimbursements): Administration Programs provides operational support and shared 

services to all offices within Departmental Offices. 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 one third consists of employee salaries, routine building 

maintenance, custodial services, library services, etc.

No specific goals/measures are presented for this budget activity as the work of the 

offices within Administration Programs is captured within the other budget activities.
DO - 18

3.2 – Budget and Performance Plan 

Tre as u ry Strategic G o al: Pro m o te Pros pe rou s U.S. and W orld Eco n o m ie s (E1 )

FY 20 02 FY 2 00 3 FY 20 04 FY 20 05 FY 2 00 6 FY 20 07

E na cted En ac te d En a cted E na cted En a cte d Re que st

Tre as u ry Strategic O b jec tiv e E1 A:

Bu d g et Ac tivitie s: F in an c ia l P olic ie s an d Pro g ram s a n d Eco n o m ic P o lic ie s an d Pro g ram s

Fin an cia l Re so urce s

Newly Ap propriated Re so urce s $3 7,81 0 $ 39 ,73 6 $ 40 ,1 05 $4 0,83 4 $ 36 ,7 98 $4 1,862

Othe r Res ou rc es 59 5 53 1 2 14 2,21 0 2 ,8 78 2,8 78

To ta l O p era tin g Le ve l $3 8,40 5 $ 40 ,26 7 $ 40 ,3 19 $4 3,04 4 $ 39 ,6 76 $4 4,740

H um a n Res ou rc es

Newly Ap propriated F TE 24 4 26 0 2 14 21 7 1 98 19 8

Othe r FT E 3 3 2 1 3 12 13

To ta l F TE (direc t an d reim bu rsa ble) 24 7 26 3 2 16 23 0 2 10 21 1

Tre as u ry Strategic O b jec tiv e E1 C:

Bu d g et Ac tivitie s: F in an c ia l P olic ie s an d Pro g ram s

Fin an cia l Re so urce s

To ta l, Te rrorism & F in an cia l Inte llig en ce P&P Newly Ap propriated Re so urce s $ 5,23 1 $5 ,47 3 $5 ,6 22 $ 5,28 8 $ 13 ,5 41 $1 3,208

Othe r Res ou rc es 0 0 0 31 0 4 03 40 3

To ta l O p era tin g Le ve l $ 5,23 1 $5 ,47 3 $5 ,6 22 $ 5,59 8 $ 13 ,9 44 $1 3,611

H um a n Res ou rc es

Newly Ap propriated F TE 3 4 3 5 30 2 8 73 69

Othe r FT E 2 2 2

To ta l F TE (direc t an d reim bu rsa ble) 3 4 3 5 30 3 0 75 71

Tre as u ry Strategic O b jec tiv e E1 :

Bu d g et Ac tivitie s: F in an c ia l P olic ie s an d Pro g ram s a n d Eco n o m ic P o lic ie s an d Pro g ram s

Fin an cia l Re so urce s

Newly Ap propriated Re so urce s $4 3,04 1 $ 45 ,20 9 $ 45 ,7 27 $4 6,12 2 $ 50 ,3 39 $5 5,070

Othe r Res ou rc es 59 5 53 1 2 14 2,52 0 3 ,2 81 3,2 81

To ta l O p era tin g Le ve l $4 3,63 6 $ 45 ,74 0 $ 45 ,9 41 $4 8,64 2 $ 53 ,6 20 $5 8,351

H um a n Res ou rc es

Newly Ap propriated F TE 27 8 29 5 2 44 24 5 2 72 26 8

Othe r FT E 3 3 2 1 5 14 15

To ta l F TE (direc t an d reim bu rsa ble) 28 1 29 8 2 46 26 0 2 86 28 3

Res o u rc e L ev el
DO - 19

Treasury Strategic Goal: Preserve the Integrity of Financial Systems (F3)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective F3A:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $12,702 $13,733 $12,219 $21,935 $37,993 $47,303

Other Resources 167 128 0 2,364 3,078 3,078

Total Operating Level $12,869 $13,861 $12,219 $24,299 $41,071 $50,381

Human Resources

Newly Appropriated FTE 68 77 57 98 190 227

Other FTE 0 0 0 16 15 16

Total FTE (direct and reimbursable) 68 77 57 114 205 243

Treasury Strategic Objective F3B:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $12,102 $26,062 $35,235 $33,700 $29,784 $31,019

Other Resources 1,826 2,578 2,468 711 244 244

Total Operating Level $13,928 $28,640 $37,703 $34,411 $30,028 $31,263

Human Resources

Newly Appropriated FTE 111 184 173 135 146 148

Other FTE 17 22 23 1 1 1

Total FTE (direct and reimbursable) 128 206 196 136 147 149

Treasury Strategic Objective F3C:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $4,526 $5,352 $5,204 $6,717 $7,116 $5,208

Other Resources 0 0 0 985 1,282 1,282

Total Operating Level $4,526 $5,352 $5,204 $7,702 $8,398 $6,490

Human Resources

Newly Appropriated FTE 30 38 29 34 39 30

Other FTE 0 0 0 7 7 7

Total FTE (direct and reimbursable) 30 38 29 41 46 37

Treasury Strategic Objective F3:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $29,330 $45,147 $52,658 $62,352 $74,893 $83,530

Other Resources 1,993 2,706 2,468 4,060 4,604 4,604

Total Operating Level $31,323 $47,853 $55,126 $66,412 $79,497 $88,134

Human Resources

Newly Appropriated FTE 209 299 259 267 375 404

Other FTE 17 22 23 24 23 24

Total FTE (direct and reimbursable) 226 321 282 291 398 428

Resource Level

Treasury Strategic Goal: Promote Stable U.S. and World Economies (E2)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective E2A:

Budget Activities: Economic Policies and Programs

Financial Resources

Newly Appropriated Resources $14,212 $18,780 $4,593 $5,123 $5,399 $6,055

Other Resources 1,000 1,015 1,070 1,029 1,340 1,340

Total Operating Level $15,212 $19,795 $5,663 $6,152 $6,739 $7,395

Human Resources

Newly Appropriated FTE 92 124 26 26 30 34

Other FTE 1 2 2 7 7 7

Total FTE (direct and reimbursable) 93 126 28 33 37 41

Treasury Strategic Objective E2B:

Budget Activities: Economic Policies and Programs

Financial Resources

Newly Appropriated Resources $7,306 $8,286 $18,134 $18,431 $18,991 $23,381

Other Resources 1,711 1,775 2,073 1,488 1,937 1,937

Total Operating Level $9,017 $10,061 $20,207 $19,919 $20,928 $25,318

Human Resources

Newly Appropriated FTE 47 56 12 99 101 106

Other FTE 13 13 16 9 9 9

Total FTE (direct and reimbursable) 60 69 28 108 110 115

Treasury Strategic Objective E2:

Budget Activities: Economic Policies and Programs

Financial Resources

Newly Appropriated Resources $21,518 $27,066 $22,727 $23,554 $24,390 $29,436

Other Resources 2,711 2,790 3,143 2,517 3,277 3,277

Total Operating Level $24,229 $29,856 $25,870 $26,071 $27,667 $32,713

Human Resources

Newly Appropriated FTE 139 180 38 125 131 140

Other FTE 14 15 18 16 16 16

Total FTE (direct and reimbursable) 153 195 56 141 147 156

Resource Level
DO - 20

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective F4A:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $10,463 $10,947 $11,244 $10,577 $7,386 $9,462

Other Resources 0 0 0 262 341 341

Total Operating Level $10,463 $10,947 $11,244 $10,839 $7,727 $9,803

Human Resources

Newly Appropriated FTE 50 71 59 56 40 50

Other FTE 0 0 0 2 2 2

Total FTE (direct and reimbursable) 50 71 59 58 42 52

Treasury Strategic Objective F4B:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $4,526 $5,352 $5,384 $5,975 $6,439 $2,985

Other Resources 0 0 0 731 952 952

Total Operating Level $4,526 $5,352 $5,384 $6,706 $7,391 $3,937

Human Resources

Newly Appropriated FTE 50 71 59 30 35 17

Other FTE 0 0 0 5 5 5

Total FTE (direct and reimbursable) 50 71 59 35 40 22

Treasury Strategic Objective F4D:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $3,395 $3,911 $3,589 $3,984 $4,293 $7,812

Other Resources 0 0 0 1,383 1,801 1,801

Total Operating Level $3,395 $3,911 $3,589 $5,367 $6,094 $9,613

Human Resources

Newly Appropriated FTE 22 28 20 20 23 45

Other FTE 0 0 0 9 9 9

Total FTE (direct and reimbursable) 22 28 20 29 32 54

Treasury Strategic Objective F4:

Budget Activities: Financial Policies and Programs

Financial Resources

Newly Appropriated Resources $18,384 $20,210 $20,217 $20,536 $18,118 $20,259

Other Resources 0 0 0 2,376 3,094 3,094

Total Operating Level $18,384 $20,210 $20,217 $22,912 $21,212 $23,353

Human Resources

Newly Appropriated FTE 122 170 138 106 98 112

Other FTE 0 0 0 16 16 16

Total FTE (direct and reimbursable) 122 170 138 122 114 128

Resource Level

Treasury Strategic Goal: Manage the U.S. Government's Finances Effectively (F4)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective M5B:

Budget Activities: Treasury-wide Management Policies and Programs

Financial Resources

Newly Appropriated Resources $31,940 $33,759 $26,415 $25,847 $26,888 $31,380

Other Resources 0 0 0 4,258 5,544 5,544

Total Operating Level $31,940 $33,759 $26,415 $30,105 $32,432 $36,924

Human Resources

Newly Appropriated FTE 225 236 121 116 129 134

Other FTE 0 0 0 18 17 19

Total FTE (direct and reimbursable) 225 236 121 134 146 153

Treasury Strategic Objective M5B:

Budget Activities: Treasury-wide Management Policies and Programs

Financial Resources

Newly Appropriated Resources $31,940 $33,759 $26,415 $25,847 $26,888 $31,380

Other Resources 0 0 0 4,258 5,544 5,544

Total Operating Level $31,940 $33,759 $26,415 $30,105 $32,432 $36,924

Human Resources

Newly Appropriated FTE 225 236 121 116 129 134

Other FTE 0 0 0 18 17 19

Total FTE (direct and reimbursable) 225 236 121 134 146 153

Resource Level

Treasury Strategic Goal: Ensure Professionalism, Excellence, Integrity and Accountability in the Management and Conduct of the Department of Treasury 

(M5)
DO - 21

Promoting Economic Growth and Security

Strengthening National Security

FY 2005 FY 2005 FY 2006 FY 2007

Strat. FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Object. Historical Historical Historical Performance Performance Performance Performance

E 1 A 1 .5 % 3 . 3 % 4 .5 % 3 . 6 % 3 . 6 % 3 . 4 % 3 . 3 %

E 1 A N / A 5 . 9 % 5 .4 % 5 . 3 % 5 . 1 % 5 . 2 % 5 . 1 %

W o r ld B a n k /I D A G r a n t s ( in m ill io n s ) E 1 A N / A 1 , 2 3 3 1 , 6 8 1 1 ,7 2 8 1 , 9 2 5 3 , 5 5 5 T B D

G r a n t s a s a % o f ID A F Y C o m m it m e n t E 1 A N / A 1 7 .0 % 1 8 . 8 % 1 9 . 6 % 2 1 .4 % 3 0 .4 % T B D

A f r ic a n D e v e lo p m e n t B a n k /A F D F G r a n t s ( in m il lio n s ) E 1 A N / A 2 4 0 6 5 2 1 6 4 6 8 7 0 T B D

G r a n t s a s a % o f A F D F F Y C o m m i tm e n t E 1 A N / A 1 7 .0 % 3 9 . 2 % 1 9 . 5 % 2 1 .8 % 3 5 .0 % T B D

E 1 A N / A N / A N / A D is c o n t in u e d D i s c o n t in u e d D i s c o n t in u e d D is c o n t in u e d

E 1 A N / A N / A N / A D is c o n t in u e d D i s c o n t in u e d D i s c o n t in u e d D is c o n t in u e d

E 1 A N / A N / A N / A N /A N / A 8 9

E 1 A N / A N / A N / A 5 7 9 7

E 1 A N / A N / A N / A 5 7 D i s c o n t in u e d D is c o n t in u e d

E 1 A , 

E 1 C N / A N / A N / A B a s e li n e 3 T B D T B D

E 1 C N / A N / A N / A N /A N / A T B D T B D

E 2 B N / A N / A N / A B a s e li n e 7 8 .0 % 9 0 .0 % 9 0 .0 %

E 2 B N / A N / A N / A 9 0 . 0 % 7 8 .0 % 9 0 .0 % 9 0 .0 %

F 3 A N / A N / A N / A N /A N / A D i s c o n t in u e d D is c o n t in u e d

Performance Level

P e r c e n t a g e o f g r a n t a n d lo a n p r o p o s a ls c o n ta i n in g s a ti s fa c to r y 

f r a m e w o r k s f o r r e s u l ts m e a s u r e m e n ts ( O e )

I m p r o v e I n t e r n a t io n a l M o n e ta r y F u n d ( I M F ) e ff e c t iv e n e s s a n d q u a lit y 

t h r o u g h p e ri o d i c r e v i e w o f I M F p r o g r a m s . ( O e )

U .S . R e a l G ro s s D o m e s ti c P r o d u c t ( G D P ) g r o w th r a te . ( O e )

U .S . u n e m p l o y m e n t r a t e . ( O e )

L e v e l o f m u lt ila te r a l d e v e l o p m e n t b a n k s ( M D B ) g r a n t f in a n c in g a n d 

s a ti s fa c to r y r e s u l ts m e a s u r e m e n t s ( O e ) 

N u m b e r o f c o u n t r ie s r e m o v e d f r o m t h e F in a n c ia l A c t io n T a s k F o r c e 

4 0 + 9 n o n - c o o p e r a ti v e c o u n t r ie s a n d t e r r i to r i e s ( N C C T ) l is t. ( O e )

L e v e l o f M D B g r a n t f in a n c in g a n d s a t is f a c to r y r e s u lts m e a s u r e m e n t s 

( O e ) 

T h e n u m b e r o f F T A s a n d B I T s t h a t r e fle c t h i g h s ta n d a r d 

c o m m i tm e n ts . ( O e )

I n c r e a s e G D P A v e r a g e in d e v e lo p in g c o u n t r ie s w it h s ig n if ic a n t 

T r e a s u r y e n g a g e m e n t ( O t )

N u m b e r o f n e w F r e e T r a d e A g r e e m e n t ( F T A ) a n d B il a te r a l 

I n v e s t m e n t T r e a ty ( B IT ) n e g o t ia ti o n s u n d e r w a y o r c o m p le t e d . ( O e )

I n c r e a s e in t o ta l n u m b e r o f c o u n t r ie s t h a t p u b l is h A n n u a l B u d g e t in 

B r i e f ( C i ti z e n 's G u id e ) e a c h y e a r . ( N e w ) ( O t) 

E n c o u r a g e m o v e m e n t t o w a rd s f le x i b le e x c h a n g e r a t e r e g im e s . ( O e )

A v e r a g e ta x c o m p l ia n c e c o s t f o r i n d i v id u a ls a n d s m a ll b u s in e s s e s 

( O e ) 1 /

S t a b ili z e D e b t /G D P r a ti o s in d e v e l o p i n g c o u n tr ie s w i th s i g n i fic a n t 

T r e a s u r y e n g a g e m e n t ( O t)

K e y : O e - O u t c o m e M e a s u r e , E - E ff ic ie n c y M e a s u r e , O t - O u t p u t/ W o r k lo a d M e a s u r e , a n d M - M a n a g e m e n t /C u s to m e r S a t is f a c t io n M e a s u r e

* P e r f o r m a n c e r e p o r t e d a f te r c l o s e o f f is c a l y e a r

1 / W o r k in g w i th I R S to d e v e lo p r e l ia b le m e a s u r e s o f th e in d i v id u a l ta x c o m p l ia n c e b u r d e n t h a t c a n b e u s e d f o r t h is p u r p o s e in th e fu tu r e .

FY 2005 FY 2005 FY 2006 FY 2007

Strat. FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Object. Historical Historical Historical Performance Performance Performance Performance

F3A N/A N/A N/A N/A N/A Discontinued Discontinued

F3B N/A N/A N/A Baseline 5 Discontinued Discontinued

F3A N/A N/A 136 136 504 Discontinued Discontinued

Requiring internal OFAC review with significantly increased 

workload. F3B N/A N/A 20 Days 20 Days 28 Discontinued Discontinued

Requiring Chief Counsel's Office/interagency review with 

significantly increased workload. F3B N/A N/A 75 Days 75 Days 63 Discontinued Discontinued

F3B N/A N/A N/A N/A N/A Discontinued Discontinued

F3B N/A N/A N/A Baseline 40 45 45

F3B N/A N/A N/A N/A N/A Discontinued Discontinued

F3B N/A N/A N/A N/A N/A Baseline TBD

F3B N/A N/A N/A Baseline 95 105 120

F3B N/A N/A N/A N/A N/A Baseline TBD

F3B N/A N/A N/A N/A N/A Baseline TBD

F3B N/A N/A N/A N/A N/A Baseline TBD

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

Increase number of terrorist finance designations for which other 

countries join the US (Ot) 

Number of countries that are assessed for compliance with the 

Financial Action Task Force 40 + 9 recommendations. (Ot)

Increase the dollar amount of terrorist assets and number of 

financial channels blocked. (Oe)

Number of strategies produced to address Priority 

Regions/Countries and /or key vulnerabilities in the financial sector 

(Ot)

Number of outreach engagements with the charitable and 

international financial communities. (Ot)

Customer satisfaction with OIA analysis in terms of its accuracy, 

timeliness, and relevance (Oe) (New)

Turn-around time for license and interpretative submissions (E) 

(New)

The number of civil penalty cases that are resolved within the 

Statute of Limitations period. (Ot) (New)

Increase the number of international measures and bodies 

established internationally to protect the financial system from 

money laundering and terrorist financing. (Ot)

Performance Level

Maintain the number of and significance to the foreign narcotics 

traffickers of new designated targets (Ot)

Maintain turnaround time for submissions with significantly 

increased workload. (E)

Number of countries removed from the Financial Action Task Force 

40+9 non-cooperative countries and territories (NCCT) list. (Oe)
DO - 22

Maintaining a World-class Treasury

3B – Description of Performance

During FY 2005 Departmental Offices assessed the value of each of its performance 

measures, selecting only the most meaningful with key results. The number of 

performance measures was reduced from 338 in FY 2004 to 122 in FY 2005, a 64 percent 

decrease in the number of performance measures reported to the public. 

Departmental Offices performance achievements are described below by budget activity. 

Specific goals and measures do not exist for the Executive Direction and Administration 

Programs budget activities because the work of the offices within those activities is 

indirectly captured within the other budget activities. 

Economic Policies and Programs

One of Treasury’s important economic performance goals is to address global imbalances 

and assure sustainable global growth. One way Treasury accomplishes this goals 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 FY 2004 Treasury met its target of 

three regimes becoming more flexible. In FY 2006 and FY 2007 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 

FY 2005 FY 2005 FY 2006 FY 2007

Strat. FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Object. Historical Historical Historical Performance Performance Performance Performance

F4B Met Met Met Met Met Met Met

F4B Met Met Met Met Met Met Met

F4B N/A N/A 3.8% 5.0% 5.0% 5.0% 5.0%

M5B 4.0 3.9 3.9 3.0 2.8 2.8 2.6

M5B N/A N/A N/A Baseline 39.3 40.3 38.2

M5B N/A N/A 77.0% 100.0% 100.0% 100.0% 100.0%

M5B N/A N/A 31.0% 50.0% 36.0% 50.0% 50.0%

M5B 20 9 8 4 7 5 2

M5B N/A N/A N/A 25.0% 25.0% 30.0% 30.0%

Performance Level

Bureau performance plans for supervisors, managers, and SES 

members contain elements that link to the bureau mission. (Oe) 

Injury and Illness rate Treasury-wide, including Departmental 

Offices (Ot) 

Manage cost per Treasury employee (E)

Audit opinion received on government-wide financial statements 

(Oe) 

Variance between estimated and actual receipts (annual forecast) 

(E) 

Release Federal Government-wide financial statements on time 

(Oe) 

Complete investigations of EEO complaints within 180 days (Oe) 

Percent of complainants informally contacting EEO (for the 

purposes of seeking counseling or filing a complaint) who participate 

in the ADR process (Ot)

Number of open material weakness (significant management 

problems identified by GAO, the IGs and/or the Bureaus) 

(President's Management Agenda) (Oe) 

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and M - Management/Customer Satisfaction Measure
DO - 23

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 us 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 2005, Treasury negotiated seven such agreements, which 

surpassed its target of five. For FY 2007, Treasury plans to negotiate seven more 

agreements.

Financial Policies and Programs

In FY 2005, Treasury’s Office of Domestic Finance released the federal Governmentwide financial statements on time. Treasury has met this performance target since 

FY 2004 and it plans to continue to meet it in FY 2007. It is important to release this 

statement on time because it is 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 to maximize investment earnings and minimize borrowing costs. 

To optimize cash management, Treasury measures that difference between actual and 

projected receipts. In FY 2005, Treasury continued to improve in forecasting receipts, 

outlays, debt and overall cash and met its targeted variance level of five percent. In 

FY 2006 and FY 2007, Treasury plans to continue efforts to improve its forecasting 

abilities in order to saving the government money.

Terrorism and Financial Intelligence 

When the Office of Terrorism and Financial Intelligence (TFI) was established in 2004, 

Treasury 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 Treasury’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 lead to significant changes to its 

suite of performance measures - several established performance measures were 

discontinued and several new measures were developed. 

TFI is working closely with the international financial community to implement 

standards that are 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 Treasury 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 2005, 49 

countries were assessed for compliance with these international standards. In FY 2007, 

Treasury will continue to work closely with the IMF and World Bank to increase 
DO - 24

assessments and gain more international cooperation with implementation of these 

standards. Treasury’s FY 2007 target for the number of countries assessed is 78, which is 

a 60 percent increase from FY 2005 results.

Another integral element in the war on terrorism is combating money laundering. 

Treasury continues to promote anti-money laundering as a key to attacking criminal 

activity, including narcotics trafficking, white collar crime, organized crime and public 

corruption. One way Treasury is fighting this illicit activity is by working with both U.S. 

and international governments and private institutions to ensure that they safeguard 

themselves and the financial system against money laundering. Treasury tracks its 

engagements with these entities through the measure “Increase the number of outreach 

engagements with charitable and financial communities.” In FY 2005, Treasury worked 

with 95 entities to ensure their financial systems are safeguarded from money laundering. 

In FY 2007, Treasury plans to work with 120 entities, an increase of over 25 percent from 

FY 2005 results.

Treasury-Wide Management Policies and Programs

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 2005, Treasury continued its aggressive 

occupational safety and health program and had a 2.8 percent rate.

The cost for Treasury-wide management per FTE will measure the cost effectiveness of 

Departmental Offices (DO) management. The FY 2005 baseline is $39.33 thousand per 

FTE. DO hopes to achieve a cost of $40.27 thousand in FY 2006 and $38.21 thousand in 

FY 2007.

Treasury measures bureau performance plans for supervisors, management, and SES 

members that contain elements linking to the bureau mission. In FY 2005, Treasury 

reached 100 percent of this goal.

The average number of EEO investigations completed within 180 days was 36 percent

and below the target of 50 percent. Vacancies existed throughout FY 2005, causing the 

slowdown. Every effort is being made to fill vacancies, and the EEO Center is working 

to identify bottlenecks and opportunities for process improvement. 

Treasury continues to make progress toward resolving its material weaknesses. The 

Internal Revenue Service (75 percent of the eight weaknesses) has targeted three for 

closure in FY 2006. The remaining 25 percent are spread between Departmental Offices 

and the Financial Management Service and are currently on track for closure during 

FY 2006 and FY 2007.

Treasury met its Alternative Dispute Resolution (ADR) target of 25 employees using

counselors and the ADR process. 
DO - 25

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

Departmental Offices has the responsibility for managing the Department’s overall 

President’s Management Agenda (PMA) effort. Treasury is working to achieve more on 

the PMA each year, improving the current status and progress status for each of the six

initiatives to reach “green” in all areas (which it is doing). More importantly, Treasury is 

focused on creating a “green” organization. In a “green” organization, all of the PMA 

initiatives work together and leverage one another’s successes. For example, in a “green”

organization, a skill gap identified by the human capital initiative might be resolved 

through a competitive sourcing activity that results in improved financial performance

reflected in a performance budget that is appropriately tracked by an e-system.

Human Capital

Treasury has developed and published a Human Capital Strategic Plan (HCSP) for 

FYs 2005–2008. It establishes a roadmap for attracting and retaining diverse talent to 

meet future challenges and mission objective. To ensure HCSP objectives are achieved, 

Treasury established a Human Capital System for Accountability that will provide a 

framework for measuring and evaluating how well the Department is doing.

A Department-wide working group transformed eight separate bureau Senior Executive 

Service (SES) performance management systems into a single Department-wide 

(including Departmental Offices) pay-for-performance system. This new system 

fundamentally changes how executive performance is evaluated. Now it differentiates 

between high and low performers, linking performance to agency mission and goals. It 

emphasizes observable outcomes and results such as the Program Assessment Rating 

Tool, the PMA, and analytical performance measures at the organizational level. As a 

follow on, Treasury’s Human Resources policy office is developing a policy requiring 

bureaus to cascade the tenets of the SES performance management system to their 

manager systems eventually addressing all employee appraisals. The criteria for getting 

to green under the Human Capital calls for Treasury to move towards this goal, which 

will begin once the system policy is in place.

Other Treasury achievements include: bureau efforts on succession planning identifying 

management competencies and reporting gaps and progress by bureaus in meeting the 45 

day hiring model. 

Treasury’s Human Resources policy office has the following Departmental goals to 

achieve a Human Capital PMA status of “green” in the future:
DO - 26

 Succession planning and closing competency gaps, particularly in the HR/Equal 

Employment Opportunity area;

 Building skills in performance measurements, using accountability systems, and 

assessing organizational effectiveness;

 Educating managers on union/management relationship issues and changing the 

labor relations environment;

 Developing the capacity to respond effectively to new Presidential initiatives; and 

 Moving to “One Treasury” within the Human Resources community.

Competitive Sourcing

Treasury is improving the cost-effectiveness of its operations every year through 

competitive sourcing. The Department began using this as a budget tool but it has 

matured into a workforce modernization tool, as an option to address findings from the 

Program Assessment Rating Tool.

Competitive sourcing solutions have ranged from the re-design of a single 

office/function; to multi-location, multi-discipline, multi-process operation; to 

groundbreaking use of training people with disabilities to staff phones for tax information 

call centers. Treasury implemented six studies within the timeframes set forth in Circular 

A-76 (the Competitive Sourcing policy); studied 3,100 positions; completed 60 

competitions (at least one per bureau) and significantly streamlined several Treasury 

processes. The Department anticipates savings as a result of competitive sourcing to 

exceed $220 million over the next five years.

Other Treasury achievements include: submitted Federal Activities Inventory Reform 

(FAIR) inventory to OMB on June 30, 2005 and all bureaus were trained to use Internal 

Revenue Service (IRS) standards which when used in 2004 improved the consistency and 

accuracy of the IRS inventory. Treasury Goals:

 Treasury currently has eight studies underway (either in pre-planning or Office of 

Management and Budget A-76 process) totaling almost 5,000 FTE; and

 The 2006 FAIR inventory will be completed in HR Connect (Treasury’s Human 

Capital system) to improve management’s ability to integrate Human Capital and 

competitive sourcing decision making.

Financial Performance

Treasury’s financial reporting process and the accuracy of monthly financial data has 

greatly improved. Bureaus now close their books by the third business day of each 

month. Meeting this closing date enables interim analysis of the monthly and quarterly 

financial statements. Timely data-management during the year ensures the issuance of 

the Performance and Accountability Report 45 days after year-end and promotes a clean 

audit opinion. Treasury has also enhanced its financial data warehouse containing all 

bureau financial data and various edit checks which have also contributed to improved 

data accuracy for monthly financial statements. Accelerated monthly and annual 
DO - 27

financial reporting has also encouraged employees to look for creative ways to streamline 

and eliminate redundant or outdated financial processes. Management also realizes that 

employees are often in the best position to find and implement solutions to long-standing 

problems.

Departmental Offices (DO) financial performance for FY 2005 included the increased 

use of payments electronically rather than by check, and the completion of audits of over 

half of DO government credit cards. The goal was to audit 50 percent of all card holders.

E-Government

Treasury was designated as a Center of Excellence for the Financial Management Line of 

Business, and conditionally designated as a Shared Service Center for the Human 

Resources Management Line of Business. This enables Treasury to enter competitions to 

provide financial management and human resources services on a government-wide 

basis. In April 2005, Treasury successfully deployed HR Connect, its enterprise human 

resources management system, at the Department of Housing and Urban Development. 

This deployment added approximately 9,200 customer records to the HR Connect 

system.

Aside from the few areas where the Department is working to eliminate duplication, 

Treasury determined that it is neither planning nor operating investment technology 

investments or programs that duplicate the PMA or Line of Business initiatives.

Treasury is implementing the PMA e-Travel initiative Department-wide as a common 

government-wide travel management service to significantly improve official travel and 

save the government money. The implementation of E-Travel using GovTrip software 

provided by Northrop Grumman Mission Systems, one of the two vendors Federal 

agencies are required to use for E-Travel. To date, the Financial Management Service, 

Financial Crimes Enforcement Network and the Alcohol and Tobacco Tax and Trade 

Bureau Office of the Inspector General, the Inspector General for Tax Administration and 

Departmental Offices have been fully implemented with assistance and service from the 

Bureau of the Public Debt’s, Administrative Resource Center. Implementation of ETravel will continue in FY 2006 with the remaining bureaus. 

Migrating to a Department-wide travel program will put all employees on one system, 

which is expected to make overall travel administration easier to manage and provide the 

following results:

 Improve the travel program for all travelers across the Department and simplify 

the transition of employees from one bureau to another;

 Make cross-bureau communications on travel system issues much more effective; 

and 

 Provide cost savings and improved efficiency.

The Safety & Health Information Management System (SHIMS) is an integrated business 

application supporting Treasury worker compensation claim reporting to the Department 

of Labor and reporting on safety incidents within the Department. This program supports 
DO - 28

electronic (paperless) claims processing with an enhanced reporting functionality, and 

electronic data exchange with the Department of Labor. One of Treasury’s FY 2005-

2006 program goals is to further leverage SHIMS to enhance Treasury’s safety and health 

program management capabilities.

During FY 2003, Treasury’s bureaus processed 4,094 workers compensation claims 

compared to 3,470 claims during FY 2004 through the SHIMS system. In FY 2005 

workers compensation claims continued to decline to 1,713 claims processed as of the 

third quarter. SHIMS is one of the tools that management can use to perform injury and 

illness analysis to identify areas in which to reduce claims and identify areas for 

improvement. 

Budget and Performance Integration

Treasury continues to streamline and improve its budget and performance integration. It 

worked with stakeholders (Congress and the Office of Management and Budget) to 

streamline and pilot a new performance budget integration tool and revise Treasury’s 

FY 2006 Budget in Brief, which was well accepted. Treasury effectively linked the 

Secretary’s testimony on the Department’s FY 2006 budget to the agency’s mission, 

goals, and outcomes.

Treasury developed a new way for its senior managers to gain a Department-wide view 

on performance using a Treasury Performance Framework. This is a web-enabled tool 

that provides quarterly information on all of the Department’s core mission areas or value 

chains. The framework is a step toward using performance information that allows senior 

decision makers to make well informed operational, policy and budget decisions.

 In 2004 Treasury reported on 338 performance measures to the public in its budget. 

During FY 2005 Treasury assessed the value of each these measures, concentrating on 

key results, and reduced the number of reported department-wide measures to only 122, a 

64 percent reduction. Enhancements to its Performance Reporting System, a tool that 

improves reporting on measures and supports the management framework, were 

finalized.

The Performance and Accountability Report (PAR) contains a wealth of information on 

the Department’s program performance, financial statements, and other management 

information of interest to Treasury employees, external stakeholders and the public. 

Treasury was the first agency to issue its FY 2003 PAR, publishing it on November 15, 

2003, two years ahead of the date mandated by OMB. Treasury issued its FY 2004 PAR 

on November 15, 2004, and its FY 2005 PAR on November 15, 2005. The publications 

included audited Department-wide financial statements with an unqualified audit opinion 

for the Department.

Treasury uses the Program Assessment Rating Tool (PART) for the rigorous evaluation 

of its programs as identified for review by OMB. Treasury submitted to OMB PARTs 
DO - 29

for six programs plus a Re-PART of a program rated Results not Demonstrated. To fully 

exploit PART, Treasury has set the following goals:

 Focus on doing a better job evaluating programs;

 Develop better efficiency and outcome measures;

 Provide bureaus with regular training to ensure a consistent approach;

 Avoid Results Not Demonstrated for undeserving programs; and

 Focus continually improving Treasury’s PMA score.

Eliminating Improper Payments

In 2006, an estimated 22 million families will receive over $40 billion in Earned Income 

Tax Credit (EITC) payments to reward work and help lift them out of poverty. The 

Internal Revenue Service is piloting new strategies, such as qualifying child certification, 

to reduce monies paid out in error, currently estimated as one out of four.

Improve Credit Program Management is a new initiative to improve the management of 

the Federal Government’s credit portfolios. Since Treasury has only a very limited 

portfolio of outstanding direct loans and loan guarantees, the status rating reflects the 

Department's efficiency and effectiveness in implementing the requirements of the Debt 

Collection Improvement Act of 1996 to recover delinquent debt for other agencies. Since 

1996, Treasury's Financial Management Service has collected more than $24 billion in

delinquent debt. In FY 2005 collections were $3 billion. Because this is the first quarter 

that agency efforts in this initiative were rated, no progress scores were given.
DO - 30

3.3 – PART Evaluation Table

PART Name: Office of Foreign Assets Control (OFAC)

Strategic Goal: Preserve the Integrity of Financial Systems

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

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

Bureau Actions Planned or Underway

OFAC has developed one long-term measure and one short-term measures, as follows:

Long-Term

The number of civil penalty cases that are resolved within the Statute of Limitations Periods. 

Target: 40

Short-Term Turn around time for license and interpretive submissions. Target: 60.

Number of out reach engagements focusing on compliance with OFAC regulations. Target: 60 

PART Name: International Development Association

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. By signing on to the IDA-13 replenishment agreement, the U.S. committed to provide $850 million annually for 

the next three years (2003 through 2005). The Administration is also requesting $27 million in 2004 to clear some of 

the $73 million in arrears that the U.S. owes IDA.

2. The Administration will request an additional $100 million for IDA in 2004 if IDA meets specific performance 

benchmarks and an additional $200 million for IDA in 2005 if IDA makes satisfactory progress in the areas of 

health, education, and private sector development.

3. The Administration will continue to press IDA and other donors to increase the amount of grants that IDA 

provides.

1. The FY 2006 budget requested $950 million for the first of three scheduled contributions to IDA-14.

2. The IDA-14 agreement provides $34 billion for development, primarily in the poorest countries, for FY 2006-FY 

2008. The U.S. committed $2.85 billion to IDA-14. Major policy initiatives that emerged in the IDA-14 agreement 

include: a significant expansion of the results measurement system; a sharp increase in the provision of grants; 

promotion of private sector development; and expanded transparency.

3. Treasury will be closely working with IDA to ensure that the performance and other reform commitments 

agreed to in the replenishment negotiations are implemented in a timely and effective manner.
DO - 31

PART Name: Technical Assistance

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Adequate

OMB Major Recommended Follow-up Actions

Bureau Actions Planned or Underway

2. OTA has two long-term measures and one annual measure. 

The Administration will continue to work with OTA as they implement the Project Management tracking System 

(PMTS) and develop long-term and annual measures and targets across OTA.

1. OTA has developed and implemented long-term performance measures, through the new PMTS, in which it 

continues to work. The trial PMTS implementation was completed with the OTA Budget Unit during FY 2005; full 

implementation across all OTA units will be effective in FY 2006.

PART Name: Global Environment Facility

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. The GEF has not yet implemented a performance-based allocation system (PBAS) as promised during the 

most recent donor replenishment agreement for the GEF (called GEF-3). While project selection focuses on 

global benefits, projects are funded in the order in which they are proposed and not on the basis of relative country 

performance or environmental benefits.

2. GEF funds should be focused on countries with the greatest potential benefits to the global environment and 

the best policy performance.

3. The GEF needs to pay great attention to cost-effectiveness.

4. While the GEF has long-term performance goals, several are rather general, such as conserving biological 

diversity; many do not have established baselines; and several goals lack time-frames.

5. GEF annual measures are mainly process rather than outcome oriented.

6. The GEF needs to undertake more rigorous evaluations of its projects' performance and donors should tie a 

portion of their replenishment contributions to key outcomes.

1. The FY 2006 budget requested $107.5 million for the fourth and final scheduled contribution to the GEF-3 

replenishment.

2. The GEF continues to work on the reform commitments contained in the GEF-3 replenishment agreement. In 

September 2005, the GEF Council approved the establishment of a performance-based allocation system, called 

the Resource Allocation Framework (RAF). The RAF will apply initially to biodiversity and climate change, which 

have historically represented two thirds of total resources. Of this, 75% will be allocated to individual countries on 

the basis of performance.

3. However, progress on other issues has been uneven. There has been an improvement in the results 

measurement frameworks of new projects, although there needs to be better focus on country and GEF-wide 

institutional outcomes and more systematic reporting of those outcomes. GEF needs to focus on further 

improvements in cost effectiveness and overall project management, including canceling dormant projects. 

Finally, the new private sector strategy is two years behind schedule.
DO - 32

PART Name: Tropical Forest Conservation Act

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

The assessment found that the program did not have performance measures that would enable a meaningful 

evaluation of program effectiveness. To overcome this deficiency, the Treasury has developed an Evaluation 

Sheet and is currently in the process of implementing this tool for existing and pending agreements. The 

Evaluation Shee will measure the success of the Tropical Forest Conservation Act (TFCA) 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 TFCA efficiency measures. To date to performance data has been 

collected, leading to the "Results Not Demonstrated" rating.

1. The FY 2006 budget requested $99.75 million for debt restructuring programs overall and flexibility in 

determining the amount to allocate for each program, including TFCA.

2. The administration will work with TFCA boards, oversight committees, and program partners to implement the 

TFCA Evaluation Sheet for all existing and pending agreements, and include the Evaluation Sheet or other 

appropriate evaluations in all new agreements.

3. The Administration will ensure that the program is effectively managed and meets performance goals.

PART Name: African Development Fund

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

o Grants are expected to total approximately 45% of AfDF total assistance, because debt 

sustainability will now be determinant of a country's financing terms;

o Enhanced AfDF development effectiveness with measurable results on the ground;

o Improved focus on support for private sector development;

o Capacity to assist post-conflict countries in clearing arrears to the AfDB group; and

o Expanded information disclosure of the Bank's activities and policies.

1. Request $118 million in 2005 for the third of three annual installments under the AfDF-IX replenishment 

agreement By signing onto the agreement, the U.S. committed to provide $118 million annually for three years 

(2003-2005).

2. Closely monitor the Bank's progress in implementing the results measurement and result-based management 

systems, particularly the development of short-term performance measures, targets, and baselines' and long-term 

targets and timeframes -- by September 2004.

3. Continue to press AfDF and other donors to increase the amount of grants that the AfDF provides.

2. The total AfDF-10 replenishment makes available approximately $1 billion per year for grant and lending 

operations.

3. Major policy objectives agreed to in AfDF-10 include:

1. The FY 2006 budget requested $135.7 million for the first of three scheduled contributions to AfDF-10.
DO - 33

PART Name: Asian Development Bank

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Results Not Demonstrated

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

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. 

1. The Fund has 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 need to be implemented and expanded.

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 need to be implemented. 

3. Transparency and accountability in the Bank are improving. AsDF-9 requires more transparency through 

improved information disclosure and communication policies. The Bank'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 African Development Fund replenishment (AsDF-9). 

Section 4 – Supporting Materials

4.1 – Human Resources Table

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 874 858 1,004

Increases:

Reason #1:

In FY 2004, DO implemented a hiring freeze to 

generate salary savings in order to establish the 

Office of Terrorism and Financial Intelligence. This 

office was created to fight the war on terrorism. -16

Reason #2:

The majority of the increase in FTEs can be 

attributed to strengthening national security. 146

Reason #3.:

The majority of the increase in FTEs can be 

attributed to strengthening national security. 54

Subtotal, Increases -16 146 54

Year-end Actual/Estimated FTEs 858 1,004 1,058

Net Change from prior year SOY to budget year EOY 200

CHANGES IN FULL-TIME EQUIVALENTS
DO - 34

Actual Full-Time Equivalent vs. Budgeted

874 874

960

1,004

1,058

874 895 858

0 0

74 76 86 86 90 74 89 89

0 0

0

200

400

600

800

1,000

1,200

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Bud. Direct Act. Direct Bud. Reimb. Act. Reimb.

4A – Human Capital Strategy Description

Departmental Offices Human Capital Strategy has three strategic goals: Organizational 

Effectiveness, Recruitment and Diversity, and Employee Retention and Employee 

Satisfaction.

By providing sound advice and guidance regarding hiring, retention, rewarding, 

employee/labor relations, performance evaluation, training and employee development, 

the Office of Human Resources (OHR) provides management with the HR tools it needs 

to manage its human capital effectively. 

HC Strategic Goal 1: Organizational Effectiveness: To align human capital plans, 

strategies, and systems to achieve organizational effectiveness and mission 

accomplishment.

DO undertook a major initiative moving transactional HR processing to the Bureau of the 

Public Debt (BPD) which consolidated recruitment and staffing functions, and revamped

DO’s on-site HR services to focus on areas aligned with Treasury’s Human Capital 

Strategic Plan. This transition is expected to enhance quality and delivery of HR services 

by eliminating redundancies and creating economies of scale.

DO and the HR Connect group implement a 45-day hiring model by mapping all business 

processes associated with classification, recruitment and processing. This result 

supported outsourcing to BPD. DO implemented “Recruitment Tracker,” a cradle-tograve hiring tracking system and began using all functions of the Career Connector 

system, which automates the vacancy announcement and assessment processes. The 
DO - 35

current hiring cycle time averages about 57 days, but these strategies should move reduce 

it to 45 days.

DO streamlined the new employee orientation process to focus more on key issues of 

importance to new hires, and developed a one-on-one new employee orientation for 

senior executives and political appointees. During the second quarter of FY 2006, a 

“technology awareness” segment will be added to encourage employees, early in their 

DO careers, to take advantage of the myriad of available system capabilities (e.g., HR 

Connect, Employee Express, etc.).

Goals for FY 2007 include implementing a 40 hour training program for new supervisors 

in an effort to better equip them to be 21st century leaders. A pilot of the program will be 

rolled out before the end of the second quarter of FY 2006. The OHR also plans to 

strengthen the performance management system for DO by ensuring alignment to 

organizational goals and results.

HC Strategic Goal 2: Recruitment and Diversity: To recruit and hire a highly skilled and 

diverse workforce aligned with business goals.

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, including Hispanic Association of Colleges and Universities,

National Internship Program, Departmental Office-specific fellowship programs, and 

other authorities.

DO uses a variety of pay and workplace scheduling flexibilities, where appropriate, e.g., 

recruitment bonuses, superior qualifications appointments and alternative work 

schedules.

Goals for FY 2006 include developing a “Manager’s Handbook”to explain and reinforce 

the use of the number of recruitment and retention flexibilities available.

HC Strategic Goal 3: Employee Retention and Employee Satisfaction: To retain a high 

performing workforce while maintaining an environment conducive to a high level of 

employee satisfaction.

DO advocates the use of a variety of retention and compensation tools to ensure that 

Treasury has the workforce needed to carry out its mission. These flexibilities include 

retention allowances and student loan repayment. 

DO effectively manages placement in management and executive development training 

programs. Efforts in this area strengthen and develop core leadership and management 

competencies. 

The OHR has a number of other planned objectives FY 2006 to support employee 

retention and satisfaction: developing an “Employee Handbook” a quick, easy reference 
DO - 36

guide on matters of importance to employees; conducting quarterly lunch-n-learn 

sessions on benefits topics of interest to employees; and probing results from the 2004 

Federal Human Capital Survey and making recommendations for improvements. 

DO faces a number of human capital challenges in FY 2006, such as a large number of 

employees reaching retirement eligibility, including those in the Senior executive 

Service, taking with them valuable institutional knowledge; increased competition from 

private sector and other federal agencies for well-qualified economic, intelligence, 

financial and other types of highly skilled analysts; and ensuring that the current 

workforce receives the training it needs to keep pace with technological advances. 

To address these challenges, OHR will work with DO management to define current and 

future competency requirements and develop strategies for closing gaps, including 

knowledge management options. Now that transactional processes have been outsourced 

to BPD, a planned OHR reorganization during early FY 2006 will result in greater 

emphasis on workforce analysis and the development of workforce and recruitment plans. 

Plans will also be put into place to maintain quality assurance of outsourced and in-house 

human resources services.
DO - 37

4.2 – Operating Levels Table

Appropriation Title: DO Salaries & Expenses FY 2005 

Enacted

FY 2006 

President's 

Budget as 

Amended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating Level

FTE 858 1,004 1,004 1,004 1,058

Object Classification:

11.1 Full-Time Permanent Positions..................................... 83,138 $85,688 $91,905 $91,905 $100,850

11.3 Other than Full-Time Permanent Positions.............. 0 0 2,781 2,781 2,781

11.5 Other Personnel Compensation................................... 2,732 2,732 197 197 197

11.8 Special Personal Services Payments..................... 580 580 0 0 0

11.9 Personnel Compensation (Total).............................86,450 89,000 5,883 0 94,883 94,883 103,828

12.0 Personnel Benefits...................................................................... 21,260 17,800 1,317 19,117 19,117 21,548

13.0 Benefits to Former Personnel............................................... 25 575 (575) 0 0 0

21.0 Travel.................................................................................. 3,354 3,025 (25) 3,000 3,000 6,296

22.0 Transportation of Things........................................... 61 0 0 0 0 0

23.1 Rental Payments to GSA................................................ 4,529 4,000 0 4,000 4,000 4,602

23.2 Rent Payments to Others............................................... 995 0 0 0 0 0

23.3 Communications, Utilities, & Misc...................................................... 4,686 9,500 (1533) 7,967 7,967 7,967

24.0 Printing and Reproduction.......................................................... 2,300 4,400 (1685) 2,715 2,715 2,715

25.1 Advisory & Assistance Services.................................................... 24,230 2,594 25420 28,014 28,014 41,852

25.2 Other Services.................................................................... 11,767 15,168 (5444) 9,724 9,724 9,724

25.3 Purchase of Goods/Serv. from Govt. Accts...... 13,443 28,454 (9607) 18,847 18,847 18,847

25.4 Operation & Maintenance of Facilities................... 535 750 150 900 900 900

25.5 Research & Development Contracts................................0 29 (29) 0 0 0

25.6 Medical Care............................................................................. 0 30 (30) 0 0 0

25.7 Operation & Maintenance of Equipment...................... 1,100 10,675 (9675) 1,000 1,000 1,000

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

26.0 Supplies and Materials.................................................... 3,200 6,125 (2414) 3,711 3,711 3,801

31.0 Equipment.......................................................................... 475 3,128 (2380) 748 748 794

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...................................................... 1 0 0 0 0 0

44.0 Refunds.............................................................................. 0 0 0 0 0 0

Total Budget Authority................................................178,411 $195,253 (627) $0 $194,626 $194,626 $223,874

Budget Activities:

Executive Direction Programs $14,430 $16,656 (327) $16,329 $16,329 $17,501

Economic Policies and Programs 31,203 32,011 (320) 31,691 31,691 41,947

Financial Policies and Programs 25,231 24,720 1588 26,308 26,308 25,336

Terrorism and Financial Intelligence 34,796 39,939 (399) 39,540 39,540 45,401

Treasury-Wide Management Policies and Programs 16,245 16,843 (168) 16,675 16,675 20,372

Administration Programs 56,506 65,084 (1990) 63,094 63,094 73,317

Currency Manipulation 0 0 990 990 990 0

Total Budget Authority................................................$178,411 $195,253 (627) $0 $194,626 $194,626 $223,874
DO - 38

4B – Appropriations Language

DEPARTMENT OF THE TREASURY

DEPARTMENTAL OFFICES

Federal Funds

General and Special 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, [not to exceed $3,000,000 for official travel expenses;] [$196,592,000] 

$223,874,000, of which not to exceed [$8,642,000] $17,501,000 is for executive direction 

program activities; [not to exceed $7,852,000 is for general counsel program activities;] 

not to exceed [$32,011,000] $41,947,000 is for economic policies and programs 

activities; not to exceed [$26,574,000] $25,336,000 is for financial policies and programs 

activities; [pursuant to section 3004 (b) of the Exchange Rates and International 

Economic Policy Coordination Act of 1988 (22 U.S.C. 5304 (b)), not to exceed 

$1,000,000, to remain available until expended, is for the Secretary of the Treasury, in 

conjunction with the President, to implement said subsection as it pertains to 

governments and trade violations involving currency manipulation and other trade 

violations;] not to exceed [$39,939,000] $45,401,000 is for [financial crimes policies and 

programs] terrorism and financial intelligence activities; not to exceed [$16,843,000] 

$20,372,000 is for Treasury-wide management policies and programs activities; and not 

to exceed [$63,731,000] $73,317,000 is for administration programs activities: [Provided, 

That of the amount appropriated for financial crimes policies and programs activities, 

$22,032,016 is for the Office of Foreign Assets Control and shall support no less than 

125 full time equivalent positions:] Provided [further], That the Secretary of the Treasury 

is authorized to transfer funds appropriated for any program activity of the Departmental 

Offices to any other program activity of the Departmental Offices upon notification to the 

House and Senate Committees on Appropriations: [Provided further, That no 

appropriation for any program activity shall be increased or decreased by more than two 

percent by all such transfers: Provided further, That any change in funding greater than 

two percent shall be submitted for approval to the House and Senate Committees on 

Appropriations:] Provided further, That of the amount appropriated under this heading, 

not to exceed $3,000,000, to remain available until September 30, [2007] 2008, for 

information technology modernization requirements; not to exceed [$100,000] $150,000

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, [$5,173,000] 
DO - 39

$5,114,000 to remain available until September 30, [2007] 2008, is for the Treasury-wide 

Financial Statement Audit and Internal Control Program, of which such amounts as may 

be necessary may be transferred to 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. (Department of the Treasury Appropriations Act, 2006.) 
Treasury Building and Annex 

Repair and Restoration 

1.1 – Appropriation Summary Table 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Treasury Building and Annex Repair and Restoration $12,217 $9,900 $0 ($9,900) -100.00%

Total Appropriated Resources $12,217 $9,900 $0 ($9,900) -100.00%

(Dollars in Thousands)

FY 2007 Priorities

The modernized Main Treasury Building is an investment to be protected. Funding in

FY 2007 for the Repair and Improvements (R&I) account is requested within the Salaries 

and Expenses account to maintain and safeguard the property.

Mission

The Treasury Building and Annex Repair and Restoration (TBARR) program 

repairs and restores the Main Treasury Building while preserving its historic 

fabric and modernizes building systems to comply with local and national codes 

and standards.
TBARR - 2

Table of Contents

Section 1 – Purpose .......................................................................................3

1A – Description of Program Vision and Priorities...................................................... 3

1B – Previous Highlights and Accomplishments ......................................................... 3

1C – Future Outlook.................................................................................................... 3

Section 2 – Explanation of Increases and Decreases.......................................4

2.1 – Budget Increases and Decreases Table................................................................ 4

2A – Budget Increases and Decreases Description....................................................... 4

Section 3 – Budget and Performance Plan ......................................................5

3.1 – Appropriation Detail Table ................................................................................. 5

3A – Budget Activity Description ............................................................................... 5

3.2 – Budget and Performance Plan Table ................................................................... 5

3B – Description of Performance................................................................................. 5

Section 4 – Supporting Materials ....................................................................6

4.1 – Human Resources Table ..................................................................................... 6

4.2 –Operating Levels Table....................................................................................... 7

4B - Appropriations Language.................................................................................... 8
TBARR - 3

Section 1 – Purpose

1A – Description of Program Vision and Priorities 

Under the Federal Property and Administrative Services Act of 1949 (as amended), the 

Treasury Department has direct operational control over the Main Treasury and Treasury 

Annex buildings. Planning to improve basic building systems began in the FY 1996 

budget under the Repair and Improvements appropriation with a funding request for 

heating, ventilation and air conditioning, and electrical systems. The time line for these 

projects was severely affected by the June 1996 fire, which caused extensive damage to 

the interior of the north wing of the Main Treasury building.

The Building Modernization and Renovation Program started in FY 1999 as an umbrella 

program to coordinate building projects in the most cost effective manner. The program 

was accomplished with a "Construction Manager as Constructor" contract, under which 

the contractor participated in the design development as well as provided overall 

construction management and subcontracting for construction of the systems. A funding 

stream was developed to modernize multiple systems simultaneously. If systems were 

modernized one at a time, costs would be greater, as repeated incursions into walls, floors 

and ceilings would be necessary. In addition, this serial approach would mean repeatedly 

evacuating portions of the building, increasing the cost of moves and rental space outside 

of the Treasury Building.

1B – Previous Highlights and Accomplishments

The TBARR program office was formed specifically to repair and restore the Main 

Treasury Building while preserving the historic fabric of the building and to modernize 

building systems to comply with local and national codes and standards. The renovated 

and modernized Main Treasury Building now features an ample local area network and 

telecommunications infrastructure, a fully compliant fire alarm and fire protection 

system, an expanded security access and alarm system, new electrical lighting and 

mechanical systems, and the addition of new elevators and emergency stairwells. 

Hallways, lobbies and office suites that possess architectural historic significance were 

restored to reflect their original condition. The rest of the suites have been modernized to 

be reconfigurable and ergonomically considerate.

1C – Future Outlook

The modernized Main Treasury Building is an investment to be protected. Funding in 

FY 2007 for the Repair and Improvements (R&I) account is requested within the Salaries 

and Expenses account to maintain and safeguard the property.
TBARR - 4

Section 2 –Explanation of Increases and Decreases

2.1 –Budget Increases and Decreases Table

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 10 $12,316

Rescission (P.L. 108-447) (99)

FY 2005 Enacted 10 12,217

FY 2006 Appropriation (P.L. 109 - 115) 9 10,000

Rescission (P.L. 109 - 148) (100)

FY 2006 Enacted 9 9,900

Changes to Base

Transfer out to DO S&E for Repairs and Improvements Account 0 (1,000)

Non-recur of TBARR (9) (8,900)

Total FY 2007 Base 0 $0

Annex Repair and Restoration

Appropriation Title: Treasury Building and 

2A –Budget Increases and Decreases Description

Transfer to DO Salaries and Expenses........................................................ -$1,000,000

Transfer Out to DO S&E for Repairs and Improvements -$1,000,000 / 0 FTE

Transfer funding to re-establish a recurring baseline for major repairs and improvements 

to the Main Treasury and Annex infrastructure. Maintenance of the Historic Landmark 

(Main Treasury) and Historic Register (Annex Building) is a priority. Prior to the 

establishment of the Treasury Building and Annex Repair and Restoration account, 

$1,000,000 was appropriated annually for this purpose in a Departmental Offices Salaries 

and Expenses no-year account.

Non-Recur .................................................................................................... -$8,900,000

Treasury Building and Annex Repair and Restoration -$8,900,000 / 0 FTE

Additional funds are not requested for the TBARR program. The FY 2006 enacted 

TBARR appropriation will be used to complete the project and re-occupy all of the Main 

Treasury building.
TBARR - 5

Section 3 – Budget and Performance Plan

3.1 –Appropriation Detail Table

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Treasury Building and Annex Repair and Restoration 11 $12,217 9 $9,900 0 0 -100.00% -100.00%

Subtotal Newly Appropriated Resources 11 $12,217 9 $9,900 0 $0 -100.00% -100.00%

Other Resources:

Available multi-year/no-year funds 0 1,934 0 0 0 0 0.00% 0.00%

Subtotal Other Resources 0 1,934 0 0 0 0 0.00% 0.00%

Total Resources Available for Obligation 11 $14,151 $9 $9,900 $0 $0 -100.00% -100.00%

(Dollars in Thousands)

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Resources Available for Obligation Enacted Enacted Request to FY 2007

3A –Budget Activity Description

This appropriation funds repairs and selected improvements to the Main Treasury 

building.

3.2 –Budget and Performance Plan Table

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective M5B:

Budget Activities: Treasury Building and Annex Repair and Restoration

Financial Resources

Newly Appropriated Resources $35,500 $28,832 $24,852 $12,217 $9,900 $0

Other Resources 0 0 0 0 0 0

Total Operating Level $35,500 $28,832 $24,852 $12,217 $9,900 $0

Human Resources

Newly Appropriated FTE 8 10 10 11 9 0

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) 8 10 10 11 9 0

Treasury Strategic Objective M5B:

Budget Activities: Treasury Building and Annex Repair and Restoration

Financial Resources

Newly Appropriated Resources $35,500 $28,832 $24,852 $12,217 $9,900 $0

Other Resources 0 0 0 0 0 0

Total Operating Level $35,500 $28,832 $24,852 $12,217 $9,900 $0

Human Resources

Newly Appropriated FTE 8 10 10 11 9 0

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) 8 10 10 11 9 0

Resource Level

Treasury Strategic Goal: Ensure Professionalism, Excellence, Integriy and Accountability in the Management and Conduct of the Department of 

Treasury (M5)

3B – Description of Performance

Major repairs and restoration have resulted in a more modernized working environment 

while preserving the historic integrity of the Treasury Building and have ensured 

improved working conditions for the health and safety of Treasury employees and 

visitors.
TBARR - 6

Section 4 –Supporting Materials

4.1 – Human Resources Table

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 10 11 9

Increases:

Reason:

11 FTE represents the amount of FTE required to 

maintain the Treasury Building and Annex Repair 

and Restoration project 1

Subtotal, Increases 1 0 0

Decreases:

Reason #1:

Reduction of 2 FTE reflects the amount of FTE 

needed to complete the program comparable to 

the funding that was authorized. -2

Reason #2:

The FTE redcution of 9 FTEs to 0 in FY 2007 is 

due to the program expiring in FY 2006. -9

Subtotal, Decreases 0 -2 -9

Year-end Actual/Estimated FTEs 11 9 0

11 9 0

Net Change from prior year SOY to budget year EOY -11

CHANGES IN FULL-TIME EQUIVALENTS

Actual Full-Time Equivalent vs. Budgeted FTE

0

2

4

6

8

10

12

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Bud. Direct Act. Direct Bud. Reimb. Act. Reimb.
TBARR - 7

4.2 – Operating Levels Table

Appropriation Title: Treasury Building and Annex 

Repair and Restoration FY 2005 

Enacted

FY 2006 

President's 

Budget as 

Amended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating 

Level

FTE 11 9 9 9 -

Object Classification:

11.1 Full-Time Permanent Positions.....................................$500 409 $409 $409 $0

11.1 Other than Full-Time Permanent Positions.............. 0 0 0 0 0

11.5 Other Personnel Compensation................................... 0 0 0 0 0

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

11.9 Personnel Compensation (Total)............................. 500 409 409 409 0

12.0 Personnel Benefits...................................................................... 180 147 147 147 0

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

21.0 Travel.................................................................................. 25 20 20 20 0

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

23.1 Rental Payments to GSA................................................624 511 511 511 0

23.2 Rent Payments to Others............................................... 0 0 0 0 0

23.3 Communications, Utilities, & Misc...................................................... 267 219 219 219 0

24.0 Printing and Reproduction.......................................................... 0 0 0 0 0

25.0 Other Services...................................................................... 216 177 (100) 77 77 0

25.1 Advisory & Assistance Services.................................................... 0 0 0 0 0

25.2 Other Services....................................................................3 3 3 3 0

25.3 Purchase of Goods/Serv. from Govt. Accts...... 0 0 0 0 0

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...................... 6 6 6 6 0

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

26.0 Supplies and Materials....................................................50 41 41 41 0

31.0 Equipment.......................................................................... 150 123 123 123 0

32.0 Lands and Structures................................................... 10,196 8,344 8,344 8,344 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................................................$12,217 $10,000 ($100) $0 $9,900 $9,900 $0

Budget Activities:

 Treasury Building and Annex Repair and Restoration $12,217 $10,000 ($100) $9,900 $9,900 $0

Total Budget Authority................................................$12,217 $10,000 ($100) $0 $9,900 $9,900 $0

(Dollars in Thousands)
Department-wide Systems and 

Capital Investments Program

1.1 – Appropriation Summary Table

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Department-wide Systems & Capital Investment Program

Critical Infrastructure Protection (Financial Institutions) $5,754 $5,742 $2,093 ($3,649) -63.55%

E-Government Initiatives 2,740 2,734 2,209 (525) -19.20%

Back-up Disaster Recovery Capacity 1,732 1,729 1,656 (73) -4.22%

Integrated Wireless Network 1,488 1,485 0 (1,485) -100.00%

Cyber Security 2,540 2,281 2,244 (37) -1.62%

Enterprise Architecture 397 396 0 (396) -100.00%

HR Connect 15,367 0 0 0 0.00%

Appliance-Based Computer Security 1,488 0 0 0 0.00%

Certificate-Based Internet Security 496 0 0 0 0.00%

Treasury Foreign Intelligence Network (TFIN) 0 5,940 21,200 15,260 256.90%

OFAC Enterprise Content Management 0 0 627 627 0.00%

Treasury Secure Data Network (TSDN) 0 2,772 4,003 1,231 44.41%

Defense Messaging System 0 495 0 (495) -100.00%

Documents Management 0 594 0 (594) -100.00%

Total Appropriated Resources $32,002 $24,168 $34,032 $9,864 40.81%

(Dollars in Thousands)

Mission

The Department-wide Systems and Capital Investments Program (DSCIP) 

account 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. 
DSCIP - 2

FY 2007 Priorities

 Completing the redesign and modernization of the Treasury Foreign Intelligence 

Network (TFIN) and upgrading and enhancing the Treasury Secure Data Network 

(TSDN). TFIN and TSDN are classified systems that are critical to Treasury’s 

expanding financial intelligence mission. 

 Continuing to modernize the Departmental Offices (DO) Information Technology

infrastructure to provide enhanced functionality, performance, and security for 

DO customers.

 Continuing to improve Treasury’s Federal Information Security Management Act 

(FISMA) performance and strengthen the Department’s overall security posture.

 Achieving new levels of resilience within the financial services sector, through 

continued Critical Infrastructure Protection testing, and the enhancement of 

regional coalitions targeted at resilience.

 Implementing all applicable initiatives as well as completing all required 

milestones as part of Treasury’s Presidential E-Government Implementation Plan.
DSCIP - 3

Table of Contents

Section 1 – Purpose .......................................................................................4

1A – Description of Program Vision and Priorities...................................................... 4

1B – Previous Highlights and Accomplishments ......................................................... 4

1C – Future Outlook.................................................................................................... 5

Section 2 – Explanation of Increases and Decreases.......................................6

2.1 – Budget Increases and Decreases Table................................................................ 6

2A – Budget Increases and Decreases Description....................................................... 6

Section 3 – Budget and Performance Plan ......................................................9

3.1 – Appropriation Detail Table ................................................................................. 9

3A – Budget Activity Description ............................................................................... 9

3.2 – Budget and Performance Plan Table ................................................................. 10

3B – Description of Performance............................................................................... 11

3C – PMA Evaluation Description ............................................................................ 11

4.1 – Human Resources Table ................................................................................... 12

4.2 –Operating Levels Table..................................................................................... 13

4B –Appropriations Language.................................................................................. 14
DSCIP - 4

Section 1 – Purpose

1A – Description of Program Vision and Priorities 

The Department-wide Systems and Capital Investments Program (DSCIP) account 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. 

Continuing investments include the Treasury Foreign Intelligence Network, Treasury 

Secure Data Network, Critical Infrastructure Protection, Back-up Disaster Recovery 

Capacity, Cyber Security, and various E-Government initiatives. First time funding is 

requested in FY 2007 to plan for the development of an Enterprise Content Management 

system for the Office of Foreign Assets Control.

1B – Previous Highlights and Accomplishments

Treasury has made significant progress in key initiatives under the DSCIP program. 

Highlights of these accomplishments include: 

HR Connect: In April 2005, Treasury successfully began servicing their first customer 

for the HR Connect enterprise human resources management system, the Department of

Housing and Urban Development (HUD). This is a first success for Treasury as a Human 

Resources Line of Business (HR LoB) provider. On August 23, 2005, the Office of 

Personnel Management selected five agencies, including Treasury, to be a Shared Service 

Center (SSC) in the HR LoB. The HR LoB provides government-wide business and 

technology solutions to support the strategic management of human capital. Treasury’s 

HR LoB product, HR Connect, currently supports 148,000 employees within Treasury, 

HUD, and components of the Departments of Justice and Homeland Security. Selection 

as an HR LoB SSC provides Treasury the opportunity to achieve significant reduction in 

per capita costs for HR Connect by spreading fixed costs over an expanded customer 

base. 

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. Treasury completed the Project Matrix Refresh effort, an

assessment and evaluation of the Department’s critical cyber and physical assets and key 

resources. This initiative, one of the Department’s “Proud To Be”milestones under the 

President’s Management Agenda, assists Treasury in its emergency preparedness efforts

and disaster recovery planning. Completion of Project Matrix Refresh also enables the 

Department of Homeland Security to address assets and key resources across the Federal 

government that impact U.S. national security. 

E-Government Initiatives: Treasury fully participates in 17 of the 25 E-Government

initiatives and four of the six E-Government Lines of Business. Treasury worked 

diligently with the Managing Partners of the Presidential E-Government Initiatives and 

completed all required Memoranda of Understanding with other Federal agencies by 
DSCIP - 5

March 30, 2005. By facilitating discussions between Departmental E-Gov 

representatives and the federal Managing Partners, Treasury-wide coordination has 

improved and transition activities have begun to identify and eliminate duplicative 

systems.

Cyber Security: Treasury has improved its Federal Information Security Management 

Act performance. Significant gains were made in the number of Treasury systems 

certified and accredited and the number of systems which have security costs integrated 

into their system life cycle. 

1C – Future Outlook

The key goals for FY 2007 include:

 Completing the redesign and modernization of the classified Treasury Foreign 

Intelligence Network and upgrading and enhancing Treasury Secure Data 

Network, which are critical to support Treasury’s expanding national security

mission.

 Continuing to modernize the DO information technology infrastructure to provide 

enhanced functionality, performance, and security for DO customers.

 Improving Treasury’s Federal Information Security Management Act 

performance and strengthening the Department’s overall security posture.

 Achieving new levels of resilience within the financial services sector, through 

continued Critical Infrastructure Protection testing and the enhancement of 

regional coalitions targeted at resilience.

 Implementing all applicable initiatives as well as completing all required 

milestones as part of Treasury’s E-Government Implementation Plan.
DSCIP - 6

Section 2 –Explanation of Increases and Decreases

2.1 –Budget Increases and Decreases Table

(Dollars in Thousands)

Treasury

 Appropriation: Department-wide Systems and Capital Budget Strategic

 Investment Program (DSCIP) FTE Amount Activity Objective

Projects :

 Treasury Foreign Intelligence Network 21,200 DSCIP M5B

 OFAC Enterprise Content Management 627 DSCIP M5B

 Treasury Secure Data Network (TSDN) 4,003 DSCIP M5B

 Critical Infratstructure Protection (Fin Inst.) 2,093 DSCIP M5B

 Back-up Disaster Recovery Capacity 1,656 DSCIP M5B

 Cyber Security 2,244 DSCIP M5B

 E-Government Iniaitatives 2,209 DSCIP M5B

Total FY 2007 Request 0 $34,032

2A –Budget Increases and Decreases Description

Projects.......................................................................................................+$34,032,000

Treasury Foreign Intelligence Network (TFIN) +21,200,000 / 0 FTE The Office of 

Terrorism and Financial Intelligence is responsible for coordinating bureau and policy 

office intelligence related to terrorist financing and other national security threats related 

to financial crime. As Treasury’s role in supporting the intelligence community and 

national security directives continues to grow, so does the urgent requirement for a 

robust, reliable, and secure classified network. The Treasury Foreign Intelligence 

Network (TFIN) is a Top Secret/Sensitive Compartmented Information (TS/SCI) system 

critical to the support of Treasury’s national security mission. Current TFIN network 

equipment and software is unstable and soon will no longer receive technical support 

from the manufacturer. It has become increasingly difficult for Treasury to exchange 

information with the intelligence community and other necessary entities. 

A system upgrade is needed to address network stability and ensure adequate cyber 

security capabilities. These enhancements are necessary to bring the operating system 

and related security measures into line with the rest of the intelligence community. TFIN 

is the Department’s top priority. The FY 2007 request will complete the redesign and 

modernization of TFIN in FY 2007 and the installation of full back up and recovery 
DSCIP - 7

capability for TFIN in the second quarter of FY 2008. A redesigned TFIN will fully 

leverage new technologies and capabilities and include replacement of core servers, 

terminals, and funding for maintenance. Enhancements include replacement of the 

secure messaging system, connection to the Defense Messaging System, and an 

intelligence community-compatible analytical toolset for use by analysts and the watch 

office. 

Treasury Secure Data Network (TSDN) +$4,003,000 / 0 FTE The Treasury Secure Data 

Network (TSDN) is the computer and network infrastructure that enables the 

communication and distribution of classified information to over 400 Departmental users. 

TSDN also provides Treasury users with access to the Secret Internet Protocol Router 

Network and the Department of Defense classified communications network, which is 

vital to ensure that the Office of Terrorism and Financial Intelligence, as well as IRSCriminal Investigations, can communicate effectively with colleagues in the law 

enforcement and intelligence communities. Currently, most national security cable traffic, 

classified data, and policy information must be compiled and formulated on stand-alone 

personal computers and hand-carried to recipients. Full implementation of TSDN will 

provide staff with the capability to sort and distribute such information electronically and 

perform retrospective searches across multiple years of data. In addition, the current 

system will soon be out-of-date and no longer supported by the manufacturer. Treasury’s 

increasing role in national security drives the greater demand for TSDN seats and 

services.

Office of Foreign Assets Control (OFAC) Enterprise Content Management +$627,000 / 0 

FTE Productivity and response time improvements are critical to OFAC’s continued 

success. An analysis of unclassified mission critical OFAC functions determined that it 

needs an Enterprise Content Management (ECM) case-centric solution to replace its

dependence on a document-centric process. Currently case folders are used in virtually 

every aspect of OFAC’s operations, including processing licenses, investigating potential 

violations, and administering penalties. These folders organize all relevant documents,

including correspondence, routing memos, case notes, and checklists. OFAC also needs

an automated document or records management system for routing or searching for 

documents. An ECM solution will allow OFAC to better meet its commitments, manage 

its records, respond to inquiries from citizens, including Freedom of Information Act 

requests, and better serve its business and government customers. OFAC will work with 

the Office of the Chief Information Officer to ensure that OFAC’s planning is 

coordinated with the Department’s efforts to plan for document management systems 

Treasury-wide. 

Critical Infrastructure Protection (Financial Institutions) +$2,093,000 / 0 FTE

Treasury has the lead role in the Homeland Security Presidential Directive 7 (HSPD-7) 

that protects the U.S. banking and finance sector’s critical infrastructure. This funding is 

requested to decrease the financial sector’s susceptibility to terrorist events and natural 

disasters. An example of HSPD-7 and CIP efforts is the response mechanisms that 

helped restore financial services in the aftermath of Hurricane Katrina. Response was 

much quicker in areas impacted by the storms, as regulatory obstacles like the waiving of 
DSCIP - 8

certain rules were removed, allowing financial institutions to co-locate in undamaged 

buildings. Treasury also informed the financial institutions about federal relief payments, 

policies on the cashing of checks issued by the government, and restoration plans for 

electricity and telecommunications. 

Back-up Disaster Recovery Capacity +$1,656,000 / 0 FTE Treasury must maintain and 

enhance the Department’s disaster recovery capabilities. These critical efforts protect 

many of Treasury’s technology systems and provide for the continuity of operations for 

key Treasury officials and functions in the event of a disaster. This provides for ongoing 

support for existing servers, software for DO critical services, such as email, shared drive 

and mainframe applications, email archiving, and Internet access.

Cyber Security +$2,244,000 / 0 FTE This program ensures Department-wide 

compliance with Federal and Treasury security policy, and in particular, with the Federal 

Information Security Management Act (FISMA). Funding is requested to protect

Treasury’s security posture by providing adequate policy and compliance reviews, and to 

improve the Department’s FISMA performance and overall cyber security posture. In 

October 2005, Treasury’s Office of Inspector General (OIG) found that Treasury was in 

substantial non-compliance with FISMA. According to the Congressional scorecard, the 

Department currently has a grade of “D.”Under current conditions, Treasury’s risk for 

catastrophic network intrusion, including exposure of sensitive, collateral classified and 

intelligence information processed by Treasury systems, could increase. This funding 

also supports the majority of compliance and oversight activities required by various laws 

and directives that are enforced by the OIG, Government Accountability Office, and 

Office of Management and Budget. Funding is requested to prevent non-compliance 

with the law and regulatory requirements in many potential areas. 

E-Government Initiatives +$2,209,000 / 0 FTE The Office of the Chief of Information 

Officer (OCIO) oversees the Department’s participation in the Government-wide EGovernment initiatives. As provided by the E-Government Act of 2002 and the 

President's Management Agenda, Treasury receives services from the shared solutions 

developed within a number of the E-Government Initiatives and Lines of Business. 

Treasury is currently a partner in 17 of these initiatives and four Lines of Business. 

OCIO ensures the execution of Memoranda of Understanding with the Managing Partner 

agencies, and commits Treasury to fulfilling its contribution to the initiatives as agreed to 

with the Managing Partner agencies.
DSCIP - 9

Section 3 – Budget and Performance Plan

3.1 –Appropriation Detail Table

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Department-wide Systems & Capital Investment Program 0 $32,002 0 $24,168 0 34,032 0.00% 40.81%

Subtotal Newly Appropriated Resources 0 32,002 0 24,168 0 34,032 0.00% 40.81%

Other Resources:

Available multi-year/no-year funds 0 11,410 0 0 0 0

Subtotal Other Resources 0 11,410 0 0 0 0 0.00% 0.00%

Total Resources Available for Obligation 0 $43,412 0 $24,168 0 $34,032 0.00% 40.81%

(Dollars in Thousands)

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Resources Available for Obligation Enacted Enacted Request to FY 2007

3A –Budget Activity Description

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. Highlights of some of the efficiencies and benefits from these investments 

include:

Completing the Modernization of Treasury Financial Intelligence Network (TFIN): 

Completing the modernization of TFIN is the top priority of the Department. The 

network is critical to the processes and productivity of Treasury’s national security and 

analytical staff. Modernization is necessary to increase network capacity to support a 

growing number of users. 

Upgrading Treasury Secure Data Network (TSDN): Updating TSDN is a critical 

component of improving the work processes and productivity of Treasury’s national 

security and analytical staff. TSDN supports a number of offices and Bureaus and 

enhancements are needed to increase uptime and reliability of the system, faster access 

and communications through increased network capacity, support for a growing number 

of users, and new tools and features that will significantly increase analyst productivity.

Ensuring the Resilience of America's Economy: The Office of Critical Infrastructure 

Protection and Compliance Policy (OCIPCP) exists to fulfill the President's direction 

pursuant to HSPD-7 and to ensure that the highest achievable level of resilience for the 

U.S. financial services sector is reached. Critical financial services sector functions must 

be highly resilient when natural disasters, such as Hurricanes Katrina and Rita, or 

terrorist attacks, occur. The OCIPCP fulfills the President's vision of a safer America for 

all through a detailed program of testing, analysis, and risk management, in cooperation 

with the private sector.
DSCIP - 10

Disaster Recovery Capabilities: This upgrade is critical to ensure the stability of 

essential operations of the Department in the event of an emergency. The upgrade will 

enhance the ability of the Department’s information technology infrastructure to recover 

in the event of a disaster or major service failure. Funding is needed to avoid limited 

operations of email, shared drive (essentially personal) files, and other of applications. 

Implementation of Presidential E-Government Initiatives: The President’s 

Management Agenda and Presidential E-Government Initiatives drive Treasury to 

identify opportunities to leverage existing systems and services in order to reduce costs 

and duplication. Treasury continues to review and monitor projects targeted for 

migration and eventual shut-down. By migrating to government-wide solutions such as 

E-Rulemaking, E-Authentication and E-Training, the Department is able to leverage 

existing systems or infrastructure, thereby reducing costs and duplicative investments 

within Treasury and across government.

3.2 –Budget and Performance Plan Table

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective M5B:

Budget Activities: Department-wide Systems and Capital Investment Program

Financial Resources

Newly Appropriated Resources $62,150 $68,828 $36,185 $32,002 $24,168 $34,032

Other Resources 0 0 0 0 0 0

Total Operating Level $62,150 $68,828 $36,185 $32,002 $24,168 $34,032

Human Resources

Newly Appropriated FTE 0 0 0 0 0 0

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) 0 0 0 0 0 0

Treasury Strategic Objective M5B:

Budget Activities: Department-wide Systems and Capital Investment Program

Financial Resources

Newly Appropriated Resources $62,150 $68,828 $36,185 $32,002 $24,168 $34,032

Other Resources 0 0 0 0 0 0

Total Operating Level $62,150 $68,828 $36,185 $32,002 $24,168 $34,032

Human Resources

Newly Appropriated FTE 0 0 0 0 0 0

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) 0 0 0 0 0 0

Resource Level

Treasury Strategic Goal: Ensure Professionalism, Excellence, Integriy and Accountability in the Management and Conduct of the Department of 

Treasury (M5)

FY 2005 FY 2005 FY 2006

Strat. FY 2002 FY 2003 FY 2004 Planned Actual Planned

Object. Historical Historical Historical Performance Performance Performance

F3C N/A 67.0% 309.0% 20.0% 20.0% 10% growth

F3C N/A N/A N/A N/A N/A 6

F3C N/A N/A N/A N/A N/A 2

F3B N/A N/A N/A N/A N/A 10.0%

F3B N/A N/A N/A N/A N/A 10.0%

F3B N/A N/A N/A N/A N/A 10.0%

* Performance reported after close of fiscal year

Increase the resilience of Treasury programs to ensure the 

effective operation of the United States financial system (Ot) 

Support and encourage the formation of regional coalitions (Ot)

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

Performance Level

Increase the quality and quantity of information sharing of U.S. 

financial information between the federal government and the U.S. 

financial services sector institutions (Ot) 

Treasury Secure Data Network (TSDN) is within 10% of cost and 

schedule (E)

Treasury Financial Intelligence Network (TFIN) is within 10% of 

cost and schedule (E)

Office of Foreign Asset Control (OFAC) Enterprise Content 

Management is within 10% of cost and schedule (E)
DSCIP - 11

3B – Description of Performance

The Office of Critical Infrastructure Protection and Compliance Policy (OCIPCP) 

partnered with the private sector to start up the Financial Sector-Information Sharing and 

Analysis Center (FS-ISAC). In FY 2003, it increased participation by 67 percent and in 

FY 2004 increased participation by 309 percent. The OCIPCP also contributed to the 

Department’s strategic objectives by increasing the resiliency and protection of the U.S. 

financial system. To this end, it has: 1) increased the number of protective response 

planning exercises for critical institutions, 2) tested crisis response of federal financial 

regulators, 3) worked with the Financial Services Information Sharing and Analysis 

Center to ensure it has accurate and useful information and that it continues to build 

membership, 4) worked with other sectors on which financial services are interdependent 

to address vulnerabilities, 5) improved the tools and processes used to communicate with 

the public and private sectors, 6) monitored the finalization of rules and implementation 

of procedures required under the Fair and Accurate Credit Transactions Act, thereby 

ensuring their consistency with the intent of the statute, and 7) and discharged Treasury’s 

obligations under Homeland Security Presidential Directive 7.

FY 2007 DSCIP performance measures are to: 1) conduct a series of tests that will allow 

the financial services sector to make informed decisions about the best course of action to 

take to protect their employees, customers, and operations and 2) support and encourage 

the formation of regional coalitions, such as ChicagoFIRST, comprising private sector 

financial industry representatives, and local, state, and federal law enforcement officials 

as well as financial regulators. Through these regional coalitions, the financial sector 

may communicate with law enforcement and the regulators in case of an emergency. 

Lastly, DSCIP’s major capital investments will be measured to ensure that cost and 

schedule are within 10 percent of estimates. These major investments include the 

Treasury Secure Data Network, Treasury Foreign Intelligence Network, and OFAC’s 

Enterprise Content Management system.

3C – PMA Evaluation Description

Expanding E-Government: Treasury is committed to improving Department-wide 

coordination and collaboration to meet the Expanding E-Government goals outlined in 

the President’s Management Agenda (PMA). The Department is working collaboratively 

to meet PMA requirements across each program area. Highlights include:

 Achieved upgrade from “Red” to “Yellow” for status and maintained “Green” for 

progress for the E-Government PMA Status as evaluated by the Office of 

Management and Budget (OMB),

 Finalized the OMB required E-Government Implementation Plan by September 1, 

2005,

 Remedied and removed the majority the Treasury business cases that were on the 

OMB watch list,
DSCIP - 12

 Completed all quarterly FISMA reporting requirements,

 Treasury was designated as a Center of Excellence for the Financial Management 

Line of Business, and conditionally designated as a Shared Service Center for the 

Human Resources Management Line of Business.

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

4.1 – Human Resources Table

DSCIP does not require a Human Resources Strategy.
DSCIP - 13

4.2 – Operating Levels Table

Appropriation Title: Department-wide Systems & 

Capital Investment Program FY 2005 

Enacted

FY 2006 

President's 

Budget as 

Amended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating 

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 0

11.5 Other Personnel Compensation................................... 0 0 0 0 0

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

11.9 Personnel Compensation (Total)............................. 0 0 0 0 0

12.0 Personnel Benefits...................................................................... 0 0 0 0 0

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

21.0 Travel.................................................................................. 76 57 57 57 81

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

23.1 Rental Payments to GSA................................................439 219 219 219 467

23.2 Rent Payments to Others............................................... 0 0 0 0 0

23.3 Communications, Utilities, & Misc...................................................... 0 122 122 122 0

24.0 Printing and Reproduction.......................................................... 0 0 0 0 0

25.0 Other Services..............................................................8,935 0 0 0 9,502

25.1 Advisory & Assistance Services.................................................... 2,604 10,576 10,576 10,576 2,769

25.2 Other Services.................................................................... 14,166 9,802 9,802 9,802 15,065

25.3 Purchase of Goods/Serv. from Govt. Accts...............3,515 2,336 (244) 2,092 2,092 3,738

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...................... 740 0 0 0 787

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

26.0 Supplies and Materials....................................................275 210 210 210 292

31.0 Equipment.......................................................................... 1,252 1,090 1,090 1,090 1,331

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................................................$32,002 $24,412 ($244) $0 $24,168 $24,168 $34,032

Budget Activities:

Department-wide Systems & Capital Investment $32,002 $24,412 ($244) $24,168 $24,168 $34,032

Total Budget Authority................................................$32,002 $24,412 ($244) $0 $24,168 $24,168 $34,032

(Dollars in Thousands)
DSCIP - 14

4B – Appropriations Language

DEPARTMENT OF THE TREASURY

DEPARTMENTAL OFFICES

Federal Funds

General and Special Funds:

DEPARTMENT-WIDE SYSTEMS AND CAPITAL INVESTMENT PROGRAM

For development and acquisition of automatic data processing equipment, software, and 

services for the Department of the Treasury, [$24,412,000] $34,032,000, to remain 

available until September 30, [2008] 2009: 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’’. (Department of the Treasury Appropriations Act, 2006.) 
TBARR - 8

4B – Appropriations Language

DEPARTMENT OF THE TREASURY

DEPARTMENTAL OFFICES

Federal Funds

General and Special Funds:

TREASURY BUILDING AND ANNEX REPAIR AND RESTORATION

[For the repair, alteration, and improvement of the Treasury Building and Annex, 

$10,000,000, to remain available until September 30, 2008.] (Department of the Treasury 

Appropriations Act, 2006.)

JUSTIFICATION OF CHANGES

The Treasury Building and Annex Repair and Restoration account is no longer needed.
Air Transportation Stabilization Program

1.1 – Appropriation Summary Table 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Air Transportation Stabilization Board $1,984 $2,723 $0 ($2,723) -100.00%

Total Appropriated Resources $1,984 $2,723 $0 ($2,723) -100.00%

(Dollars in Thousands)

FY 2007 Priorities

In FY 2006 the Board plans to negotiate repayment or remarketing of its remaining loans

and the sale of its warrants. ATSB expects that these events will eliminate the need to 

request additional resources for FY 2007. 

Mission

The Air Transportation Stabilization Board (ATSB) was established under the 

Air Transportation Safety and System Stabilization Act (Public Law 107-42) to 

issue federal credit instruments (loan guarantees) to assist air carriers that 

suffered losses as a result of the September 11, 2001 terrorist attacks on the 

United States. 
ATSP - 2

Table of Contents

Section 1 – Purpose .......................................................................................3

1A – Description of Program Vision and Priorities...................................................... 3

1B – Previous Highlights and Accomplishments ......................................................... 3

1C – Future Outlook.................................................................................................... 4

Section 2 – Explanation of Increases and Decreases.......................................5

2.1 – Budget Increases and Decreases Table................................................................ 5

Section 3 – Budget and Performance Plan ......................................................5

3.1 – Appropriation Detail Table ................................................................................. 5

3A – Budget Activity Description ............................................................................... 6

3.2 – Budget and Performance Plan Table ................................................................... 6

3B – Description of Performance................................................................................. 6

Section 4 – Supporting Materials ....................................................................7

4.1 – Human Resources Table ..................................................................................... 7

4.2 – Operating Levels Table....................................................................................... 7

4B –Appropriations Language.................................................................................... 8
ATSP - 3

Section 1 – Purpose

1A – Description of Program Vision and Priorities 

The Air Transportation Stabilization Board (ATSB) was established under the Air 

Transportation Safety and System Stabilization Act (Public Law 107-42) to issue federal 

credit instruments (loan guarantees) to assist air carriers that suffered losses as a result of 

the September 11, 2001 terrorist attacks on the U.S. The ATSB is composed of the

Chairman of the Board of Governors of the Federal Reserve System, the Secretary of the 

Department of Transportation, the Secretary of the Department of Treasury, and the U.S.

Comptroller General (as a non-voting member) or their designees. Current voting 

members of the ATSB are: Chairman Donald L. Kohn, Board of Governors of the 

Federal Reserve System; Randal Quarles, Under Secretary for Domestic Finance, 

Department of the Treasury; and, Jeffrey Shane, Under Secretary for Policy, Department 

of Transportation. The program is governed and accounted for in accordance with the 

provisions of the Federal Credit Reform Act of 1990. 

To date, the ATSB has issued six loan guarantees, four of which have been paid off. Of 

the remaining two loans, one guarantee has been called and the ATSB has paid the 

private lender and now owns the loan directly. This borrower is in a Chapter 11

bankruptcy proceeding and is expected to reorganize and exit bankruptcy in the first half 

of FY 2006. The loan will be reinstated as a direct loan. The one remaining borrower 

with a loan guarantee is current on all interest, guarantee fees, and principal payments.

Additionally, the ATSB held warrants in each of its borrowers. The ATSB is currently in 

the process of monetizing its remaining warrant portfolio in a manner that maximizes the 

return from these securities to the taxpayer.

1B – Previous Highlights and Accomplishments

The ATSB received 16 applications prior to its June 28, 2002 application deadline 

requesting loan guarantees totaling $3.6 billion. It approved seven applications and

denied nine. It has negotiated and issued six Federal loan guarantees totaling $1.6 billion 

to air carriers for term loans with maturities ranging from four and one half to seven 

years. The seventh approved applicant withdrew its request.

The guarantee agreements negotiated by the ATSB provide that the ATSB receive 

guarantee fees from each borrower and stock warrants representing 10 percent to 32

percent of the borrower’s equity. These warrants can be exercised and sold at the 

ATSB’s discretion for the benefit of the U.S. taxpayers. To date, the ATSB has sold 

warrants totaling approximately $112 million.

The ATSB closely monitors its loan guarantee portfolio to determine the financial health 

of its borrowers and compliance with the terms of the loan agreements, including timely 

payment of fees and principal. Its staff reviews periodic reports submitted by borrowers, 

meets with borrowers on a regular basis and briefs Board members on significant 
ATSP - 4

developments. The staff prepares quarterly reviews of each borrower for Board 

evaluation.

The ATSB frequently receives requests from borrowers for amendments or waivers to 

certain loan agreement terms. The ATSB reviews these requests to determine the impact 

on the ATSB’s credit position and determines whether to approve the requests and if so 

on what terms. 

As of December 31, 2005, two of the ATSB borrowers had repaid in full the outstanding 

balances on their ATSB guaranteed loans. Additionally, two of the remaining four 

guarantees were successfully remarketed to institutional investors without the 

government guarantee.

One of the ATSB’s two remaining borrowers is in a Chapter 11 bankruptcy proceeding. 

The ATSB has actively worked with this borrower throughout the bankruptcy process to 

ensure that the taxpayer interests are protected.

Finally, the ATSB remaining warrant positions currently have an intrinsic value that 

exceeds $25 million.

1C – Future Outlook

In early 2006 the ATSB will be conducting complex negotiations with respect to the 

emergence of one of its two remaining borrowers from bankruptcy protection. In 

addition, the ATSB will be investigating other transactions that would result in the 

repayment of or remarketing of its remaining two loans as well as exploring transactions 

designed to maximize return on its remaining warrant portfolio. With respect to all 

restructuring and bankruptcy matters, the ATSB must rely heavily on its experienced 

financial and legal consultants and staff. The key challenge will be to protect taxpayer 

interests 

In FY 2006 the ATSB will continue to closely monitor its loan guarantee portfolio. 

ATSB expects that the Board will be able to negotiate repayment or remarketing of its 

remaining loans by the end of FY 2006. The Board has met the requirements established 

under P.L. 107-42 and will terminate its activities in 2007. 
ATSP - 5

Section 2 –Explanation of Increases and Decreases

2.1 –Budget Increases and Decreases Table

FTE Amount Budget 

Activity

Treasury Strategic 

Objective

FY 2005 Consolidated Appropriations (H. R. 4818 ) 3 $2,000

Rescission (H. R. 2673) - $16

FY 2005 Enacted 3 $1,984

FY 2006 Appropriation (P.L. 109 - 115) 6 2,750

Rescission (P.L. 109 - 148) - (27)

FY 2006 Enacted 6 2,723

Non - Recur of ATSP Funds (6) (2,723)

Total, FY 2007 Request - $0

(Dollars in Thousands)

Appropriations: Air Transportation Stabilization Program

The ATSB is winding down its portfolio and expects to end its activities by the end of 

FY 2006.

Section 3 – Budget and Performance Plan

3.1 –Appropriation Detail Table

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Air Transportation Stabilization Board 3 $1,984 6 $2,723 0 $0 -100.00% -100.00%

Subtotal Newly Appropriated Resources 3 $1,984 6 $2,723 0 $0 -100.00% -100.00%

Other Resources:

Recoveries 0 $0 0 $177 0 $0 0.00% 0.00%

Available multi-year/no-year funds 0 $566 0 $0 0 $0 0.00% 0.00%

Subtotal Other Resources 0 $566 0 $177 0 $0 0.00% 0.00%

Total Resources Available for Obligation 3 $2,550 6 $2,900 0 $0 -100.00% -100.00%

(Dollars in Thousands)

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Resources Available for Obligation Enacted Enacted Request to FY 2007
ATSP - 6

3A –Budget Activity Description

The ATSB budget covers cost of operations including staff salaries and benefits and other 

operating expenses such as rent and the costs associated with the Board’s various 

financial and legal consultants. 

To date, despite the serious economic challenges facing the airline industry, the ATSB 

has been successful in maximizing value of assets in its loan guarantee program while 

minimizing risk of loss under its loan guarantees. Continuing success depends on having 

an experienced staff and financial and legal consultants who are expert in the many facets 

of airline operations and finances. 

3.2 –Budget and Performance Plan Table

Treasury Strategic Goal: Promote Stable U.S. and World Economies (E2)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Request

Treasury Strategic Objective E2A:

Budget Activities: Air Transportation Stabilization Board

Financial Resources

Newly Appropriated Resources $9,400 $6,041 $2,277 $1,984 $2,723 $0

Other Resources 595 531 214 0 0 0

Total Operating Level $9,995 $6,572 $2,491 $1,984 $2,723 $0

Human Resources

Newly Appropriated FTE 0 8 6 3 6 0

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) 0 8 6 3 6 0

Resource Level

FY 2005 FY 2005 FY 2006 FY 2007

Strat. FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Object. Historical Historical Historical Performance Performance Performance Performance

F3C N/A 100.0% 100.0% 100.0% 100.0% 100.0% Discontinue

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

Performance Level

On-time payment of federal loan guarantee fees and repayment of 

underlying loans by borrowers (Oe)

* Performance reported after close of fiscal year

N/A: Not Applicable

3B – Description of Performance

The Air Transportation Stabilization Board supports Treasury’s strategic goal to promote 

stable U.S. and world economies in its strategic objective of increasing citizen economic 

security and safety. The ATSB has not had any exceptions with regards to its 

performance measurement goals.
ATSP - 7

Section 4 –Supporting Materials

4.1 – Human Resources Table

ATSB does not require a Human Resources Strategy.

4.2 – Operating Levels Table

Appropriation Title: Air Transportation Stabilization 

Board FY 2005 

Enacted

FY 2006 

President's 

Budget as 

Amended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating 

Level

FTE 3 6 6 6 -

Object Classification:

11.1 Full-Time Permanent Positions..................................... $275 $100 $100 $100 $0

11.1 Other than Full-Time Permanent Positions.............. 0 0 0 0 0

11.5 Other Personnel Compensation................................... 0 0 0 0 0

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

11.9 Personnel Compensation (Total)............................. 275 100 100 100 0

12.0 Personnel Benefits...................................................................... 51 50 50 50 0

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

21.0 Travel.................................................................................. 10 0 0 0 0

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

23.1 Rental Payments to GSA................................................ 197 0 0 0 0

23.2 Rent Payments to Others............................................... 0 0 0 0 0

23.3 Communications, Utilities, & Misc...................................................... 0 0 0 0 0

24.0 Printing and Reproduction.......................................................... 0 0 0 0 0

25.0 Other Services...................................................................... 0 0 0 0 0

25.1 Advisory & Assistance Services.................................................... 1,400 2,600 (27) 2,573 2,573 0

25.2 Other Services.................................................................... 50 0 0 0 0

25.3 Purchase of Goods/Serv. from Govt. Accts...... 0 0 0 0 0

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 0 0 0 0

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

26.0 Supplies and Materials.................................................... 1 0 0 0 0

31.0 Equipment.......................................................................... 0 0 0 0 0

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................................................ $1,984 $2,750 ($27) $0 $2,723 $2,723 $0

Budget Activities:

Appropriation Title: Air Transportation Stabilization Board $1,984 $2,750 ($27) $2,723 $2,723 $0

Total Budget Authority................................................ $1,984 $2,750 ($27) $0 $2,723 $2,723 $0

(Dollars in Thousands)
ATSP - 8

4B – Appropriations Language

DEPARTMENT OF THE TREASURY

DEPARTMENTAL OFFICES

Federal Funds

General and Special Funds:

AIR TRANSPORTATION STABILIZATION PROGRAM ACCOUNT

[For necessary expenses to administer the Air Transportation Stabilization Board 

established by section 102 of the Air Transportation Safety and System Stabilization Act 

(Public Law 107-42), $2,750,000, to remain available until expended.] In fiscal year 

2007, the Air Transportation Stabilization Board may charge fees to a borrower for the 

costs to the ATSB associated with bankruptcy proceedings of the borrower. Such fees 

shall be collected and deposited in the Air Transportation Stabilization Board account, to 

be available for such costs. (Department of the Treasury Appropriations Act, 2006.) 
Treasury Forfeiture Fund 

Non-Appropriated Resources Summary 

Table 1.1 

(Dollars in Thousands) 

FY 2007 Priorities 

• 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 support of law 

enforcement’s National Money Laundering Strategy and anti-terrorism 

financing efforts,

• 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,

• Work to reinforce relationships with member bureaus that extend across 

Departmental boundaries and with state and local law enforcement agencies 

who “extend the reach” of federal law enforcement, and

• Develop and modify forfeiture training and awareness programs that are 

responsive to today’s needs and to continually re-evaluate such training 

initiatives for best practices. 

Mission 

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. 

$ Change % Change

 FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Obligations Estimated Estimated to FY 2007 to FY 2007

Forfeiture Revenue $340,583 $292,094 $251,000 ($41,094) -14%
Treasury Forfeiture Fund - 2 

Treasury Forfeiture Fund 

FY 2007 Congressional Budget Submission 

Table of Contents 

Section 1 – Purpose............................................................................................................. 3 

1A – Description of Bureau Vision and Priorities.......................................................... 3 

1.1 – Resources Summary Table ................................................................................... 5 

1B – Previous Highlights and Accomplishments ........................................................... 5 

1C – Future Outlook ....................................................................................................... 6 

Section 3 – Budget and Performance Plan.......................................................................... 6 

3.1 – Activity Summary Table........................................................................................ 6 

3A – Budget Activity Description .................................................................................. 6 

3.2 – Budget and Performance Plan................................................................................ 7 

3B – Description of Performance ................................................................................... 7 

 3C -- Presidential Management Agenda........................................................6 

 3.3 --PART Evaluation...........................................................................8 

Section 4 – Supporting Materials........................................................................................ 6 

4.1 – Human Resources Table ....................................................................................... 8 

4A – Human Capital Strategy Description ..................................................................... 9 

4.3 – Operating Levels Table...................................................................................... ...9
Treasury Forfeiture Fund - 3 

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 Fund was established in October of 1992 as the 

successor to the Customs Forfeiture Fund. When the enabling legislation for the Fund 

was enacted, it brought together all of Treasury law enforcement under a single forfeiture 

program. The original member law enforcement bureaus of the Fund were the U.S. 

Customs Service (Customs), the U.S. Secret Service (Secret Service), the Bureau of 

Alcohol, Tobacco and Firearms (ATF) and the Internal Revenue Service’s Criminal 

Investigation (IRS-CI). These member bureaus were joined by the U.S. Coast Guard of 

the Department of Transportation (Coast Guard), as the result of a long-standing close 

law enforcement relationship with Customs. 

The Homeland Security Act of 2002, enacted November 25, 2002, transferred the 

majority of ATF to the Department of Justice, all of Customs and the Secret Service, as 

well as the Coast Guard, to the new Department of Homeland Security, with IRS 

continuing as the principal Treasury participant of the Fund. The law enforcement 

bureaus of the Department of Homeland Security continue as active member bureaus of 

the Treasury forfeiture program. 

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. 

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 
Treasury Forfeiture Fund - 4 

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 un-obligated 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. 

 

Strategic Vision: Fund management will focus on strategic cases and investigations that 

result in high-impact seizures. Management believes this approach will have the greatest 

impact on criminal organizations and thus will accomplish the ultimate goal 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 

Purchase of Evidence and Information, Expenses Associated with Joint Operations, 

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. 

Strategic Goals: The goal of the Treasury Forfeiture Fund is to support the now multiDepartmental national asset forfeiture program in a manner that results in federal law 

enforcement’s continued and effective use of asset forfeiture as a high-impact law 

enforcement sanction to disrupt and dismantle criminal enterprises. In addition, the Fund 

has the following four supporting goals which further the strategic mission: 1) deprive 

criminals of property used in or acquired through illegal activities; 2) encourage joint 

operations among federal, state and local law enforcement agencies, as well as foreign 

countries; 3) strengthen law enforcement; and 4) protect the rights of the individual. 

To achieve these goals, the program must be administered in a fiscally responsible 

manner that minimizes the administrative costs incurred and maximizes the benefits for 

law enforcement and the society it protects. Also, the continued viability of the program 

rests upon public confidence in its integrity, and, therefore, safeguarding the rights of 

affected individuals is an overriding concern in the administration of the program. 

Key Strategic Issues: Asset seizure and forfeiture is a top priority for the Fund’s 

participating law enforcement organizations, as well as the Department of Treasury, and 
Treasury Forfeiture Fund - 5 

is linked directly to the National Money Laundering Strategies. In this regard, 

management has identified the following key strategic issues: 

• 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.

1.1 – Resources Summary Table 

Revenues are not guaranteed to remain constant, so the FY 2006 and FY 2007 estimates assume a 

conservative program. 

1B – Previous Highlights and Accomplishments 

The Treasury Forfeiture Fund continued in its capacity as a multi-Departmental Fund in 

FY 2005, representing the forfeiture interests of law enforcement components of the 

Departments of Treasury and Homeland Security. In the midst of this period of growth 

and change, the Fund’s family of 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 2005 was a productive year for the Fund with revenue from 

forfeitures and recoveries that supported obligations totaling $340,583,000. 

Strategic performance target: Again in FY 2005, the Fund’s law enforcement bureaus 

exceeded the target for the Fund’s strategic performance measure, Percent High Impact 

Cases. The Fund established a target of 75 percent for cash forfeitures to equal or exceed 

$100,000 on a per-case basis and the bureaus exceeded this target with a final 

performance level of 81 percent high-impact forfeitures. 

This measure was first established in 2001 as management’s choice of a “strategic view” 

of overall bureau performance in the application of the forfeiture sanction. At the same 

time, Fund management established a strategic approach to expense funding, i.e., an 

emphasis on funding those expense categories that would lead to higher-impact forfeiture 

cases. The strategy has proven to be successful with revenue reaching or exceeding 

(Dollars in thousands) $ Change % Change

 FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Obligations Estimated Estimated to FY 2007 to FY 2007

Forfeiture Revenue $340,583 $292,094 $251,000 ($41,094) -14%
Treasury Forfeiture Fund - 6 

projected levels and the bureaus exceeding the performance measure target for high 

impact cases. 

1C – Future Outlook 

FY 2006: 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. 

Strategies for FY 2007: For FY 2007, Fund management plans to continue investment in 

technologies and data collection; to encourage the bureaus to pursue truly major cases 

and establish financial plans that reflect such priorities; to 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 method 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. 

Section 3 – Budget and Performance Plan 

3.1 – Activity Summary Table 

Dollars in Thousands 

3A – Budget Activity Description 

BUDGET ACTIVITY: Law Enforcement Operations 

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. 

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Description Actual Estimated Estimated to FY 2007

Revenue Sources:

 Carryover from prior year $ 95,778 $ 91,094 $ 50,000 -45%

 Current year forfeiture revenue 335,899 251,000 251,000 0%

 Total................................... $ 431,677 $ 342,094 $ 301,000 -12%

Uses:

 Permanent Authority (Obligations) $ 340,583 $ 292,094 $ 251,000 -14%

 Carryover to next year 1

/ 91,094 50,000 50,000 0%

 Total................................... $ 431,677 $ 342,094 $ 301,000 -12%

1/ The Fund incurs expenses immediately upon the start of the new year, including costs of an extensive array

of property contracts which must be funded without delay. Therefore, a carryover is required each year.
Treasury Forfeiture Fund - 7 

3.2 – Budget and Performance Plan 

Strategic Objective: Disrupt and Dismantle Financial Infrastructure of Terrorists, Drug Traffickers,

and Other Criminals and Isolate Their Support Networks - F3A

Budget Activity: Law Enforcement Operations

Performance Goal: Strategic use of asset forfeiture by Treasury law enforcement in a manner that results in

a high-impact forfeiture program.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of forfeited cash proceeds resulting from high-impact cases (%) (Oe)

Target 75 75 75 75 75 75

Actual 73 80.55 83.95 81

Target Met? N Y Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

Definition of "high impact:" A cash seizure equal to or greater than $100,000 (in dollars.)

For detailed information about each performance measure, including definition, verification and validation, please go 

to: http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3B – Description of Performance 

Strategic performance: For FY 2007, 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 highimpact 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. 

Performance 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. The 

data is regularly available to Fund management and provided through accounting systems 

of record the data from which is audited annually as part of the annual financial statement 

audit process. 

Performance Exceeds Target: Law enforcement bureaus participating in the Treasury 

Forfeiture Fund have exceeded the performance target in each of the last three fiscal 

years with performance at 80.6 percent, 84 percent and 81 percent for FY 2003, FY 2004 

and FY 2005, respectively. This achievement remains excellent given the extra demands 

placed on law enforcement personnel for anti-terrorism initiatives. The Fund expects to 

meet or exceed the target for FY 2007 given performance projections to date. 
Treasury Forfeiture Fund - 8 

3C – Presidential Management Agenda 

Human Capital 

The Treasury Forfeiture Fund reports to the Assistant Secretary for Terrorist Financing in 

Departmental Offices. The Executive Office of Asset Forfeiture (EOAF) utilizes DO’s 

Human Resources office and adheres to DO’s human capital policies and strategies. 

Competitive Sourcing 

The Treasury Forfeiture Fund is a small organization which is classified as inherently 

governmental. EOAF has participated in shared services for years by utilizing DO and 

DHS for all of its administrative services. 

Financial Performance 

The Treasury Forfeiture Fund continued to meet all consolidated financial statement 

reporting deadlines. The Fund’s independent auditors gave the FY 2005 financial 

statements an Unqualified Opinion. Management asserted a statement of reasonable 

assurance with regard to the Federal Managers’ Financial Integrity Act (FMFIA) and 

substantial compliance with the Federal Financial Management Improvement Act 

(FFMIA) for FY 2005. 

3.3 PART Evaluation 

The Treasury Forfeiture Fund has not and is not scheduled to be PARTed at this time but 

its performance is measured through carefully selected goals. 

Section 4 – Supporting Materials 

4.1 – Human Resources Table 

All staffing of the Treasury forfeiture program is reimbursed, there are no direct FTEs associated with the Fund. 

Full Time Equivalents Budgeted vs. Actual FTE Table

20 20 20 20 20 20 20 20 20 20

0

5

10

15

20

25

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

FTEs

Budget Actual
Treasury Forfeiture Fund - 9 

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 for a total of about 20 FTE annually, depending 

upon the status of vacancies at any one time. 

4.3 – Operating Levels Table 

Amounts shown in the table below agree with Table 3.2 but exclude the annual carryover 

funding shown under “Uses” of Table 3.2. Carryover amounts are required for start-up 

expenses of the Fund in each new fiscal year. Since there must be a carryover balance for 

business purposes at the beginning of each fiscal year, the carryover amount is not 

allocated for expenses of the Fund and is, therefore, excluded from operational obligation 

amounts shown below. 

Revenues are not guaranteed to remain constant, so the FY 2006 and FY 2007 estimates assume a 

conservative program. There may be minor differences between the object classification detail in the 

President’s Budget Appendix and this document. 

 

Table 4.3 Operating Levels

Dollars in thousands

 FY 2005 FY 2006 FY 2007 

Treasury Forfeiture Fund Obligations Estimated Estimated

25.2 Other Services (Direct) $179,083 $134,094 $115,000

25.3 Reimbursable Services 69,453 78,000 71,000 41.0 Equitable Sharing 92,047 80,000 65,000

 Total....................................................... $340,583 $292,094 $251,000
FinCEN-i

Financial Crimes Enforcement Network 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

BSA Administration and Analysis $63,635 $64,458 $81,143 $16,685 25.89%

Regulatory Support Programs 8,287 8,436 $8,651 215 2.55%

Total Appropriated Resources $71,922 $72,894 $89,794 $16,900 23.18%

(Dollars in Thousands)

Appropriation Summary

Table 1.1

FY 2007 PRIORITIES 

• Maintain and potentially expand outreach and guidance efforts to better meet 

the expectations of both the regulated communities and those who examine for 

Bank Secrecy Act requirements. 

• Expand analytical efforts to provide more policy level analysis of money 

laundering and terrorist financing trends and methodologies. 

• Upgrade BSA Direct to meet the expanded user population and enhance the 

electronic filing component to prepare for the transfer of collection and 

dissemination processes currently performed by Internal Revenue Service. 

• Expand BSA Direct to handle the volume of cross-border wire transfer data 

anticipated from implementation of the Intelligence Reform Act of 2004, 

Section 6302. 

Mission 

To safeguard the financial system from the abuses of financial crime, 

including terrorist financing, money laundering, and other illicit activity. 
FinCEN-ii

Table of Contents 

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

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

1B – Previous Highlights and Accomplishments ................................................................3 

1C - Future Outlook.............................................................................................................4 

Section 2 – Explanation of Increases and Decreases.............................................................7 

2.1 – Budget Increases and Decreases Table.......................................................................7 

2A - Budget Increases and Decreases Descriptions.............................................................7 

Section 3 – Budget and Performance Plan ..........................................................................11 

3A – Budget Activity Description .....................................................................................11 

3.2 – Budget and Performance Plan Tables.......................................................................11 

3B – Description of Performance ......................................................................................14 

3C – PMA Evaluation Description ....................................................................................18 

3.3 – PART Evaluation Table............................................................................................20 

Section 4 – Supporting Material ..........................................................................................21 

4.1 – Human Resources Information .................................................................................21 

4A – Human Capital Strategy Description ........................................................................22 

4.3 – Operating Levels Table.............................................................................................24 

4C – Appropriation Language ...........................................................................................25 
FinCEN-1 

Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

Mission

The Financial Crimes Enforcement Network (FinCEN), a bureau within 

Treasury’s Office of Terrorism and Financial Intelligence, is the largest overt 

collector of financial intelligence in the United States. FinCEN’s mission is to 

safeguard the financial system from the abuses of financial crime, including 

terrorist financing, money laundering, and other illicit activity. This is 

accomplished primarily through the administration of the Bank Secrecy Act; 

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. 

Vision

Financial Crimes Enforcement Network responds with agility and creativity to the 

challenges posed to the domestic and global financial systems by terrorist 

financiers and operatives, money launderers and other perpetrators of financial 

crime. 

Strategic Goals

In February 2005, Financial Crimes Enforcement Network developed and 

adjusted its strategic plan to more clearly articulate our role as a regulatory 

agency and establish goals to better use our analytical resources. As part of that 

process, FinCEN established the following Strategic Goals: 

• Protect the financial system through effective administration of the Bank 

Secrecy Act; 

• Combat terrorism, money laundering and other financial crime through 

analysis of the Bank Secrecy Act data and other relevant information; 

• Intensify international anti-money laundering collaboration through the 

global network of Financial Intelligence Units; and 

• Facilitate regulatory compliance, data management and information 

sharing through electronic government. 

Priorities

To accomplish its strategic goals, FinCEN established several priorities. First, FinCEN 

will strengthen efforts to oversee the effective and uniform application of the Bank 

Secrecy Act (BSA) aimed at reducing the vulnerability of financial institutions to abuse 

by terrorists and other criminals. Second, in coordination with Treasury’s Office of 

Intelligence and Analysis, FinCEN will enhance the value of its efforts to analyze and 

mine the Bank Secrecy Act data and other relevant information to combat terrorism, 

money laundering, and other financial crime. Third, FinCEN will intensify international 

anti-money laundering collaboration through the global network of financial intelligence 

units, playing a leadership role in the Egmont process. Finally, FinCEN will continue to 
FinCEN-2 

enhance technology to improve the collection and access to the Bank Secrecy Act data 

through integration of all component processes into BSA Direct. 

To fulfill its mission, goals and priorities, FinCEN works to: (1) issue, interpret, 

and enforce compliance with regulations implementing the Bank Secrecy Act, 

including provisions of Title III of the USA PATRIOT Act; (2) support and 

oversee compliance examination functions delegated to other federal regulators; 

(3) manage the collection, processing, storage, and dissemination of Bank Secrecy 

Act data; (4) maintain a government-wide access service to the Bank Secrecy Act 

data and network users with overlapping interests; and (5) in coordination with 

Treasury’s Office of Intelligence and Analysis, conduct analysis in support of 

policy makers, law enforcement, regulatory and intelligence agencies, and the 

financial industry. Our three primary functional areas are described below. 

Regulatory: Financial Crimes Enforcement Network supports and oversees examination 

activities to help ensure effective and uniform application of the Bank Secrecy Act 

regulations. To achieve effective and uniform compliance, FinCEN works closely with 

its regulatory partners. When warranted, FinCEN may assess civil money penalties or 

impose lesser enforcement remedies against institutions to promote and encourage greater 

compliance. In the global arena, our activities include: expanding and systematizing the 

exchange of financial intelligence information, improving the expertise and capabilities 

of personnel in money laundering and terrorist financing areas, and fostering better and 

more secure communication among financial intelligence units through the application of 

technology. 

Analysis: Financial Crimes Enforcement Network’s analysis function is moving to a 

new paradigm that emphasizes more complex and higher-level research and analysis. 

The new paradigm will help analysts understand and explain the cutting-edge problems 

relating to money laundering and illicit finance, including terrorist financing. The 

analysis is based upon all sources of information, linking the data collected under the 

Bank Secrecy Act 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. Analysts develop threat assessments, industry reports, and technical guides 

describing financial transaction mechanisms. 

Data Collection and Sharing: The Financial Crimes Enforcement Network provides 

direct access to the Bank Secrecy Act data to authorized law enforcement, regulatory and 

intelligence agencies. FinCEN will continue to integrate and modernize the various 

components of the Bank Secrecy Act data collection and sharing systems into an overall 

BSA Direct system. The goal of this modernization effort is to improve the quality of the 

Bank Secrecy Act data by preventing the omission of critical information, validating the 

information collected, and improving feedback on the use and utility of the data. Further 

integration of the BSA Direct components will improve the analysis and utility of the 

Bank Secrecy Act data. 
FinCEN-3 

1B – Previous Highlights and Accomplishments 

In FY 2005, the Financial Crimes Enforcement Network was appropriated $71,922,000 to 

support 309 FTE. With this appropriation, FinCEN addressed significant strategic threats 

such as terrorism, drug trafficking, and other money laundering activities. During FY 

2005, FinCEN published an interim adjustment to its strategic plan and completed a 

major organizational restructuring to meet these challenges. Major accomplishments are 

addressed below by functional area. 

Regulatory. 

• Established and executed information sharing agreements with five federal banking 

agencies and the Internal Revenue Service, which have delegated examination 

authority. These agreements describe the specific and aggregate information that the 

regulators will provide so that FinCEN better understands industry compliance with 

the Bank Secrecy Act. 

• Developed and executed 35 information sharing agreements with state financial 

institution regulators to obtain and share Bank Secrecy Act compliance information. 

The information collected from the sharing agreements will allow FinCEN to 

leverage resources, especially for non-bank financial institutions such as money 

services businesses, and enhance our overall ability to ensure the uniform application 

of the Bank Secrecy Act. 

• Issued a final rule to require dealers in precious metals, stones and jewels to establish 

anti-money laundering programs. A final rule to require insurance companies to 

establish an anti-money laundering program and to file suspicious activity reports was 

also submitted for Treasury clearance. 

• Hosted the 13th Egmont Plenary in June 2005. The Egmont Group is a global 

organization made up of financial intelligence units. At this meeting, Egmont 

membership grew to more than 100 financial intelligence units. 

• Participated in two newly created Financial Action Task Force (FATF) Style 

Regional Bodies, the Middle East and North Africa FATF, and the Eurasia FATF. 

FinCEN provided seven technical assistance visits this fiscal year to Argentina, 

Brazil, Paraguay, Thailand, Turkey, Azerbaijan, and Georgia. 

Analysis. 

• Devoted significant analytic resources to support regulatory compliance efforts by 

identifying compliance weaknesses in the reporting submitted by the regulated 

industries as well as trends, patterns, and threats posed by money launderers and 

illicit financiers to the financial system. 

• Completed a review of the case development support and are implementing a strategy 

to transition agencies now requesting routine query support to BSA Direct. 

• Supported Treasury’s efforts to develop a National Money Laundering Threat 

Assessment, which will track money laundering threats over a large geographic area, 

identify changing money laundering methodologies, and assist law enforcement and 

other end users in applying resources to areas of greatest threat. 
FinCEN-4 

• Supported Treasury initiatives by identifying jurisdictions or institutions as primary 

money laundering concerns under Section 311 of the USA PATRIOT Act. 

Data Collection and Sharing. 

• The BSA E-Filing system received a Golden Link award from the Armed Forces 

Communications and Electronics Association as an excellent government technology 

solution. 

• Launched the BSA Direct initiative that will provide the architecture for long-range 

plans to collect, process, store, and disseminate Bank Secrecy Act data. BSA Direct 

established a data warehouse with integrated query and analysis tools to streamline 

and enhance processes for storing, accessing, and analyzing data collected under the 

Bank Secrecy Act. 

• Deployed new software to accept bulk electronic filing by the largest financial 

institutions. 

• Improved the information sharing exchange program through the establishment of a 

secure web site. This secure web will allow us to share information with the financial 

industry that will help them assess risk and better discharge their responsibilities 

under the Bank Secrecy Act. 

• Initiated a feasibility study to outline options for collecting cross-border wire transfer 

data, which will be completed in FY 2006. 

1C - Future Outlook 

The enacted level in FY 2006 for Financial Crimes Enforcement Network is $72,894,000 

and will support 330 FTE. This request continues to address the objectives and priorities 

outlined in our strategic plan. The objectives include continued strengthening of our 

regulatory administration and oversight activities. In addition, FinCEN will complete an 

upgrade of the new BSA Direct reporting and retrieval component. This is a key element 

for the transition of major collection and dissemination functions from the Internal 

Revenue Service to the Financial Crimes Enforcement Network. To accomplish these 

priorities, FinCEN requests $89,794,000 to support 352 FTE in FY 2007. The key 

challenges and planned accomplishments are addressed below for each functional area. 

Regulatory: The key challenge faced by the regulatory program will be to meet 

expanding expectations in all aspects of Bank Secrecy Act administration and continue to 

attract and recruit skilled employees. 

FinCEN will strengthen our regulatory role in FY 2006 by: 

• Providing outreach to the industries that are newly covered by Bank Secrecy Act 

requirements (approximately 15 industry groups), expanding outreach on suspicious 

activity reporting to covered industry groups (approximately 12 groups), increasing 

issuance of guidance, and expanding the number of examiner training sessions for 

federal and state regulatory agencies. 

• Consolidating the existing Regulatory Helpline, Financial Institutions Hotline and 

webmaster functions to improve outreach and customer responsiveness by 
FinCEN-5 

establishing a modernized resource center, staffed with regulatory support specialists 

dedicated to responding to inquiries from the public, attorneys, accountants, industry, 

regulators, examiners, and law enforcement. 

• Enhancing automation to improve workflow and documentation of analyses of the 

compliance data submitted by the Federal and State Regulators. 

• Improving the exchange of international terrorist financing information by upgrading 

the Egmont Secure Web. FinCEN will play a leadership role within Egmont to 

implement information exchange policies and procedures to systematize terrorismrelated financial record checks and analysis throughout the global network. 

• Enhancing efforts with regard to Financial Action Task Force Style Regional Bodies, 

which are expected to increase by two in FY 2007. 

With the basic support framework established, FinCEN will work to expand requirements 

for regulatory efforts in FY 2007 to: 

• Expand regulatory outreach and education building on existing programs. The 

outreach is intended to reach not only the financial industry, but also state and federal 

regulators and international organizations. 

• Enhance relationships with state regulatory authorities to improve compliance within 

newly covered industries, many of which are supervised by state regulatory 

authorities. The new partnership with state regulators has expanded our regulatory 

partners from eight to potentially 48. 

Analysis: The key challenge faced by the analysis function will be transitioning the 

workforce and workload to perform sophisticated research in support of complex and 

significant law enforcement investigations, and the expanded production of strategic 

products. 

FinCEN will continue to strengthen analytic efforts in FY 2006 by: 

• Transitioning users requiring simple Bank Secrecy Act data extracts to direct access 

programs, allowing analytical staff to concentrate on more complex analysis. 

• Continuing to expand collaborative efforts with Egmont Group international partners 

by developing joint analytic efforts that fuse data with our partners to develop 

typologies and methodologies on global criminal networks. 

• Continuing to devote significant portion of the analytic workforce to support 

regulatory compliance and oversight. 
FinCEN-6 

With the transition to the BSA Direct retrieval platform complete, analytical efforts in FY 

2007 will expand to: 

• Continuing to expand support of regulatory efforts to administer the Bank Secrecy 

Act. This effort will be extremely challenging given the inclusion of the state 

regulatory agencies reporting of their compliance examination efforts. 

• Provide more policy level analysis of money laundering and terrorist financing trends 

and methodologies. 

Data Collection and Sharing: The key challenge faced by data collection and sharing 

functions will be enhancing BSA Direct while developing and implementing the crossborder wire transfer program and database as mandated by the Intelligence Reform Act of 

2004, Section 6302. The wire transfer database is expected to be significantly larger than 

the Bank Secrecy Act data warehouse. 

FinCEN will continue to enhance data collection and sharing in FY 2006 by: 

• Improving marketing and outreach for BSA electronic filing. 

• Completing transition to the BSA Direct retrieval platform. 

• Continuing planning efforts to assume the Bank Secrecy Act processing functions 

now performed by the Internal Revenue Service (IRS). 

• Automating the networking processes within BSA Direct. 

With basic BSA Direct capabilities in place, data collection efforts in FY 2007 will be 

enhanced. This is essential to transfer and modernize collection and dissemination 

processes currently performed by Internal Revenue Service into BSA Direct, the 

Financial Crimes Enforcement Network’s umbrella system. In FY 2007, FinCEN will 

expand data collection and sharing efforts to include: 

• Continue planning efforts to transfer and integrate additional BSA data collection 

processes now performed by the Internal Revenue Service (IRS). 

• Upgrading BSA Direct to meet the expanded user population. 

• Expanding electronic filing alternatives and develop capability to integrate this 

component directly into the retrieval component. 

• Expanding BSA Direct to handle the volume of cross-border wire transfer data is 

anticipated following the Treasury Secretary’s approval of the feasibility study, by 

implementation of the mandates included in the Intelligence Reform Act of 2004, 

Section 6302. 
FinCEN-7 

Section 2 – Explanation of Increases and Decreases 

2.1 – BUDGET INCREASES AND DECREASES TABLE 

 

2A - Budget Increases and Decreases Descriptions

Changes to Base................................................................................. $+4,427,000/18 FTE

Adjustments to Maintain Current Levels +1,929,000/0 FTE: Funds are requested for the 

FY 2007 cost of the January 2006 pay increase of $229,000; the proposed January 2007 

pay raise and other labor related benefits of $635,000; and non-labor related items such 

as contracts, travel, supplies, equipment, and GSA rent adjustments of $1,065,000. 

Annualizations of the FY 2006 Program Increases +$2,498,000/+18 FTE: This provides 

additional funding to annualize the staffing initiative approved in FY 2006. It allows 

FinCEN to better assess and respond to the challenges posed by terrorist financiers and 

operatives, money launderers, and other perpetrators of financial crime against domestic 

FY 2005 Enacted 309 71,922

FY 2006 Request Consolidated Appropriations (P.L. 109-115) 330 73,630

Rescission (P.L. 109-148) -736

FY 2006 Enacted 330 72,894

Current Services

Adjustments to Maintain Current Levels 18 4,427

 Annualization of FY 2006 Initiatives 18 2,498

 Pay Annualization 229

 Proposed Pay Raise 635

 Non-Pay Inflation Adjustment 1,065

Program Reductions -38 -5,749

 Realignments to Enhance Critical Operations -19 -3,211

 Realignments to Strengthen Regulatory Oversight -19 -2,538

Base Re-Investments 42 5,749

 Enhancements to Strengthen Critical Operations 23 3,211

 Strengthen Regulatory Compliance and Oversight 19 2,538

FY 2007 Current Services Level 352 77,321

Program Increases: 0 12,473

Enhance BSA Direct, including electronic filing 0 2,473

 Develop BSA Direct - Cross-Border Wire Transfer System 0 10,000

Total FY 2007 Request 352 89,794

Budget Increases and Decreases

Table 2.1

Appropriation: FinCEN Salaries and Expenses 

(Dollars in Thousands) FTE Amount
FinCEN-8 

and global financial systems. This includes 1) enhance outreach to financial institutions 

newly covered by Bank Secrecy Act Regulations, and strengthen oversight of 

examination and enforcement activities; 2) strengthen analytical support services by 

building a secure support structure to fully integrate all data sources; 3) expand support to 

international financial intelligence units to facilitate information exchange and 

coordination, and increase technical support and training functions associated with 

expanding the Egmont secure network; and 4) upgrade Bank Secrecy Act filing 

environment by improving marketing and outreach for electronic filing and augment 

analytical tools to improve search capabilities; and operation and maintenance of the 

BSA E-filing contract administered and controlled by the Financial Crimes Enforcement 

Network. 

Program Reductions .........................................................................$-5,749,000/-38 FTE 

Realignments to Enhance Critical Operations: $-3,211,000/-19 FTE: FinCEN 

continually reviews and reprioritizes its activities to meet critical mission requirements. 

Following a major reorganization in FY 2005, FinCEN realigned resources to better 

address the goals in its updated Strategic Plan. This included automating a number of 

data-related functions performed by contractors to facilitate information sharing under 

Section 314(a) of the USA PATRIOT Act, retiring internal legacy systems whose 

functionality will be encompassed in the new BSA Direct system allowing redeployment 

of five information technology specialists, reducing the number of supervisory staff by 

ten to create a more proportionate organizational structure, and consolidating duties of 

four administrative positions to improve operational efficiency. 

Realignments to Strengthen Regulatory Oversight: $-2,538,000/-19FTE: As part of the 

reorganization completed in FY 2005, FinCEN reevaluated BSA compliance oversight 

activities in light of several high-profile enforcement actions. As a result of this review, 

FinCEN reassigned five personnel from regulatory policy to compliance oversight issues. 

Similarly, FinCEN also reprioritized analytical efforts by redirecting fourteen positions 

from law enforcement case analysis to analyze BSA data to identify potential regulatory 

compliance issues and analyze information obtained from the new regulatory information 

sharing agreements. 

Base Reinvestments........................................................................... +$5,749,000/42 FTE 

Enhancements to Strengthen Critical Operations $+3,211,000/23 FTE: FinCEN 

redirected contract funds from the automation of 314(a) functions to create four new 

positions to centralize compliance assistance for 314(a) activities, enhancing the 

information sharing program. FinCEN also redirected five staff supporting legacy 

systems that will be replaced, to strengthen BSA Direct project oversight and related 

activities. Most significantly, FinCEN redirected 10 employees from supervisory 

positions to higher priority operational functions throughout the organization, 

strengthening functions critical to achieving the revised strategic goals. Finally, FinCEN 

consolidated administrative activities and redeployed four positions to support the 

expanding workload associated with managing BSA Direct customer profiles. 
FinCEN-9 

Strengthen Regulatory Compliance and Oversight $+2,538,000/19 FTE: FinCEN 

redirected staff to enhance compliance oversight functions both in the regulatory and 

analytical areas. Specifically, FinCEN redirected five regulatory policy staff to establish 

a dedicated staff to oversee Bank Secrecy Act compliance activities, forming the Office 

of Compliance. In addition, FinCEN restructured investigative and strategic analytical 

functions and reassigned fourteen staff to form the Office of Regulatory support. This 

expanded support provides dedicated analytical support to enhance oversight through 

Bank Secrecy Act data analysis to identify potential regulatory compliance issues and 

systematic data quality inconsistencies. 

Program Increases ............................................................................ $+12,473,000/0 FTE 

Enhance BSA Direct $+2,473,000/0 FTE To improve operations and align functional 

responsibilities, the Bank Secrecy Act (BSA) collection processes will transition over 

time from the Internal Revenue Service to the Financial Crimes Enforcement Network. 

In anticipation of this transition, FinCEN will enhance the BSA Direct system, including 

integration and enhancements to the BSA electronic filing component. FinCEN needs to 

move these components to the next level to further prepare for the transition of all 

collection, retrieval, and sharing pocesses from the Internal Revenue Service. The 

electronic filing component is already operational and electronic BSA filings increased to 

44% by the end of the first quarter of 2006. However, further upgrades to the electronic 

filing component are needed to allow direct input into the retrieval and sharing 

component such as reference number assignment, error notification or other 

correspondence, and improved editing of certain types of filing errors. In addition, the 

system must provide a cost effective and simplified submission option for single form 

filers to eliminate paper submission of reports. The next component of BSA Direct is the 

retrieval and sharing component, which became operational in the FY 2006. By FY 

2007, the user base is expected to triple over FY 2004 as we transition users from other 

BSA access systems to this single portal. Additional system enhancements and hardware 

upgrades will be required to meet the anticipated user base. 

BSA Direct - Cross-Border Wire Transfer System Initiative +$10,000,000/0 FTE: The 

Intelligence Reform Act of 2004, Section 6302, directed the Secretary of the Treasury to 

report to Congress on the necessity and feasibility of implementing technological systems 

to receive, store, exploit, and disseminate reports of certain cross-border electronic 

transmittals of funds. If the Secretary determines such systems are reasonably necessary 

to fight financial crime and feasible, a significant portion of the system development must 

occur in FY 2007 to meet the statutory completion deadline of December 2007. This 

includes the prescription of regulations requiring appropriate financial institutions to 

submit such reports to FinCEN. As background, current data systems contain 

approximately 175 million individual reports (about 15 million per year); the proposed 

investment would require the capacity to receive, store, analyze, and disseminate tens of 

millions of additional reports per year. To meet the high data storage and retrieval 

requirements associated with this report, FinCEN will expand several components of the 

BSA Direct System. The investment will significantly enhance FinCEN’s ability to 

support intelligence agencies and law enforcement customers in the conduct of complex 
FinCEN-10 

financial investigations, and, enhance law enforcement’s ability to punish and deter 

criminal activity, including terrorist financing. 
FinCEN-11 

Section 3 – Budget and Performance Plan 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

BSA Administration and Analysis 309 $63,635 330 $64,458 352 $81,143 6.67% 25.89%

Regulatory Support Programs 0 8,287 0 8,436 0 8,651 0.00% 2.55%

Subtotal Newly Appropriated Resources 309 $71,922 330 $72,894 352 $89,794 6.67% 23.18%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable* 0 $1,541 0 $3,541 1 $1,541 -56.48%

Available multi-year appropriations 10,766 N/A ** N/A** N/A**

Transfers In/Out

Subtotal Other Resources 0 12,307 0 3,541 1 1,541

Total Resources Available for Obligation 309 $84,229 330 $76,435 353 $91,335 6.97% 19.49%

* Includes a request to the Treasury Forfeiture Fund of $2,000,000

** Multi-year are included within the Subtotal above. 

Request to FY 2007

FY 2006

Resources Available for Obligation

FY 2005 FY 2007 FY 2006 

Appropriation Detail

(Dollars in Thousands)

Table 3.1

% Change

Enacted Enacted

3A – Budget Activity Description 

Bank Secrecy Act Administration and Analysis ($81,143,000 from direct appropriations)

FinCEN administers the Bank Secrecy Act through the promulgation of regulations, 

provides outreach and guidance to the regulated industries, initiates regulatory 

enforcement actions, and provides oversight of the compliance with the Bank Secrecy 

Act. FinCEN supports law enforcement and intelligence activities by linking the BSA 

data with other data to support policy decisions. FinCEN also facilitates the exchange 

and analysis of investigative information with foreign jurisdictions, and refers 

information that identifies suspicious financial activity. FinCEN is modernizing the 

systems that provide direct access to the BSA data to authorized law enforcement, 

regulatory, and intelligence agencies.

Regulatory Support Programs Including Money Services Businesses ($8,651,000 from 

direct appropriations) This activity supports requirements to strengthen anti-money 

laundering controls with the money services business industry, casinos, securities brokerdealers, and other industries with new program or reporting requirements under the Bank 

Secrecy Act. This budget activity also supports FinCEN's efforts with the Internal 

Revenue Service to ensure industry compliance and support the collection of Bank 

Secrecy Act data in the money services business industry. 
FinCEN-12 

3.2 – Budget and Performance Plan Tables 

Treasury Strategic Goal: Preserve the Integrity of Financial Systems (F3)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Requested

Budget Activity: BSA Administration and Analysis

Financial Resources

Newly Appropriated Resources $39,747 $43,132 $49,127 $63,635 $64,458 $81,143

Other Resources $3,580 $4,297 $3,341 $1,541 $3,541 $1,541

Total Operating Level $43,327 $47,429 $52,468 $65,176 $67,999 $82,684

Human Resources

Newly Appropriated FTE 238 259 277 309 330 352

Other FTE 511 1 1 1

Total FTE (direct and reimbursable) 243 260 278 310 331 353

Budget Activity: Regulatory Support Programs, including Money Services Businesses

Financial Resources

Newly Appropriated Resources $7,790 $8,284 $8,104 $8,287 $8,436 $8,651

Other Resources

Total Operating Level $7,790 $8,284 $8,104 $8,287 $8,436 $8,651

Treasury Strategic Goal F3:

Total Financial Resources

Total Newly Appropriated Resources $47,537 $51,416 $57,231 $71,922 $72,894 $89,794

Total Other Resources 3,580 4,297 3,341 1,541 3,541 1,541

Total Operating Level $51,117 $55,713 $60,572 $73,463 $76,435 $91,335

Total Human Resources

Total Newly Appropriated FTE 238 259 277 309 330 352

Total Other FTE 5 1 1 1 1 1

Total FTE (direct and reimbursable) 243 260 278 310 331 353

Treasury Strategic Objective F3A: Disrupt and Dismantle Financial Infrastructure of Terrorists, Drug 

Traffickers, and Other Criminals and Isolate Their Support Networks

Budget and Performance Plan

Table 3.2

(Dollars in Thousands)

Resource Level
FinCEN-13 

Strategic Objective: Disrupt and Dismantle Financial Infrastructure of Terrorists, Drug Traffickers,

and Other Criminals and Isolate Their Support Networks - F3A

Budget Activity: Investigative Analysis and BSA Administration

Performance Goal: Combat terrorism, money laundering, and other financial crime through analysis of Bank

Secrecy Act data and other relevant information.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of customers finding FinCEN's analytic support valuable (%) (Oe)

Target Baseline 75 78

Actual 73

Target Met? N/A N/A N/A Y

Budget Activity: Investigative Analysis and BSA Administration

Performance Goal: Facilitate regulatory compliance, data management, and information sharing through E

government.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Number of users accessing BSA data electronically (Oe) [DISCONTINUED FY 2006]

Target Baseline 900 1,700 3,000 Discontinued Discontinued

Actual 898 1,105 2,181 3,941

Target Met? Y Y Y Y

Percentage of users that rate the BSA Direct system satisfactory for their work requirements (%) (Oe)

Target Baseline TBD 

Actual

Target Met? N/A N/A N/A N/A

Budget Activity: Investigative Analysis and BSA Administration

Performance Goal: Protect the financial system through effective administration of the Bank Secrecy Act.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Average time to process enforcement matters (in Years) (E)

Target 1.8 1.5 1.2 1.1 1 1

Actual 1.5 1.3 1 1.3

Target Met? Y Y Y N

Number of federal and state regulatory agencies with which FinCEN has concluded memoranda of

understanding/information sharing agreements. (Oe) 

Target Baseline 45 48

Actual 41

Target Met? N/A N/A N/A Y

Number of vulnerable industries covered by anti-money laundering regulations (Oe) [DISCONTINUED FY

2006]

Target Baseline 7 11 15 Discontinued Discontinued

Actual 10 10 10 11

Target Met? Y Y N N

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure
FinCEN-14 

3B – Description of Performance 

To further discuss performance highlights from the table above: 

FinCEN surpassed the performance target for the number of users accessing BSA data 

electronically with an actual of 3,941 users compared to the target of 3,000. FinCEN 

achieved this increase by establishing Memoranda of Understanding with law 

enforcement that access the data and increasing outreach and training. In FY 2006, 

FinCEN will discontinue using this performance measure as an external budget measure. 

However, it will be tracked internally. 

In FY 2005, FinCEN conducted the surveys that established a baseline and future targets 

for the measure “Percentage of customers finding Financial Crimes Enforcement 

Network’s analytic support valuable”. A baseline of 73% was established along with 

future targets anticipating increased customer ratings of our analytical products. This 

performance measure combines data from surveys on strategic analytical products, 

investigative case reports and investigative targets. The measure will provide important 

information on how our financial industry customers rate the value of our analytic 

support. 

FinCEN issued draft and final anti-money laundering regulations for many vulnerable 

industries in FY 2005. Specifically, on June 9, 2005, we published the interim final rule 

for dealers in precious metals, precious stones, and jewels in the Federal Register. The 

interim rule requires dealers to implement anti-money laundering programs by January 1, 

2006. Further, in February 2005, Financial Crimes Enforcement Network completed the 

final regulation requiring certain insurance companies to establish anti-money laundering 

programs and transmitted the regulation to Treasury for review and clearance. FinCEN 

prepared drafts of final regulations requiring securities investment advisers, commodity 

trading advisors, and unregistered investment companies to establish anti-money 

laundering programs and circulated them to the Securities and Exchange Commission 

(SEC) and the Commodity Futures Trading Commission (CFTC) for review and 

comment. The challenges addressed above contributed to the inability to fully meet the 

FY 2005 target of issuing final anti-money laundering program regulations covering 15 

industries. FinCEN will work toward completion of the regulations for securities 

investment advisors, commodity trading advisors, and unregistered investment companies 

which require extensive consultation and coordination with both the SEC and CFTC 

FinCEN will continue to work closely with policy makers and attorneys within Treasury 

to clear the pending insurance company regulation and any future regulation submissions. 

In FY 2005, FinCEN closed an unprecedented number, 76, of enforcement cases and 

eliminated the historic case backlog at Financial Crimes Enforcement Network. 

Although FinCEN did not meet the FY 2005 performance target of 1.1 years average 

time to process cases, the actual result of 1.3 years reflects focusing resources on 

eliminating the case backlog. In other words, closing cases that had been open for a long 

period of time, caused the average time to increase. With the elimination of the case 
FinCEN-15 

backlog, FinCEN will direct resources exclusively towards the timely, appropriate 

resolution of significant cases such as AmSouth Bank and Arab Bank. FinCEN 

processed the AmSouth Bank and Arab Bank cases in three months and eight months, 

respectively. Over the past year, we reorganized the Regulatory Policy and Programs 

Division, added additional resources, and developed case processing procedures to 

improve internal efficiency. 

Performance Plan 

Regulatory: Financial Crimes Enforcement Network supports and oversees examination 

activities to help ensure effective and uniform application of the Bank Secrecy Act 

regulations. To achieve effective and uniform compliance, we work closely with our 

regulatory partners. Additionally, regulatory activities support global partners and 

include: expanding and systematizing the exchange of financial intelligence information, 

improving the expertise and capabilities of personnel in money laundering and terrorist 

financing areas, and fostering better and more secure communication among financial 

intelligence units through the application of technology. 

In FY 2005, in the regulatory area, FinCEN accomplished the following: 

• Established an office to support and communicate with regulatory agencies that 

examine financial institutions for Bank Secrecy Act compliance, including recruiting 

and hiring 18 persons. 

• Participated in the drafting of revised Bank Secrecy Act examination procedures with 

five Federal banking agencies. 

• Assessed a civil money penalty against AmSouth Bank in the amount of $10 million 

and Arab Bank for $24 million. 

• Issued guidance to address the crisis of money services businesses unable to obtain 

banking services. 

• Connected an additional nine financial intelligence units to the Egmont Secure Web, 

raising the total connected to 93 by the end of FY 2005. 

• Hosted the Egmont Group’s 10th anniversary plenary meeting in Washington, D.C. 

• Participated in two newly created Financial Action Task Force (FATF) Style 

Regional Bodies, the Middle East and North Africa FATF, and the Eurasia FATF. 

In the regulatory area, FinCEN will be able to achieve the following quantifiable results 

and accomplishments with the requested funds in FY 2007: 

• Increase the number of Memorandum of Understanding agreements signed with 

regulatory agencies to exchange compliance data to 8 federal agencies and 40 state 

agencies. 

• Provide regulatory guidance to financial institutions subject to the Bank Secrecy Act 

in order to improve consistency in the interpretation and application of Bank Secrecy 

Act regulations. 

• Identify “best practices” to be incorporated into Bank Secrecy Act examination 

procedures, and the increased expectation to improve consistency in the examination 

process. 

• Process enforcement matters within the target of 1.0 years. 
FinCEN-16 

• Increase participation in conferences and seminars to provide enhanced technical 

assistance and training to financial intelligence units and foreign delegations. 

• Establish a baseline and targets for the quality of support provided to call center 

customers receiving regulatory guidance. 

• Enhance efforts with Financial Action Task Force Style Regional Bodies, which are 

expected to increase by two in FY 2007. 

• Connect new Egmont members to the Egmont Secure Web to promote collection and 

sharing of suspicious or unusual financial activity from the financial industry. 

Analysis: FinCEN’s analysis function is moving to a new paradigm that emphasizes 

more complex and higher-level research and analysis. The new paradigm will help 

analysts understand and explain the cutting-edge problems relating to money laundering 

and illicit finance, including terrorist financing. 

In FY 2005, in the analysis area, FinCEN accomplished the following: 

• Established the Office of Intelligence Support within our Analytics Division. 

• Showed an increase in the percentage of complex analysis products produced from 

1.6% in FY 2004 to 10% in FY 2005. 

• Began a long-term analysis of mortgage loan fraud based on Suspicious Activity 

Report filings. 

• Supported over 1,400 investigative efforts through research and analysis of Bank 

Secrecy Act and other data. 

• Researched more than 8,000 subjects being investigated by law enforcement. 

• Supported the Department’s efforts to develop a National Money Laundering Threat 

Assessment. 

• Analyzed money laundering and illicit financing schemes based on use of 

commodities, false invoicing, trade diversion, and other mechanisms. 

In the analytical area, FinCEN will be able to achieve the following quantifiable results 

and accomplishments with the requested FY 2007 funds: 

• Report on targets established for the percentage of customers finding FinCEN’s 

analytic support valuable. 

• Increase the percentage of complex analysis products produced by Financial Crimes 

Enforcement Network analysts to 50%. 

• Reduce the median processing time between the receipt of a Financial Institution 

Hotline Tip to transmittal of the information to law enforcement or the intelligence 

community to 25 days. 

• Decrease the average time expended to perform financial institution reviews dealing 

with compliance issues. 

• Increase production of predictive analyses that identify trends and patterns in terrorist 

financing and money laundering and vulnerability assessments to identify areas 

susceptible to financial crime. 

• Expand participation in joint collaborative efforts with international counterparts. 

• Update findings identified in the national money laundering threat assessment, 

outlining any changes in money laundering methodology or demographics. 
FinCEN-17 

• Continue to support and enhance participation in Treasury USA PATRIOT Act 

Section 311 initiatives to target foreign financial institutions as money laundering 

concerns. 

• Expand and enhance support of significant, complex law enforcement investigative 

initiatives, working closely with law enforcement liaison representatives. 

• Provide enhanced support to regulatory initiatives including the routine exchange of 

Bank Secrecy Act examination activities at the federal and state level, initiation of 

enforcement actions and providing timely feedback to the financial community 

concerning the use and utility of Suspicious Activity Reports. 

Data Collection and Sharing: Financial Crimes Enforcement Network provides direct 

access to the Bank Secrecy Act data to authorized law enforcement, regulatory and 

intelligence agencies. FinCEN will continue to integrate and modernize the various 

components of the Bank Secrecy Act data collection and sharing systems into an overall 

BSA Direct system. The goal of this modernization effort is to improve the quality of the 

Bank Secrecy Act data by preventing the omission of critical information, validating the 

information collected, and improving feedback on the use and utility of the data. 

In FY 2005, in the area of collection and sharing of Bank Secrecy Act data, FinCEN 

accomplished the following: 

• Increased the number of users accessing Bank Secrecy Act data electronically to 

2,181 in FY 2004 nearly double the 1,105 direct users in FY 2003. In FY 2005 we 

surpassed the target of 3,000 with 3,941 users directly accessing the Bank Secrecy 

Act data. 

• Developed online training and testing modules as a way to streamline customer 

training for users accessing Bank Secrecy Act data through the web-based system. 

• Sent 402 law enforcement information requests to more than 44,000 financial 

institution points of contact through the law enforcement-financial institution 

information-sharing program authorized under Section 314(a) of the USA PATRIOT 

Act. 

• Moved the operation and work flow of the Section 314 (a) information-sharing 

program to a secure online environment. 

FinCEN will be able to achieve the following quantifiable results and accomplishments 

for collecting and sharing Bank Secrecy Act data with the requested FY 2007 funds: 

• Upgrade the electronic filing component of BSA Direct with the capability to directly 

integrate into the retrieval and sharing component. (Linked to FY 2007 Request) 

• Increase e-filing to 80 percent to meet target of 90 percent in FY 2008. (Linked to FY 

2007 Request). 

• Increase the number of users accessing Bank Secrecy Act data to 6,000. (Linked to 

FY 2007 Request). 

• Reduce the cost per BSA form E-filed to 0.15. 

• Increase the number of largest BSA report filers using E-Filing to 353. 

• Increase the networking of similar investigations through BSA direct access programs 

by 15%. 
FinCEN-18 

• Increase onsite and offsite inspections by 6%, and increase delegated inspections 

from zero in 2005 to 25 in 2007. 

• Expand BSA Direct to handle the volume of cross-border wire transfer data 

anticipated following the Treasury Secretary’s approval of the feasibility study, by 

implementation of the mandates included in the Intelligence Reform Act of 2004, 

Section 6302. (linked to FY 2007 request) 

Regulatory Support Programs including Money Services Businesses: The Department of 

Treasury has delegated the Internal Revenue Service responsibility for ensuring 

compliance with the Bank Secrecy Act for all financial institutions not otherwise subject 

to examination by another federal functional regulator, including money services 

businesses, casinos and credit unions. FinCEN will 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 

information processing of the BSA data. 

Major accomplishments for this program in FY 2005 include the following: 

• Completed an update to a study concerning the nature, characteristics, geographic 

allocation and size of the money services business industry. 

• Established the Bank Secrecy Act Resource Center; granted a contract for 

development of technology to integrate and convert the Regulatory Helpline, 

Financial Institutions Hotline, and Webmaster into one web-based data management 

system. 

• Provided funding for 20% of funding used by Internal Revenue Service Small 

Business/Self Employed Division (SB/SE) to perform their Title 31 regulatory 

functions related to oversight of the money services business industry. 

FinCEN will achieve the following quantifiable results and accomplishments related to 

money services businesses with the requested FY 2007 funds: 

• Update and publish (in multiple languages) money services businesses guidance 

materials. 

• Support the collection and processing activities at Internal Revenue Service related to 

the Money Services Business industry. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA EVALUATION DESCRIPTION 

Competitive Sourcing

• Submitted FY 2005 FAIR Act Inventory. 

• FinCEN relies heavily on the private sector to perform commercial activities, 

especially in the information technology environment and is committed to continuing 

this in the future. 
FinCEN-19 

E-Government

• FinCEN uses a travel E-gov system that is administered by Bureau of Public Debt’s 

Administrative Resource Center. 

• The BSA E-filing project supports the Government-to-Business E-Gov business 

model. BSA E-filing provides financial institutions an on-line option for filing Bank 

Secrecy Act reports, which otherwise must be submitted via paper. This system has 

achieved a high level of customer satisfaction. 

• The BSA Direct project is an example of a Government-to-Government E-Gov 

application. BSA Direct will be completed in FY 2006 and will provide federal and 

state law enforcement and regulatory agencies a means of accessing BSA data using a 

secure web portal. With the deployment of BSA Direct and its electronic filing 

component, FinCEN is aggressively pursuing a strategy aimed at leveraging web 

technology to both acquire and disseminate BSA data more efficiently than 

previously possible. Electronic filing of the BSA data is allowing FinCEN to both 

improve the quality of the data and reduce the processing time allowing access to the 

data much sooner. Additionally, some of our largest filing institutions are realizing 

the advantages of increased security and instant acknowledgement of their BSA data 

filings. 

Human Capital Management

• Set the strategic human capital objective to attract, develop and retain a highperforming diverse workforce. 

• Developing a Financial Crimes Enforcement Network Human Capital Strategic Plan 

which will be aligned with the Treasury Human Capital Strategic Plan. 
FinCEN-20 

3.3 – PART Evaluation Table 

PART Name: BSA Data Collection, Retrieval and Sharing

Strategic Goal: Preserve the integrity of the financial systems (F3)

Rating: Moderately Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Table 3.3

PART Evaluation

●The program has long-term performance measures that focus on the program's purpose and 

strategic goals, but more work is needed to measure the quality of data collected. 

●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. 

●The program can show improved efficiencies and cost effectiveness for collecting and sharing data. 

The program has been able to show substantial increases in the number of users directly accessing 

data, the share of filings submitted electronically, and improved cost effectiveness for costs per form 

E-Filed. 

We are taking the following actions to improve the performance of the program: 

●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. 

●Creating targets to measure the number of top 650 filers who file reports electronically. Currently, the program tracks the 

top filers' use of E-Filing but does not set annual targets. 

●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. 

For the FY 2008 Budget Submission, FinCEN plans to conduct PART evaluations on two 

remaining programs: BSA Administration and BSA Analysis. 
FinCEN-21 

Section 4 – Supporting Material 

4.1 – Human Resources Information 

Actual Full-Time Equivalent vs. Budgeted FTE

259 277

309 330 352

11111 1111

352 330

267 250 229

1

0

50

100

150

200

250

300

350

400

FY2003 FY2004 FY2005 FY2006 FY2007

Bud.Direct Act.Direct Bud. Reimb Act.Reimb
FinCEN-22 

4A – Human Capital Strategy Description 

FinCEN created a strategic human capital objective to attract, develop and retain a highperforming diverse workforce. The headings listed below represent the key focus areas 

of the strategic human capital objective, and include related accomplishments. 

Strategic Alignment: Each of the four strategic objectives in the FY 2006-2008 Strategic 

Plan include areas that will require more employees and/or employees with enhanced 

skills, which align directly with the strategic human capital objective. Additionally, the 

Strategic Plan has a management objective to attract, develop and retain a highperforming diverse workforce. 

Workforce Planning & Deployment: FinCEN established a new training office charged 

with developing defined paths for career progression, and developed mentoring and 

coaching programs to identify and grow talent, and enhance the skills of existing 

employees. In terms of competitive sourcing, FinCEN submitted the FY 2005 FAIR Act 

Inventory in May 2005. Financial Crimes Enforcement Network has always relied 

heavily on the private sector to perform commercial activities, especially in the 

information technology environment and we are committed to continuing this in the 

future. 

Leadership and Knowledge Management: The senior leadership of Financial Crimes 

Enforcement Network is committed to succession planning. We completed a workforce 

analysis and are in the process of developing an action plan for succession planning. The 

action plan will define specific roles, responsibilities and priorities, and will link to the 

strategic plan. Included in the workforce analysis was an assessment of the leadership 

skills of the current management team. Significant gaps were identified and an action 

plan was agreed upon by the senior leadership that includes a plan for training managers 

in FY 2005 and FY 2006. Additionally, employees actively participate in governmentwide leadership programs such as the Executive Leadership Program, Executive Potential 

Program and Congressional Internships. 

Results-Oriented Performance Culture: We abolished the pass/fail performance system 

and established a new 5-tier performance management system that requires each 

employee to establish an Individual Development Plan and three individual commitments 

linked directly to the strategic plan. We also have two award programs, an Incentive 

Awards Program and the Director’s Awards and Recognition Program. In May 2005, the 

Director’s Awards Program acknowledged 11 employees of whom 18% were minorities 

and 45% female. 

Diversity: FinCEN completed several efforts to ensure a diverse workforce is 

maintained. Major efforts are listed below: 

• Held an annual Diversity Day Training Conference consisting of six workshops on 

various topics. Approximately 70% of the workforce attended the conference. 
FinCEN-23 

• Participated in the Treasury Diversity Council and its support group. 

• Created a Diversity Advisory Committee. 

• Established a mandatory EEO/Diversity element addressing EEO principles, 

workplace conflict, supporting EEO plans and diversity hiring requirements in all 

supervisory performance plans. 

• Created an EEO/Diversity Manager and Employee of the Year award to recognize 

individuals who have made outstanding contributions to building and maintaining a 

diverse, high-quality workforce. 

Talent: FinCEN identified mission critical occupations—Intelligence Research 

Specialists, Law Enforcement Liaison Specialists, Regulatory Programs Specialists and 

Information Technology Specialists. Training development plans have been created to 

identify core skill training that is required to perform job tasks for both the Intelligence 

Research Specialist and Law Enforcement Liaison Specialists. FinCEN also began to 

develop competency models for these mission critical occupations. Additionally, FinCEN 

took advantage of many hiring authorities and flexibilities within the last year. For 

example, numerous students were hired under the Student Temporary Employment 

Program (STEP) – 8 in FY04 and 10 in FY05. FinCEN also made several Veteran 

Rehabilitation Act (VRA) and Schedule A appointments over the past two years and 

within the last year made 4 appointments utilizing the Outstanding Scholars Program. 

Accountability: FinCEN is committed to supporting disabled employees and equal 

opportunity. The subject of providing reasonable accommodations to disabled employees 

is discussed in the Financial Crimes Enforcement Network 101 – Basic Manager EEO 

Training Class. Further, an updated directive and procedures for requesting reasonable 

accommodations is being prepared for employees. All employees receive a copy of the 

Financial Crimes Enforcement Network EEO policy statement and prevention of sexual 

harassment brochure during new employee orientation, and receive annual training on 

new EEO regulations and changes to internal policies and procedures. New managers 

attend an eight-hour Financial Crimes Enforcement Network 101 Supervisory EEO 

Training Course. 
FinCEN-24 

4.3 – Operating Levels Table 

Appropriation Title: FinCEN Salaries & Expenses FY 2005 

Enacted

FY 2006 

President's 

Budget as 

Amended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating 

Level

FTE 309 330 330 330 352 

Object Classification:

11.1 Full-Time Permanent Positions..................................... $24,159 $26,720 $26,720 $27,310 $29,345

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 0 0 0

11.9 Personnel Compensation (Total)............................. 24,969 27,530 27,530 28,120 30,155

12.0 Personnel Benefits...................................................................... 6,062 6,818 6,818 7,156 7,789

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

21.0 Travel.................................................................................. 911 1,377 (45) 1,332 1,332 1,561

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

23.1 Rental Payments to GSA................................................4,167 4,800 4,800 4,800 4,968

23.2 Rent Payments to Others............................................... 43 43 43 43 55

23.3 Communications, Utilities, & Misc...................................................... 651 751 751 995 995

24.0 Printing and Reproduction.......................................................... 250 250 250 250 250

25.1 Advisory & Assistance Services.................................................... 180 180 180 522 750

25.2 Other Services.................................................................... 15,405 11,155 (606) 10,549 9,354 19,642

25.3 Purchase of Goods/Serv. from Govt. Accts...... 8,756 9,539 (85) 9,454 9,454 9,892

25.4 Operation & Maintenance of Facilities................... 1,344 960 960 960 960

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

25.6 Medical Care............................................................................. 108 120 120 120 128

25.7 Operation & Maintenance of Equipment...................... 5,866 6,008 6,008 6,008 6,150

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

26.0 Supplies and Materials.................................................... 334 369 369 369 395

31.0 Equipment.......................................................................... 2,876 3,730 3,730 3,411 6,104

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................................................$71,922 $73,630 ($736) $0 $72,894 $72,894 $89,794

Budget Activities:

BSA Administration and Analysis $63,635 $65,109 ($651) $64,458 $64,458 $81,143

Regulatory Support Programs including Money Services 

Businesses

8,287 8,521 (85) 8,436 8,436 8,651

Total Budget Authority................................................$71,922 $73,630 ($736) $0 $72,894 $72,894 $89,794

Operating Levels

Table 4.3

(Dollars in Thousands)
FinCEN-25 

4C – Appropriation Language 

DEPARTMENT OF TREASURY 

FINANCIAL CRIMES ENFORCEMENT NETWORK 

Federal Funds 

General and Special 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 [law enforcement] 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, 

[$73,630,000] $89,794,000 of which not to exceed [$6,944,000] $19,740,000 shall 

remain available until September 30, [2008] 2009; and of which [$8,521,000] $8,651,000

shall remain available until September 30, [2007] 2008: Provided, that funds appropriated 

in this account may be used to procure personal services contracts. 

JUSTIFICATION OF LANGUAGE CHANGES 

During FY 2007, the Financial Crimes Enforcement Network anticipates funding 

additional technical assistance and training efforts in partnership with global support and 

partnership with financial intelligence units. Therefore, the appropriation language was 

changed to clarify this intent. Currently, a large portion of that training had previously 

been funded through interagency agreements from the State Department. In recent years, 

this funding has not been adequate to meet the needs of many of the developing nations. 

This funding is used to support training at both developing Financial Intelligence Units 

and established Egmont Financial Intelligence Units. The Egmont Financial Intelligence 

Units have grown rapidly with 101 members. 

The funding available until September 30, 2009 is required for information technology or 

special analytical efforts and therefore may require a longer lead-time to execute. The 

funding was adjusted based on the funding requested in FY 2007 for information 

technology projects. This adjustment will allow the projects to be executed in a single 

appropriation regardless of lead-time for acquisition. 

The funding available until September 30, 2008, reflects the amount requested for 

Regulatory Support Programs, including Money Services Businesses. The funding level 

was adjusted for inflation. This approach in essence establishes a separate appropriation 
FinCEN-26 

for the Regulatory Support Programs, including Money Services Businesses funding, 

which will be implemented through inter-government contract support with the Internal 

Revenue Service and other contractual partners. It also funds outreach and other 

activities to industries newly regulated under the Bank Secrecy Act.
Alcohol and Tobacco Tax and Trade Bureau 

Mission 

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. 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Collect the Revenue $45,285 $49,618 $45,376 ($4,242) -8.55%

Protect the Public 37,051 40,597 18,588 ($22,009) -54.21%

Total Appropriated Resources $82,336 $90,215 $63,964 ($26,251) -29.10%

Adjustments (+/-)

User Fees 1/ $0 $0 $28,640 $28,640 100.00%

Unobligated balance lapsing $0 $0 $0 $0 0.00%

Offsetting Collections - Reimbursable 1/ $1,700 $1,700 $1,700 $0 0.00%

Total Adjustments $1,700 $1,700 $30,340 $28,640 1684.71%

Total Program Operating Level $84,036 $91,915 $94,304 $2,389 2.60%

1/ The FY 2007 Protect the Public regulatory activity is to be funded partially from new proposed user fees in the amount of $28,640.

2/ Reimbursable Funds from the "cover over" (return to Puerto Rico Government) for the cost of the Puerto Rico Operations.

(Dollars in Thousands)

Appropriation Summary

Table 1.1

FY 2007 Priorities 

• Collect roughly $15 billion in excise taxes. 

• Process more than 4,000 original and 11,000 amended permit applications that allow for the start 

up of new businesses in the alcohol and tobacco industries. 

• Process over 100,000 applications for certificates of label approval that allow industry members to 

introduce new alcohol products into the marketplace. 

• Collect excise taxes for the government of Puerto Rico and the Virgin Islands. 

• Process roughly 3,000 drawback claims for manufacturers of non-beverage alcohol products 

resulting in claims in the range of $300-$400 million.

• Collect 98 percent of the federal excise tax receipts electronically. 

• Conduct some 90 audits of major taxpayers who pay 98 percent of the annual federal excise tax 

collections 

• Conduct over 900 field investigations to protect the public, based on incoming permit application 

requests, consumer complaints, Federal Alcohol Administration (FAA) trade practice violations 

leads, and work from the product integrity program.
Table of Contents 

Section 1 – Purpose ............................................................................................................. 3

1A – Description of Bureau Vision and Priorities.......................................................... 3 

1B – Previous Highlights and Accomplishments........................................................... 3 

1C – Future Outlook ....................................................................................................... 6 

Section 2 – Explanation of Increases and Decreases........................................................... .9

2.1 – Budget Increases and Decreases Table .................................................................. 9 

2A – Budget Increases and Decreases Description......................................................... 9 

Section 3 – Budget and Performance Plan ......................................................................... 13

3.1 – Appropriation Detail Table.................................................................................. 13 

3A – Budget Activity Description ................................................................................ 13 

3.2 – Budget and Performance Plan Table.................................................................... 17 

3B – Description of Performance ................................................................................. 19 

3C – PMA Evaluation Description ............................................................................... 20 

3.3 – PART Evaluation Table....................................................................................... 24 

Section 4 – Supporting Materials........................................................................................ 25

4.1 – Human Resources Table ...................................................................................... 25 

4A – Human Capital Strategy Description ................................................................... 26 

4.2 – Summary of IT and Non-IT Resources Table...................................................... 28 

4B – Information Technology and Non-Information Technology Strategy ................. 28 

4.3 – Operating Levels Table........................................................................................ 29 

4C – Appropriations Language..................................................................................... 30 

TTB - 2 
Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

In FY 2007, the Alcohol and Tobacco Tax and Trade Bureau (TTB) will continue to 

collect federal excise taxes and to develop policies, regulations, procedures, rulings, 

directives, and other materials that guide the operations of the regulated industries. TTB 

will protect the public by preventing consumer deception and fraud and ensures that 

alcohol beverage products comply with federal commodity, safety and distribution 

standards. TTB provides regulatory and tax collection functions as well as technical, 

scientific, and legal expertise relating to these products. 

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. 

TTB has roughly 7,300 taxpayers and 200 of the largest taxpayers account for 98 percent 

of the annual excise tax collections. In FY 2005, the majority of taxes collected were 

from tobacco (50 percent of revenue collections) and alcohol (48 percent of revenue 

collections), with the remaining tax collections from firearms and ammunition (2 

percent). The key to collecting all the revenue rightfully due is a field approach that uses 

analysis to target non-compliant industry members and establishes an identifiable 

presence within all of industry that encourages voluntary compliance. As a result, TTB 

strives to provide the most effective and efficient system for the collection of all revenue 

that is rightfully due, in addition to eliminating or preventing tax evasion and providing 

high quality service to its customers while imposing the least regulatory burden. 

Protect the Public- TTB’s Protect the Public activity assures 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 to prevent consumer 

deception. Under this activity, TTB enforces federal laws related to the labeling, 

advertising, and marketing of alcohol products through education, investigation, and 

laboratory testing. TTB works with industry, foreign and state governments, and other 

interested parties to make it easier to comply with regulatory requirements, and maintain 

the appropriate level of oversight to ensure the public’s safety. Innovation, partnerships, 

and open communication are paramount to achieving this strategic goal. 

1B – Previous Highlights and Accomplishments

Collect the Revenue 

The following highlights and accomplishments represent a full year activity based on FY 

2005 results: 

• During FY 2005, TTB collected more than $14.7 billion in excise taxes, interest, 

and other revenues from alcohol, tobacco, firearms and ammunition industries. 

The taxes collected by TTB, net of related fund disbursements, are remitted to the 

Department of the Treasury General Fund. The firearms and ammunition excise 

TTB - 3 
taxes are remitted to the Fish and Wildlife Restoration Fund under provisions of 

the Pittman-Robertson Act of 1937. 

• During FY 2005, 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 program. In FY 2005, 98 percent of TTB’s tax receipts were 

collected electronically. 

• Voluntary compliance is an important element of TTB’s collection strategy. In 

FY 2005, 70 percent of taxpayers filed payments on or before the scheduled due 

date. 

• TTB will audit the largest taxpayers who pay 98 percent of the annual $14.7 

billion in federal excise tax collections. This is a multi year effort and is the 

driving force in measuring the tax gap and for ensuring that the bureau is 

collecting the amount of revenue that is rightfully due. Through FY 2005, TTB 

completed audits on 113 of the largest taxpayers, and plans to finish the remaining 

audits in FY 2006 and 2007. Audit findings have included underpayment of tax, 

recordkeeping violations, and internal control irregularities. Audit results include 

an additional $4.3 million in collections and an additional $10.2 million in tax, 

penalties, and interest potentially due. While the audit effort focuses on the major 

taxpayers, the remaining taxpayers are selected for audit based on risk and 

random sampling. In FY 2007, the bureau plans to complete 90 to 100 field 

audits of taxpayers. 

• Federal excise taxes are collected on certain articles produced in Puerto Rico and 

the Virgin Islands that are imported into the United States. In accordance with the 

law, such taxes collected on Puerto Rico and Virgin Islands rum imported into the 

United States are “covered-over” or paid into the treasuries of Puerto Rico and the 

Virgin Islands. In FY 2005, TTB processed $420 million in cover-over payments 

to Puerto Rico and $6 million to the Virgin Islands. 

• Under current law, persons who use non-beverage alcohol in the manufacture or 

production of medicines, medical preparations, food products, flavors, flavoring 

extracts, or perfume may be eligible to claim drawback of excise tax paid on 

distilled spirits used in their products. During FY 2005, TTB processed $317 

million in drawback claims to manufacturers of non-beverage products. 

Claimants must submit a product formula to the TTB laboratory for analysis and 

approval of the non-beverage product before manufacturing the product and filing 

a claim.

• During FY 2005, TTB laboratories analyzed 1,901 beverage alcohol samples for 

product integrity, pre-market analysis of imported products, and compliance. 

These analyses determine the class and type of the products for proper tax 

collection, and ensure that the marketed products are compliant with TTB 

regulations. TTB also processed 10,111 non-beverage alcohol flavor formulas, 

riders, and samples; 2,534 specially denatured alcohol formulas and samples; 109 

tobacco tax classification submissions; and 110 submissions for 5010 tax credit. 

Considering the trends in the last few years, TTB expects to see at least 15 percent 

growth in the beverage alcohol samples analyzed by the laboratories in FY 2007. 

In addition, TTB anticipates a significantly larger increase in tobacco samples 

submitted to the laboratories in FY 2007 because of the new standards of 

identification for classifying cigarettes and little cigars. 

TTB - 4 
Protect the Public 

The following highlights and accomplishments represent a full year activity based on FY 

2005 results: 

• The Federal Alcohol Administration Act requires importers and bottlers of 

beverage alcohol to obtain a certificate of label approval (COLA) or certificate of 

exemption from label approval for most alcoholic beverages prior to their 

introduction into interstate commerce. During FY 2005, TTB processed over 

110,000 COLAs. COLAs Online was launched in FY 2003 as an e-filing option 

for obtaining label approval. TTB continues to encourage its use by all industry 

members and the number of e-filers and the percent of the e-filed applications has 

risen steadily since the launch. The FY 2005 performance target was that 30 

percent of all COLAs would be processed within nine calendar days of receipt. In 

FY 2005, TTB processed 50 percent of all COLAs within nine calendar days, and 

received 25 percent of all COLAs electronically. 

• The tobacco and alcohol industries have the potential to participate in illicit 

activity, so it is crucial that organized crime and terrorists are kept out of these 

industries. To combat illegal activity in its regulated industries, TTB issues 

original and amended permits to persons for the production and operation of its 

regulated industries. In FY 2005, TTB issued 4,000 original and 11,000 

amended permits. TTB conducted 400 field inspections on these applications. In 

FY 2005, TTB exceeded its goals by completing 81 percent of permit transactions 

within 60 days. 

• TTB’s rulemaking activities provide information and guidance to taxpayers, 

industry members, and the public to help promote voluntary compliance by the 

regulated industry. During FY 2005, TTB resolved a controversial regulatory and 

excise tax issue by setting a Federal standard or definition of flavored malt 

beverages that could be adopted by all fifty states. This rulemaking received 

significant press attention and TTB addressed 16,000 comments in the process. 

The final rule limits the addition of flavors and non-beverage materials containing 

alcohol to beers and malt beverages and ensures that consumers are adequately 

informed about the identity of flavored malt beverages. In FY 2007, TTB will 

address several other controversial issues including allergen labeling, ingredient 

and nutritional listing and “serving facts” panels in alcohol labels. 

• TTB provides significant support to the Office of the United States Trade 

Representative (USTR). TTB participated in negotiations between the United 

States and Mexico regarding cross-border trade in tequila, resulting in an

agreement that will be signed in the near future. The agreement reaffirms that 

Mexico is prohibited from banning the export of bulk tequila to the U.S. By 

providing very detailed, technical, legal and regulatory advice, TTB played a 

crucial role in developing a satisfactory bilateral agreement. The U.S.-Mexico 

tequila agreement will ensure that exports of tequila from Mexico to the U.S., 

valued at approximately $400 million per year, shall continue uninterrupted. 

• TTB also played a significant role in negotiating the Agreement in Trade in Wine 

between the U.S. and the European Community. This agreement covers wineTTB - 5 
making practices and labeling, and will facilitate bilateral trade in wine valued at 

$2.8 billion annually. 

• In FY 2007, TTB plans to complete over 900 field investigations, based on 

incoming permit application requests, consumer complaints, FAA trade practice 

violation leads, and work from the product integrity program. In FY 2005, TTB 

initiated over 479 product integrity investigations, 113 of which were on 

importers and conducted over 400 field application investigations for prospective 

distilleries, wineries, breweries, and importers in the U.S. and Puerto Rico. 

• During 2005, the Scientific Services Division analyzed 1,848 alcohol beverage 

products for methanol, a potential carcinogen. Of these, 39 products were found 

to contain methanol in excess of the current Food and Drug Administration (FDA) 

regulatory limit. The laboratories also analyzed 940 wines for sulfur dioxide 

content (an allergen) and label waiver requests. Eight wines, submitted for label 

waiver request were found to contain sulfur dioxide and required label 

declaration. In addition, 115 beverage alcohol products were analyzed for 

ingredients which are declared limited and/or prohibited in alcoholic beverages by 

the FDA. As part of the yearly pesticide monitoring program, the laboratories 

analyzed 120 imported and domestic wines for pesticides and their residues. Also, 

the laboratories analyzed 1,901 beverage alcohol samples for product integrity, 

pre-market analysis of imported products, and alcohol sampling program to 

ensure that the products are complaint with TTB laws and regulations so that the 

consumers are not misled and that the products are safe for consumption. TTB 

processed 517 requests for information on flavors intended for use in alcoholic 

beverages. This information includes TTB and FDA limited ingredients allowing 

TTB to make certain that products made with these flavors are safe and properly 

labeled. In FY 2007, the TTB laboratories will continue to analyze alcoholic 

beverages for adulterants, limited and prohibited ingredients to ensure the safety 

of the country’s alcohol beverages. The yearly pesticide monitoring program for 

wines will also continue. TTB anticipates a greater role of the laboratories in 

enforcing the Food Allergen and Consumer Protection Act (FALPCA) in 

alcoholic beverages as mandated by the Congress starting in January 2006. 

IC – Future Outlook

In FY 2007, TTB plans to conduct 90 to100 excise tax audits, including two national 

audits. These audits are accomplished using a staff of approximately 93 professional 

auditors located throughout the United States. The goal is to complete an audit of all of 

the major 200 taxpayers within a 3-4 year cycle which will establish a baseline for future 

efforts. While the audit effort focuses on the major taxpayers, the remaining taxpayers 

will be selected for audit based on risk and random sampling. 

As part of its investment in electronic government, TTB future plans are to consolidate 

all of the tax databases into a single integrated system known as the Integrated Revenue 

Information System (IRIS). The FY 2006 plans include merging the Federal Excise Tax 

(FET) database into its tax collecting and reporting to the IRIS database. This merger 

will eliminate duplicate entries of taxpayer information (name, address, principal parties, 

etc) that already reside in IRIS. TTB also plans to put into production the eFAPS 

TTB - 6 
program, which is the electronic downloading of tax payment information into the FET 

database. This will reduce and eliminate manual entries into FET and the imaging of

paper documents. TTB will continue to improve on its performance measures to process 

all applications and claims within a limited time, and to accurately and quickly verify that 

all tax that is rightfully due is paid. TTB will also continue its industry liaison work by 

conducting informational and educational seminars to members of regulated industries. 

Recent law amended the Internal Revenue Code of 1986 (IRC) in two ways that affect 

TTB and its taxpayers. First, it suspended the Special Occupational Tax (SOT) on most 

alcohol taxpayers, effective July 1, 2005. It repealed SOT for all alcohol taxpayers 

effective July 1, 2008. However, the SOT relating to tobacco permittees (manufacturers, 

importers and export warehouses) remains intact. 

Likewise, the law amended the tax payment and return provisions of IRC section 5061 to 

extend the existing semi-monthly payment and return periods for taxpayers whose annual 

liability does not exceed $50,000. Effective January 1, 2006, taxpayers under this 

category may pay their taxes and submit their returns on a quarterly basis, as provided 

under the IRC. 

In FY 2007, the TTB Office of Headquarters Operations plans to continue to make 

improvements to its processes, systems and availability of information to enhance its 

ability to service TTB’s industry members. The Scientific Services Division will finalize 

method development of utilizing chemical analysis to verify grape variety claims in wine. 

The International Trade Division will increase assistance to U.S. alcohol exporters by 

providing comprehensive beverage and industrial alcohol export requirements for all 

major world markets via the TTB website. The Advertising, Labeling and Formulation 

Division will continue to market the use of the Certificate of Label Approval (COLA) efiling system. 

The Trade Investigations Division (TID) is planning over 900 field investigations in FY 

2007. Investigations will be based on incoming permit application requests, risk 

assessment results, consumer complaints and information referrals. TTB completed its

initial Federal Alcohol Administration trade practice enforcement training in FY 2006 

and can expect results in the number of cases and hours worked per case in FY 2007. 

Anticipated activities for the Protect the Public function include: 

• permit application investigations 

• product integrity investigations (includes consumer complaints) 

• trade practice investigations (includes alcohol advertising investigations) 

• revenue investigations, and 

• Industry seminars. 

Succession planning is high on the list of TTB strategic priorities for future transitioning, 

especially as it relates to TTB’s investigator forces. TTB expects to lose fifty percent of 

its workforce between now and 2010 due to retirements and other attrition. To mitigate 

these losses, it is vital that TTB continue to have the use of the personnel interventions 

identified in the pay demonstration project to enable the Bureau to improve its capacity to 

TTB - 7 
recruit, develop, and retain high-caliber employees. TTB must have the flexibility to 

continue to use the 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. It is essential that the authority be extended to continue this 

pilot program. 

 

TTB - 8 
Section 2 – Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 544 $83,000

Rescission (P.L. 108-447) (664)

FY 2005 Enacted 544 82,336

FY 2006 Appropriation (P.L. 109-115) 544 91,126

Rescission (P.L. 109-148) (911)

FY 2006 Enacted 544 90,215

Changes to Base

Proposed Pay Raise 1,103

Pay Annualization 401

Non-Pay Inflation Adjustment 909

Base Reinvestments 1,576

Program Reduction

Tax Services-SOT Suspension/Quarterly Tax Filings (1,600) Collect the Rev F4A

Total FY 2007 Base 544 92,604

Total FY 2007 Request 544 92,604

Offsetting Fees 

User Fees Proposal ($28,640)

Total Net FY 2007 Request 544 $63,964

Budget Increases and Decreases

Table 2.1

(Dollars in Thousands)

Appropriation: TTB Salaries and Expenses

2A – Budget Increases and Decreases Description 

Changes to Base............................................................................................... +$2,413,000 

Adjustments to Maintain Current Levels +$2,413,000/ 0 FTE Funds are requested for 

the FY 2007 pay inflation cost relating to the January 2006 pay increase which carries 

into the next fiscal year (October 2006 to December 2006) and the proposed January 

2007 pay raise, the total estimated pay inflation adjustment is $1,504,000 and the 

proposed non pay inflation and annualization adjustment is $909,000. 

Program Reduction............................................................... -$1,600,000 

Recent law amended the Internal Revenue Code of 1986 (IRC) in two ways that affect 

TTB and its taxpayers. First, it suspended the Special Occupational Tax (SOT) on most 

TTB - 9 
alcohol taxpayers, effective July 1, 2005. It repealed SOT for all alcohol taxpayers 

effective July 1, 2008. However, the SOT relating to tobacco permittees (manufacturers, 

importers and export warehouses) remained intact. 

Likewise, the law amended the tax payment and return provisions of IRC section 5061 to 

extend the existing semi-monthly payment and return periods for taxpayers whose annual 

liability does not exceed $50,000. Effective January 1, 2006, taxpayers under this 

category may pay their taxes and submit their returns on a quarterly basis, as provided 

under the IRC. 

The anticipated pay and non pay savings realized from this legislation is $1,600,000. The 

bureau plans to reinvest this savings. 

TTB expects to realize a savings of 12 Full Time Equivalents (FTE) because of the 

amendments and plans to redeploy the FTE into other areas of the National Revenue 

Center (NRC) to meet increasing workloads in these critical program areas. Assuming a 

savings of 12 FTE, 10 FTE would originate from the savings realized by the SOT 

suspension and repeal; the other two FTE are projected to result from the reduction in 

payment and return submissions incident to the extended return and payment periods that 

will be available for qualified taxpayers described above. 

TTB maintained a staff of 12 FTE to administer the SOT program. In FY 2005, one FTE 

was redeployed to meet workload demands in other areas of the NRC. Of the remaining 

11 FTE, one FTE is required to continue administering the SOT requirements applicable 

to tobacco permittees, as these provisions were not suspended or repealed. The 

remaining 10 FTE will be available for reassignment to meet other critical needs at the 

NRC as the work on SOT diminishes over the next three years until the time of SOT 

repeal. 

TTB expects a savings of two FTE realized from the implementation of quarterly 

payment and return periods. Currently, TTB has 7 FTE at the NRC assigned as tax 

specialists who process payments and returns for approximately 4,200 taxpayers who are 

eligible to pay and file quarterly based upon their annual tax liability. Of these 4,200 

taxpayers, TTB expects that, at a maximum, only 1,500 (37 percent, which consists of 

every qualified brewer) will opt to avail themselves of the quarterly payment and filing 

option. This projection is based upon the fact that, in contrast to other taxpayers, the 

brewers’ bonds are based upon their annual tax liability. Consequently, their option to 

file on a quarterly basis has no effect on their required bond coverage. By contrast, other 

taxpayers’ bonds are based upon their liability within their return period. If their return 

period is extended from the existing semi-monthly period to a quarterly period, their 

corresponding bond coverage must increase proportionately, or 5 times. TTB believes 

this increased bond requirement will dissuade otherwise eligible taxpayers from opting in 

to the quarterly payment and filing option. 

TTB anticipates that it will require 37 percent fewer FTE in payment and return 

processing at the NRC. This equates to a savings of two FTE. 

TTB - 10 
Base Reinvestment................................................................ +$1,576,000 

To meet the demands caused by the steady increase in permit activity and associated tax 

administration duties demonstrated over the last three years, TTB intends to reinvest the 

12 FTE realized from the changes outlined above into Application Services and Tax 

Services, as follows. 

a) Process Wine, Beer and Wholesaler/Importer Applications $308,000/5 FTE. 

TTB intends to redeploy five FTE to Application Services, to be distributed between the 

Wine Applications Branch and the Beer and Wholesaler/Importer Application Branch to 

handle the increase workload associated with permit and applications work in the wine, 

beer and wholesaler/importer area. From FY 2000 to present, the number of original 

applications to establish new wine premises has grown dramatically, with over 3,900 

applications processed during FY 2005, which represents a 25 percent increase from FY 

2004. Also, the number of Beer and Wholesaler/Importer applications has grown, with 

nearly 9,000 applications processed during FY 2005, which represents a 12 percent 

increase from FY 2004. 

b) Administer Excise Tax Accounts for Wine, Spirits, and Tobacco $425,000 / 7 FTE 

3⁄4 Wine Excise Tax Group - Redeploy 4 FTE 

The Wine Excise Tax Group currently has a staff of eight specialists who administer 

roughly 4,200 taxpayer accounts. These specialists examine and conduct analyses of tax 

accounts including tax returns, operational reports, export documentation, and claims; 

initiate collection actions; and handle other tax-related transactions for the over 4,200 

active wineries. 

TTB has seen a proliferation in new wine permittees over the last several years, with 774 

new accounts established during FY 2005. In order to administer the excise tax 

requirements relating to this growing number of permittees, and to handle related support 

activities to other components of the Bureau for the Collect the Revenue function, TTB 

intends to redeploy four FTE to this group (for a total staff level of 12 tax specialists). 

These additional FTE will reduce the number of accounts assigned to each specialist to

375 accounts per specialist, and enable this group to examine effectively wine tax 

accounts which ensures that TTB collects all the revenue that is rightfully due from these 

taxpayers and conducts necessary support functions for other Bureau components. 

3⁄4 Spirits and Tobacco Excise Tax Group – Redeploy 3 FTE 

The Spirits and Tobacco Excise Tax Group currently has a staff of eight tax specialists 

who perform all tax related services for approximately 400 distilled spirits plants and 275 

tobacco permittees who represent approximately 50 percent or $7.5 billion of the annual 

federal excise tax collections that TTB collects. Among other duties, these specialists 

administer the cover-over for Puerto Rico and the Virgin Islands, process monthly and 

quarterly claims for drawback of tax on spirits used to manufacture non-beverage 

TTB - 11 
products (MNBP); process disaster claims; process operational reports, notices, and 

claims for all 400 distilled spirits plants and 275 tobacco permittees; and reconcile these 

documents to ensure that TTB collects the revenue rightfully due. Where a taxpayer has 

failed to pay the tax or to file a report, these specialists conduct follow-up activities to 

bring the taxpayer into compliance and to protect the revenue. These specialists also 

perform a support function for other TTB and NRC components. For example, specialists 

in the Spirits and Tobacco Excise Tax Group investigate and respond to inquiries from 

the Applications Group on issues relating to the current tax payment status of particular 

taxpayers whose security or collateral bonds are proposed for cancellation or refund. As a 

result of their work, TTB collected $675,000 in unpaid tax liability in FY 2005 alone. 

In the area of non-beverage drawback, TTB receives and processes approximately 3,000 

MNBP claims involving an estimated $317 million each year. Because of the high dollar 

amount involved for the respective taxpayers, TTB set a goal of processing these claims

within 30 days of their submission. While TTB currently meets this performance 

standard, it has required a realignment of existing resources and has caused a resulting 

drain on other branch functions, to include reconciliation and support activities. 

Redeployment of additional FTE to this group will enable the NRC to meet its 

performance goals for processing of drawback claims without a detrimental impact upon 

its tax collection and reconciliation activities or its support function to other Bureau 

components. 

TTB intends to redirect three FTE to the Spirits and Tobacco Excise Tax Group to equip 

this group with the resources necessary to meet its revenue protection mission. 

c) Treasury Working Capital Fund for TCS and DTS (Telecommunications) - 

$503,000 

The Treasury Office of the Chief Information Officer for the Department of the Treasury 

Departmental Offices has acknowledged that costs for working capital 

telecommunications costs will increase by $503,000 for bureau specific costs related to

new IT infrastructure. This increase is the result of having to add more circuits than 

originally planned as the bureau went from two computer rooms to four computer rooms 

as it separated its IT infrastructure from the Bureau of Alcohol Tobacco and Firearms 

(ATF). Additional circuit capacity was required to keep all four computer rooms 

synchronized and accessible by all TTB users. The reinvestment strategy is to absorb the 

costs with the savings from the anticipated non pay savings realized from the repeal of 

the SOT and change in tax filings. 

d) Bureau of the Public Debt Administrative Resource Center (BPD ARC) $340,000 

The Bureau of the Public Debt Administrative Resource Center provides administrative 

support services for TTB and has acknowledged that costs for these services will increase 

by $340,000 based on anticipated workload activity. 

Program Increases..............................................................................................$0/ 0 FTE 

TTB - 12 
Section 3 – Budget and Performance Plan 

3.1 – Appropriation Detail Table 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Collect the Revenue 299 $45,285 299 $49,618 267 $45,376 -10.91% -8.55%

Protect the Public 1/ 245 $37,051 245 $40,597 109 $18,588 -55.47% -54.21%

Subtotal Newly Appropriated Resources 544 $82,336 544 $90,215 376 $63,964 -30.96% -29.10%

Other Resources:

Recoveries

User Fees 1/ 0 $0 0 $0 168 $28,640 100.00% 100.00%

Offsetting Collections - Reimbursable 2/ 15 $1,700 15 $1,700 15 $1,700 0.00% 0.00%

Transfers In/Out

Subtotal Other Resources 15 1,700 15 1,700 183 30,340 1120.00% 1684.71%

Total Resources Available for Obligation 559 $84,036 559 $91,915 559 $94,304 -0.08% 2.60%

1/ The FY 2007 Protect the Public regulatory activity is to funded patially from new proposed user fees in the amount of $28,640. See proposed new user fee 

language.

2/ Reimbursable Funds from the "cover over" (return with Puerto Rico) covers the cost of the Puerto Rico Operations.

3/ Budget and FTE information covering estimates of staff participation in projects and programs under each activity is based on prior year budget experience.

Request to FY 2007*

FY 2006

Resources Available for Obligation

FY 2005 FY 2006 FY 2007

Appropriation Detail

(Dollars in Thousands)

Table 3.1

% Change

Enacted Enacted

3A – Budget Activity Description 

Collect the Revenue (Total funding $46,209,000; direct portion $45,376,000 and 

reimbursable funding portion of $833,000)

TTB strategic goals supported by the “Collect the Revenue” budget activity include 

providing the most effective and efficient systems 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 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) is establishing a baseline of risk data upon 

which taxpayers will be audited. In FY 2004, 54 audits were conducted and roughly 1/3 

of the total federal excise tax revenues collected during a three-year period were audited 

and the amount of tax was established as rightfully due and collected. The goal is to 

complete an audit of all of the major taxpayers that contribute roughly 98 percent of the 

federal excise tax revenue within a 3-4 year cycle. The Office of Field Operations will 

continue to provide industry outreach to encourage compliance, investigate 

allegations/indications of tax fraud where a full tax audit is not contemplated, verify 

destruction of large quantities of taxable commodities, and conduct compliance 

inspections of non-taxpaying permittees who have substantial potential for tax liability. In 

FY 2005, TTB completed 400 permit application qualifications and 479 product integrity 

investigations/inspections. TTB expects the demand for these services to continue in FY 

2007. 

TTB - 13 
The goals of reducing taxpayer burden and improving service remain a priority at TTB. 

TTB will continue working to increase the number of taxpayers who can file their returns 

electronically. The ultimate goal is to allow permittees and taxpayers to file all 

payments, returns and applications online with the National Revenue Center. The FY 

2007 budget request enables the continuation of efforts towards 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. 

In FY 2005, TTB established an entire field structure for tax audit and trade investigation. 

This involved recruiting and hiring supervisors, auditors, investigators, and locating, 

equipping, and opening field offices. Several investigations and audits of large taxpayers 

were conducted. The goal by FY 2007 is to continue such audits of the major taxpayers 

that represent 98 percent of the federal excise tax collections. 

TTB’s FY 2007 budget request supports Treasury’s financial strategic goal to “Manage 

the Government’s Finances Effectively” by maintaining a level of funding that 

effectively collects nearly $15 billion in federal excise taxes through the following 

strategic objectives: 

• Reduce taxpayer burden and improve service 

• Use Electronic Government; 

o Reduce the taxpayer paperwork burden associated with collection of the 

revenue by creating alternative electronic filing methods 

o Increase online filing for permit applications and formula submissions, 

and payment of tax returns, business activity reports, claims, applications, 

COLAs, and other forms

o Increase program effectiveness through partnerships with industry, States, 

and other Federal agencies 

o Continue to automate business applications at the National Revenue 

Center (NRC) 

o Improve collections and efficiency of service through information sharing 

efforts, such as seminars, publications, and industry meetings. 

o Ensure consistent tax administration 

• Collect all the revenue that is rightfully due; 

o Account accurately for the revenue assessed and collected. 

o Increase review of taxpayer returns and collect delinquencies to ensure 

voluntary compliance 

o Ensure correct payment of taxes through audit of “at-risk” taxpayers 

o Implement and refine ways to identify potential tax jeopardy patterns 

o Through partnership with industry, States, and other Federal agencies, 

develop alternative methods of promoting voluntary tax compliance 

• Prevent tax evasion and identify other criminal conduct in the regulated industries 

TTB - 14 
o Investigate and assist with the prosecution of business entities suspected of

being involved in tax evasion schemes, including diversion and smuggling 

of taxable commodities 

o Forge partnerships with and provide training to Federal, State, local, tribal, 

and foreign governments to enforce tax laws 

Protect the Public (Total funding $48,095,000; direct portion $18,588,000; $28,640,000 

of reimbursable funding under proposed “User Fee” initiative; and reimbursable 

funding portion of $867,000)

TTB’s Protect the Public strategy assures 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 labeling, 

advertising and marketing of alcohol products through education, investigation, and 

laboratory testing. TTB works with industry, other federal and state governments, and 

other interested parties to make it easier to comply with regulatory requirements, while 

maintaining the appropriate level of oversight to ensure the public’s safety. Innovation, 

partnerships, and open communication are paramount to achieving this strategic goal. 

Pursuant to provisions of the Internal Revenue Code (IRC) of 1986, TTB has agreements 

with 40 States to share tax information. 

TTB monitors trade practices of the alcohol industry and takes enforcement actions on 

violations or discrepancies, monitors and reviews international trade in alcoholic 

beverages to identify trade barriers, promotes free access to foreign markets, and 

suppresses incidents of international fraud and contaminated products. TTB also 

processes applications for certificates of label approval and proposed formulas for 

imported and domestic distilled spirits, beer, and wine products to ensure that products 

are manufactured in accordance with standards of identity, are properly classified for 

excise tax, and that labels and advertisements are not misleading. 

TTB examines all alcohol labels prior to use and issues a certificate of label approval 

(COLA) to ensure alcohol beverage labels adequately identify the product and do not 

contain misleading information. The number of COLA submissions increases each year, 

while TTB staffing remains at a steady state. On May 21, 2003, TTB launched COLAs 

Online, the first facet of TTB’s e-Gov initiative. This system enables the submission and 

processing of COLA applications via the Internet. The innovation improved the 

submission and review process for alcohol beverage labels by providing an expedient and 

paperless means of obtaining Federal label approval. The number of electronically filed 

COLAs is expected to increase in FY 2007. 

Users of specially denatured alcohol (SDA) are required to submit a formula to the TTB 

Laboratory. Likewise, those using alcohol for non-beverage purposes, such as in the 

manufacture of flavorings or medicines, must also gain approval of their formula in order 

to file a claim for drawback of excise taxes previously paid. In both cases, the TTB Lab 

reviews the formula and analyzes samples to grant or deny the action requested by the 

applicant. TTB’s Non-Beverage Products Laboratory (NPL) has pledged in its Customer 

TTB - 15 
Service Plans to process 90 percent of the non-beverage and SDA formulas within 10 

working days of receipt. The NPL is meeting the target of 10 days for non-beverage 

formulas and the FY 2007 budget initiative will ensure that with the steady increase in 

workload demand from industry and a steadfast number of chemists that this performance 

standard can continue to be achieved. 

 

In order to protect the consumer, TTB will continue to document responses internally to 

unsafe conditions and product deficiencies related to alcohol products and labels. TTB 

does this through various methods including responding to consumer complaints, 

responding to referrals from foreign governments, market basket sampling at retail 

locations, and product integrity inspections conducted at domestic alcohol plants. 

Through these programs, TTB tests samples of alcoholic beverages sold at the retail level 

and obtained directly from producers to ensure that alcoholic beverages marketed in the 

United States meet formulation and labeling requirements, do not contain unauthorized 

substances or contaminants, and are properly classified for tax purposes. 

Strategic Objectives: 

• Assure the integrity of the products, people, and companies in the marketplace 

• Ensure that only qualified applicants enter the regulated industries 

• 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 

• Ensure compliance with laws and regulations through education, inspection, and 

investigation 

• Respond to industry and consumer complaints. Investigate product contamination 

and adulteration 

• Investigate thefts of regulated commodities 

• Investigate violations of trade practices, labeling, and advertising in the beverage 

alcohol industry 

• Inspect alcohol beverages at producer and importer premises to detect consumer 

deception on health issues 

• Educate interested parties on the laws and regulations of the United States and 

other countries in areas concerning the regulated industries 

TTB - 16 
3.2 – Budget and Performance Plan Table

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Actual Actual Actual Enacted Enacted Requested

Treasury Strategic Objective F4A:

Budget Activities: Collect the Revenue

Financial Resources

Newly Appropriated Resources $51,830 $56,431 $56,801 $45,285 $49,618 $45,376

Other Resources $1,171 $1,700 $935 $935 $833

Total Operating Level $51,830 $57,602 $58,501 $46,220 $50,553 $46,209

Human Resources

Newly Appropriated FTE 363 363 363 299 299 267

Other FTE 15 15 15 8 8 7

Total FTE (direct and reimbursable) 378 378 378 307 307 274

Treasury Strategic Goal: Promote Stable U.S. and World Economies (E2)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Actual Actual Actual Actual Enacted Requested

Treasury Strategic Objective E2A:

Budget Activities: Protect the Public

Financial Resources

Newly Appropriated Resources $21,170 $23,049 $22,727 $37,051 $40,597 $18,588

Reimbursable User Fees $0 $0 $0 $0 $0 $28,640

Other Resources $0 $0 $0 $0 $765 $867

Total Operating Level $21,170 $23,049 $22,727 $37,051 $41,362 $48,095

Human Resources

Newly Appropriated FTE 181 181 181 245 245 109

Reimbursable User Fees/Full-time 

equivalents (FTE) 000 0 0

Reimbursable Full-time equivalents (FTE) 000 778

Total FTE (direct and reimbursable) 181 181 181 252 252 285

Budget and Performance Plan

Table 3.2

(Dollars in Thousands)

Resource Level 

Resource Level

168

TTB - 17 
Strategic Objective: Collect Federal Tax Revenue When Due Through a Fair and Uniform

Application of the Law - F4A

Budget Activity: Collect the Revenue

Performance Goal: Apply statistically valid state-of-the-art methods to measure and analyze compliance

with tax laws, and identify any gaps in tax payment

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Cumulative percentage of excise tax revenue audited over 3 years (%) (Ot)

Target 65 90 98

Actual 82

Target Met? N/A N/A N/A Y

Percentage of Voluntary Compliance in filing tax payments timely and accurately (in terms of number of

compliant industry members)(%) (Oe)

Target 70 74 78

Actual 70

Target Met? N/A N/A N/A Y

Ratio of taxes collected vs. resources expended (Ot) [DISCONTINUED FY 2006]

Target 211 257 250 Discontinued Discontinued

Actual 242 368 367

Target Met? N/A Y Y Y

Resources as a percentage of revenue (%) (E)

Target .4 .34 .34

Actual .37

Target Met? N/A N/A N/A Y

Unit cost to process an excise tax return based on new legislation ($) (E)

Target Baseline Baseline TBD

Actual 71

Target Met? N/A N/A N/A Y

Budget Activity: Collect the Revenue

Performance Goal: Reduce the paperwork burden by continuing to create alternative reporting and filing

methods through electronic government

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of Voluntary Compliance in filing tax payments timely and accurately (in terms of revenue) (%)

(Oe)

Target Baseline 82 84 86 88

Actual 80 81.2 86.3

Target Met? N/A Y N Y

Percentage of total tax receipts collected electronically (%) (Oe)

Target Baseline 98 98 98 98 98

Actual 98 98 97.3 98

Target Met? Y Y N Y

TTB - 18 
Strategic Objective: Increase Citizens Economic Security - E2A

Budget Activity: Protect the Public

Performance Goal: Improve customer service by decreasing turn-around times for Certification and 

 Label Approval (COLA) processing (electronic and paper). Promote use of COLAs

 Online in an effort to improve the completeness and accuracy of submitted COLA

 applications while allowing TTB and the regulated industry to exchange information

 instantly via electronic means, thus reducing the burden to industry 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of COLA approval applications processed within 9 calendar days of receipt (%) (E)

Target Baseline 60 30 55 57

Actual 57 23 50

Target Met? N/A Y N Y

Percentage of permit application (original and amended) processed by the National Revenue Center within 60

days (%) (E)

Target 67 80 82

Actual 81

Target Met? N/A N/A N/A Y

Budget Activity: Protect the Public

Performance Goal: Protect the consumer

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of electronically filed Certificate of Label Approval applications (%) (Oe)

Target 10 7 16 27 30

Actual 3 10 25

Target Met? N/A N Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

3B – Description of Performance 

TTB met all of its performance measures in FY 2005, and set ambitious targets for FY 

2007. TTB plans to continue to improve its core business operations and provide high 

quality service to its industry members. 

TTB continues to expand its e-filing program to allow all excise taxpayers (roughly 

7,300) to file and pay taxes electronically through the Pay.Gov program. There are 

approximately 1,000 industry members enrolled to e-file through the Pay.Gov program. 

TTB met its FY 2005 performance target of 98 percent of tax receipts collected via 

electronic funds and plans to meet the goal again in FY 2007. Voluntary compliance is 

an important element of the TTB collection strategy. TTB met its FY 2005 target to have 

70 percent of the total taxpayers file payments on or before the scheduled due date and 

plans to meet its target of 78 percent set for FY 2007. 

TTB will audit the largest 200 taxpayers who pay 98 percent of federal excise tax 

collections. This multi year effort is the driving force in measuring and closing the tax

gap. Through FY 2005, TTB audited 113 of the largest taxpayers, and plans to finish 

audits of the remaining taxpayers in FY 2007 and FY 2008. Audit findings have resulted 

in an additional $4.3 million in unpaid revenue and an additional $10.2 million in tax 

penalties and interest. While the audit effort focuses on the major taxpayers, the 

TTB - 19 
remaining taxpayers are selected for audit based on risk and random sampling. In FY 

2007, the Bureau plans to complete 90 to 100 field audits of taxpayers. The FY 2005 

audit performance target for the cumulative percentage of revenue that the audits have 

examined was met. 

The tobacco and alcohol industries have the potential to participate in illicit activity, so it 

is crucial that organized crime and terrorists are kept out of these industries. To combat 

illegal activity in its regulated industries TTB issues original and amended permits to 

persons for the production and operation of its regulated industries. In FY 2005, TTB 

issued 4,000 original and 11,000 amended permits. TTB conducted field inspections on 

400 of these applications. The Bureau exceeded its FY 2005 performance target by 

completing 81 percent of the transactions within 60 days. TTB plans to meet its FY 2007 

target of 82 percent. 

The Federal Alcohol Administration Act requires importers and bottlers of beverage 

alcohol to obtain a certificate of label approval or certificate of exemption from label 

approval (COLA) for most alcoholic beverages prior to their introduction into interstate 

commerce. During FY 2005, TTB processed over 110,000 COLAs. In FY 2003, TTB 

launched an e-filing option for obtaining label approval. TTB continues to encourage its 

use by all industry members. The number of e-filers and the percent of the e-filed 

applications have risen steadily since the launch. In FY 2005, TTB exceeded its 

performance target of processing 30 percent of all COLAs within nine calendar days of 

receipt. TTB plans to meet or exceed the target of 57 percent for FY 2007. TTB also 

met the performance goal to receive 25 percent of all COLAs electronically, and TTB 

plans to meet or exceed its FY 2007 target of 30 percent. 

TTB received an Effective rating (93 out of 100) on its FY 2005 Collect the Revenue 

Program Assessment Rating Tool (PART) evaluation. This was the first PART review 

conducted under the TTB umbrella. The results of the PART indicate that TTB has an 

effective program in place for the collection of federal excise taxes and the Bureau has 

developed an action plan that will address OMB’s findings and recommendations 

resulting from this review.

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

Human Capital

• 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 - 20 
• 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 published an Equal Employment Opportunity and Diversity Advancement 

policy statement. 

• TTB conducted a total workforce diversity/affirmative employment analysis 

identifying barriers, goals, and measures of progress. 

• 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 performance workgroup to improve the TTB General Schedule 

performance management system. 

• TTB established a flexi-place 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 for stakeholders. 

• TTB has established an annual awards ceremony as a tool for recognizing and 

retaining outstanding employees. 

• TTB implemented the Demonstration Project (PAY DEMO) to enhance the 

Bureau’s ability to effectively recruit, develop, and retain highly qualified 

employees. It seeks to attain these objectives by implementing changes in 

management, personnel, and compensation practices. The project focuses on 

designated occupations that are mission critical (e.g., chemists and information 

technology staff) 

• Beginning in June 2004, TTB outsourced all of its human resource functions to 

the Bureau of the 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 has adopted a progressive five-tier performance management system that 

cascades throughout the organization. The new performance system holds 

employees and managers accountable for program results. 

TTB - 21 
• 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. 

Electronic Government

• TTB expanded the Pay.Gov program to allow all federal excise taxpayers to file 

and pay electronically. 

• TTB launched an online system for Certificates of Label Approval (COLA) that 

allows industry members to file their applications for labels electronically. 

• Security accreditation has been achieved for all TTB Information Technology 

systems. 

• TTB has begun to consolidate its major databases into a single integrated system

to promote greater efficiency and reduce costs. 

• TTB has implemented enhancements to both its Internet and Intranet sites to 

provide greater benefits to external and internal customers. 

• The Bureau is completing its enterprise architecture program, which was based on 

the use of the Enterprise Architecture Assessment tool, and TTB is confident that

the program changes have now elevated the enterprise architecture score beyond 

the required standard level. 

Competitive Sourcing 

• In creating TTB, the executive leadership decided to create a lean organization by 

contracting with governmental and commercial sources for services that are not 

inherently governmental (e.g., Human Resources, Information Technology, 

Training, Property Management, Finance, Procurement, and Records 

Management). Contractors are providing TTB with all operational IT services 

except for Contracting Officers Technical Representative responsibilities, which 

were kept in-house. TTB is comprised of 88 percent inherently governmental 

services and 12 percent commercial, as substantiated by its FY 2005 FAIR Act 

Inventory. 

• TTB has migrated its information technology operations from the Bureau of 

Alcohol, Tobacco, Firearms and Explosives and outsourced its Information 

Technology services to commercial firms. 

TTB - 22 
Budget & Performance Integration

• TTB has migrated its financial operations to Bureau of Public Debt 

Administrative Resource Center (BPD ARC), including key legacy tax 

information. 

• TTB has improved its tracking of activity based costing for its two budget 

activities 

• Implementation of WebTA (time keeping) system allows TTB to track its direct

labor costs for over ninety project codes under these two key activities. 

• The Bureau is using performance information to make budget decisions, and has 

realigned its account code structure to capture and measure program and project 

costs. 

• TTB has worked extensively to define performance measures and continues to 

strive to identify the right measures and mix of measures that portray the best 

picture of the Bureau’s operations and performance. TTB is working with a 

contractor to refine its outcome-oriented performance measures and align them

with business processes and budget submissions. The Bureau needs to improve 

its managerial cost accounting, and deciphering the cost of doing business and its 

relationship to TTB measures and goals will do this. By working closely with 

Treasury, TTB will identify some system changes that would provide the ability 

to provide marginal unit cost information on budget initiatives and performance. 

Improving Financial Performance 

• TTB continues to monitor its financial performance and improve its ability to 

interface with budget information. 

• TTB has successfully migrated its accounting and financial data, including its 

legacy data to the Bureau of the Public Debt Administrative Resource Center 

repository for tax information. 

• Improved classification and account coding of projects and activities. 

• Benchmarks have been established on service provider’s performance of financial 

operations. 

• TTB has achieved green status in this initiative, because no unresolved internal 

control material weaknesses or reportable conditions were found and all audits 

have been unqualified. The bureau has successfully used financial management to 

meet financial deadlines and avoid Anti-Deficiency Act violations. TTB is 

working to integrate financial management into its management framework, 

which will facilitate the integration of all five PMA initiatives and align financial 

TTB - 23 
management closely with Budget and Performance Integration, in order to 

provide current and accurate information. 

3.3 – PART Evaluation Table 3.3 

PART Name: Collect the Revenue

Strategic Goal: Manage the Government’s Finances Effectively (F4)

Rating: Effective

OMB Major Findings/Recommendations

1. The Collect the Revenue program has a clear purpose and is well designed to achieve its goals. TTB administers 

and ensures compliance with portions of the Internal Revenue Code dealing with collection of excise taxes on alcohol, 

tobacco, firearms and ammunitions and regulation of those manufactures.

1. Developing baselines for annual performance measures.

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. The program has not developed adequate baselines for its annual performance measures. Three out of the four

annual measures do not have baselines.

Bureau Actions Planned or Underway. 

 We are taking the following actions to improve the performance of the program

3. Developing a baseline to compare the incremental costs and net benefits of regulation.

2. The program has developed adequate long-term performance measures with ambitious targets and timeframes. 

TTB measures the percent of voluntary compliance in filing tax payments and will increase this targets from 82% in 2004 to 

92% in 2010.

TTB - 24 
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Full Time vs. Budgeted FTE

0

100

200

300

400

500

600

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

FT

E

Budgeted FTEs Actual/Projected FTE Bud Reimb Act. Reimb

TTB - 25 
FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 514 523 559

Increases:

Reason #1: 9 36

Subtotal, Increases 9 36 0

Decreases:

Reason #1:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 523 559 559

1/

Net Change from prior year SOY to budget year EOY 0

1/ Direct FTEs 544 and Reimbursable (Puerto Rico Cover Over) FTEs 15 = 559

The Alcohol and Tobacco Tax and Trade Bureau was established 

January 24, 2003 as a result of the Homeland Security Act of 2002. A

key strategic challenge for TTB was staffing the Division of Field

Operations with auditors (Budget Activity: Collect the Revenue) and 

investigators (Budget Activity: Protect the Public) to establish a field 

presence with industry members. The Bureau currently has 539 full time

positions on board and the remaining positions are in various stages of

recruitment, but we anticipate to be fully staffed at 559 full time positions. 

TTB has created a streamlined organization by contracting with

governmental and commercial sources for all services that are not 

inherently governmental (e.g., human resources, IT, accounting, etc.). 

The TTB E Gov strategy incorporates Treasury Enterprise Solutions and

the President's twenty four government initiatives to the maximum extent

possible.

(Break-out the FTE changes by as many reasons for the change as possible, and include a 

description for each the increase or decrease)

(Break-out the FTE changes by as many reasons for the change as possible, and include a 

description for each the increase or decrease)

4A – Human Capital Strategy Description

By properly managing its human capital needs, TTB supports Treasury’s strategic goals: 

 

1. Increase Citizens’ Economic Security, and; 

2. Manage the U.S. Government’s Finances Effectively, 

To accomplish and fulfill both TTB’s and Treasury’s strategic plans, TTB has taken 

several steps in order to not only maintain its current professional workforce but also 

augment 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 

TTB - 26 
forecast will be developed by assessing and modeling the changing nature of TTB’s 

mission critical occupations and the Bureau’s mission. 

The President’s Budget is introducing legislative language to extend the Pay Demo Pilot 

Program for FY 2007. A recommendation will be made on the results of the evaluation 

of the pilot program. The Pay Demo program will continue to be used by the Bureau to 

develop and retain high caliber employees. TTB expects to lose 50 percent of its 

workforce between now and 2010 due to retirements and other attrition. To accommodate 

these losses from the baseline it is vital that TTB continue to have the use of 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 must 

have the flexibility to continue to utilize the tailored approaches designed, developed and 

implemented specifically to 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 program that 

function in mission critical occupations such as chemists, industry analysts, auditors and 

information technology specialists. 

The estimated pay for performance awards per participant covered under this program

average $3,900 or 5 percent of the base pay, and at full hiring capacity TTB estimated 

120-132 program participants with total payouts in FY 2007 estimated at roughly 

$550,000. 

TTB - 27 
4.2– Summary of IT and Non-IT Resources Table 

Budget Activity FY 2005

Obligations

FY 2006

Enacted

FY 2007

Request

Information Technology:

Protect the Public

and Collect the 

Revenue

$0.000 $1.700 $0.000

0.000 0.000 0.000

Subtotal $0.000 $1.700 $0.000

Non-Information Technology:

0.000 0.000 0.000

Subtotal $0.000 $0.000 $0.000

Total Major Investments $0.000 $1.700 $0.000

Summary of IT and Non-IT Resources

Table 4.2

(Dollars in Millions)

Major Investments

4B – Information Technology and Non-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 

Treasury’s Office of 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: 

1) Does the initiative have value to TTB? 

2) Is there a balance of benefits against costs and risks?

3) Are 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 - 28 
4.3 – Operating Levels 

Appropriation Title: TTB Salaries & Expenses FY 2005 

Enacted

FY 2006 

President's

Budget as 

Amended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted

FY 2006 

Proposed 

OperatingLevel

Total Budget

Estimate

Direct 

Funding

Reimbursable 

(Proposed User 

Fees)

FTE 544 544 544 544 544 376 168

Object Classification:

11.1 Full-Time Permanent Positions........................ 36044 39,013 - 1852 38348 40865 40693 28108 12585

11.1 Other than Full-Time Permanent Positions...... 0 0 - 0 0 0 0 0 0

11.5 Other Personnel Compensation....................... 408 0 - 0 0 0 718 496 222

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

11.9 Personnel Compensation (Total)..................... 0 0 - 0 0 0 0 0 0

12.0 Personnel Benefits........................................... 10257 10,799 - -258 10799 10541 10868 7506 3362

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

21.0 Travel.............................................................. 3886 4,282 - -1000 4282 3282 4410 3046 1364

22.0 Transportation of Things.................................. 117 0 - 136 0 136 104 72 32

23.1 Rental Payments to GSA................................. 5248 5,405 - -630 5405 4775 4725 3264 1461

23.2 Rent Payments to Others................................ 0 0 - 314 0 314 0 0 0

23.3 Communications, Utilities, & Misc.................... 3786 4,570 - 473 4570 5043 4806 3320 1486

24.0 Printing and Reproduction............................... 0 0 - 408 0 408 0 0 0

25.1 Advisory & Assistance Services....................... 0 0 - 0 0 0 0 0 0

25.2 Other Services................................................. 20557 23,240 - -568 22993 21761 23959 16549 7410

25.3 Purchase of Goods/Serv. from Govt. Accts...... 0 0 - 0 0 0 0 0 0

25.4 Operation & Maintenance of Facilities............. 0 0 - 0 0 0 0 0 0

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

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

25.7 Operation & Maintenance of Equipment.......... 0 0 - 0 0 0 0 0 0

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

26.0 Supplies and Materials.................................... 661 661 - -40 661 621 682 471 211

31.0 Equipment....................................................... 1222 2,656 - -537 2656 2119 1639 1132 507

32.0 Lands and Structures....................................... 150 500 - -150 501 350 0 0 0

33.0 Investments & Loans....................................... 0 0 - 0 0 0 0 0 0

41.0 Grants, Subsidies............................................ 0 0 - 0 0 0 0 0 0

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

43.0 Interest and Dividends................................. 0 0 - 0 0 0 0 0 0

44.0 Refunds........................................................... 0 0 - 0 0 0 0 0 0

Total Budget Authority....................................... $82,336 $91,126 - $0 $90,215 $90,215 $92,604 $63,964 $28,640

Budget Activities:

Protect the Public................................................ $37,051 50,119 $0 $5,413 $40,597 $44,205 $47,228 $18,588 $28,640

Collect the Revenue............................................. 45,285 41,007 0 (5,413) 49,618 46,010 45,376 45,376 0

Total Budget Authority....................................... $82,336 $91,126 $0 $0 $90,215 $90,215 $92,604 $63,964 $28,640

cludes $1.7 million in Puerto Rico Reimbursable Funding "Cover Over"

Operating Levels

Table 4.3 (Dollars in Thousands)

FY 2007

Ex

TTB - 29 
4C – Appropriations Language 

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, [$91,126,000] $63,964,000; 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. (Department of the Treasury Appropriations Act, 2006.) 

In addition, $28,640,000 from the General Fund: Provided, That such amount shall be 

reduced by such sums as may be deposited to the Alcohol and Tobacco Regulatory Fund, 

so as to result in a final fiscal year [2006] 2007 appropriation from the General Fund 

under this paragraph estimated at $0: Provided further, That amounts from the Alcohol 

and Tobacco Regulatory Fund may be transferred to this account, to be merged with and 

available for the same purposes as this account, to remain available until expended. 

Treasury General Provisions:

Sec. 216. Section 122(g) (1) of Public Law 105-119 (5 U.S.C. 3104 note), is further 

amended by striking [“7 years”] “8 years” and inserting [“8 years”] “9 years”. 

JUSTIFICATION OF LANGUAGE CHANGES (EXHIBIT 1c)

The Homeland Security Act of 2002 authorized the new Alcohol and Tobacco Tax and 

Trade Bureau. The Act provided for the continuation of the personnel management 

demonstration project, which is contained in the Treasury Department’s General 

Provision language. The Homeland Security Act of 2002 also provided for the 

establishment of the Bureau of Alcohol, Tobacco, Firearms, and Explosives under the 

Department of Justice. 

[The Omnibus Consolidated and Emergency Supplemental Appropriations Act for FY 

1999 authorized by the Secretary of the Treasury to establish a Department of the 

Treasury demonstration project for designated critical occupations. This project was 

established to enhance Treasury’s ability to effectively recruit and retain highly qualified 

employees.] 

TTB - 30 
Legislative Proposals on Pay Demo Program:

The FY 2006 President’s Budget includes a general provision to extend the Pay 

Demonstration Program an additional year. The Omnibus Consolidated and Emergency 

Supplemental Appropriations Act for FY 1999 authorized by the Secretary of the 

Treasury to establish a Department of the Treasury demonstration project for designated 

critical occupations. 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. 

For FY 2007, TTB proposes to continue the Pay Demonstration Program by amending 

the general provision language to extend the program an additional year.

The legislative authorization history to date on the Pay Demonstration Project: 

• The Pay Demonstration Project was originally enacted for the Department of the 

Treasury and the Department of Justice for a three-year period in the Departments of 

Commerce, Justice, State, the Judiciary, and Related Agencies Appropriates, 1998, 

Public Law 105-119 (November 26, 1997). See section 122(g), 111 Stat. 2470, 

relating to the Department of the Treasury. 

• The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999, 

Public Law 105-277 (October 21, 1998) continued the enactment of the project for 

three years from the date of the enactment. See section 102, 112 Stat. 2681-585. 

• The Treasury and General Government Appropriations Act, 2002, Public Law 107-67 

(November 21, 2001) extended the project by substituting four years for three years. 

See section 120, 115 Stat. 525. 

• The Homeland Security Act of 2002, Public Law 107-296 (November 25, 2002), 

transferred the Pay Demonstration project to the Attorney General for the continued 

use by ATF and the Secretary of the Treasury for continued use by TTB. See section 

1115, 116 Stat. 2274. 

• The Omnibus Consolidated Appropriations Act, 2003, Public Law 108-7 (February 20, 

2003) extended the project by substituting five years for four years. See section 119. 

Prior to the enactment of this appropriation for FY 2003, the project continued in 

place at ATF/TTB under numerous continuing resolutions. 

• The Omnibus Consolidated Appropriations Act, 2004, Public Law 108-199 (January 

23, 2004) extended the project by substituting six years for five years. See section 

216, 118 Stat. 320. 

• The Omnibus Consolidated Appropriations Act, 2005, Public Law 108-477 (December 

4, 2004) extended the project by substituting seven years for six years. 

• The Department of Transportation, Treasury, Housing and Urban Development, 

Judiciary, District of Columbia, and Independence Agencies, Public Law 109-115 

(November 30, 2005) extended the project by substituting eight years for seven years.

TTB - 31 
Legislative Proposal on User Fees 

The Budget proposes to establish user fees to cover the costs of TTB's regulatory 

functions under its "Protect the Public" line-of-business. The new user fees include 

administrative fees for “drawbacks” from Manufacturers of Non Beverage Products 

(MNBP), filing fees for Certificate of Label Approvals (COLAs) for distilled spirits, wine 

and beer, American Viticultural Areas (AVA), proposed formulas, and new permit 

applications. This change would generate estimated user fee collections of $28,640,000 

annually. Authorizing legislation will be proposed that amends the Internal Revenue 

Code (Title Internal Revenue Code of 1986, 26 U.S.C.) and the Federal Alcohol 

Administration Act (27 U.S.C.), and system and operational changes would be needed to 

implement this proposal. The President’s Budget proposes authorizing legislation to 

collect mandatory receipts. Language in the appropriations bill will allow these receipts 

to be spent on the discretionary program for FY 2007. 

Inclusions

The new user fees include administrative fees to cover the cost of processing claims for 

drawback of tax, processing applications for Certificate of Label Approvals (COLAs) for 

distilled spirits, wine and beer, applications for new American Viticultural Areas (AVA), 

submissions of proposed formulas, and applications for new permits. The industry would 

pay for the benefits it receives from TTB’s regulatory efforts. These efforts protect the 

public against misleading labels and adulterated alcohol products, and prevent dishonest 

persons from entering the alcohol and tobacco trade, while promoting fair competition 

among industry members. 

 Manufacturers of Non Beverage Products (MNBP) 

3⁄4 Under current law, manufacturers of non-beverage products may 

be eligible to claim a drawback of tax for the use of tax paid 

distilled spirits in its products (26 U.S.C. 5134). The net payment 

of $1 per proof gallon is intended to cover administrative costs in 

processing the claims. The proposal includes an increase in the net 

payment from $1 to $2 per proof gallon. This fee has not been 

increased in over fifty years. 

 COLA User Fee 

3⁄4 Application Fees for COLAs/Certificates of Exemption: Under 27 

U.S.C. 205(e), producers, bottlers and wholesalers of alcohol 

beverage products must first obtain a COLA before bottling such 

alcohol beverage products. Those who will sell the alcohol 

beverage products intrastate must apply for a Certificate of Label 

Exemption. These requirements also apply to importers; a COLA 

must be obtained as a condition for removal of the alcohol 

beverage product from Customs custody. TTB must review each 

TTB - 32 
label submitted to determine compliance with its labeling 

regulations. The COLA user fee would cover the costs of 

reviewing and processing such COLA applications. A key feature 

of the proposal is to encourage businesses to file their applications 

electronically, so a two-tier (electronic vs. paper) fee structure 

would be introduced as an incentive for businesses to file their

applications on an electronic basis rather than the traditional paper 

submission. 

 Petition for American Viticultural Areas (AVA) User Fee

3⁄4 Applications for new American Viticultural Areas (AVAs): A 

Viticultural area is a delimited place or region with boundaries that 

are recognized for use on labels of wine (27 C.F.R. 4.25(e)). 

Petitions may be made to TTB for recognition of new AVAs. TTB 

must review the petition and submit it for formal rulemaking. 

 Formula Reviews User Fees 

3⁄4 Review of Formulas: TTB regulations require industry members to 

submit various formulas and statements of process for certain 

alcohol beverage products (27 C.F.R. 5.25, et seq). In its review, 

TTB may also conduct lab analyses of such products. Such work 

is necessary for TTB to determine the proper labeling 

classifications of the products, and to determine whether a 

proposed manufacturing process results in a change of character, 

composition, class or type of product. 

 Lab Analysis for Sulfur Dioxide Waiver and/or Methanol in Grappa

3⁄4 Lab Analysis: A user fee is proposed on work related to Lab 

analysis and issuance of a report for waiver of sulfur dioxide 

and/or methanol in grappa warning statement on the label.(Grappa 

may be generically defined as a spirit--dry and high in alcohol).

 Permits Original Application User Fee 

3⁄4 Applications for New Permits: Under 27 U.S.C. 203(a), a person 

may not engage in the business of manufacturing or importing, 

bottling or warehousing alcohol beverage products without a 

permit. TTB must review and investigate the qualifications of the 

applicant, including the applicant’s potential criminal background 

and whether he or she is likely to operate in conformity with 

Federal law.

TTB - 33 
Fee Requirement:

The fee to be charged under the program required shall not in any event be less than the 

amount under the following table: 

Category Minimum Fee

Permit applications $ 500 

Certificate of label approval applications – electronic filing $ 50 

Certificate of label approval applications – paper filing $ 100 

American viticultural area petitions $3,000 

Formula review (with no laboratory analysis) $ 200 

Formula review (with laboratory analysis) $ 600 

Laboratory analysis (other than for formula review) $ 150 

Exclusions

Certain services and activities covered under the “Protect the Public” mission do not lend 

themselves to the user fee initiative. As a result, the following activities are not intended 

to be subject to user fees: 

 Enforcement of Regulatory Provisions. Enforcement of TTB’s laws and 

regulations is designed primarily to protect the public. Investigators 

conduct product integrity inspections and other fieldwork that provides an 

assurance to the general public that the product they purchase is what it is 

represented to be.

 Market Compliance (including import/export activities). TTB has 

excluded certain services provided under Advertising, Labeling and 

Formulation Division (ALFD), the International Trade Division (ITD), 

and the Trade Investigations Division on the basis that the underlying 

activities are directed more to protecting the public than benefiting any 

industry member. TTB has excluded those efforts of ALFD with regards 

to responding to consumer complaints. Activities that ALFD conducts 

with regard to case processing on product integrity inspections; the 

Alcohol Sampling Program; and the Alcohol Advertising Program have 

been excluded. In addition, activities covered under ITD that facilitate 

trade of alcohol beverages in the international area have also been 

excluded, because imposing user fees discourages free trade with other 

countries. 

TTB - 34 
 Lab Analysis Regarding Contaminants. Lab analysis of beverage 

alcohol products to examine for contaminants provides benefits to the 

general public and provides no specific benefit to the user. 

 Permit Renewal Fees for Existing Permittees or for Amended 

Applications. User fees on permits would not apply to existing permittees 

or amended applications. There are roughly 4,000 existing permittees that 

pay nearly $15 billion in excise taxes per year. Implementing user fees on 

existing members who pay excise taxes is contradictory to OMB Circular 

A-25. Amended applications occur when permittees change addresses, 

board members, etc. 

TTB - 35 
Treasury 

Office of Inspector General 

FY 2007 Priorities 

• Complete 56 audits, 

• Complete 100 percent of statutory audits on time, and 

• Refer 85 fraud, waste or abuse investigative cases for criminal prosecution, civil 

litigation or administrative action. 

Mission 

The Treasury Office of Inspector General (OIG) conducts and supervises audits and 

investigations of Treasury programs and operations; provides leadership and 

coordination and recommends 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 keeps the Secretary and the Congress fully and currently informed 

about problems, abuses, and deficiencies in Treasury programs and operations. 

OIG $ Change % Change

Salaries and Expenses FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Audit $11,299 $11,549 $11,908 $359 3.1%

Investigations 5,069 5,281 5,444 163 3.1%

Total Appropriated Resources $16,368 $16,830 $17,352 $522 3.1%

(Dollars in Thousands)

Appropriation Summary

Table 1.1
OIG-2 

Table of Contents 

Section 1 – Purpose ............................................................................................................. 3

1A – Description of Bureau Vision and Priorities.......................................................... 3 

1.1 – Appropriation Summary Table .............................................................................. 4 

1B – Previous Highlights and Accomplishments ........................................................... 4 

1C – Future Outlook ....................................................................................................... 6 

Section 2 – Explanation of Increases and Decreases............................................................ 8

2.1 – Budget Increases and Decreases Table.................................................................. 8 

2A – Budget Increases and Decreases Description......................................................... 8 

Section 3 – Budget and Performance Plan ........................................................................... 9

3.1 – Appropriation Detail Table.................................................................................... 9 

3A – Budget Activity Description .................................................................................. 9 

3.2 – Budget and Performance Plan Tables.................................................................. 12 

3B – Description of Performance ................................................................................. 13 

3C – PMA Evaluation Description ............................................................................... 14 

Section 4 – Supporting Materials........................................................................................ 15

4.1 – Human Resources Information ............................................................................ 15 

4A – Human Capital Strategy Description ................................................................... 15

4.3 - Operating Levels Table ........................................................................................ 16 

4C – Appropriations Language..................................................................................... 17 
OIG-3 

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), that: (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. 

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. 

While there are a number of critical areas where the OIG will provide oversight, 

highlights of three of the Department’s most serious management challenges and where 

OIG would like to focus its work include: 

Programs to Combat Terrorist Financing and Money Laundering -- The Financial 

Crimes Enforcement Network (FinCEN) is responsible for administering the Bank 

Secrecy Act (BSA), but largely relies on other Treasury and non-Treasury regulatory 

agencies to enforce the requirements of the BSA, including the enhanced terrorist 

financing provisions in the USA PATRIOT Act. Past audits and a series of 

Congressional hearings have surfaced regulatory gaps in either the detection of BSA 

violations or its timely enforcement. This management challenge will continue to be a 

major focus of the OIG 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 the FY 2005 Federal 

Information Security Management Act (FISMA) independent evaluation, OIG continued 

to report that the Department has significant deficiencies in information security that 

constitute substantial non-compliance with the FISMA requirements. A core issue 

continues to be the need to establish and maintain a system inventory. OIG reported that 

Treasury’s system inventory was not accurate, complete, or consistently reported. OIG 

also identified deficiencies in the Department’s certification and accreditation, contractor 

oversight, plans of action and milestones, tracking corrective actions, training and 

security configuration policies. The Department made some progress in addressing 

information security issues during the past year; however, major improvements are still 

needed in order to meet information security requirements. 

Treasury’s Management of Capital Investments -- Treasury needs to better manage large, 

multiyear acquisitions of systems and other capital investments. OIG reported significant 

cost escalations in the Department’s HR Connect system and Treasury and Annex Repair 
OIG-4 

and Restoration (TBARR) projects. OIG plans to focus on the Department’s transition 

from the Treasury Communication System to the Treasury Communications Enterprise 

(TCE), where audit work is currently being performed on the business case for this 

investment. However, the transition to TCE has been delayed due in part to a successful 

protest of the bid award, and the Department changing course on how it plans to address 

the bid protest decision. 

1.1 – Appropriation Summary Table 

1B – Previous Highlights and Accomplishments 

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. During the fiscal year, OIG audits identified monetary benefits 

(cost savings and/or funds put to better use) totaling nearly $52 million, and the 

investigative efforts led to more than $6 million in fines, restitution, recoveries and 

settlements paid to the government or aggrieved parties. 

OIG has continued to increase the number of audits completed and the number of cases 

referred for criminal prosecution, civil litigation or administrative action. FY 2007 

approved resources will allow OIG to maintain performance at a level consistent with the 

FY 2006 level, but will not permit expansion of audit or investigation efforts. 

OIG has continued to redirect 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. As a result of this work, the Under Secretary for 

Terrorism & Financial Crimes has requested that the Office of Audit also review the 

responsibilities and authorities of the Office of Terrorism and Financial Intelligence. 

The Treasury OIG's Office of Audit performs audits, attestation engagements and 

evaluations that are mandated by law, support the President's Management Agenda and 

address high risk programs and operations. The Office of Audit also responds to requests 

OIG $ Change % Change

Salaries and Expenses FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Audit $11,299 $11,549 $11,908 $359 3.1%

Investigations 5,069 5,281 5,444 163 3.1%

Total Appropriated Resources $16,368 $16,830 $17,352 $522 3.1%

(Dollars in Thousands)

Appropriation Summary

Table 1.1
OIG-5 

by Treasury officials and the Congress for specific work. The number of congressionallyrequired audits has increased in recent years. 

 

As examples of significant results during FY 2005, the OIG Office of Audit: 

• Issued the audit report on Treasury’s FY 2004 consolidated financial statements 

by November 15th, representing the 3rd year Treasury successfully reported its 

financial results on an accelerated basis. 

• Completed four audits related to FinCEN’s administration of the Bank Secrecy 

Act (BSA). The audits provided recommendations to management for improving 

the quality of suspicious activity reports filed by financial institutions, increasing 

the use of FinCEN’s BSA E-Filing system, and enhancing FinCEN’s program to 

register money services businesses. Additionally, the OIG provided an early 

assessment of (1) FinCEN’s efforts to establish an Office of Compliance and (2) 

the level of cooperation under recent memorandums of understanding between 

FinCEN and federal banking regulators to share information. 

• Reported on the results of an independent review of the on-going Treasury 

Building and Annex Repair and Restoration (TBARR) project, a $237 million 

program. The review noted that Treasury exerted extraordinary effort in bringing 

the renovation of the Main Treasury building to its current state. However, some 

building code violations and other deficiencies were identified which are being 

addressed by the Department. 

The Treasury OIG Office of Investigations prevents, detects and investigates complaints 

of fraud, waste and abuse in Treasury programs and operations. 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 is also 

responsible for performing quality assurance, oversight and spot check reviews of 

Treasury law enforcement and security, intelligence or national security. 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 leadership for corrective 

administrative action 

The investigative caseload has remained at the level it was before the FY 2003 

divestiture. Complaints of fraud, waste and abuse requiring investigative review have 

averaged about 7,000 per year. Thus fewer investigators handling the same caseload has 

caused some delays in completing investigations, including the more complex or high 

visibility investigations. However, the Office of Investigations has improved case 

completion rates, and OIG investigative efforts continue to contribute to exposing and 

resolving fraud, waste, abuse, and criminal activities, such as: 

• In March 2005, two people were sentenced as a result of investigations with FDIC 

and the FBI into the Sinclair National Bank failure. One person was sentenced to 

five years incarceration with three years supervised release and ordered to pay 

$4.2 million in restitution. Another person was sentenced to 2 years probation 

and fined $5,000. 
OIG-6 

• As a result of a joint investigation with the HUD OIG into fraudulent predatory 

lending practices, a person was indicted on thirteen counts of using Fictitious 

Government Financial Instruments. The person used fraudulent bill of exchange 

instruments to purchase approximately $1.6 million in real estate from low 

income families. 

• The Office of Investigations participated in the recovery of a missing shipment of 

nickels from a U.S. Mint facility valued at $180,000, that were destined for the 

Federal Reserve Bank in Louisiana. The contractor’s tractor-trailer was 

eventually located, and as a result approximately $160,000 worth of nickels was 

recovered and five subjects were arrested. 

• Another investigation identified a BEP employee who allegedly removed at least 

$5,000, in increments of $50 Federal Reserve Notes, from the Western Currency 

Facility (WCF) in Ft. Worth, Texas. The employee circumvented and/or violated 

multiple BEP security policies and procedures. The suspect has been terminated 

from BEP, and indictments are expected in the Northern District of Texas. 

1C – Future Outlook 

OIG expects to complete 56 audits and evaluations and refer 85 investigations in both 

FY 2006 and FY 2007. The OIG continues to lack sufficient resources to 

comprehensively audit the Department’s programs and operations, and complete an 

increasing number of investigations in a timely manner as envisioned by the Inspector 

General Act of 1978. 

The audit priorities for FY 2007 are: 

• 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 (potentially more than $25 

million) to the deposit insurance funds, 

• Department’s progress in addressing the President’s Management Agenda (PMA) 

initiatives (Strategic Management of Human Capital, Competitive Sourcing, 

Improved Financial Performance, Expanded Electronic Government and Budget 

and Performance Integration), and 

• Significant known and emerging areas of risk such as IT security and programs to 

combat terrorist financing and money laundering. 

OIG will also perform a “peer review” of the Department of Education OIG under the 

auspices of the President’s Council on Integrity and Efficiency (PCIE). 

In FY 2007, the Office of Audit will perform or supervise contractors to meet mandated 

audit requirements. The Office of Audit will also continue to work with the Department 

and focus a substantial amount of its self-initiated audit resources to address the major 

management and performance challenges identified by the Inspector General. Those 
OIG-7 

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. 

The investigative priorities for FY 2007 are: 

• Investigating complaints of alleged criminal and serious misconduct, 

• Investigating allegations of fraud and other crimes involving Treasury contracts, 

grants, guarantees, and federal funds, 

• Investigating a variety of financial programs, 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 Department’s law 

enforcement programs and operations (BEP or Mint Police), and 

• Proactive efforts in detecting, investigating, and deterring electronic crimes and 

other threats to the Department’s physical and cyber critical infrastructure. 

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 the 

Office of Investigations to maintain the improvements in the OIG’s efforts to 

aggressively investigate, close and refer cases in a timely manner. 
OIG-8 

Section 2 – Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands

2A – Budget Increases and Decreases Description 

Changes to Base.................................................................................................. +$522,000 

Adjustments Necessary to Maintain Current Levels +$522,000/ 0 FTE: Funds are for: 

the FY 2007 cost of the January 2006 pay increase of $92,000; the proposed January 

2007 pay raise of $315,000; other labor related benefits; and non-labor related items such 

as contracts, travel, supplies, equipment and GSA rent adjustments of $115,000. 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447)115 $16,500

Rescission (P.L. 108-447) (132)

FY 2005 Enacted 115 $16,368

FY 2006 Enacted (P.L. 109-115) 115 17,000

Rescission (P.L. 109-148) (170)

FY 2006 Enacted 115 $16,830

Changes to Base

Non-Pay Inflation Adjustment 115

Pay Annualization 92

Proposed Pay Raise 315

Total FY 2007 Base 115 $17,352

Program Changes

Subtotal FY 2007 Program Changes 0 0

Total FY 2007 President's Budget Request 115 $17,352 M5

Appropriation: OIG Salaries and Expenses
OIG-9 

Section 3 – Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands

3A – Budget Activity Description 

Audit: The Office of Audit conducts audits of eight Treasury bureaus and all non-IRS 

Treasury offices, and produces more than 50 reports annually; providing a firsthand, 

unbiased perspective 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 self-initiated audits. 

The Office of Audit also responds to requests by Treasury officials and the Congress for 

specific work. While Congress requires certain audits be conducted every year, the number 

of additional congressionally-required audits has increased in recent years. 

The work of the Office of Audit is subject to the availability of funding, so the number of 

projects the Office of Audit can take on is also limited. In FY 2005 the OIG undertook 

seven new self-initiated projects while completing work on nine self-initiated projects 

started during the prior fiscal year. During FY 2005, the self-initiated work identified 

nearly $52 million in potential monetary benefits. 

Many audit benefits cannot be quantified in dollars but identify areas where improvement 

is critical to the success of Treasury programs and operations. For example, in FY 2005 

the OIG reported that (1) FinCEN needed to address continued problems with the quality 

of suspicious activity reports filed under the BSA, (2) BEP’s network and systems 

remained vulnerable to attacks even though progress has been made and (3) the Mint’s A76 competitive sourcing study for coin blank production was significantly delayed and 

required substantial revision before a legitimate competition could take place. 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Audit 74 11,299 74 11,549 74 11,908 0.0% 3.1%

Investigations 41 5,069 41 5,281 41 5,444 0.0% 3.1%

Total - Newly Appropriated Resources 115 $16,368 115 $16,830 115 $17,352 0.0% 3.1%

Other Resources:

Reimbursable Activities 6 2,342 5 2,342 5 2,342 0.0% 0.0%

Subtotal - Other Resources 6 2,342 5 2,342 5 2,342 0.0% 0.0%

Total - Resources Available for Obligation 121 $18,710 120 $19,172 120 $19,694 0.0% 2.7%

Appropriation Detail Table

(Dollars in Thousands)

Table 3.1

% Change 

FY 2005 Enacted FY 2006 Enacted FY 2007 Request to FY 2007

FY 2006

Resources Available for Obligation
OIG-10 

OIG’s planning process identified significant Treasury activities that need audit attention, 

but are dependent on funds availability, such as: 

• Treasury’s Debt Issuance Process ($4 trillion in debt held by the public) – last 

audited in 1999, 

• FMS’ Controls Over Disbursements ($1.5 trillion annually)*, 

• CDFI Fund’s New Markets Tax Credit Program ($15 billion), 

• TTB Tax Audit Division Targeting Program ($15 billion)*, 

• OCC/OTS Examination Coverage of Financial Institutions Off-Shore 

Outsourcing*, 

• Background Checks Over Individuals Handling Sensitive BSA Reports*, and 

• Follow up work to verify that corrective actions for previously reported 

deficiencies were, in fact, implemented and effective. 

* Program has never been audited. 

In summary, to provide viable audit coverage to the Department and oversight on behalf 

of the Department’s stakeholders, each of Treasury’s most significant programs and 

operations should be audited on a regular basis apart from mandates, prior findings, or 

new programs and initiatives. However, due to higher priority work and limited 

resources, such regular audit coverage has not been possible for some time. 

Investigations: 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 leadership for corrective 

administrative action. 

Complaints of fraud, waste, and abuse requiring investigative review have remained 

constant (at about 7,000 per year) since FY 2002, although the Office of Investigations, 

has had 60 percent fewer investigators to complete these reviews. In FY 2002, 

Investigations had 101 FTE and opened 202 new cases. In FY 2005, Investigations had 

41 FTE and opened 168 new cases. This is a 59 percent reduction in staff, with only a 17 

percent reduction in new cases. 

 

Since the number of new cases has increased disproportionately to the number of 

criminal investigators, each OIG criminal investigator currently carries a caseload of 

about 14 active cases. This is almost triple the number of cases carried by criminal 

investigators across the federal law enforcement community and at other Offices of 

Inspector General, where most criminal investigators carry just five cases each. In 

comparison, prior to divestiture each OIG criminal investigator carried an average 

caseload of five to six cases. 
OIG-11 

The Office of Investigations prioritizes its workload by directing investigators to work on 

their most significant cases first. However, with the large caseloads, significant casework 

delays have occurred. For example, a recent trend analysis of cases has shown that 

investigators have been able to work on only 41 percent of their open cases each month. 

The OIG has taken continuing steps to mitigate the impact of individual agents carrying 

unreasonably large caseloads. In 2005, OIG hired and trained additional investigators; 

restructured the Office of Investigations for more effective operations; and increased 

agent and case supervision to improve case direction, review and oversight. In total, 

these steps have had the affect of moderating investigator workload and enabling each 

investigator to bring more cases to timely completion and referral. 

141

117

54

202

214

42

89

225

54

132

43

143

168

53

258

0

100

200

300

400

500

FY 01 FY 02 FY 03 FY 04 FY 05

FY 05 Cases by Open, Closed and 

Pending

Cases Pending

Cases Closed

Cases Opened

The total number of Investigations’ open cases has increased more than threefold since 

2003. This has led to an unreasonably large workload for the Office of Investigations 

workforce, with some resultant investigative delays. These delays have the potential to 

adversely affect successful completion of cases as evidence becomes stale, lost or 

potentially destroyed and witnesses become unavailable. Delays in investigating some of 

the more complex or high visibility allegations may exceed one year. 
OIG-12 

3.2 – Budget and Performance Plan Tables 

Dollars in Thousands

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted /1 Enacted Enacted Enacted Requested

Treasury Strategic Objective M5:

Budget Activities: Audit and Investigations

Financial Resources

Newly Appropriated Resources $35,424 $10,987 $14,158 $16,368 $16,830 $17,352

Other Resources

Total Operating Level $35,424 $10,987 $14,158 $16,368 $16,830 $17,352

Human Resources

Newly Appropriated FTE 282 87 99 115 115 115

Other FTE

Total FTE (direct only) 282 87 99 115 115 115

Budget and Performance Plan Table

Table 3.2

(Dollars in Thousands)

Resource Level

Treasury Strategic Goal: Ensure Professionalism, Excellence, Integrity, and Accountability in the Management and Conduct of the Department 

of the Treasury (M5)

/1 Adjusted for divestiture of resources to Department of Homeland Security 

Strategic Objective: Protect the Integrity of the Department of the Treasury - M5A

Budget Activity: Audit

Performance Goal: Complete 100 percent of audits required by statute by the required date.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of statutory audits completed by the required date (%) (E)

Target 100 100 100 100 100 100

Actual 100 92 100 100

Target Met? Y N Y Y

Budget Activity: Audit

Performance Goal: Complete 53 audits

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Number of completed audits and evaluations (Ot)

Target 130 146 48 53 56 56

Actual 130 116 49 54

Target Met? Y N Y Y

Budget Activity: Investigations

Performance Goal: Keep the Secretary of the Treasury and the Congress fully and currently informed about

problems and deficiencies in Treasury programs and operations, and the need for and

progress of corrective actions.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Number of investigations referred for criminal prosecution, civil litigation or corrective administrative action.

(Oe)

Target 15 24 15 72 85 85

Actual 15 26 23 85

Target Met? Y Y Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

For detailed information about each performance measure, including definition, verification and validation, please go 

to: http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance
OIG-13 

3B – Description of Performance 

The OIG has achieved the performance targets outlined above, and at current resource 

levels expects to meet the performance targets for FY 2006 and FY 2007. To more 

effectively use its resources the OIG closed its San Francisco field audit office in 

FY 2005 and reallocated those resources to Washington, D.C., where it consolidated the 

banking audit function. This shift in resources will increase the breadth and regularity of 

the OIG's banking-related work. 

Since 2003, OIG has steadily increased the number of audits completed and the number 

of cases referred for criminal prosecution, civil litigation or administrative action. 

FY 2007 approved resources will allow OIG to maintain performance at a level 

consistent with FY 2006. 

OIG continued to redirect 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, including the Bank Secrecy Act (BSA) program. 

The Treasury OIG's Office of Audit performs audits, attestation engagements and 

evaluations that are mandated by law, support the President's Management Agenda and 

address high risk programs and operations. The Office of Audit also responds to requests 

by Treasury officials and the Congress for specific work. The number of congressionally 

required audits has increased in recent years. 

The Treasury OIG Office of Investigations has improved case completion rates, and OIG 

investigative efforts continue to contribute to exposing and resolving fraud, waste, abuse 

and criminal activities. With the additional Special Agents, Special Agent in Charge 

(SAC)/Assistant Special Agent in Charge (ASAC) positions created in late FY05, the 

Office of Investigations realigned operations to better address the growing workload. 

This is a significant interim step, and has increased the Office of Investigations ability to 

re-assess, and close some cases OI was previously unable to complete. The result of this 

increased number of Special Agents is a reduction in caseload from approximately 25.7 

cases per agent in FY 2003 to a projected 10.7 cases per agent in FY 2006. This in turn 

has resulted in greater productivity in bringing more cases to closure. In FY 2005 OIG 

referred 85 cases for criminal prosecution, civil litigation or administrative action, up 

from 68 in FY 2004. 

The OIG also maximized its efficiency, productivity, and has significantly pared down its 

costs by partnering with the Bureau of Public Debt’s Administrative Resource Center, 

which provides common administrative services, such as personnel and accounting 

services, on a fee-for-service basis. OIG plans to continue this cross-servicing 

arrangement in FY 2007, and has also implemented a paperwork management system to 

reduce the amount of valuable audit and investigative talent expended on document 

control. 
OIG-14 

3C – PMA Evaluation Description 

OIG has attained a green status in each area. 

Human Capital 

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 maintain its 

human capital pipeline for almost four years, with OIG job announcements attracting 

upwards of 1,000 applicants, and selections made and positions offered, all within a 30-

day period. 

Competitive Sourcing 

The OIG completed the FAIR Act inventory, with 75 percent of OIG positions classified 

as inherently governmental. The remainder, though classified as commercial, has been 

determined to be non-competitive due to the nature and sensitivity of the inspector 

general function. 

Financial Performance 

The OIG meets all financial statement reporting deadlines. The OIG has no AntiDeficiency Act violations, and no material internal control weaknesses, or noncompliance with laws or regulations.

E-Government 

One hundred percent of all IT systems are secured (certified and accredited). 

The OIG submits quarterly status reports on correcting IT security weaknesses; all steps 

being completed ahead of schedule.

Budget-Performance Integration

OIG senior managers examine reports that integrate financial and performance 

information every two weeks.

Strategic and annual plans, and performance appraisals and awards are directly linked to 

agency performance measures 

3.3 – PART Evaluation Table 

The OIG is not included in the PART process. 
OIG-15 

Section 4 – Supporting Materials 

4.1 – Human Resources Information 

Actual Full Time Equivalent vs. Budgeted FTE 

87

99

115 115 115

87

99 101

115 115

666 666 5 5 5 5

0

20

40

60

80

100

120

140

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

FTEs

Bud Direct Act Direct Bud Reimb Act Reimb

FY 2005 FY 2006 FY 2007

99 101 115

Increases:

Reason #1: 2 14

Subtotal, Increases 2 14 0

Decreases:

Subtotal, Decreases 0 0 0

101 115 115

Net Change from prior year SOY to budget year EOY 14

Note 1 - Direct FTE only; does not include IGATI reimbursable FTE who perform no audit or investigative 

functions for OIG.

Year-end Actual/Estimated FTEs (Note 1)

CHANGES IN FULL-TIME EQUIVALENTS

Congressional increase to the FY 2005 

appropriation to assist OIG in further recovery 

from the 2003 divestiture

Base: Year-end Actual from Prior Year (Note 1)

4A – Human Capital Strategy Description 

OIG has identified two mission critical occupations that closely align to its two budget 

activities. Workforce plans for these specialized professionals (auditors, criminal 

investigators) integrate with strategic and annual plan goals and objectives. The OIG has 

had exceptional recruitment success using automated tools to maintain its human capital 

pipeline for almost four years. OIG job announcements attract upwards of 1,000 

applicants. Selections are made and positions are offered, all within a 30-day period. 
OIG-16 

4.3 – Operating Levels Table 

Dollars in Thousands

Appropriation Title: OIG Salaries & Expenses

FY 2005 

Enacted

FY 2006 

Enacted

Cong. Action 

or Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating 

Level

FTE 115 115 115 115 115 

Object Classification:

11.1 Full-Time Permanent Positions........................................................... 8,876 10,034 (130) 9,904 10,310 10,655

11.1 Other than Full-Time Permanent Positions......................................... 50 245 245 100 45

11.5 Other Personnel Compensation..........................................................100 600 600 200 90

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

11.9 Personnel Compensation (Total).......................................................... 9,026 10,879 (130) 10,749 10,610 10,790

12.0 Personnel Benefits.............................................................................2,000 2,110 (40) 2,070 2,384 2,443

13.0 Benefits to Former Personnel............................................................ 0 0 0 63 0

21.0 Travel..................................................................................................400 600 600 437 440

22.0 Transportation of Things.................................................................... 500 0 0 0 0

23.1 Rental Payments to GSA..................................................................1,400 1,652 1,652 1,365 1,410

23.2 Rent Payments to Others.................................................................. 0 0 0 0 0

23.3 Communications, Utilities, & Misc..................................................... 500 404 404 333 350

24.0 Printing and Reproduction................................................................. 22 0 0 6 10

25.1 Advisory & Assistance Services.........................................................240 0 0 0 0

25.2 Other Services................................................................................... 150 100 100 280 285

25.3 Purchase of Goods/Serv. from Govt. Accts..................................850 550 550 880 900

25.4 Operation & Maintenance of Facilities............................................... 250 100 100 181 202

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

25.6 Medical Care...................................................................................... 30 0 0 30 32

25.7 Operation & Maintenance of Equipment.............................................300 67 67 106 200

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

26.0 Supplies and Materials.......................................................................100 135 135 75 90

31.0 Equipment.......................................................................................... 600 403 403 80 200

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...................................................................... $16,368 $17,000 ($170) $0 $16,830 $16,830 $17,352

Budget Activities:

Audit ............................................................................................ 11,299 11,667 11,549 11,549 11,549 11,908

Investigations ................................................................................. 5,069 5,333 5,281 5,281 5,281 5,444

Total Budget Authority...................................................................... $16,368 $17,000 $16,830 $0 $16,830 $16,830 $17,352

(Dollars in Thousands)

Table 4.3

Operating Levels
OIG-17 

4C – Appropriations Language 

 DEPARTMENT OF THE TREASURY 

 OFFICE OF INSPECTOR GENERAL 

 Federal Funds 

General and Special 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, not to exceed $2,000,000 for official 

travel expenses, including hire of passenger motor vehicles; and 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, [$17,000,000] $17,352,000, of 

which not to exceed $2,500 shall be available for official reception and representation 

expenses. (Department of the Treasury Appropriations Act, 2006.) 
Treasury Inspector General 

for Tax Administration 

Fiscal Year 2007 Budget 

Congressional Justification 

Appropriation Summary 

Table 1.1 

(Dollars in Thousands) 

FY 2007 Priorities 

• Issue 128 audit reports that will address the IRS’ major management challenges 

and result in recommendations that lead to improvements in these areas, 

• Audit reports will result in more than $130 million of total potential cost savings 

and potentially impact more than 14.5 million taxpayers, 

• Conduct professional criminal and administrative investigations that lead to 

criminal prosecutions for both employees and non-employee perpetrators, and 

administrative disciplinary actions for IRS employees, and 

• Attain a performance ratio of 70 percent of final closed cases with positive results 

in three core mission areas: IRS employee integrity, external attempts to corrupt 

tax administration and infrastructure security. Positive results are the 

investigative reports resulting in criminal, civil or administrative adjudication or 

the identification of matters of security or investigative interest.

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Audit $48,392 $49,761 $51,521 $1,760 3.5%

Investigations 79,701 82,192 84,948 2,756 3.4%

Total Appropriated Resources $128,093 $131,953 $136,469 $4,516 3.4%

Mission 

The Treasury Inspector General for Tax Administration provides audit and investigative 

services that promote economy, efficiency, and integrity in the administration of the 

internal revenue laws. 
TIGTA - 2 

Table of Contents

Section 1 – Purpose ............................................................................................................. 3

1A – Description of Bureau Vision and Priorities.......................................................... 3 

1.1 – Appropriation Summary Table .............................................................................. 4 

1B – Previous Highlights and Accomplishments ........................................................... 4 

1C – Future Outlook ....................................................................................................... 6 

Section 2 – Explanation of Increases and Decreases............................................................ 7

2.1 – Budget Increases and Decreases Table.................................................................. 7 

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

Section 3 – Budget and Performance Plan ........................................................................... 8

3.1 – Appropriation Detail Table.................................................................................... 8 

3A – Budget Activity Description .................................................................................. 8 

3.2 – Budget and Performance Plan Table.................................................................... 11 

3B – Description of Performance ................................................................................. 12 

3C – PMA Evaluation Description ............................................................................... 13 

3.3 – PART Evaluation Table....................................................................................... 14 

Section 4 – Supporting Materials........................................................................................ 14

4.1 – Human Resources Table -.................................................................................... 14 

4A – Human Capital Strategy Description ................................................................... 15 

4.3 – Operating Levels Table........................................................................................ 16 

4C – Appropriations Language..................................................................................... 17 
TIGTA - 3 

Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

The Treasury Inspector General for Tax Administration (TIGTA) provides independent 

oversight of Internal Revenue Service (IRS) activities. TIGTA has two primary offices: 

the Office of Audit (OA); and the Office of Investigations (OI). TIGTA’s audits and 

investigative services protect and promote the fair administration of the tax system and 

ensure that the IRS is accountable in its administration of internal revenue laws. 

TIGTA’s purpose is to keep Congress, the Secretary of the Treasury and IRS 

management informed on issues, problems and deficiencies related to the administration 

of IRS programs and operations, and the need for corrective action. 

TIGTA’s requested funding will be used to provide critical audit and investigative 

services, ensuring the integrity of tax administration on behalf of the Nation’s taxpayers. 

While there are a number of critical areas where TIGTA will provide oversight, 

highlights of four primary priority areas include: 1) IRS’ efforts to modernize technology; 

2) TIGTA’s ability to protect tax administration from corruption; 3) IRS’ efforts to 

improve tax compliance; and 4) IRS’ use of private debt-collection agencies. 

Information on each of these priorities is presented below. 

IRS’ Efforts to Modernize Technology - Modernizing the IRS’ computer systems has been 

a persistent challenge for many years, and will likely remain a challenge for the 

foreseeable future. Through December 2005, the IRS has received appropriations of 

approximately $2 billion to support the Business Systems Modernization (BSM) 

program. It is estimated that the BSM program will last up to 15 years and cost more than 

$8 billion. Although progress is being made, the modernization program is behind 

schedule, over budget, and is delivering less functionality than originally planned. The 

IRS must demonstrate that it can effectively manage the BSM program before the 

program’s chances for success improve. TIGTA will continue to assess the IRS’ efforts 

at managing the risks involved in this significant area. 

Protecting Tax Administration from Corruption - Corruption jeopardizes faith in the tax 

administration system, therefore, it must be eliminated to protect the IRS, its employees, 

and facilities. The goal of TIGTA’s investigations is to produce high-quality products 

that promote IRS employee integrity, protect IRS employees and infrastructure and 

defend the IRS against external attempts to corrupt tax administration. TIGTA will 

continue its diligence in conducting investigations and protecting the integrity of tax 

administration. 

Improving Tax Compliance Initiatives – The IRS continues to face challenges in ensuring 

that taxes owed are paid on time. The importance of this issue cannot be overstated. The 

Nation’s ability to provide for the general welfare and protection of its citizens is based 

on the ability to raise revenue through taxes. The widely recognized tax gap, which 

consists of the amount of taxes that are owed but not collected each year, is unacceptably 

high. In the most recently updated estimate of the tax gap, released March 29, 2005, and 

developed for Tax Year 2001, the IRS estimated the annual gross tax gap to be between 
TIGTA - 4 

$312 billion and $353 billion. Audit and investigative work in this area will address the 

vulnerabilities at the IRS that contribute to the tax gap, and will identify opportunities 

and make recommendations for improvement. 

Use of Private Debt-Collection Agencies – The passage of the American Jobs Creation 

Act of 2004 cleared the path for the IRS to initiate a delinquent tax debt collection effort 

through the use of private contractors. This is an important and highly visible initiative 

requiring TIGTA’s oversight throughout the process. When fully implemented, the IRS 

intends to have up to 12 private contractors handling delinquent tax debt collection cases. 

IRS estimates that the Treasury could receive approximately $2.7 billion over the next 10 

years from this program. While the use of private collection agencies could result in 

significant recoveries of unpaid taxes, the potential for abuse of taxpayers’ rights exists. 

Private debt collectors who abuse their authority while collecting taxes will be 

investigated, and appropriate civil and criminal sanctions will be imposed as warranted. 

In addition, TIGTA plays a key role in ensuring that the IRS utilizes this new authority 

effectively, while ensuring that taxpayers’ due process and privacy rights are protected. 

1.1 – Appropriation Summary Table 

Dollars in Thousands 

1B – Previous Highlights and Accomplishments 

TIGTA has distinguished itself in the federal community as a leader in developing 

innovative approaches to maximize efficiency and productivity. For example, TIGTA’s 

Telecommuting and Hoteling initiatives have been recognized as successes across the 

federal government. TIGTA has twice won awards for its initiatives in this area. The 

results of these initiatives have helped offset escalating GSA rent increases. 

TIGTA has consistently used previous resources to successfully deliver program results. 

Specifically in FY 2005, TIGTA issued 180 audit reports, identifying $46.7 million in 

potential cost savings and $83.3 billion in potential increased or protected revenue. 

TIGTA’s work provides recommendations that lead to improvements in significant areas 

such as systems modernization, tax compliance, tax-return processing and the 

implementation of tax-law changes. 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Audit 48,392 49,761 51,521 1,760 3.5%

Investigations 79,701 82,192 84,948 2,756 3.4%

Total Appropriated Resources $128,093 $131,953 $136,469 $4,516 3.4%
TIGTA - 5 

There are numerous examples that demonstrate how TIGTA adds significant value to the 

IRS. For example: 

• Each year the TIGTA audits the IRS’ BSM program that addresses the design, 

development, and deployment of modernized systems, and the controls and 

effectiveness of the BSM contractor. These reviews have consistently identified the 

need to improve the BSM program. Audit reports related to the IRS’ BSM program 

have contained recommendations that would improve the effective, timely delivery of 

BSM projects, which would result in cost savings and increased value to taxpayers. 

For example, based on TIGTA’s 2004 annual BSM program assessment report, the 

IRS agreed to several overall recommendations, ensuring: the overall health of the 

BSM program was periodically subjected to a third-party assessment, modernization 

efforts were scaled back, and senior IRS business unit managers were held 

accountable for the success of modernization efforts related to business requirements. 

• The audit work related to IT security, addresses such issues as: the IRS’ compliance 

with the Federal Information Security Management Act, the IRS’ progress in 

addressing material weaknesses in its computer systems, the use of audit trails to 

detect unauthorized actions, the security of external Web sites, the effective use of 

secure messaging, and the use of social engineering to obtain unauthorized 

information. The Office of Audit also reviewed the adequacy of security controls 

incorporated in the design and development of the IRS’ modernized systems. These 

audit reports included numerous recommendations to IRS management that would 

improve both the physical and information technology security of the IRS. 

Specifically, one TIGTA review showed that the audit trails for detecting improper 

activities on modernized systems were not always functioning, thereby diminishing 

the IRS’ ability to detect improper activity on computer systems. Another TIGTA 

review showed that while IRS employees have become more cognizant of security 

risks inherent in their daily activities, a hacker or disgruntled employee may still be 

able to obtain usernames and passwords to gain unauthorized access to IRS systems. 

TIGTA also focused on IRS employee integrity, employee and infrastructure security, 

and external attempts to corrupt tax administration. In FY 2005, TIGTA received 8,012 

complaints of alleged criminal wrongdoing or administrative misconduct, opened 3,513 

investigations, and closed 3,468 cases. Investigations continue to prevent fraud and to 

enhance the integrity of the IRS tax administration. For instance, several FY 2005 

investigations related to IRS contracts with lockbox facilities resulted in significant 

prosecutions: 

• In one case, six former employees of Mellon Financial Services were indicted in for 

initially hiding, and then destroying, approximately 80,000 unprocessed federal tax 

returns, vouchers, and checks in an attempt to conceal their inability to fulfill their 

contractual requirements with the IRS. 

• A second TIGTA investigation revealed that a former lockbox employee stole 26 

taxpayer remittances totaling more than $2.7 million from an IRS lockbox facility. 

Both investigations illustrate the importance of monitoring the IRS’ use of private 

collection agencies to collect tax remittances or provide debt-collection services. 
TIGTA - 6 

1C – Future Outlook 

TIGTA will need to prioritize its discretionary funding and try to improve productivity to 

fulfill its mission. 

In FY 2007, TIGTA will administer an audit program that strikes a balance between 

statutory audit coverage and discretionary audit work. The statutory coverage will 

include audits mandated by the IRS Restructuring and Reform Act of 1998 (RRA 98), as 

well as reviews that address computer security, taxpayer privacy and rights and financial 

matters. In addition, TIGTA will continue to monitor the IRS’ modernization efforts to 

identify problems the IRS may encounter as it implements new programs and rolls out 

information systems. Discretionary audit coverage will focus on the major management 

challenges facing the IRS, the IRS’ response to the President’s Management Agenda 

initiatives, and the IRS’ progress in achieving its strategic goals and eliminating 

identified material weaknesses. TIGTA will also provide audit coverage of the IRS’ 

evolving private debt collection initiative. 

TIGTA will continue to investigate complaints of wrongdoing that could potentially 

impact the integrity of tax administration. This includes continuing to conduct 

investigations that concentrate on three core areas: employee integrity; external attempts 

to corrupt tax administration; and employee and infrastructure security. TIGTA will also 

concentrate on heightening integrity awareness through the regular delivery of integrity 

awareness presentations to IRS employees, law enforcement agencies, tax practitioners 

and community groups. TIGTA will work together with the IRS, other government 

agencies, and the public to ensure that the Nation’s taxes are collected fairly, lawfully, 

and free of corrupt interference. 
TIGTA - 7 

Section 2 – Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

2A – Budget Increases and Decreases Description 

Changes to Base................................................................................................ +$4,516,000 

Adjustments to Maintain Current Levels +$4,516,000/0 FTE - Funds are requested for: 

the FY 2007 cost of the January 2006 pay increase of $845,000, the proposed January 

2007 pay raise of $2,120,000; other labor related benefits; and non-labor related items 

such as contracts, travel, supplies and equipment of $610,000. Also included is a 

$941,000 transfer from the IRS to fund TIGTA’s Working Capital Fund operating costs. 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 862 $129,126 

Rescission (P.L. 108-447) (10) (1,033)

FY 2005 Enacted 852 $128,093

FY 2006 Appropriation (P.L. 109-115) 856 133,286

Rescission (P.L. 109-148) (6) (1,333)

FY 2006 Enacted 850 $131,953

Changes to Base

Pay Inflation Adjustment 2,965

Non-Pay Inflation Adjustment 610

Base Transfer from Internal Revenue Service 941

Total FY 2007 Base 850 $136,469

Program Changes

Subtotal FY 2007 Program Changes 0 0

Total FY 2007 Request 850 $136,469

Audit and 

Investigations M5A

Appropriation: TIGTA Salaries and Expenses
TIGTA - 8 

Section 3 – Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands 

3A – Budget Activity Description 

TIGTA’s operations are divided into two major budget activities: audit and 

investigations. 

Audit ($51,521,000 from direct appropriations and $725,000 from reimbursements) - 

The Office of Audit promotes the sound administration of the nation’s tax laws through 

comprehensive, independent performance and financial reviews of the IRS’ programs, 

operations and activities by assessing efficiency, economy, effectiveness and program 

accomplishments. The Office of Audit’s reviews also help ensure compliance with 

applicable laws and regulations, and detect and deter fraud, waste and abuse. The IRS’ 

implementation of audit recommendations results in cost savings and increased or 

protected revenue, reduction of taxpayer burden and protection of: taxpayer rights and 

entitlements; taxpayer privacy and security; and IRS resources. 

Each fiscal year the Office of Audit prepares an audit plan that communicates audit 

priorities to Congress, the Department of the Treasury, and the IRS. The plan is 

organized around the IRS’ core business activities. Emphasis is placed on mandatory 

coverage imposed by RRA 98 and other statutory authorities and standards involving 

computer security, taxpayer rights and privacy issues and financial audits. The balance 

of TIGTA’s audit work focuses on the major management challenges facing the IRS, the 

IRS’ progress in achieving its strategic goals and eliminating identified material 

weaknesses, and the IRS’ response to the President’s Management Agenda initiatives. 

Two examples of these major issues and their potential audit coverage follow. 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Audit 357 $48,392 355 $49,761 355 $51,521 0.0% 3.5%

Investigations 495 79,701 495 82,192 495 84,948 0.0% 3.4%

Subtotal Newly Appropriated Resources 852 $128,093 850 $131,953 850 $136,469 0.0% 3.4%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 9 $2,876 3 $1,200 3 $1,200 0.0% 0.0%

Available multi-year/no-year funds

Transfers In/Out

Subtotal Other Resources 9 2,876 3 1,200 3 1,200 0.0% 0.0%

Total Resources Available for Obligation 861 $130,969 853 $133,153 853 $137,669 0.0% 3.4%

Request to FY 2007

FY 2006

Resources Available for Obligation

FY 2005 FY 2006 FY 2007

% Change 

Enacted Enacted
TIGTA - 9 

Tax Compliance Initiatives - For some time, the IRS, Congress and other interested 

stakeholders have been concerned about the slow erosion of tax compliance. IRS tax 

compliance programs must ensure that noncompliant taxpayers are identified and 

penalized. The undermining of voluntary compliance begins when honest taxpayers 

believe that others are not paying their fair share. The challenge for the IRS is to 

establish a taxpayer compliance program that identifies those citizens who do not meet 

their tax obligations, either by not paying the correct amount of tax or not filing proper 

tax returns. TIGTA’s audits in this area will concentrate on assessing the IRS’ efforts to 

deal with issues such as obtaining timely and reliable data on the tax gap, helping 

taxpayers understand the tax laws, processing tax returns and enforcing compliance with 

tax laws, as well as other tax compliance issues. 

Systems Modernization –The success of the IRS’ systems modernization effort is critical, 

not only because of the amount of time and money at stake, but also to improve the level 

of service provided to taxpayers. TIGTA has recommended that the IRS slow the pace of 

the BSM program due to some of the risks that have surfaced. Specifically, the 

imbalance between the number and pace of BSM projects and available management 

capabilities has added significant cost, schedule and performance risks. In addition, 

TIGTA has identified four primary challenges that the IRS must meet for modernization 

to succeed: 

1) Implement planned improvements in key management processes and commit 

necessary resources, 

2) Manage the increasing complexity and risks of the modernization program, 

3) Maintain continuity of strategic direction with experienced leadership, and 

4) Ensure that the contractors’ performance and accountability are effectively 

managed. 

Without addressing these four challenges, modernization efforts will not succeed. 

TIGTA’s audits will focus on the IRS’ efforts to address these challenges as well as other 

issues related to BSM. 

Other Resources - TIGTA receives approximately $725,000 in offsetting collections and 

reimbursements to support activity related to Defense Contract Audit Agency audits 

conducted on behalf of the IRS. 

Investigations ($84,948,000 from direct appropriations and $475,000 from 

reimbursements) - While most Offices of Inspector General focus primarily on fraud, 

waste and abuse, TIGTA’s mission is more extensive. TIGTA has the statutory 

responsibility to protect the integrity of tax administration and to protect the ability of the 

IRS to collect revenue for the federal government. To do this, TIGTA conducts 

investigations in three core areas: 

• 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 
TIGTA - 10 

extortion, theft, taxpayer abuses, false statements and financial fraud. In addition, an 

integral part of the employee integrity program involves investigations of 

unauthorized access, inspection and/or disclosure 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 of 

such attempts include bribes offered by taxpayers to compromise IRS employees, the 

use of fraudulent IRS documentation to commit crimes, impersonation of IRS 

officials and the corruption of IRS programs through procurement fraud. 

• Employee and infrastructure security – The President designated IRS operations as a 

critical infrastructure. TIGTA meets the challenge of maintaining IRS employee and 

infrastructure security by conducting investigations in reaction to incidents in which 

IRS employees, facilities and infrastructure are sabotaged, threatened, or assaulted. 

Potential threats are identified by TIGTA’s administration of a Criminal Intelligence 

Program that utilizes law enforcement and intelligence sources to proactively identify 

individuals and groups who may pose a threat to tax administration. 

Investigative work in these areas is imperative for protecting the reputation and integrity 

of the IRS. Investigative results elevate the public’s confidence in the IRS, and thereby 

promote voluntary compliance with federal tax laws. 

Other Resources - TIGTA receives approximately $475,000 in offsetting collections and 

reimbursements to support activity related to the Inspector General Academy and other 

activity conducted on behalf of the Department of the Treasury. 
TIGTA - 11 

3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Treasury Strategic Goal: Ensure professionalism, excellence, integrity and accountability in the management and conduct of the

 Department of Treasury (M5)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Requested

Treasury Strategic Objective M5A:

Budget Activities: Audit

Financial Resources

Newly Appropriated Resources 50,318 48,781 48,347 48,392 49,761 51,521

Other Resources 50 709 50 1,092 725 725

Total Operating Level - Audit $50,368 $49,490 $48,397 $49,484 $50,486 $52,246

Human Resources

Newly Appropriated FTE 445 408 369 357 355 355

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) - Audit 445 408 369 357 355 355

Treasury Strategic Objective M5A:

Budget Activity: Investigations

Financial Resources

Newly Appropriated Resources 75,460 75,417 78,932 79,701 82,192 84,948

Other Resources 3,079 3,079 3,023 1,784 475 475

Total Operating Level - Investigations $78,539 $78,496 $81,955 $81,485 $82,667 $85,423

Human Resources

Newly Appropriated FTE 550 539 516 495 495 495

Other FTE 15 15 15 9 3 3

Total FTE (direct and reimbursable) - Investigations 565 554 531 504 498 498

Treasury Strategic Goal M5:

Total Financial Resources

Total Newly Appropriated Resources 125,778 124,198 127,279 128,093 131,953 136,469

Total Other Resources 3,129 3,788 3,073 2,876 1,200 1,200

Total Operating Level $128,907 $127,986 $130,352 $130,969 $133,153 $137,669

Total Human Resources

Total Newly Appropriated FTE 995 947 885 852 850 850

Total Other FTE 15 15 15 9 3 3

Total FTE (direct and reimbursable) 1,010 962 900 861 853 853

Resource Level 
TIGTA - 12 

Strategic Objective: Protect the Integrity of the Department of the Treasury - M5A

Budget Activity: Audit

Performance Goal: Promote the Economy, Efficiency and Effectiveness of Tax Administration

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Average calendar days to issue final audit report (Ot)

Target 250 250 300 300 325 325

Actual 308 317 338 358

Target Met? N N N N

Number of total taxpayer accounts potentially impacted as a result of audit activities (in Millions)(Ot)

Target 14 14 13.4 13 14.5 14.5

Actual 7.5 47 49.7 2.8

Target Met? N Y Y N

Budget Activity: Investigations

Performance Goal: Protect the Integrity of Tax Administration

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of positive results from investigative activities (%) (Oe)

Target Baseline 67 70 70

Actual 64 82

Target Met? N/A N/A Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

For detailed information about each performance measure, including definition, verification and validation, please go 

to: http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3B – Description of Performance 

TIGTA’s performance target for the “Percentage increase in positive results from 

investigative activities” was baselined in FY 2004 (actual performance was 64 percent). 

Examples of the types of cases in the positive results category include: 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; and 

impersonation of IRS officials. Examples of cases that do not achieve positive results 

concern allegations which TIGTA is required to investigate that are either closed with no 

action or do not meet administrative and/or criminal guidelines or criteria, such as: 

impersonation of an IRS official or theft of an IRS tax remittance where no perpetrator is 

identified; and bribes offered to IRS employees where something of value is not actually 

provided. At the conclusion of FY 2005, actual performance exceeded expectations 

(actual performance was 82 percent, while the target was 67 percent). These results are 

indicative of TIGTA’s focus on quality results as defined during the baseline year. 

In FY 2004, TIGTA achieved its target for “Increase in the total taxpayer accounts 

potentially impacted as a result of audit activities” (actual performance was 49.7 million 

taxpayer accounts potentially impacted, while the target was 13.4 million). At the 

conclusion of FY 2005, the number of taxpayer accounts potentially impacted was 2.8 

million, while the target was 13 million. This measure includes the total number of 

taxpaying entities for whom rights and entitlements could be protected, taxpayer burden 

is reduced, or privacy and security of sensitive taxpayer data improved if TIGTA audit 

recommendations made in audit reports issued during a fiscal year were implemented. 
TIGTA - 13 

In FY 2005, TIGTA did not achieve its target for the “Average calendar days to issue 

final audit report.” The target was 300 average calendar days, while actual performance 

was 358 calendar days. Historically TIGTA has not been able to meet this goal due to the 

increased complexity of the audits. TIGTA must balance the goal of issuing timely 

reports with the need to provide the IRS with sufficient time to evaluate and respond to 

recommendations. As a result of these issues, TIGTA plans to change the target for this 

measure. 

3C – PMA Evaluation Description 

Competitive Sourcing 

• The FAIR Act inventory is being completely revised to reflect reorganizations, 

significant FTE reductions and new Departmental guidance to ensure consistency in 

categorizing positions. 

• TIGTA is participating in the Department’s Shared Services initiative to provide 

common resources, procurement support, and expertise to support all competitive 

sourcing studies in the Department. 

E-Government

• TIGTA successfully completed Certification and Accreditation (C&A) of its third and 

final information system. TIGTA is now 100 percent compliant, having successfully 

completed C&A activities on its other two systems in FY 2005. These requirements 

are taken seriously and TIGTA does its utmost to make sure TIGTA systems are safe 

and secure. 

• TIGTA is fully cognizant of the benefits in efficiencies and economies that accrue to 

those government entities that engage in the E-Government initiatives of the 

President’s Management Agenda. For example, TIGTA uses an approved human 

resource center of excellence, HRConnect, for all eHRI activities and NFC for 

ePayroll activity through an agreement with BPD for human resources, travel, and 

accounting support. TIGTA has also partnered with the IRS on major software 

licensing agreements since 1998. 

• TIGTA serves as co-chair of the Treasury Department’s sub-council on Enterprise 

Architecture, which is developing the Federal Enterprise Architecture compliant 

Treasury Architecture. 

Human Capital Management 

• TIGTA implemented a Strategic Human Capital Plan. All SES, manager and 

employee performance plans were or are being aligned with TIGTA’s strategic goals 

and objectives. 

 

• TIGTA is developing a recruitment strategy to address succession planning, identify 

under-representation, and identify skills-gaps in mission-critical areas. The two 

major program offices have developed and implemented leadership and/or 

management development programs. 
TIGTA - 14 

3.3 – PART Evaluation Table 

TIGTA is not included in the PART process. 

Section 4 – Supporting Materials 

4.1 – Human Resources Table - 

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 877 855 853

Increases:

Subtotal, Increases 0 0 0

Decreases:

Reason #1: Rescission Reduction -10 -6

Reason #2: -6

Reason #3: -6 4

Subtotal, Decreases -22 -2 0

Year-end Actual/Estimated FTEs 855 853 853

End of Year (EOY) Actual/Estimated FTEs

Net Change from prior year SOY to budget year EOY -2

Attrition and Accession 

variances

Reduce IRS reimbursable 

investigative activity

1/ Changes shown by year (increases and decreases) are the incremental changes for that year.

2/ Budgeted FTE - FTE requested in Congressional Justification. 

CHANGES IN FULL-TIME EQUIVALENTS

3/ Actual/Projected FTE - For previous fiscal years, this number should agree with the number on the bureau SF-113G form submitted to OMB . The FY 

2006 and FY 2007 amounts are projections.

Full Time Equivalents vs. Budgeted FTE Table

885

15 15 15 15 15 9 3 3 3 3

850 850

947

852 850 850 862 911

846

0

100

200

300

400

500

600

700

800

900

1000

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

FTEs

Budgeted FTEs 2/ Actual/Projected FTE 3/ [Excludes Actual Reim.] Bud Reimb Act. Reimb
TIGTA - 15 

4A – Human Capital Strategy Description 

TIGTA is implementing the strategies outlined in its Strategic Human Capital Plan. This 

plan addresses the many mandates related to Human Capital management. A recruitment 

strategy is being developed to address succession planning and identify underrepresentation and skills-gaps in the mission-critical positions of Auditors, Special 

Agents, Attorneys, and Information Technology Specialists. 

TIGTA 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 leading role among federal agencies in the area of telecommuting has resulted 

in many positive workforce flexibilities. These flexibilities produce a work environment 

that values employees’ differences, fosters clear communications, and ensures that 

TIGTA’s Human Capital services meet the needs of customers and support TIGTA in 

carrying out its mission and responsibilities. 
TIGTA - 16 

4.3 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: TIGTA Salaries & Expenses FY 2005

Enacted

FY 2006

President's

Budget as

Amended

Cong.

Action or

Rescission

Transfers or

Supplementals

FY 2006

Enacted

Level

FY 2006

Proposed

Operating

Level

FY 2007

Proposed

Operating

Level

FTE 856 852 (6) 850 850 850 

Object Classification:

11.1 Full-Time Permanent Positions........................ $70,547 $72,644 ($399) $72,245 $72,588 74,363

11.1 Other than Full-Time Permanent Positions...... 509 524 524 542 555

11.5 Other Personnel Compensation....................... 8,330 8,624 (34) 8,590 8,599 8,809

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

11.9 Personnel Compensation (Total)..................... 79,386 81,792 (433) 81,359 81,729 83,727

12.0 Personnel Benefits........................................... 22,999 23,776 (131) 23,645 23,740 24,708

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

21.0 Travel.............................................................. 4,130 4,249 4,249 4,352 4,446

22.0 Transportation of Things.................................. 13 13 13 24 24

23.1 Rental Payments to GSA................................. 8,887 10,206 (769) 9,437 9,337 9,562

23.2 Rent Payments to Others................................ 242 246 246 270 275

23.3 Communications, Utilities, & Misc.................... 2,128 2,167 2,167 1,913 1,960

24.0 Printing and Reproduction............................... 8 9 9 8 8

25.1 Advisory & Assistance Services....................... 1,089 1,105 1,105 1,100 1,124

25.2 Other Services................................................. 850 862 862 881 899

25.3 Purchase of Goods/Serv. from Govt. Accts...... 2,913 3,158 3,158 3,079 4,090

25.4 Operation & Maintenance of Facilities............. 174 219 219 393 398

25.5 Research & Development Contracts................ 0 0 000

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

25.7 Operation & Maintenance of Equipment.......... 1,184 1,201 1,201 1,197 1,223

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

26.0 Supplies and Materials.................................... 1,120 1,157 1,157 1,117 1,143

31.0 Equipment....................................................... 2,871 3,025 3,025 2,618 2,685

32.0 Lands and Structures....................................... 0 0 000

33.0 Investments & Loans....................................... 0 0 0 0 0

41.0 Grants, Subsidies............................................ 0 0 0 0 0

42.0 Insurance Claims & Indemn............................. 49 50 50 145 146

91.0 Confidential Expenditures................................ 50 51 51 50 51

Total Budget Authority....................................... $128,093 $133,286 ($1,333) $0 $131,953 $131,953 $136,469

Budget Activities:

Audit............................................................... $48,392 $50,329 ($568) $49,761 $49,761 $51,521

Investigations...................................................... 79,701 82,957 (765) 82,192 82,192 84,948

Total Budget Authority....................................... $128,093 $133,286 ($1,333) $0 $131,953 $131,953 $136,469
TIGTA - 17 

4C – Appropriations Language 

DEPARTMENT OF THE TREASURY 

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 

Federal Funds 

General and Special 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 (31 U.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; not to exceed $6,000,000 

for official travel expenses; and 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, [$133,286,000] $136,469,000; and of which not to 

exceed $1,500 shall be available for official reception and representation expenses. 

(Department of the Treasury Appropriations Act, 2006.) 
Community Development Financial 

Institutions Fund

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Community Development Financial 

Institutions Program $31,560 $30,969 $0 ($30,969) -100.0%

New Markets Tax Credit Program 6,494 4,254 4,314 $60 1.4%

Bank Enterprise Awards Program 11,132 13,417 0 ($13,417) -100.0%

Native Initiatives 5,892 5,810 0 ($5,810) -100.0%

Portfolio Management 0 0 3,507 $3,507 N/A

Total Appropriated Resources $55,078 $54,450 $7,821 ($46,629) -85.6%

(Dollars in Thousands)

Appropriation Summary

Table 1.1

FY 2007 Priorities

 Provide tax allocations supporting $3.5 billion of equity investments into lowincome communities via the New Markets Tax Credit Program,

 Continue downsizing efforts to reach a level of 35 FTEs, and

 Provide oversight and management for the portfolio of existing Fund awards.

Mission:

To expand the capacity of financial institutions to provide credit, capital 

and financial services to underserved populations and communities in 

the United States. 
CDFI - 2

Table of Contents

Section 1 – Purpose ......................................................................................................... 3

1A – Description of Fund Vision and Priorities........................................................... 3

1B –Previous Highlights and Accomplishments......................................................... 4

1C – Future Outlook ................................................................................................... 4

Section 2 – Explanation of Increases and Decreases.......................................................... 6

2.1 – Budget Increases and Decreases Table................................................................ 6

2A – Budget Increases and Decreases Description....................................................... 6

Section 3 – Budget and Performance Plan......................................................................... 8

3.1 – Appropriation Detail Table................................................................................. 7

3A – Budget Activity Description ............................................................................... 7

3.2 - Budget and Performance Plan Table ......................................................9

3B - Description of Performance..................................................................9

3C – PMA Evaluation Description.............................................................11

3.3 – PART Evaluation Tables. .............................................................................. ...13

Section 4 – Supporting Materials .................................................................................... 16

4.1 – Human Resources Information ........................................................................ 16

4A – Human Capital Strategy Description................................................................. 16

4.3 – Operating Levels Table .................................................................................... 18

4C – Appropriations Language.................................................................................. 19
CDFI - 3

Section 1 – Purpose

1A – Description of Fund 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. As part of the 

“Strengthening America’s Communities” initiative, program funding for the Fund’s three 

grant programs is being consolidated into the Departments of Housing and Urban 

Development and Commerce for FY 2007. This request discusses FY 2007 budget needs 

for the Fund’s remaining activities, which are the making of allocations of tax credits 

under the New Markets Tax Credit Program and administering awards under the Fund’s 

three prior grant programs.

The Fund has two priorities: (1) continue to provide allocations of tax credits under the 

New Markets Tax Credit (NMTC) Program and (2) manage the Fund’s existing portfolio 

of awards. 

NMTC Allocations –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. This activity also includes monitoring 

CDE compliance with the terms of their allocation agreements.

Portfolio Management - While funding is no longer provided for the CDFI Fund’s grant 

programs, the existing portfolio of grant awards must still be managed. Required 

activities include finalizing the terms of assistance agreements with recent awardees, 

making disbursements under awards not fully disbursed as of the end of FY 2006 and 

monitoring awardee compliance with the terms of their three year award assistance 

agreements. This latter step includes reviewing annual reports provided by awardees to 

ensure that their performance as stipulated in the assistance agreements is met and that 

unmet performance is explained.
CDFI - 4

1B – Previous Highlights and Accomplishments

The CDFI Fund administers both direct funding programs in support of Community 

Development Financial Institutions (CDFIs) and the New Markets Tax Credit Program. 

In FY 2005, New Markets Tax Credit Program and CDFI program awardees reported 

creating or maintaining 23,656 full-time equivalent jobs. The Fund reviewed, evaluated 

and processed 338 grant applications, which will result in awards totaling approximately 

$45 million through the Fund’s direct funding programs. CDFI Program awardees 

exceeded the Fund’s $500 million leverage goal for Financial Assistance awards by 

leveraging $1.8 billion. Overall, the leverage ratio has increased from $20 in private 

sector and other investments to $27 for $1 awarded by the fund. The Fund also accepted, 

reviewed, evaluated and processed 208 applications to the New Markets Tax Credit 

program, for which 41 allocations totaling $2 billion were made. Since program 

inception, New Markets Tax Credit program allocatees reported raising a total of $1.5 

billion in private equity and investing $1.3 billion in low-income communities.

The Fund makes extensive use of technology. First, in FY 2005 the New Markets Tax 

Credit Program became nearly an exclusively on-line, web-based process, from the 

application publication, submission of applications by applicants, the evaluation and 

management of the majority of the award and compliance and monitoring processes, 

including communications with allocatees on awards. Second, the Fund enhanced its 

mapping system. The mapping system enables applicants to geocode addresses, map 

census tracts and counties and determine the eligibility of census tracts and counties 

under the Fund’s various program distress criteria. Third, the Fund released an updated 

version of its Community Investment Impact System, an electronic data gathering system 

which has been recognized by Federal Reserve Chairman Alan Greenspan as an example 

of a data collection system that has “produced insights into the markets that community 

economic development lenders serve and the characteristics and financial performance of 

the institutions providing these services.”

Significant contracts expected to be entered into in FY 2006 will:

 Provide financial education to Native Americans,

 Evaluate the Financial Assistance, Technical Assistance, Training and 

Certification programs of the CDFI Fund, and

 Evaluate the New Markets Tax Credit Program. 

1C – Future Outlook

For FY 2007 the CDFI Fund will be awarding an allocation of tax credits under the 

NMTC Program which will support $3.5 billion in private sector investment into lowincome areas. The Fund will also continue to monitor its increasing portfolio of NMTC 

allocatees for compliance with the terms of their allocation agreements. Although no 

program funding is being requested for FY 2007, the Fund has an existing portfolio of 
CDFI - 5

grant awards which require closing, disbursement and monitoring for compliance with 

the terms of their assistance agreements.

The Fund will continue its downsizing to reach a level of 35 FTEs. Downsizing is 

necessary due to the elimination of new grant program funding and the decreasing 

portfolio of awards. The Fund anticipates a steadily decreasing number of awards to 

manage over the next few years, with FY 2009 being the last year for any significant 

management activities pertaining to its award portfolio. 

One challenge the Fund faces in FY 2007 is that its lease expires during the year. With 

downsizing efforts in place, the Fund will need to locate and occupy a smaller amount of 

space with a minimum of interruption of operations. 
CDFI - 6

Section 2 – Explanation of Increases and Decreases

2.1 – Budget Increases and Decreases Table

Dollars in Thousands

Treasury

Appropriation: Community Development Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 68 $55,522

Rescission (P.L. 108-447) (444)

FY 2005 Enacted 68 55,078

FY 2006 Consolidated Appropriations (P.L. 109 - 115) 68 55,000

Rescission (P.L. 109-148) (550)

FY 2006 Enacted 54,450

Changes to Base

Pay Inflation Adjustment 38

Non-Pay Inflation Adjustment 76

Proposed Pay Raise 100

Total FY 2007 Base 68 54,664

Program Changes

Decreases

(40,838)

Portfolio 

Management E1A

-33 (6,005)

Subtotal FY 2007 Program Changes -33 (46,843)

Total FY 2007 Request 35 $7,821

 Financial Institutions Fund

Consolidation of Programs

Decrease in Administrative Costs due to consolidation 

of programs

2A – Budget Increases and Decreases Description

Changes to Base.................................................................................. +$214,000/ 0 FTE

Adjustments to Maintain Current Levels +$214,000/ 0 FTE Funds are requested for: the 

FY 2007 cost of the January 2006 pay increase of $38,000; the proposed January 2007 

pay raise of $100,000; and non-labor related items such as contracts, travel, supplies, 

equipment and GSA rent adjustments of $76,000. 

Program Decreases......................................................................-$46,843,000/ -33 FTE

Consolidation of Programs -$40,837,500 / 0 FTE As part of the “Strengthening of 

America’s Communities” initiative, program funding for the Fund’s three grant programs 
CDFI - 7

is being consolidated into the Departments of Housing and Urban Development and 

Commerce.

Decrease in Administrative Costs Due to Consolidation of Programs -$6,005,500/ -33 

FTE This decrease in administrative costs is due to the consolidation of the Fund’s three 

grant programs. With no need for providing grants, the Fund will no longer require all of 

the Fund’s current program and administrative staff and the related costs. 
CDFI - 8

Section 3 – Budget and Performance Plan

3.1 – Appropriation Detail Table

Dollars in Thousands

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

33 $31,560 33 $30,969 0 $0 -100.0% -100.0%

New Markets Tax Credit Program 19 $6,494 19 $4,254 19 $4,314 0.0% 1.4%

Bank Enterprise Awards Program 6 $11,132 6 $13,417 0 $0 -100.0% -100.0%

Native Initiatives 10 $5,892 10 $5,810 0 $0 -100.0% -100.0%

Portfolio Management 0 $0 0 $0 16 $3,507 NA NA

Subtotal Newly Appropriated Resources 68 $55,078 68 $54,450 35 $7,821 -48.5% -85.6%

Other Resources 0 0 0 0 0 0 0.0% 0.0%

Total Resources Available for Obligation 68 55,078 68 54,450 35 7,821 -48.5% -85.6%

Community Development Financial Institutions 

Program

Request to FY 2007

FY 2006

Resources Available for Obligation

FY 2005 FY 2006 FY 2007

% Change

Enacted Enacted

3A – Budget Activity Description

New Markets Tax Credit (NMTC) Program ($4,314,000 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 

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 $15 billion in investor capital will be raised under the 

NMTC Program. Four funding rounds have been completed corresponding to tax credit 

allocations supporting $8 billion in private sector capital, with the final two rounds to 

occur during FY 2006 and FY 2007. Each of the last two allocation rounds are to provide 

tax credit allocations supporting $3.5 billion in investor capital ($7 billion in total).

Through FY 2005, the Fund projects that $1.5 billion in private sector capital was raised 

through this program of which $1.1 billion was invested in low-income areas (an 

additional $300 million has been raised but not yet invested) and 11,321 jobs were

created or maintained. 

The FY 2007 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 

would be for grant programs). Without this funding, which supports 19 FTEs and the 

related personnel and other administrative costs, the Fund will be unable to carry out the 

legislative mandate which established the NMTC Program. 
CDFI - 9

Portfolio Management ($3,507,000 from direct appropriations) Portfolio Management 

refers to the activities necessary to administer the Fund’s existing portfolio of grant 

awards. Although no new funding is requested for the related award programs, certain 

activities are still required with regard to awards made through FY 2006 (the last year of 

program funding). These activities consist of:

 Closing of awards – closing consists of agreeing on acceptable levels of 

performance with Fund awardees, obtaining all legal documents required of the 

awardee including documenting the receipt of matching funds and having the 

awardee sign the assistance agreement. A number of FY 2005 and FY 2006 

awards are projected to close in FY 2007.

 Disbursement of awards - once awards close they are eligible for disbursement. 

The number of undisbursed awards decreases over time, but the Fund projects a 

number of disbursements to be made in FY 2007. 

 Monitoring of awards – This will be the most significant portfolio management 

activity during FY 2007. Monitoring awards is a time-consuming activity which 

requires review and evaluation of performance and financial reports provided by 

awardees. Awardees considered to be non-compliant require additional time in 

which to communicate with the awardee, understand reasons for non-compliance

and in some events, to develop revised performance measures. The Fund’s 

assistance agreements cover a three-year period and so awards to be monitored 

during FY 2007 consist of those that closed from FY 2004 through FY 2006. 

While the number of awards to monitor will also decrease over time, the number 

to be monitored during FY 2007 is fairly significant. 
CDFI - 10

3.2 – Budget and Performance Plan Table

Dollars in Thousands

Treasury Strategic Goal: Stimulate Economic Growth and Job Creation (E1A)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Requested

Treasury Strategic Objective E1A:

Budget Activities: CDFI, NMTC and BEA Programs, Native Initiatives

Financial Resources

Newly Appropriated Resources $80,000 $75,000 $61,000 $55,078 $54,450 $7,821

Other Resources $0 $0 $0 $0 $0 $0

Total Operating Level $80,000 $75,000 $61,000 $55,078 $54,450 $7,821

Human Resources

Newly Appropriated FTE 57 68 65 68 68 35

Other FTE 0 0 0 0 0 0

Total FTE (direct and reimbursable) 57 68 65 68 68 35

Resource Level 1/

Strategic Objective: Stimulate Economic Growth and Job Creation - E1A

Budget Activity: Bank Enterprise Award Program

Performance Goal: Increase FDIC-insured institutions' investments in community development and

economic revitalization in distressed communities.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Administrative costs per number of Bank Enterprise Award (BEA) Applications processed ($) (E)

Target Baseline 1280 0

Actual 1280

Target Met? N/A N/A N/A Y

Increase in community development activities over prior year for all BEA program applicants ($ in millions)

(Oe)

Target Baseline 307 134 81 0

Actual 138 307 103

Target Met? N/A Y Y N

Budget Activity: New Markets Tax Credit Program

Performance Goal: To attract private sector capital into low-income communities through CDEs.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Administrative costs per number of New Markets Tax Credit (NMTC) applications processed ($) (E)

Target Baseline 5390 5390

Actual 5390

Target Met? N/A N/A N/A Y

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) 

Target Baseline 1.4 1.6 2.1

Actual .1 1.1

Target Met? N/A N/A Y N
CDFI - 11

Budget Activity: Native Initiatives

Performance Goal: To build the capacity and coverage of CDFIs and other institutions to provide credit,

captial, and related servies to Native communities.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Administrative costs per number of Native American CDFI Assistance (NACA) applications processed ($)(E) 

Target Baseline 10050 0

Actual 10050

Target Met? N/A N/A N/A Y

Annual percentage increase in the total assets of Native CDFIs (%) (Oe)

Target Baseline 35 33 33

Actual 39 103

Target Met? N/A N/A Y Y

Budget Activity: Community Development Financial Institutions Program

Performance Goal: To build the capacity and coverage of CDFIs to provide credit, capital, and related

services to otherwise underserved markets.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Administrative costs per Financial Assistance (FA) application processed (E)

Target Baseline 5,130 0

Actual 5,130

Target Met? N/A N/A N/A Y

Dollars of private and non-CDFI Fund investments that CDFIs are able to leverage because of their CDFI

Fund Financial Assistance. (in millions) (Oe)

Target Baseline 1,150 669 500 1,100 861

Actual 660 1,623 1,300 1,800

Target Met? Y Y Y Y

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)

Target 40,230 33,830 5,852 26,995 29,158 34,009

Actual 36,275 9,141 9,212 23,656

Target Met? N N Y N

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure 

3B – Description of Performance 

Fund awardees reported 23,656 full-time equivalents (FTEs) created or maintained in 

underserved communities in FY 2005, compared to the target of 26,995. The primary 

factor for this shortfall is that fewer awardees reported data in FY 2005 than in previous 

years. In the future, the Fund intends to work more closely with awardees regarding the 

importance of reporting in a timely and accurate manner and may initiate administrative 

sanctions for such non-compliance. The Fund’s expectations are based on historic actual 

performance of CDFIs and CDEs. 

Even though FY 2006 is to be the last year in which program funding is provided to the 

Fund, the number of FTEs created or maintained during FY 2006 through FY 2007 is 

projected to increase with most of the increase coming from the NMTC program. The 

only funding required under the NMTC Program is for administrative costs to operate the 

program. During FY 2006 and FY 2007, the NMTC Program is projected to create or 

maintain 24,508 and 30,924 jobs, respectively. The remaining jobs reported for the Fund 

result from those created or maintained under the CDFI Program, which results from the 

deployment of funds disbursed to awardees in prior years.
CDFI - 12

The Fund’s FY 2005 target that CDFI Program awardees would be able to leverage $500 

million using the Fund’s awards was exceeded by $1.3 billion (total leverage was $1.8 

billion). The amount leveraged is based on the amount of awards disbursed by the Fund 

multiplied by a computed leverage ratio. Awardees have increased the ability to leverage 

debt by showing a higher ratio of liabilities to net assets. Furthermore, awardees have 

reported a greater project leverage by partnering with other entities to finance projects. 

Overall, the leverage ratio reported in FY 2004 of $20:$1 was increased to $27:$1 in 

FY 2005.

Dollars leveraged as a result of the Fund’s awards is projected to decrease between 

FY 2006 and FY 2007. Amounts leveraged pertain to Financial Assistance (FA) award 

amounts disbursed by the Fund. FA award disbursements usually begin a year after the 

award is made due to the time it takes to get a signed assistance agreement in place and 

the fact that Fund awards are not disbursed to the awardee until the awardee provides 

evidence of matching funds. Starting in FY 2007, the amounts of undisbursed award 

amounts will decrease each year due to the lack of any additional program funding. 

Accordingly, a smaller amount of FA disbursements will be made each year, resulting in 

a reduction in the amount of dollars leveraged.

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

Competitive Sourcing

 During FY 2005 the Fund completed its FAIR Act inventory and identified 5 

FTEs (10 percent of the total workforce) that are considered suitable for a cost 

comparison. 

E-Government

 The Fund participates in the Grants Streamlining Initiative (P.L. 106-107) 

whereby all Federal agency grant opportunities can be accessed via a single webbased portal administered by the Department of Health and Human Services. A 

description of the Fund’s grant programs are included, with a link to the Fund’s

website enabling interested applicants to review a more detailed description of the 

program requirements and the ability to apply for a grant electronically by 

completing an application form.

Improved Financial Performance

 For FY 2005 (and for the prior six fiscal years), the Fund has received an 

unqualified opinion on its financial statements, with no reportable conditions or 

instances of non-compliance with laws and regulations.
CDFI - 13

3.3 – PART Evaluation Tables

PART Name: CDFI Fund: Finance and Technical Assistance

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

5. A contract to evaluate the program is anticipated to be awarded in FY 2005.

2. The Fund is building the IT system needed to set a target for the second long-term measure. The Fund anticipates the 

system being completed in FY 2005, data entered in early FY 2006, and the target being set in the second quarter of FY 

2006.

3. Conduct the analysis needed to set the efficiency measure baseline and target by the end of FY 2005 and measure 

progress starting in FY 2006.

4. The Fund made disaggregated data available to the public in January 2005 and will continue to do so annually.

a. Fewer than 10 states administer CDFI programs and none of these state programs fully meet 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’ need for capital.

1. The CDFI Program is not unique because several states administer similar programs and CDFIs can use private sector 

equity investments 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:

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.

4. Make disaggregated program performance data available to the public.

5. Conduct an independent evaluation of the program.
CDFI - 14

PART Name: New Markets Tax Credit

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

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. 

1. The Fund is not taking any action on the duplicative/redundancy finding because in the Fund’s opinion the other available 

program complement rather than duplicate the NMTC Program.

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.

4. Conduct an independent evaluation of the program.

2. NMTC Program allocatees will submit data in June 2005 that the Fund needs to set performance measure targets. The 

Fund will set targets and measure its achievement in FY 2005.

3. Conduct the analysis needed to set the efficiency measure baseline and target by the end of FY 2005 and measure 

progress starting in FY 2006.

4. Put out a bid for an independent evaluation by the end of FY 2005 and begin the multi-year evaluation in FY 2006.
CDFI - 15

One recommendation in each of the three OMB PART evaluations was for the Fund to 

conduct an independent evaluation of the three programs. The Fund has reserved 

approximately $3.5 million of FY 2005 funding to conduct evaluations of the CDFI and 

NMTC Programs. The Fund has a vendor under contract to conduct the evaluation of the 

CDFI Program and has completed a statement of work for the evaluation of the NMTC 

Program to be awarded during the first half of FY 2006. The Government Accountability 

Office will be conducting a similar evaluation of the BEA Program during FY 2006.

No additional budget resources to carry out OMB’s PART recommendations are 

considered necessary.

PART Name: Bank Enterprise Award Program

Strategic Goal: Promote Prosperous U.S. and World Economies

Rating: Results Not Demonstrated / Measures Adequate

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

2. The Fund had been planning to conduct an evaluation of the BEA Program in FY 2006, but has discontinued that 

planning as it will discontinue the BEA Program in FY 2006.

3. The Fund began measuring progress toward meeting long-term and annual goals in FY 2003, and has measured 

progress annually since then.

4. The Fund considered amending the BEA statute to allow it to make awards abased on prospective commitments to 

engage in innovative investment activities, but determined that it was not politically feasible.

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. 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.

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: (1) to CDFIs with a greater need for the incentive provided by the BEA Program 

award, and (2) 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 achieves greater operational efficiencies for applicants and the Fund. 

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.
CDFI - 16

Section 4 – Supporting Materials

4.1 – Human Resources Information

Full Time Equivalents vs. Budgeted FTE Table

68 68 68

46

54

50

68

35

63

35

0

10

20

30

40

50

60

70

80

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

F

T

E

s

Budgeted FTEs Actual/Projected FTEs

 (Note – the Fund has no reimbursable FTEs)

BASE: Start of Year (SOY) Actual or Estimated FTEs PY CY BY

 (Note: SOY 2003 will be equal to End of Year (EOY) Actuals 2002) FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Actual/Projected FTE 50 46 54 50 63

INCREASES 1/

Increase #1:

Description: Increase additional hires in appropriated fund; 

backfilling positions vacated in prior year 8 13

DECREASES 1/

Decrease #1: -4

Description: Positions vacated during the year.

Decrease #2: 0

Description: -4

Decrease #3: 0

Description: -28

Subtotal, Decreases -4 0 -4 0 -28

End of Year (EOY) Actual/Estimated FTEs

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Budgeted FTEs 2/ 68 68 68 68 35

Actual/Projected FTE 3/ 46 54 50 63 35

Net Change from prior year (PY) SOY base to budget year (BY) EOY estimate: -19

2/ Budgeted FTE - FTE requested in Congressional Justification. 

Reduction in Force due consolidation of programs.

Reduction due to potential transfer of Fund's 

appropriation to Dept of Commerce

1/ Changes shown by year (increases and decreases) are the incremental changes for that year.
CDFI - 17

4A – Human Capital Strategy Description

The Fund’s Human Capital challenge over the next several years is to be able to retain 

qualified staff to complete the Fund’s business. Existing staff are more likely to leave the 

Fund to seek other career opportunities since they know that their positions are shortterm. Attracting new hires will be a challenge since their period of employment with the 

Fund is known to be limited. To help attract and retain the staff necessary, the Fund will 

consider offering retention incentives, hire term employees and where necessary, to 

contract out work. Any additional funds required to implement this strategy will come 

from savings in personnel costs resulting from employees leaving the Fund earlier than 

anticipated.

Since FY 2006 is the final year of requested program funding, the Fund’s main focus is to 

administer the remaining portfolio of awards. These awards consist of those made under 

the Community Development Financial Institutions Fund (CDFI) Program, the Bank 

Enterprise Award (BEA) Program and Native Initiatives which either have not yet closed, 

or have closed but are not fully disbursed. BEA Program awards do not have a formal 

closing and so the only activity to be performed for this program is to disburse the 

remaining amounts of the awards during FY 2007 – FY 2010. Accordingly, the Fund 

anticipates a decreasing number of FTEs required to administer the remaining grant 

program portfolio, dropping from 16 in FY 2007, to 0 FTEs sometime in FY 2011. 

The Fund estimates that 19 FTEs will be required in FY 2007 for the New Markets Tax 

Credit (NMTC) Program.
CDFI - 18

4.3 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Community Development 

Financial Institutions Fund FY 2005 

Enacted

FY 2006 

President's 

Budget as 

Am ended

Cong. 

Action or 

Rescission

Transfers or 

Supplementals

FY 2006 

Enacted 

Level

FY 2006 

Proposed 

Operating 

Level

FY 2007 

Proposed 

Operating 

Level

FTE 68 35 33 68 68 35

Object Classification:

11.1 Full-Time Permanent Positions..................................... 5,400 3,556 1,793 5,349 5,349 3,681

11.1 Other than Full-Time Permanent Positions.............. - - - - - -

11.5 Other Personnel Compensation................................... - - - - - -

11.8 Special Personal Services Payments..................... - - - - - -

11.9 Personnel Compensation (Total)............................. 5,400 3,556 1,793 5,349 5,349 3,681

12.0 Personnel Benefits...................................................................... 1,389 906 466 1,372 1,372 942

13.0 Benefits to Former Personnel............................................... - - - - -

21.0 Travel.................................................................................. 171 73 30 103 103 70

22.0 Transportation of Things........................................... 50 16 4 20 20 20

23.1 Rental Payments to GSA................................................ 1,216 1,125 (7) 1,118 1,118 898

23.2 Rent Payments to Others...............................................75 72 (24) 48 48 15

23.3 Communications, Utilities, & Misc...................................................... 243 123 139 262 262 172

24.0 Printing and Reproduction.......................................................... 87 43 (33) 10 10 10

25.1 Advisory & Assistance Services.................................................... 2,559 1,464 2,258 3,722 3,722 1,566

25.2 Other Services.................................................................... 508 185 208 393 393 169

25.3 Purchase of Goods/Serv. from Govt. Accts...... 555 281 812 1,093 1,093 206

25.4 Operation & Maintenance of Facilities................... - - - - -

25.5 Research & Development Contracts................................ 2,300 - - - -

25.6 Medical Care............................................................................. - - - - -

25.7 Operation & Maintenance of Equipment...................... - - - - -

25.8 Subsistence & Support of Persons....................................- - - - -

26.0 Supplies and Materials.................................................... 131 44 3 47 47 18

31.0 Equipment.......................................................................... 345 12 63 75 75 54

32.0 Lands and Structures................................................... - - - - -

33.0 Investments & Loans.................................................... 2,364 - 1,802 1,802 1,802

41.0 Grants, Subsidies........................................................... 37,685 - 39,036 39,036 39,036

42.0 Insurance Claims & Indemn................................................. - - - -

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

44.0 Refunds..............................................................................- - - -

Total Budget Authority................................................$55,078 $7,900 $46,550 $0 $54,450 $54,450 $7,821

Budget Activities:

Community Development Financial Institutions 

Program 31,560 3,600 27,369 $30,969 $30,969 $0

New Markets Tax Credit Program 6,494 4,300 (46) $4,254 $4,254 $4,314

Bank Enterprise Awards Program 11,132 0 13,417 $13,417 $13,417 $0

Native Initiatives 5,892 0 5,810 $5,810 $5,810 $0

Portfolio Management 0 0 0 $0 $0 $3,507

Total Budget Authority................................................$55,078 $7,900 $46,550 $0 $54,450 $54,450 $7,821
CDFI - 19

4C – Appropriations Language

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, 

[$55,000,000, to remain available until September 30, 2007, of which $4,000,000 shall be 

for financial assistance, technical assistance, training and outreach programs designed to 

benefit Native American, Native Hawaiian, and Alaskan Native communities and 

provided primarily through qualified community development lender organizations with 

experience and expertise in community development banking and lending in Indian 

country, Native American organizations, tribes and tribal organizations and other suitable 

providers, and up to $13,500,000 may] $7,821,000 to be used for [administrative 

expenses, including] administration of the New Markets Tax Credit[, up to $6,000,000 

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 $11,000,000] program and for management of the existing portfolio of awards to 

Community Development Financial Institutions and insured financial institutions. 

(Department of the Treasury Appropriations Act, 2006.)
Internal Revenue Service Summary 

Mission: 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. 

$ Change % Change

FY 2006 FY 2006

Appropriation FY 2005 FY 20061 FY 2006 FY 20072 Oper. Plan Oper. Plan

Enacted Enacted Operating Plan Request to FY 2007 to FY 2007

Processing, Assistance, and Management $4,056,857 $4,095,212 $4,095,212 $4,045,122 ($50,090) -1.22%

Tax Law Enforcement $4,363,539 $4,678,498 $4,678,498 $4,762,327 $83,829 1.79%

Information Systems $1,577,768 $1,582,977 $1,582,977 $1,602,232 $19,255 1.22%

Business Systems Modernization $203,360 $197,010 $197,010 $167,310 ($29,700) -15.08%

Health Insurance Tax Credit Administration $34,562 $20,008 $20,008 $14,846 ($5,162) -25.80%

Total Appropriated Resources $10,236,087 $10,573,706 $10,573,706 $10,591,837 $18,131 0.17%

Numbers may not add due to rounding.

2 In FY 2007, the IRS request is supplemented by $135 million in new user fees for a total operating level of $10,726,837 thousand.

Appropriation Summary

(Dollars in Thousands)

1 The IRS FY 2006 enacted level includes 1% across the board rescission and excludes rescission of unobligated balances ($20 million from PAM and $9 

million from HITCA)

FY 2007 Priorities 

 

• Maintain balance between service and enforcement 

• Maintain the tax enforcement funding increase provided in FY 2006 to improve 

tax compliance 

 

• Focus on areas in need of closer scrutiny by IRS, including tax strategies 

involving international elements for both corporations and high-income

individuals 

• Continue the examination of tax-exempt charities used to violate federal income

tax laws 

• Focus on technology issues to ensure the IRS is utilizing technological advances 

to optimize both taxpayer service and enforcement programs 
Table of Contents

Strategic Context ........................................................................................................................... 2

Budget Increases and Decreases Table for Taxpayer Service .................................... 7 

Budget Increases and Decreases Table for Enforcement............................................ 8 

1.1 – Appropriation Summary Table .......................................................................... 9 

1B – Previous Highlights and Accomplishments..................................................... 10 

1C – Future Outlook ................................................................................................. 14 

1D – IRS’ Long-Term Goals .................................................................................... 16 

Explanation of Budget Increases and Decreases ......................................................................21

2.1 – Budget Increases and Decreases Table ............................................................ 21 

2A – Budget Increases and Decreases Description................................................... 22 

Processing, Assistance, and Management.................................................................................29

Explanation of Increases and Decreases....................................................................................29

2.1 – Budget Increases and Decreases Table ............................................................ 29 

2A – Budget Increases and Decreases Description................................................... 30 

Budget and Performance Plan....................................................................................................32

3.1 – Appropriation Detail Table.............................................................................. 32 

Pre-Filing Taxpayer Assistance and Education ..........................................................................33

3A – Budget Activity Description ............................................................................ 33 

3.2 – Budget and Performance Plan Table................................................................ 34 

3B – Description of Performance ............................................................................. 35 

Filing and Account Services........................................................................................................36

3A – Budget Activity Description ............................................................................ 36 

3.2 – Budget and Performance Plan Table................................................................ 37 

3B – Description of Performance ............................................................................. 38 

Shared Services Support............................................................................................................39

3A – Budget Activity Description ............................................................................ 39 

3.2 – Budget and Performance Plan Table................................................................ 40 

3B – Description of Performance ............................................................................. 40 

General Management and Administration...................................................................................42

3A – Budget Activity Description ............................................................................ 42 

3.2 – Budget and Performance Plan Table................................................................ 43 

3B – Description of Performance ............................................................................. 43 

Tax Law Enforcement...................................................................................................................45

Explanation of Increases and Decreases....................................................................................45

2.1 – Budget Increases and Decreases Table ............................................................ 45 

2A – Budget Increases and Decreases Description................................................... 46 

Budget and Performance Plan....................................................................................................47

3.1 – Appropriation Detail Table.............................................................................. 47 

Compliance Services ..................................................................................................................48

3A – Budget Activity Description ............................................................................ 48 

3.2 – Budget and Performance Plan Table................................................................ 49 

3B – Description of Performance ............................................................................. 51 

Research and Statistics of Income .............................................................................................52

3A – Budget Activity Description ............................................................................ 52 

3.2 – Budget and Performance Plan Table................................................................ 52 

3B – Description of Performance ............................................................................. 53 

IRS - i
Earned Income Tax Credit..........................................................................................................54

3A – Budget Activity Description ............................................................................ 54 

3.2 – Budget and Performance Plan Table................................................................ 54 

3B – Description of Performance ............................................................................. 55 

Information Systems.....................................................................................................................57

Explanation of Increases and Decreases....................................................................................57

2.1 – Budget Increases and Decreases Table ............................................................ 57 

2A – Budget Increases and Decreases Description................................................... 58 

Budget and Performance Plan....................................................................................................59

3.1 – Appropriation Detail Table.............................................................................. 59 

Information Systems Improvement Programs.............................................................................60

3A – Budget Activity Description ............................................................................ 60 

3.2 – Budget and Performance Plan Table................................................................ 60 

3B – Description of Performance ............................................................................. 61 

Information Services ...................................................................................................................62

3A – Budget Activity Description ............................................................................ 62 

3.2 – Budget and Performance Plan Table................................................................ 62 

3B – Description of Performance ............................................................................. 63 

Business Systems Modernization ...............................................................................................69

Explanation of Increases and Decreases....................................................................................69

2.1 – Budget Increases and Decreases Table ............................................................ 69 

2A – Budget Increases and Decreases Description................................................... 70 

Budget and Performance Plan....................................................................................................70

3.1 – Appropriation Detail Table.............................................................................. 70 

3A – Budget Activity Description ............................................................................ 71 

3.2 – Budget and Performance Plan Table................................................................ 72 

3B – Description of Performance ............................................................................. 73 

Health Insurance Tax Credit Administration...............................................................................77

Explanation of Increases and Decreases....................................................................................77

2.1 – Budget Increases and Decreases Table ............................................................ 77 

2A – Budget Increases and Decreases Description................................................... 78 

Budget and Performance Plan....................................................................................................79

3.1 – Appropriation Detail Table.............................................................................. 79 

3A – Budget Activity Description ............................................................................ 79 

3.2 – Budget and Performance Plan Table................................................................ 80 

3B – Description of Performance ............................................................................. 80 

PMA and PART Evaluation...........................................................................................................82

3C – PMA Evaluation Description ........................................................................... 82 

3.3 – PART Evaluation Table................................................................................... 90 

Supporting Materials ..................................................................................................................104

4A – Human Capital Strategy Description ............................................................. 104 

4.1 – Human Resources Table ................................................................................ 108 

4.3 – Operating Levels Table.................................................................................. 109 

4.4 – IRS Performance Measures Summary Table and Data Dictionary Link....... 115 

4C – Appropriation Language Sheet, Justification of Changes, and Legislative 

Proposals................................................................................................................. 117 

4D – User Fee Summary......................................................................................... 125 

4E - IRS Oversight Board Proposed FY 2007 Budget Request for the IRS........... 127 

IRS - ii
Strategic Context

IRS - 1
Strategic Context 

The Internal Revenue Service (IRS) administers America’s tax laws and collects revenue 

to fund most government operations and public services. The IRS and its employees 

represent the face of government to more U.S. citizens than any other agency. 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 IRS budget request for FY 2007 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 guiding the future 

direction of the Service are: 

 

• Improve Taxpayer Service – Improve service to taxpayers to help them

understand their tax obligations, 

• Enhance Enforcement of the Tax Laws – Ensure taxpayers meet their tax 

obligations so when Americans pay their taxes, they can be confident their 

neighbors and competitors are doing the same, and 

• Modernize the IRS Through Its People, Processes, and Technology – Strategically 

manage resources, associated business processes, and technology systems to meet 

service and enforcement goals. 

The IRS recently established several long-term goals that will measure its progress over 

the span of the IRS Strategic Plan. A discussion of IRS’ long-term goals is included in 

Section 1D. 

IRS Contributes to the Administration’s Efforts to Reduce the Federal Deficit 

The IRS supports the Administration’s goal to reduce the federal deficit by increasing tax 

receipts collected through taxpayer service and enforcement compliance. The FY 2007 

Budget provides funding to continue the IRS’ commitment to service, and sustains its 

efforts to enhance enforcement of the tax laws. The great majority of Americans pay their 

fair share of taxes, but there is still a significant tax gap – the difference between what 

taxpayers are supposed to pay and what they actually pay – due to non-filing, 

underreporting and nonpayment. Reducing the net tax gap, currently estimated at $257 to 

$298 billion for 2001, is a top priority. The IRS’ approach to reducing the tax gap and 

increasing tax receipts relies on implementation of selected tax-related legislative 

changes, improved administrative procedures, and implementing a sound technological 

infrastructure designed to support taxpayer service and enforcement. The IRS also 

supports the Administration’s deficit reduction goal by continuing to identify productivity 

improvements and efficiencies that will reduce the cost of collecting revenues. 

IRS - 2
Improve IRS Operations through Legislative Changes

The Administration proposes five new legislative changes to reduce the tax gap and reproposes four legislative changes to improve tax administration efficiency. In addition, 

the Administration will study the standards used to distinguish between employees and 

independent contractors for purposes of withholding and paying federal employment 

taxes. The nine legislative changes are: 

Closing the Tax Gap 

1. Clarify the circumstances in which employee leasing companies and their clients can 

be held jointly liable for federal employment taxes. This proposal would facilitate the 

effective use of third party employee leasing companies by small businesses to pay 

employment taxes. In addition to clarifying joint liability, it would also provide 

standards for holding employee leasing companies solely liable for such taxes, if they

meet specified requirements. 

2. Increase information reporting on payment card transactions. In order to improve 

compliance, payment card issuers would be required to report to the IRS annually the 

aggregate reimbursement payments made to certain businesses in a calendar year. 

3. Expand information reporting to certain payments made by federal, state and local 

governments to procure property and services. This proposal would improve tax 

compliance of those taxpayers who do business with government agencies. 

4. Amend Collection Due Process procedures for employment tax liabilities. For 

Collection Due Process purposes, this proposal would align the treatment of levies to 

collect employment taxes with the treatment of levies to collect federal taxes from

state tax refunds. The proposal would curtail delinquent employers’ ability to 

pyramid multiple periods of unpaid employment tax liabilities. Taxpayers would 

retain the ability to seek managerial appeal and to participate in the formal Collection 

Appeals Process. 

5. Expand to non-income tax returns the requirement that paid return preparers identify 

themselves on such returns and expand the related penalty provision. This proposal 

would address the growing problem of return preparers who assist in the preparation 

and submission of improper excise, employment tax, and other non-income tax 

returns and related documents. 

Improving Tax Administration 

1. Implement administrative reforms to improve the efficiency of IRS operations such as: 

(a) adopt measures to reduce frivolous submissions made solely to delay or impede 

tax administration; (b) allow the IRS to terminate installment agreements if the 

taxpayer is not paying as agreed; and (c) streamline jurisdiction over collection due 

process cases in the Tax Court. 

IRS - 3
2. Initiate cost savings measures such as: (a) Reduce transaction costs by changing the 

way the Treasury Department’s Financial Management Services is reimbursed for 

offsetting collections, and (b) expand IRS’ authority to require electronic filing. 

 

3. Authorize the IRS to access employment data in the HHS’ National Directory of New 

Hires for tax administration purposes, including data matching, verification of 

taxpayer claims during return processing, preparation of substitute returns for noncompliant taxpayers, and identification of levy sources. 

4. Extend IRS’ authority to fund undercover operations, which expires on December 31, 

2006, to permit the IRS to fund certain necessary and reasonable expenses of 

undercover operations, including international and domestic money laundering and 

narcotics operations. 

The legislative changes strategically target areas where (1) research reveals the existence 

of significant compliance problems, (2) improvements will burden taxpayers as little as 

possible, and (3) the changes support the Administration’s broader focus on identifying 

legislative and administrative changes to reduce the tax gap. The implementation of 

these legislative changes positions the IRS for improved service and enforcement 

productivity. Additional information about these proposals is included in Section 4C and 

in the FY 2007 Treasury Blue Book, which contains all of the Administration’s 

legislative proposals. 

The Appropriations Account Structure and the Strategic Alignment of Taxpayer 

Service and Enforcement Programs 

The IRS’ funding is appropriated among five accounts (see chart 1.1). Three are 

operating accounts associated with the salaries and expenses of tax administration: 

Processing, Assistance and Management (PAM), Tax Law Enforcement (TLE), and 

Information Systems (IS). The fourth account, Business Systems Modernization (BSM), 

funds contract costs for the development, delivery, and implementation of the IRS’ 

modernized, major systems. The fifth account, Health Insurance Tax Credit 

Administration (HITCA), funds the costs of administering the Health Coverage Tax 

Credit. The FY 2007 Budget request for each of these accounts, including descriptions of 

each budget activity, is presented under separate tabs within this document. 

The IRS programs and supporting functions appropriated in the three operating accounts 

– PAM, TLE and IS – strategically align with either taxpayer service or tax law 

enforcement. The budgets for these two strategic areas – taxpayer service and 

enforcement – are funded by allocating direct and overhead resources from the three 

operating accounts (see chart 1.2). For example, salaries for direct tax enforcement are 

funded and paid from the TLE account and the rent is funded from the PAM account; and 

IT systems, computers and telecommunications from the IS account. The information 

technology resources funded in the IS account provide the infrastructure that is a critical 

component ensuring delivery of IRS programs. 

IRS - 4
The following information summarizes the strategic alignment of the IRS’ FY 2007 

resources requested in the PAM, TLE, and IS operating accounts: 

Strategic Alignment of Taxpayer Service and Enforcement Programs 

(Dollars in Thousands) 

Programs

FY 2005

Enacted

FY 2006

Enacted

FY 2007

Request

% Change

FY 2006 to

FY 2007

Taxpayer Service $3,605,978 $3,532,618 $3,583,336 1.4%

Direct Appropriation $3,605,978 $3,532,618 $3,448,336 -2.4%

New User Fee Revenue $135,000 N/A

Enforcement $6,392,187 $6,824,070 $6,961,345 2.0%

Total Taxpayer Service & 

Enforcement $9,998,165 $10,356,688 $10,544,681 1.8%

• Taxpayer Services ─ The request for taxpayer service programs is $3,448 million 

in direct appropriations and $135 million from new user fee revenue, for a 

combined operating level of $3,583 million, a 1.4 percent increase from the 

FY 2006 enacted level. The IRS will maintain its commitment to high-quality 

taxpayer services through improvements to information technology and other 

targeted efficiencies. 

The IRS will continue to identify opportunities to provide quality taxpayer service 

at a lower cost, such as providing and marketing expanded services to increase 

use of the Internet. For example, taxpayers can now access a vast amount of 

information on the IRS website (www.irs.gov) , including frequently asked tax 

law questions, tax publications, and verification of taxpayers’ refund status. The 

growth in electronic filings also improves efficiency and accuracy, ultimately 

reducing tax administration costs. Electronic filing is fast, easy, and less prone to 

error than are paper-filed returns. Taxpayers benefit from filing electronically 

because they receive rapid verification that the IRS received their return, and they 

get their refunds sooner. Moreover, the proposed legislative changes summarized 

in Section 4C will increase the proportion of electronically filed returns.

• Enforcement ─ The request for enforcement activities is $6,961 million, a 

2.01 percent increase from the FY 2006 enacted level. The IRS continues to 

emphasize compliance with tax laws and the importance of enhanced enforcement 

to increase collections through productivity improvements, such as the 

implementation of legislative changes, streamlining operating procedures, and 

deploying improved technology (See Section 1B). 

IRS - 5
The FY 2006 Budget provided increased budget authority as part of a 

government-wide program integrity “cap adjustment” for IRS enforcement 

programs in FY 2006. This was proposed as part of the Budget Enforcement Act 

(BEA) reauthorization (not yet enacted) but provided in the 2006 Budget 

Resolution. The IRS FY 2007 Budget request reflects a two percent increase in 

enforcement funding. The Administration is again proposing to fund this increase 

(+$137.275 million) as a BEA program integrity cap adjustment (see Chapter 15, 

Budget Reform Proposals of the Analytical Perspectives volume of the 2007 

President’s Budget). 

The Administration continues to support the restructuring of the three operating accounts 

into an appropriation structure that facilitates the reporting of the full costs dedicated to 

each service or enforcement program. The IRS intends to work with Congress to develop 

a mutually acceptable budget structure that supports the Appropriators’ requirements and 

achieves the Administration’s goals. 

IRS - 6
Budget Increases and Decreases Table for Taxpayer Service 

Dollars in Thousands 

FTE Amount Treasury Strategic Objective

FY 2006 President's Budget 37,581 $3,567,455

Congressional Adjustment $846

1% Rescission (215) ($35,683)

FY 2006 Enacted 37,366 $3,532,618

Base Realignment

FTE Adjustment (348)

FY 2006 Operating Level 37,018 $3,532,618

Maintaining Current Levels (MCLs)

Pay Annualizations $19,380

Proposed Pay Raise $47,244

Non-Pay Inflation $21,989

Sub-total, Maintaining Current Levels (MCLs) 0 $88,613

Base Reinvestment

Increase Returns Processing Efficiencies 11 $12,237 F4A

Sub-total, Base Reinvestment 11 $12,237

Program Cost Savings

E-File Savings (174) ($6,760) F4A

Improvement Project Savings (122) ($7,553) F4A

Competitive Sourcing Savings ($10,000) F4A

Taxpayers Service Efficiencies (825) ($32,200) F4A

Sub-total, Program Cost Savings (1,121) ($56,513)

Transfers Out

Transfer to TIGTA ($304) F4A

Sub-total, Transfers Out 0 ($304)

Total, FY 2007 Base 35,908 $3,576,651

Program Changes

Program Increases

Consolidate Philadelphia Campus $6,685 F4A

Sub-total, Program Increases 0 $6,685

FY 2007 Request 35,908 $3,583,336

Offsetting Fees

New User Fees Revenue ($135,000)

Total, FY 2007 President's Budget Request 35,908 $3,448,336

Numbers may not add due to rounding

Taxpayer Service

IRS - 7
Budget Increases and Decreases Table for Enforcement 

Dollars in Thousands 

FTE Amount Treasury Strategic Objective

FY 2006 President's Budget 59,411 $6,892,596

Congressional Adjustment 0 $404

1% Rescission (390) ($68,930)

FY 2006 Enacted 59,021 $6,824,070

Base Realignment

FTE Adjustment (670)

FY 2006 Operating Level 58,351 $6,824,070

Maintaining Current Levels (MCLs)

Pay Annualizations $42,602

Proposed Pay Raise $102,517

Non-Pay Inflation $38,161

Sub-total, Maintaining Current Levels (MCLs) 0 $183,280

Program Cost Savings

Improvement Project Savings (13) ($662) F4A

Competitive Sourcing Savings ($7,000) F4A

Enforcement Efficiencies (1,271) ($51,921) F4A

Sub-total, Program Cost Savings (1,284) ($59,583)

Transfers Out

Transfer to TIGTA ($637) F4A

Sub-total, Transfers Out 0 ($637)

Total, FY 2007 Base 57,067 $6,947,129

Program Changes

Program Increases

Consolidate Philadelphia Campus $14,215 F4A

Sub-total, Program Increases 0 $14,215

FY 2007 Request 57,067 $6,961,345

Offsetting Fees

New User Fees Revenue $0

Total, FY 2007 President's Budget Request 57,067 $6,961,345

Numbers may not add due to rounding

Enforcement

IRS - 8
1.1 – Appropriation Summary Table 

 Dollars in Thousands 

$ Change % Change

FY 2006 FY 2006

Appropriation FY 2005 FY 20061 FY 20062 FY 20073 Oper. Plan Oper. Plan

Enacted Enacted Operating Plan Request to FY 2007 to FY 2007

Processing, Assistance, and 

Management

Pre-Filing Taxpayer Assistance and 

Education $539,374 $517,707 $330,536 $329,557 ($979) -0.30%

Filing and Account Services $1,710,368 $1,679,688 $1,678,132 $1,618,784 ($59,348) -3.54%

Shared Services Support $1,210,874 $1,285,181 $1,484,366 $1,504,247 $19,881 1.34%

General Management & 

Administration $596,241 $612,636 $602,178 $592,534 ($9,644) -1.60%

Subtotal, PAM $4,056,857 $4,095,212 $4,095,212 $4,045,122 ($50,090) -1.22%

Tax Law Enforcement

Compliance Services $4,104,471 $4,415,063 $4,414,935 $4,496,735 $81,800 1.85%

Research and Statistics of Income $94,474 $95,954 $96,754 $97,542 $788 0.81%

Earned Income Tax Credit $164,594 $167,481 $166,809 $168,050 $1,241 0.74%

Subtotal, TLE $4,363,539 $4,678,498 $4,678,498 $4,762,327 $83,829 1.79%

Information Systems

Improvement Programs $49,002 $48,960 $49,302 $49,302 $0 0.00%

Information Services $1,528,766 $1,534,017 $1,533,675 $1,552,930 $19,254 1.26%

Subtotal, IS $1,577,768 $1,582,977 $1,582,977 $1,602,232 $19,255 1.22%

Business Systems Modernization $203,360 $197,010 $197,010 $167,310 ($29,700) -15.08%

Subtotal, BSM $203,360 $197,010 $197,010 $167,310 ($29,700) -15.08%

Health Insurance Tax Credit 

Administration $34,562 $20,008 $20,008 $14,846 ($5,162) -25.80%

Subtotal, HITCA $34,562 $20,008 $20,008 $14,846 ($5,162) -25.80%

Total Appropriated Resources $10,236,087 $10,573,706 $10,573,706 $10,591,837 $18,131 0.17%

Numbers may not add due to rounding

2 The FY 2006 Operating Level includes alignment of printing and postage from Pre-filing Taxpayer Assistance and Education to Shared Services

 Support as proposed in the FY 2006 Operating Plan.

3 In FY 2007, the IRS request is supplemented by $135 million in new user fees for a total operating level of $10,726,837 thousand.

1 The IRS FY 2006 enacted level includes 1% across the board rescission and excludes rescission of unobligated balances ($20 million from

 PAM and $9 million from HITCA)

IRS - 9
1B – Previous Highlights and Accomplishments

The following is a summary, outlined by the IRS’ strategic goals, of significant 

accomplishments and program performance improvements: 

Improve Taxpayer Service 

Assisting the public to understand their tax reporting and payment obligations is the 

cornerstone of taxpayer compliance and is vital for maintaining public confidence in the 

tax system. The IRS continues to meet this challenge by improving the quality and 

accuracy of responses from its call centers and expanding taxpayer service through 

increased electronic self-service transactions. The following information highlights the 

IRS’ taxpayer service achievements in FY 2005: 

• Survey results from the American Customer Satisfaction Index and the IRS Oversight 

Board Taxpayer Attitude Survey reveal that most taxpayers are satisfied with the 

levels of service they receive over the telephone. In FY 2005, the IRS’ customer 

assistance call centers answered 59.1 million calls. The IRS exceeded its FY 2005 

target of 82 percent toll-free telephone level-of-service and improved its toll-free tax 

law accuracy rate to 89 percent, an increase from 80 percent in FY 2004. 

• The newly redesigned IRS website, www.irs.gov, provides 24-hour assistance, seven 

days a week, with improved site navigation and an enhanced search engine, 

increasing search result accuracy and usability. New and improved features for 

www.irs.gov in 2006 include: 

o 1040 Central ─ One-stop service for accessing key forms, what’s new in the tax 

code, and answers to frequently asked questions. 

o Free File ─ Free tax preparation software and free e-filing to individuals who 

earn approximately $50,000 or less. Users must access Free File through IRS.gov 

to qualify. 

o Alternative Minimum Tax Assistant (AMT) ─ A simple test for taxpayers to 

determine whether they may be subject to the AMT. The IRS estimates most 

taxpayers can make entries and get an answer in five to ten minutes using the new 

application. 

o Earned Income Tax Credit (EITC) Assistant ─ An aid to determine eligibility 

for the tax credit and provides an estimate on the amount of the credit. 

o Where's My Refund? ─ Status of refund tool that enabled more than 22 million 

taxpayers to check on the status of their refunds this past filing season, a 

49 percent increase over the year before. A new feature provides taxpayers the 

capability to generate replacement checks if the first one has been lost; the 

taxpayer provides an updated address if the U.S. Post Office was unable to deliver 

a refund check due to an out-of-date address. 

o Employer Identification Number (EIN) ─ Internet application enables 

taxpayers to apply for and receive an EIN via the Internet in under five seconds. 

IRS - 10
• The IRS provided and staffed toll-free phone assistance lines for hurricane victims. 

The IRS also implemented numerous tax law changes to help the victims of 

hurricanes Katrina and Rita, businesses located in the disaster areas, and individuals 

donating to charities to support the victims. The IRS will continue to implement 

recent tax law changes designed to encourage investment in areas affected by 

hurricane Katrina, including the Administration’s Gulf Opportunity (GO) Zone 

proposals for bonus depreciation and additional small business expensing. 

• The number of taxpayers filing electronically continues to increase. In 2005, for the 

first time, more than half of all individual taxpayer returns (68 million) were filed 

electronically with more than five million of these taxpayers filing for free through 

the Free File Alliance. This is a 43 percent increase in Free File Alliance filings over 

the previous year. Increased electronic filing benefits the taxpayer and the IRS. The 

American Customer Satisfaction Index shows that e-file taxpayers are significantly 

more satisfied with their interaction with the IRS than are paper filers. In addition, 

electronic filing processes refunds more quickly and eliminates most common filing 

errors (math errors, number transposition, etc.). 

The Service continues to leverage community partnerships to provide free tax return 

preparation assistance through successful programs such as Volunteer Income Tax 

Assistance (VITA) and Tax Counseling for the Elderly (TCE). In 2005, over 

62,000 trained volunteers at 14,000 locations across the country prepared more than 

2.1 million tax returns, an 80 percent increase since 2001 (the year prior to the 

implementation of the community partnership model). In addition, the VITA and TCE 

volunteers e-filed more than 77 percent of these returns, an increase in volume of 

130 percent over 2001. 

Enhance Enforcement 

The IRS made significant progress towards achieving its enforcement-related goals in 

FY 2005. These improvements were achieved through efforts such as streamlining and 

centralizing work processes, improving workload selection techniques, increasing 

managerial involvement in casework, and implementing initiatives to reduce cycle time 

by refining case selection criteria. The IRS also expanded its compliance coverage 

through increased efficiency in its examination program. The Service’s examination 

coverage technique encourages examiners to pursue significant tax issues and to use their 

professional judgment when asking taxpayers for supplemental documentation. As a 

result the IRS: 

 

• Collected more than two trillion dollars in revenue with $47.3 billion collected 

through enforcement activities, a 10 percent increase from FY 2004, 

• Increased high-income audits (taxpayers earning $100,000 or more) by 33 percent 

from FY 2004, 

• Increased individual audits completed by 20 percent from FY 2004, 

• Increased small business audits (< $10 million) by 81 percent, and increased 

corporate audits (> $10 million) by 15 percent from FY 2004, 

IRS - 11
• Generated more than $4.7 billion in revenue in FY 2005 through two prominent 

settlement initiatives aimed at reducing examination and litigation expenses while 

deterring the use of abusive tax shelters, 

• Increased collection case closures by 12 percent and dollars collected by 14 percent 

from FY 2004, and 

• Increased convictions to 2,151 in 2005 (from 1,926 in 2002) through increased 

productivity. 

In addition, the IRS leveraged its Counterterrorism Program both to support the war on 

terrorism and tax compliance. Almost half of Criminal Investigation Division’s (CID) 

inventory of terrorism-related cases have a tax-related violation under investigation. In 

FY 2005, the Department of Justice obtained 78 indictments on CID counterterrorism 

cases and CID recommended 86 cases for prosecution. 

Modernize the IRS through its People, Processes and Technology 

The IRS must ensure its employees have the tools and skills necessary to increase 

organizational effectiveness and support its mission. In addition, employees need 

challenging work and appropriate compensation. To achieve these objectives, the IRS 

recently developed a new Human Capital Strategic Plan. Once finalized, the plan will 

communicate the direction the IRS will take to hire, train, and retain employees while 

ensuring retention of organizational knowledge, leadership competency and continuity. 

Within the past two years, the IRS Business Systems Modernization (BSM) program has 

begun to improve its performance on delivering projects and releases on time, on budget, 

and meeting or exceeding scope expectations. After several years of not achieving project 

costs, scheduling, and performance goals, the IRS is realizing benefits to taxpayers and 

enhanced BSM program management capabilities. 

In FY 2006 and continuing in FY 2007, BSM is revising its modernization strategy to 

emphasize the incremental release of projects to deliver business value sooner and at a 

lower risk. The FY 2005 IRS modernization efforts focused on three key tax 

administration systems that provide additional benefits to taxpayers and IRS employees: 

the Customer Account Data Engine (CADE) project; Modernized e-File (MeF); and 

Filing and Payment Compliance (F&PC). 

• CADE will ultimately replace the IRS’ antiquated Master File system, which is the 

repository of taxpayer information. CADE allows faster refunds (processing refunds 

on a daily basis), improved taxpayer service, faster issue detection, more timely 

account settlement, and a robust foundation for integrated and flexible modernized 

systems. CADE posted more than 1.4 million returns and generated more than 

$427 million in refunds. In FY 2006, CADE will process 4 million returns (with an 

anticipated 33 million by the following year) and will be the single authoritative 

repository for account and return data for those returns. 

• MeF deployed Form 7004 (filing extension for corporations) as well as Form 990PF 

(information returns for private foundations). This enabled the IRS to establish 

IRS - 12
regulations requiring large corporations and tax-exempt organizations to file their 

income tax or annual information returns electronically. MeF processed Forms 1120 

and 990 at higher-than-expected volumes while still achieving performance goals – a 

significant reduction in burden and time for corporate and tax-exempt taxpayers. 

• F&PC, Release 1.1 completed the architecture engineering analysis and development 

needed to separate complex cases requiring direct IRS involvement from those that 

private collection agencies can handle. This release will provide initial capabilities 

for routing collection cases to private collection agencies in FY 2006. 

In 2005, for the sixth consecutive year, the IRS achieved an unqualified audit opinion 

from the Government Accountability Office on all financial statements. This was 

accomplished despite the challenge of implementing the new Integrated Financial 

System. 

IRS - 13
1C – Future Outlook 

Challenges

Delivering cost effective and efficient services to meet the demands of diverse taxpayer 

segments within a constrained budget environment is a challenge for the IRS. As the IRS 

continues to seek alternative, less costly ways of improving taxpayer service and 

bolstering enforcement, it remains committed to identifying efficient and effective 

alternatives to administering our nation’s tax laws. Leveraging the use of the Internet by 

providing the capability for taxpayers to quickly access information and services is one 

innovative means to increase efficiency. Another is the use of contractors to help collect 

known tax debt and reimbursing them through a percentage of the collections. 

Additional challenges over the next several years include reducing the tax gap and 

achieving the 80 percent e-filing goal set by the IRS Restructuring and Reform Act of 

1998 (RRA 98). 

Tax Gap 

Tax gap reduction remains a key challenge for the IRS. Increasing the tax receipts to the 

Treasury remains at the heart of the IRS’ emphasis on enforcement. The IRS will 

continue to address the gap by bolstering compliance through new, targeted reporting 

requirements, other tax code statutory changes, and expanded enforcement. The IRS will 

continue to analyze tax information and results of compliance research studies to better 

define and quantify the tax gap. The IRS will use the results of these efforts to counter 

methods used by those taxpayers who fail to report or pay what they owe. The IRS is 

also focusing its efforts 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. Using the data collected in the National Research Program

study of individual taxpayers will help the IRS better target its audits of individuals on 

the most non-compliant returns. Targeting high-risk taxpayers should improve IRS 

efficiency and reduce the burden on compliant taxpayers. It will also increase and focus 

the IRS’ enforcement presence where it is most needed. 

Achieving 80 Percent E-Filing 

The IRS continues to work toward achieving the goal of having taxpayers electronically 

submit 80 percent of all filings by 2007. While the e-filing rates continue to increase, it 

was only in 2005 that the IRS received more than half of all tax returns electronically. 

Today, many taxpayers use tax preparation software to prepare their returns, but continue 

to mail in paper returns. Without a legislative change, as proposed, to expand IRS’ 

authority to mandate electronic filing in some cases, encouraging more of the taxpaying 

public to e-file remains a challenge. 

The Complexity of the Tax Code 

The Internal Revenue Code contains well over a million words creating complexity for 

taxpayers. Provisions such as the “alternative minimum tax” and the “earned income tax 

credit” create additional computational work for taxpayers and can be hard to interpret. 

IRS - 14
The IRS must explain the Code in a way that taxpayers can understand if they are to 

comply with their tax obligations. 

IRS - 15
1D – IRS’ Long-Term Goals 

This FY 2007 Congressional Budget Justification introduces a series of crosscutting, 

“enterprise” and “programmatic” long-term goals that link directly to the IRS’ strategic 

goals: Improve Taxpayer Service; Enhance Enforcement of the Tax Laws; and 

Modernize the IRS Through its People, Processes and Technology. The inclusion of 

long-term goals in the FY 2007 Congressional Budget Justification represents the first 

update to the IRS Strategic Plan since its release in June 2004. 

The “enterprise-wide” and “programmatic” long-term goals are highlighted below and 

included in the performance tables. These long-term goals combined with the program 

related efficiency and outcome measures, serve as indicators of achieving long-term

objectives that support the IRS’ mission critical programs. The long-term goals are 

intended to provide focus and rigor to measuring the outcome of IRS programs’ 

effectiveness in managing the nation's tax system 

Enterprise-wide Long-Term Goals 

The IRS recently began developing enterprise-wide long-term goals that will measure 

progress over the span of the IRS Strategic Plan. These goals, when completed, will 

represent the three components of the IRS’ balanced measurement system, highlighting 

customer satisfaction, business results, and employee engagement. The enterprise-wide 

long-term goals will be measured quantitatively. The IRS will update its targets 

periodically based on the available resources and the appropriate balance necessary to

provide services to taxpayers and reduce the tax gap. 

The IRS remains committed to identifying and implementing opportunities to increase 

the number of taxpayers who file their tax returns electronically. The Service will 

continue to target improvement and track its progress in increasing the rate of

electronically filed returns, while striving to improve the overall satisfaction of its 

customers. As a measurement of its customer satisfaction the IRS will evaluate 

improvement based on the annual scores assigned from the American Customer 

Satisfaction Index. 

 

The IRS selected Improve Voluntary Compliance and Non-revenue Enforcement as the 

main areas of focus for its enforcement programs. These long-term goals will measure 

and target the activities performed in the major revenue generating enforcement 

activities, Examination and Collection - and those enforcement activities that do not have 

a direct impact on tax revenue, such as Criminal Investigation and Tax Exempt and 

Government Entities. The IRS has established an aggressive target for its Improve 

Voluntary Compliance goal, from the 83.0 percent reported in its 2001 study to 

85.0 percent by 2009. The IRS plans to achieve this goal by deploying multiple 

approaches, including targeted changes in the tax code, increased usage and improved 

access to taxpayer assistance through the Internet, and a continued emphasis on tax 

enforcement. The performance results from these goals will provide indicators of the 

IRS’ effectiveness in leveraging taxpayer behavior in terms of compliance and 

influencing public opinion relating to the need for compliance with the nation’s tax laws. 

IRS - 16
The IRS also established long-term goals to evaluate its success in improving the public’s 

perception of the IRS’ ability to treat taxpayers fairly and equitably while enforcing the 

tax laws. The IRS will use the results of Question 1 (How much, if any, do you think is 

an acceptable amount to cheat on your income taxes?) from the IRS Oversight Board’s 

annual Taxpayer Attitude Survey to measure its progress against reducing the percentage 

of taxpayers who think it is acceptable to cheat on their taxes. 

To balance the suite of enterprise-wide goals, the IRS will evaluate its progress in 

engaging and gaining maximum productivity from employees. To measure progress in 

this area the IRS intends to use results from its established employee survey process. 

 

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

FY 2004 Actual Planned Planned Planned Planned Planned

Actual Performance Performance Performance Performance Performance Performance

Improve Voluntary Compliance - Oe * N/A 83.0% N/A N/A N/A 85.0% N/A

Reduce the Precent of Taxpayers Who Think it

is OK to Cheat on Their Taxes - Oe 12.0% 10.0% 10.0% 10.0% 9.0% <9.0% <9.0%

Key: Oe - Outcome Measure

* FY 2005 projection based on findings from Tax Year 2001.

N/A: Not applicable for the particular fiscal year.

IRS Long-Term Goals - Enterprise 

Performance Level

Programmatic Long-Term Goals 

Consistent with the requirements of the Government Performance Results Act (GPRA) 

outlined in OMB Circular A-11, the IRS established long-term, outcome-oriented goals 

and annual targets for its major programs. These programmatic goals support the 

achievement of the IRS enterprise-wide long-term goals. The IRS’ long-term goals and 

targets are outlined in the table that follows. 

Taxpayer Service 

Assisting the public to understand their tax reporting and payment obligations is the 

cornerstone of taxpayer compliance and is vital for maintaining public confidence. Given 

the complexity of the tax code, there is an expectation that taxpayers will contact the IRS 

with questions regarding their filing and payment obligations. The long-term goal for 

Taxpayer Self-Assistance, introduced in FY 2006, is consistent with the IRS strategic 

strategy to match the services offered to taxpayers participating in the tax system to meet 

a wide range of technological literacy. The self-assistance rate measures the IRS’ 

effectiveness in providing certain cost effective services including those for telephone 

automation and Internet automation. 

 

The IRS long-term goals for increasing the number of individual and business returns 

filed electronically show the importance the Service places on broadening the range of 

e-file offerings for taxpayers. In FY 2006 and beyond, the IRS plans to continue the 

expansion of electronic tax products for businesses by providing new forms and 

schedules for estates, trusts, and partnership tax returns; accepting amended returns; and 

IRS - 17
accepting the new annualized employment tax returns. For FY 2006, the IRS enhanced 

its website with new features, such as improved search capabilities, tax applications

and/or calculators, and has increased the accessibility and services it offers to the Spanish 

language community. 

Enforcement 

The overarching long-term objective for all IRS programs is to increase the rate of 

voluntary compliance among taxpayers. While all IRS programs serve to promote 

voluntary compliance with the tax law, Examination, Automated Underreporter, 

Collection and Criminal Investigation are the major IRS enforcement activities that 

interact directly with potentially non-compliant taxpayers. 

• Examination and Automated Underreporter ─ Two of the major IRS activities 

intended to minimize revenue loss through document matching and audits of 

individuals, businesses, and special purpose entities through the verification of 

income, deductions, exemptions, and credits reported on tax returns. After dropping 

substantially in the late 1990s, the IRS’ examination enforcement results have begun 

to improve. The IRS plans to continue to increase audit rates largely through 

productivity growth. 

The Automated Underreporter program has continued to make substantial strides in 

both the efficiency of its use of resources and the coverage of its activities in 

comparison to steady increases in tax return filings.

The IRS commitment to maintaining robust underreporter and examination programs 

are demonstrated by its efforts to increase enforcement results, efforts reflected in the

IRS long-term goals and corresponding performance targets. In FY 2006 and 

beyond, the IRS will continue efforts to identify additional long-term goals for the 

Examination program, in particular those that insure that the IRS is focusing on the 

right types of audits, and that IRS examiners are conducting the audits in an effective 

and efficient manner. 

• Collection ─ The collection of taxes due is a high priority for the IRS, which in 

FY 2005 collected $47.3 billion in revenue through Servicewide direct enforcement 

action. The long-term objectives for the Collection activity emphasize: (a) steps to 

draw down the potentially collectible inventory; (b) improving Field Collection’s 

ability to address complex payment avoidance tactics; and (c) enhancing the 

efficiency and effectiveness of Collection personnel through technology, systems, and 

support structure improvements. Another long-term objective for the Collection 

activity is increasing collections of known tax debt by using private collection 

agencies ─ an action that also will increase the speed and timeliness of service to 

taxpayers. 

• Criminal Investigation ─ The program focuses on tax cases, particularly abusive tax 

schemes, refund crimes, non-filers, and employment tax fraud. The Investigations 

program has maintained a consistently high case acceptance rate from the Justice 

IRS - 18
Department and has achieved equally impressive conviction rates of approximately 

91 percent in both FY 2004 and 2005. 

In 2005, the IRS introduced three Criminal Investigation program goals that 

collectively demonstrate the IRS’ long-term commitment to promoting taxpayer 

compliance. The goals are: Number of Convictions, Conviction Rate, and Conviction 

Efficiency Rate. The Number of Convictions is used as a proxy measure for Criminal

Investigation's impact on compliance. While this impact cannot be directly measured, 

academic research suggests that higher levels of convictions/criminal sentences lead

to higher compliance. Conviction Rate demonstrates the quality of IRS’ investigative 

work as only properly investigated cases will lead to a conviction. Conviction 

Efficiency Rate measures the overall efficiency of the IRS Investigation program. 

The comprehensive list of programmatic long-term goals is shown on the following page. 

IRS - 19
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

FY 2004 Actual Planned Planned Planned Planned Planned

Actual Performance Performance Performance Performance Performance Performance

Taxpayer Service 

Taxpayer Self Assistance Rate Oe * 46.4% 42.5% 45.7% 47.5% 49.8% 55.7% 59.1%

Percent Individual Returns Processed 

Electronically Oe ‡ 46.5% 51.1% 55.0% 58.8% 62.0% 64.7% 67.0%

Percent of Business Returns Processed

Electronically Oe ‡ 17.4% 17.8% 18.6% 20.6% 22.7% 24.9% 26.9%

Enforcement

Examination Coverage - Individual Oe ^ 0.8% 0.9% 0.9% 1.0% 1.0% 1.0% 0.9%

Field Exam Embedded Quality (EQ) N/A N/A Baseline TBD TBD TBD TBD

Office Exam Embedded Quality (EQ) N/A N/A Baseline TBD TBD TBD TBD

Examination Quality (LMSB) - Industry Oe 74.0% 77.0% 80.0% 84.0% 87.0% 90.0% 90.0%

Examination Quality (LMSB) - Coordinated 

Industry Oe 87.0% 89.0% 92.0% 93.0% 95.0% 95.0% 95.0%

Examination Coverage - Business (Corps. >

$10 M) Oe ††† 7.5% 7.8% 7.5% 8.4% 8.0% 7.4% 7.3%

Examination Efficiency - Individual E ^ ^ N/A 121 121 128 129 130 131

AUR Efficiency ** 1,514 1,701 1,759 1,834 1,873 1,905 1,938

AUR Coverage ** 1.9% 2.2% 2.3% 2.4% 2.4% 2.4% 2.4%

Collection Coverage - Units Oe † N/A 53.0% 52.0% 52.0% 53.0% 54.0% 55.0%

Collection Efficiency - Units Oe †† N/A 1,514 1,650 1,717 1,771 1,796 1,824

Field Collection Embedded Quality Oe N/A N/A Baseline TBD TBD TBD TBD

Criminal Investigations Completed Ot 4,387 4,104 3,945 3,960 4,045 4,175 4,260

Number of Convictions Ot 2,008 2,151 2,260 2,305 2,350 2,400 2,485

Conviction Rate E 91.2% 91.2% 92.0% 92.0% 92.0% 92.0% 92.0%

Conviction Efficiency Rate ($) E 362,849 295,316 339,565 341,334 341,755 342,332 338,227

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

* FY 2004-2005 data based on methodology developed in FY 2005.

^ ^ Methodology change - prior performance reported as 222 

† Methodology change - prior performance reported in PAR and PARTas 39%

†† Methodology change - prior performance reported as 510 

†††Variance from PART in 2007 reflects a recent increase in the Examination plan for LMSB

‡ 80% remains the long-term goal for electronic filing as identified by statute. It will not be achieved in the legislative timeframe

N/A: Not applicable for this fiscal year.

Performance Level

IRS Long-Term Goals - Programmatic 

** Measure includes data for SBSE and W&I. Total W & I Closures include Non-EITC and EITC Closures for FY 2004 - 2007. 

^ Methodology change - FY 2004 and FY 2005 performance previously reported as 2.3% and 1.4% (respectively)

IRS - 20
Explanation of Budget Increases and Decreases

The Internal Revenue Service (IRS) budget request for FY 2007 is $10,591,837,000 in 

direct appropriations, supplemented by $135,000,000 in new user fee revenue, for a total 

operating level of $10,726,837,000. This represents an increase of 1.4 percent from the 

FY 2006 enacted level. 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

FTE Amount Treasury Strategic Objective

FY 2006 President's Budget 97,009 $10,679,261

Congressional Adjustment 0 $1,250

1% Rescission (605) ($106,805)

FY 2006 Enacted 96,404 $10,573,706

Base Realignment

FTE Adjustment (1,018)

FY 2006 Operating Level 95,386 $10,573,706

Maintaining Current Levels (MCLs)

Pay Annualizations 0 $61,994

Proposed Pay Raise 0 $149,819

Non-Pay Inflation 0 $60,418

Sub-total, Maintaining Current Levels (MCLs) 0 $272,231

Program Reduction

Business Systems Modernization Program Reduction 0 ($29,700) F4A

Sub-total, Program Reduction 0 ($29,700)

Base Reinvestment

Increase Returns Processing Efficiencies 11 $12,237 F4A

Sub-total, Base Reinvestment 11 $12,237

Program Cost Savings

E-File Savings (174) ($6,760) F4A

Improvement Project Savings (135) ($8,215) F4A

Competitive Sourcing Savings 0 ($17,000) F4A

Program Efficiencies (2,096) ($84,121) F4A

HITCA Program Efficiency 0 ($5,500) F4A

Sub-total, Program Cost Savings (2,405) ($121,596)

Transfers Out

Transfer to TIGTA 0 ($941) F4A

Sub-total, Transfers Out 0 ($941)

Total, FY 2007 Base 92,992 $10,705,937

Program Changes

Program Increases

Consolidate Philadelphia Campus 0 $20,900 F4A

Sub-total, Program Increases 0 $20,900

FY 2007 Request 92,992 $10,726,837

Offsetting Fees

New User Fees Revenue 0 ($135,000)

Total, FY 2007 President's Budget Request 92,992 $10,591,837

Numbers may not add due to rounding

FY 2006 enacted level excludes rescission of unobligated balances ($20 million from PAM and $9 million from HITCA).

Appropriation: All

IRS - 21
2A – Budget Increases and Decreases Description

Maintaining Current Levels (MCLs).................................+$272,231,000 / 0 FTE 

The IRS is a labor intensive organization (72 percent). To maintain current operations ─

protect the integrity of the filing season and oversee tax administration programs ─ the 

IRS must have the resources to pay for the increased costs associated with statutory pay 

and other required increases. The request funds the estimated cost of pay and benefit 

increases and non-pay inflation. This amount includes: 

• Annualization of the FY 2006 Federal Pay Raise (3.1%) in FY 2007, +$61,994,000 

• Proposed FY 2007 Federal Pay Raise (2.2%), +$149,819,000 

• Non-Pay Inflation (2.2%), +$60,418,000 

Program Reductions ......................................................- $29,700,000 / 0 FTE

Business Systems Modernization Program Reduction -$29,700,000 / 0 FTE

This reduced level of funding continues support for the development and deployment of 

the Customer Account Data Engine, the Filing and Payment Compliance project, and the 

Modernized e-Filing project. 

Base Reinvestment ...................................................+ $12,237,000 / +11 FTE 

Increase Returns Processing Efficiencies +$12,237,000 / +11 FTE

This initiative requests funding to continue consolidating the processing of Individual 

Master File returns into fewer submission processing sites. These resources fund the 

ramp down of the Philadelphia submission processing site in FY 2007 and prepare for the 

ramp down of the Andover submission processing site in FY 2009. The initial ramp

down of the Andover site requires funding to secure swing space, ship equipment, and 

begin preliminary infrastructure support. The estimated costs to ramp down the 

Philadelphia submission processing site include severance costs and information 

technology support. 

The ramp down for both Philadelphia and Andover submission processing sites should 

not affect taxpayers and IRS will retain a strong employment presence in both areas. 

Benefits to the IRS include aligning the workforce with processing demands and 

technology and increasing returns processing efficiency. 

Program Cost Savings ..........................................- $121,596,000 / -2,405 FTE 

E-File Savings -$6,760,000 / -174 FTE

This savings results from increased electronic filing (e-file) and a reduction in Individual 

Master File paper returns. Estimated e-file savings are based on the projected reduction 

IRS - 22
in the number of paper returns processed each year, offset by the cost of processing 

e-filed returns. In FY 2007, the IRS expects to process 3.6 million fewer paper filed 

returns than in FY 2006. The savings from reduced paper returns is 230 FTE and the 

corresponding cost for supporting increased e-filed returns is 56 FTE, resulting in a net 

savings of 174 FTE and $6.8 million.

Title II of the Restructuring and Reform Act of 1998 (RRA ’98) provides the IRS with a 

policy statement regarding electronic filing. Paperless filing should be the preferred and 

most convenient means of filing federal tax and information returns as the IRS supports 

its goal of at least 80 percent of all such returns filed electronically by the year 2007. The 

IRS should collaborate with and encourage the private sector to promote and increase 

electronic filing of such returns. 

The percent of individual returns processed electronically for FY 2004 is 47 percent and 

51.1 percent in FY 2005, targeted to be 55 percent in FY 2006, 59 percent in FY 2007, 

and 62 percent in FY 2008. Paper return volume is expected to be down to 53 million by 

year 2008 with e-filed returns increasing to 84 million by year 2008. This decrease is a 

direct result of the increase of electronically filed returns from 74 million (or 55 percent) 

in 2006 to 80 million (or 59 percent) in 2007. 

0

50

100

150

2004 2005 2006 2007 2008 2009 2010

Year

Total Individual returns Total E-File Returns Paper Return Volume

Improvement Project Savings -$8,215,000 / -135 FTE 

This savings result from operational improvements generated by the Contact Recording, 

Queuing Management (Q-Matic), Correspondence Imaging Systems, and End-to-End 

Publishing improvement projects already in progress. 

• Contact Recording will enable managers at toll-free sites and Taxpayer Assistance 

Centers (TACs) to improve the quality of taxpayer assistance on incoming and 

outgoing telephone calls/interviews. These reviews support performance 

documentation, employee development, quality measurement, and overall program

improvement. The National Quality Review System will continue to collect data on 

customer accuracy. Improved productivity and accuracy will result in the reduction 

of: call length, return calls based on wrong or incomplete answers to taxpayers, 

assistor-to-assistor transfers, and attrition/assistor turnover. Fewer Customer Service 

IRS - 23
Representatives (CSRs) will answer the same number of calls. Savings include 

83 FTE in Accounts Management and 13 FTE in Compliance. 

• The Queuing Management System (Q-Matic) is an on-line system available at TACs 

to facilitate workload and resource distribution for improved workflow and timeliness 

of service. Q-Matic provides three major benefits: (1) increased usable space in 

TACs through improved traffic management, (2) increased management information 

to support program planning and control, and (3) reduced taxpayer burden and 

increased confidentiality by managing wait areas more efficiently. Q-Matic’s 

improved data gathering and customer traffic management capabilities support the 

delivery of standardized services in all TACs and develop quality measures for 

gathering and validating data. Q-Matic reports will eliminate the need for manual 

daily recordation of contact information by each employee and subsequent manual 

consolidation of such information to generate resource management reports. The 

system will identify peak periods, customer wait times, number of customers served 

and, most frequently requested services. 

• The Correspondence Imaging System will allow CSRs to work from a stored image 

to streamline case resolution. The system will allow the Imaging Control Unit to 

batch, control, and assign cases more efficiently. CSRs will receive correspondence 

more quickly and start to work it sooner. The system saves images of the 

correspondence and related documentation after the case is closed. There will be 

reductions in printing, routing, mailing and handling of mail for both outgoing and 

incoming responses for each campus. 

• End-to-End Publishing will provide technology solutions to streamline business 

processes associated with publishing and distribution. This will include procurement 

and integration of multiple commercial off-the-shelf products to improve value and 

address document creation, document management, printing procurement, electronic 

publishing, order fulfillment, warehouse management, and transportation 

management. 

Competitive Sourcing Efficiencies -$17,000,000 / 0 FTE 

The IRS expects to achieve efficiencies and savings through competitive sourcing 

resulting from six different projects in various phases of implementation. These projects 

reduce operational costs through the establishment of a most efficient organization or 

through private vendor efficiencies. The National Distribution Center (centralization of 

nationwide tax forms distribution operation) and Integrated Document Solutions 

Enterprise (formerly Campus Operations, which provides information systems computer 

operations at the 10 IRS Campus Facilities) reach full implementation in FY 2007 and 

achieve the last increment of savings.

IRS - 24
Project Savings

National Distribution Center $19,000

Integrated Document Solutions Enterprise $2,472,000

Building Delegation $1,655,000

Files Activity

1/ $6,060,000

Logistics Services

1/ $2,548,000

Fuels Compliance

1/ $4,246,000

TOTAL $17,000,000 1/ Savings may vary based upon actual award date and level of efficiency achieved.

Competitive Sourcing Savings by Project

There are four projects that will make substantial progress in FY 2007. The first, already 

awarded, is Building Delegation, which provides functions identified in agreements 

between the General Services Administration and the IRS to include responsibilities to

operate and maintain building systems. The second, Files Activity, receives, controls, 

shelves, and maintains all returns/documents for retention and retirement. The third, 

Logistics Services, provides warehousing and transportation, mainly at the ten campus 

sites. Finally, Fuels Compliance monitors 1,400 terminals, all fuel wholesalers, 

thousands of retail motor fuel outlets, and U.S. border crossings. 

Program Efficiencies -$84,121,000 / -2,096 FTE 

The IRS continues to improve efficiencies for taxpayer service and enforcement 

programs. Productivity efficiencies applying to both programs are from infrastructure 

savings and improvements and consolidation of central management functions. 

Improvement efficiencies directly applying to each program include: 

• Taxpayer Service (-$32,200,000 / -825 FTE) ─ Operations will be improved through 

a variety of efforts, including the judicious distribution of workload and the 

automation of certain taxpayer assistance functions. For example, the Service 

monitors case inventories centrally. This process improves the case processing 

workload by redirecting cases from offices with excessive inventory levels to those 

with a more manageable workload. Subsequently, existing staff work more cases. 

The Service will improve Taxpayer Service operations through a Systemic Advocacy

effort. It involves analyzing the causes of past taxpayer cases and monitoring current 

program activities dealing with taxpayers to prevent future Taxpayer Service case 

receipts. Systemic Advocacy also encompasses legislative proposals included in the 

National Taxpayer Advocate’s Annual Report to Congress. These proposed statutory 

changes, if enacted, also can reduce the number of cases. 

Another effort to improve Taxpayer Service efficiency is through the use of the 

Individual Taxpayer Identification Number Real Time System (ITIN RTS). The ITIN 

RTS will save time and resources for both the Service and taxpayers, as it will 

IRS - 25
automate the process of providing a Taxpayer Identification Number (TIN) to those 

taxpayers ineligible for a Social Security Number but required to provide identifying 

information on a tax return. In addition, the Service will continue to improve 

telephone operations through expansion of scripts, automated services, and leveraging 

of service delivery to improve the toll-free experience for the taxpayer. 

• Enforcement (-$51,921,000 / -1,271 FTE) ─ In FY 2007, the IRS’ enforcement 

operations will enhance productivity and efficiency through the reduction of 

resources allocated to overhead and internal support functions, and the redirection of 

those resources to front-line compliance activities. As the enforcement personnel 

hired in FY 2006 complete their training cycles, they will spend less time in training 

and will spend more time performing their roles as Examiners. In addition, those 

veterans, who were pulled offline to conduct on-the-job training, will focus on their 

exam cases, resulting in increased productivity. 

The Service also will identify processes that can be reengineered and centralized and 

will improve workload selection techniques in examination and collection cases. 

These procedural improvements will help the IRS resolve simple cases quickly while

simultaneously allowing the Service to concentrate resources on addressing the most 

egregious examples of abuse. 

The IRS will maintain audit coverage levels for large organizations with improved 

data collection techniques and enhanced work processes. To accomplish this, the IRS 

will leverage increased financial reporting requirements under the Sarbanes Oxley 

provisions, the implementation of the Schedule M-3, (Net Income [Loss] 

Reconciliation for Corporations with Total Assets of $10 Million or More), 

Modernized E-File, scanning and imaging of tax returns and other documents, and 

improved management systems to collect data and focus work processes. They will 

provide more rapid access to data for quicker risk analysis, thereby allowing the IRS 

to focus earlier on the highest non-compliance risks and reduce the amount of time 

required to place returns in the hands of Field Agents for compliance review. 

The Service will use new approaches to expand its enforcement presence in the 

regulated communities. For example, the Employee Plan and Exempt Organization 

(EP/EO) will provide a mechanism for the IRS to resolve return and other filing 

errors among EP/EO filers through correspondence contact. This in turn will permit 

the IRS to conserve future enforcement resources because these compliance checks 

take less time. As a result, the Service will improve coverage at a lower cost than 

traditional examinations. 

In addition to improvements in existing examination and collection activities, the IRS

will focus on improving investigative efficiencies through enhanced managerial 

oversight and the streamlining of business procedures. The Service will continue to 

enhance investigations through improvements in the technological capability to 

process electronic data and evidence. The Service will also increase its oversight of

the tax practitioner community and take appropriate enforcement actions against 

IRS - 26
those practitioners and enrolled agents who flagrantly disregard or manipulate the tax 

code. 

Health Insurance Tax Credit Administration (HITCA) Program Efficiency -$5,500,000 / 

0 FTE

This funding adjustment reflects the program’s effort to align fiscal year costs with 

contract year expenditures. In addition, HICTA is using a comprehensive plan outlining 

cost reduction initiatives to improve customer service and reduce information technology 

support to achieve these savings. This plan also includes further business process 

enhancements to the program to assure continued delivery of high quality service while 

keeping program costs down. 

Transfer to Treasury Inspector 

General for Tax Administration (TIGTA) ..............................- $941,000 / 0 FTE 

Transfer to TIGTA -$941,000 / 0 FTE 

This base transfer is comprised of (1) TIGTA’s portion of the Working Capital Fund 

(WCF), which is currently paid directly by the IRS (-$926,000) and (2) printing funds 

currently paid directly by the IRS to the Government Printing Office (GPO) for TIGTA 

activities (-$15,000). 

Program Increases........................................................+ $20,900,000 / 0 FTE 

Consolidate the Philadelphia Campus +$20,900,000 / 0 FTE 

This initiative requests funding for the information technology related costs to relocate 

multiple IRS activities from the remaining nine satellite sites located throughout 

Philadelphia into a single facility in the United States Postal Service (USPS) main 

building located in Philadelphia, PA. These activities include compliance and customer 

account services, operations support, taxpayer advocate services, and appeals. Relocation 

to the USPS site presents several benefits, including rent stability, improved employee 

access to public transportation, and a quality work environment. 

Tangible savings will be the reduced costs for redundant support services, security, and 

the elimination of transportation between sites (nine buildings). This investment will 

result in cost avoidance of additional maintenance and repair costs on the old, leased 

buildings that are already beyond their useful life. Employees serve taxpayers better 

when they work in a quality environment. The IRS’ service to taxpayers hinges on the 

effectiveness of its employees and the Service’s investment in their development and 

work environment. 

IRS - 27
Processing, Assistance, and 

Management (PAM) 

IRS - 28
Processing, Assistance, and Management 

The FY 2007 request is $4,045,122,000 in direct appropriation, supplemented by 

$114,771,000 in new user fee revenue, for a total operating level of $4,159,893,000. This 

is an increase of 1.6 percent from the FY 2006 enacted level. This appropriation funds all 

functions related to processing of tax returns, including providing services to the taxpayer 

before a return is filed, accounting for tax revenues, issuing refunds and tax notices. In 

addition, this appropriation provides direct support resources for management to provide 

leadership and direction to IRS personnel and administrative services such as facilities 

and procurement services.

Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2006 President's Budget 38,839 $4,136,578

Congressional Adjustment

1% Rescission (43) ($41,366)

FY 2006 Enacted 38,796 $4,095,212

Base Realignment

FTE Adjustment (488)

FY 2006 Operating Level 38,308 $4,095,212

Maintaining Current Levels (MCLs)

Pay Annualizations $21,148

Proposed Pay Raise $51,090

Non-Pay Inflation $32,168

Sub-total, Maintaining Current Levels (MCLs) 0 $104,406

Base Reinvestment

Increase Returns Processing Efficiencies $7,696 Filing, Shared Services, General Management F4A

Sub-total, Base Reinvestment 0 $7,696

Program Cost Savings

E-File Savings (174) ($6,640) Filing, Shared Services, General Management F4A

Improvement Project Savings (122) ($7,000) All BACs F4A

Competitive Sourcing Savings ($10,206) General Management F4A

Program Efficiencies (2,063) ($23,946) All BACs F4A

Sub-total, Program Cost Savings (2,359) ($47,792)

Transfers Out

Transfer to TIGTA ($272) Pre-Filing, General Management F4A

Sub-total, Transfers Out 0 ($272)

Total, FY 2007 Base 35,949 $4,159,250

Program Changes

Program Increases

Consolidate Philadelphia Campus $643 Shared Services F4A

Sub-total, Program Increases 0 $643

FY 2007 Request 35,949 $4,159,893

Offsetting Fees

New User Fees Revenue ($114,771)

Total, FY 2007 President's Budget Request 35,949 $4,045,122

Numbers may not add due to rounding

FY 2006 enacted level excludes rescission of unobligated balances ($20 million).

Appropriation: Processing Assistance and Management

IRS - 29
2A – Budget Increases and Decreases Description 

Maintaining Current Levels (MCLs)..................................+$104,406,000 / 0 FTE 

This request funds the estimated cost of statutory pay and benefit increases and non-pay 

inflation. This amount includes: 

• Annualization of the FY 2006 Federal Pay Raise (3.1%) in FY 2007, +$21,148,000 

• Proposed FY 2007 Federal Pay Raise (2.2%), +$51,090,000 

• Non-Pay Inflation (2.2%), +$32,168,000 

Base Reinvestment .........................................................+ $7,696,000 / 0 FTE 

Increase Returns Processing Efficiencies +$7,696,000 / 0 FTE

This base reinvestment will provide funding to continue consolidating Individual Master 

File returns processing into fewer Submission Processing sites. (For more information on 

this base reinvestment, see page 22.) 

Program Cost Savings .............................................- $47,792,000 / -2,359 FTE 

E-File Savings -$6,640,000 / -174 FTE

This savings results from increased electronic filing and a reduction in Individual Master 

File paper returns. (For more information on this savings, see page 22.) 

Improvement Project Savings -$7,000,000 / -122 FTE 

These are savings generated by the following projects: Contact Recording, Queuing 

Management, Correspondence Imaging Systems, and End-to-End Publishing. (For more 

information on this savings, see page 23.) 

Competitive Sourcing Savings -$10,206,000 / 0 FTE 

These savings are the result of six different competitive sourcing projects, which reduce 

costs through the development of a most efficient organization (MEO) or through private 

vendor efficiencies. (For more information on this savings, see page 24.) 

Program Efficiencies -$23,946,000 / -2,063 FTE 

Efficiencies are generated by a Servicewide reevaluation of overhead staffing and an 

increase of management’s span of control, as well as production efficiencies associated 

with improved processes, redistributing workload, and leveraging technology. (For more 

information on this savings, see page 25.) 

IRS - 30
Transfer to Treasury Inspector 

General for Tax Administration (TIGTA) ..............................- $272,000 / 0 FTE 

Transfer to TIGTA -$272,000 / 0 FTE 

This base transfer is comprised of (1) TIGTA’s portion of the Working Capital Fund 

(WCF), which is currently paid directly by the IRS (-$257,000) and (2) printing funds 

currently paid directly by the IRS to the GPO for TIGTA activities (-$15,000). 

Program Increases ............................................................+ $643,000 / 0 FTE 

Consolidate the Philadelphia Campus +$643,000 / 0 FTE 

This initiative requests funding to relocate multiple IRS activities from the remaining 

nine satellite sites located throughout Philadelphia into a single facility in the United 

States Postal Service (USPS) main building located in Philadelphia, PA. (For more 

information on this initiative, see page 27.) 

IRS - 31
Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

 Pre-Filing 3,200 $539,374 2,812 $517,707 2,920 $330,536 2,847 $329,557 -2.50% -0.30%

Filing and Account Services 28,843 $1,710,368 $1 28,181 ,679,688 $1 27,507 ,678,132 25,229 $1,618,784 -8.28% -3.54%

Shared Service Support 3,591 $1,210,874 3,567 $1,285,181 3,609 $1,484,366 3,609 $1,504,247 0.01% 1.34%

General Management 4,267 $596,241 4,236 $612,636 4,272 $602,178 4,264 $592,534 -0.18% -1.60%

Subtotal Newly Appropriated Resources 39,901 $4,056,857 38,796 $4,095,212 38,308 $4,095,212 35,949 $4,045,122 -6.16% -1.22%

FY 2007 New Resources:

Mandatory Approp. - New User Fees $114,771

Subtotal FY 2007 New Resources 35,949 $4,159,893

Other Resources

Unobligated Balances Available, SOY $10,754 $13,236 $13,236

Offsetting Collections - Reimbursable 569 $46,225 934 $62,150 934 $62,150 1,040 $71,473 11.35% 15.00%

Mandatory Approp. - Existing User Fees $0 $30,000 $30,000 $30,229 0.76%

50% Carryover $14,281 $0 $0

Recoveries $392 $0 $0

Available multi-year/no-year funds $2,107 $0 $0

Transfers In/Out ($7,892) $0 $0

Subtotal Other Resources 569 $65,867 934 $105,386 934 $105,386 1,040 $101,702 11.35% -3.50%

Total Resources Available for Obligation 40,470 $4,122,724 39,730 $4,200,598 39,242 $4,200,598 36,989 $4,261,595 -5.74% 1.45% 1 FY 2006 enacted level includes 1% across the board rescission and excludes rescission of unobligated balance ($20 million).

Numbers may not add due to rounding

FY 2005 FY 20061 FY 2007

% Change

 Processing Assistance and Management

Enacted

FY 20062

2 The FY 2006 Operating Level includes alignment of printing and postage from Pre-filing Taxpayer Assistance and Education to Shared Services Support as proposed in the

 FY 2006 Operating Plan.

Enacted Operating Level Request to FY 2007

FY 2006 Oper.

Resources Available for Obligation

IRS - 32
Pre-Filing Taxpayer Assistance and Education 

3A – Budget Activity Description 

Pre-Filing Taxpayer Assistance and Education ($329,557,000 from direct appropriation 

and $4,120,000 from new user fees) This activity provides services to assist with tax 

return filing and includes interpretation of the tax laws, media, and publications. The IRS 

continues to emphasize taxpayer education, outreach, increased volunteer support time 

and locations, expanding pre-filing agreements and rulings, and enhancing pre-filing 

taxpayer support through electronic media. This activity funds the following programs: 

• Pre-Filing Services Management to manage pre-filing, taxpayer assistance, and 

education programs, 

• Tax Law Interpretation and Published Guidance to interpret the tax law through 

published guidance, technical advice, and other technical legal services, 

• Taxpayer Communication and Education to research customer needs, prepare tax 

forms and publications, develop and manage educational programs, establish 

partnerships with stakeholder groups, and disseminate 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 to develop understandable notices, produce forms and 

publications for printed and electronic tax materials, and to supply media production 

services to taxpayers, 

• Rulings and Agreements to apply the tax law to specific taxpayers in the form of prefiling agreements, determination letters, advance pricing agreements and other prefiling determinations and advice, 

• Taxpayer Advocacy to ensure that taxpayers have an advocate to prevent future 

problems by identifying the underlying causes of taxpayer problems and participating 

in the development of systemic and/or procedural remedies (The vast majority of 

resource funding for Taxpayer Advocate Service (TAS) program is in the TLE 

appropriation), and 

• National Distribution Center to receive and process orders for IRS forms and 

publications received from individual taxpayers, tax practitioners, and IRS tax return 

preparation partners. 

IRS - 33
3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Pre-Filing Taxpayer Assistance and Education (BAC 21)

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 20062

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $610,969 $624,160 $624,790 $539,374 $517,707 $330,536 $329,557

New User Fees $4,120

Total New Resources $610,969 $624,160 $624,790 $539,374 $517,707 $330,536 $333,677

Existing User Fees 1 $1,085

Offsetting Collection (Reimbursable) $503 $741 $1,335 $1,357 $1,831 $1,831 $2,106

Total Operating Level $611,472 $624,901 $626,125 $540,730 $519,538 $332,367 $336,868

Human Resources

Newly Appropriated FTE 4,179 4,055 3,884 3,200 2,812 2,920 2,847

Other FTE 0 3 7 628 28 3

Total FTE (direct and reimbursable) 4,179 4,058 3,891 3,205 2,840 2,948 2,878

1 User Fees data is excluded for FY 2002 through FY 2004

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Timeliness of Critical Filing Season Tax Products to the 

Public - Oe N/A N/A 76.0% 80.0% 91.4% 92.0% 93.0%

Timeliness of Critical Other Tax Products to the Public - Oe N/A N/A 76.0% 80.0% 80.0% 85.0% 86.0%

Taxpayer Self Assistance Rate - Oe * (L) N/A 51.0% 46.4% Baseline 42.5% 45.7% 47.5%

Refund Timeliness - Individual (paper) - E 98.2% 98.8% 98.3% 98.4% 99.2% 99.2% 99.2%

Key: Oe - Outcome Measure, E - Efficiency Measure, and (L) - Long-term Goal

*FY 2003-2004 data based on a methodology for calculating performance developed in FY 2005

N/A: Not Applicable for this fiscal year

Resource Level

Performance Level

2 The FY 2006 Operating Level includes alignment of printing and postage to Shared Services Support as proposed in the FY 2006 Operating Plan.

1

IRS - 34
3B – Description of Performance 

Assisting the public to understand their tax reporting and payment obligations is the 

cornerstone of taxpayer compliance and is vital for maintaining public confidence in 

administering the tax laws. The IRS improved its service over the last several years and 

improved the efficiency and effectiveness of the tax administration system. The IRS 

continued to expand electronic filing for businesses by increased marketing; expanded 

e-file programs, including the acceptance of new forms and schedules; leveraging partner 

organizations such as state taxing authorities; and increased volunteer presence to better 

serve taxpayer needs. 

The FY 2007 Budget supports the IRS’ continued efforts to deliver high-quality service 

to taxpayers through: 

• Simplification of tax forms and publications to make them more suitable for use on 

computer-based systems. All published products will be accessible in electronic 

format. The IRS also will continue to work with partners to provide effective access 

and support to more taxpayers. 

• Improved quality and accuracy of responses from its call centers and extended 

taxpayer service through increased self-service enhancements. Self-service enables 

taxpayers to get immediate answers to questions. 

In FY 2006 and continuing in FY 2007, the IRS will research and evaluate taxpayer 

service needs through surveys and focus groups to obtain feedback from taxpayers and 

tax practitioners about ways to improve tax forms, instructions and publications. The 

IRS will seek opportunities to improve processes and training to achieve consistent, 

repeatable quality service with reduced unit delivery costs. In addition, the IRS plans to 

improve the quality and clarity of computer-generated notices issued to taxpayers to 

reduce the need for follow-up telephone contacts and make it easier for taxpayers to 

understand and comply with their tax requirements. 

IRS - 35
Filing and Account Services 

3A – Budget Activity Description 

Filing and Account Services ($1,618,784,000 from direct appropriation and 

$110,651,000 from new user fees) This activity funds taxpayer services, issuing refunds, 

and maintaining taxpayer accounts in addition to the processing of all paper and 

electronically submitted tax returns. The IRS continues to make progress in decreasing

paper returns and increasing the use of electronic filing and payment methods. The IRS 

is increasing both the capacity and effectiveness of its telephone and in-person taxpayer 

support. This activity funds the following programs: 

• Filing and Account Services Management to manage filing and account services in 

the program, 

• Submission Processing to process paper and electronically submitted tax returns and 

supplemental documents, account for tax revenues, and issue refunds and tax notices, 

• Account Management and Assistance – Electronic/Correspondence Assistance to 

furnish assistance, education and compliance services to taxpayers through telephone, 

correspondence, and electronic means and to resolve account and notice inquiries, 

either electronically or by telephone, 

• Account Management and Assistance – Field Assistance to provide face-to-face 

assistance, education, and compliance services to taxpayers. It includes preparing 

returns, answering tax questions, resolving account and notice inquiries, and 

supplying forms and publications to taxpayers, and 

• Files Most Efficient Organization to store the administrative files and the most recent 

tax returns in-process which are most likely to be requested for research by various 

IRS organizations until they are forwarded to the federal records centers. 

IRS - 36
3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Filing and Account Services (BAC 22)

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $1,657,342 $1,652,261 $1,705,742 $1,710,368 $1,679,688 $1,678,132 $1,618,784

New User Fees $110,651

Total New Resources $1,657,342 $1,652,261 $1,705,742 $1,710,368 $1,679,688 $1,678,132 $1,729,435

Existing User Fees 1 $6,200 $30,000 $30,000 $29,144

Offsetting Collection (Reimbursable) $19,472 $17,444 $28,290 $36,813 $49,697 $49,697 $57,152

Total Operating Level $1,676,814 $1,669,705 $1,734,032 $1,753,381 $1,759,385 $1,757,829 $1,815,731

Human Resources

Newly Appropriated FTE 31,123 31,581 30,990 28,843 28,181 27,507 25,229

Other FTE 453 393 503 562 746 746 832

Total FTE (direct and reimbursable) 31,576 31,974 31,493 29,405 28,927 28,253 26,061

1 User Fees data is excluded for FY 2002 through FY 2004

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Percent Individual Returns Processed Electronically - Oe (L)‡‡ 35.6% 40.3% 46.5% 51.0% 51.1% 55.0% 58.8%

Percent of Business Returns Processed Electronically - Oe (L) ‡‡ N/A N/A 17.4% 17.0% 17.8% 18.6% 20.6%

Customer Accuracy - Tax Law Phones - Oe N/A 82.0% 80.0% 82.0% 89.0% 90.0% 90.5%

Customer Accuracy - Accounts (Phones) - Oe N/A 88.0% 89.0% 89.8% 91.5% 92.0% 92.6%

Customer Contacts Resolved per Staff Year - E N/A 8,318 8,015 7,261 7,585 7,477 7,555

Customer Service Representative (CSR) Level of Service - Oe 68.0% 80.0% 87.3% 82.0% 82.6% 82.0% 82.0%

Key: Oe - Outcome Measure, E - Efficiency Measure

‡‡ 80% remains the long term goal for electronic filing as identified by statute. It will not be achieved in the legislative timeframe

N/A: Not Applicable for this fiscal year 

Performance Level

Resource Level

IRS - 37
3B – Description of Performance 

In FY 2005, the IRS set a record with more than 68 million individual taxpayer returns 

(more than half) filed electronically, representing an 11 percent increase over FY 2004. 

Home computer usage by individuals to e-file tax returns also increased 17 percent over 

FY 2004 to more than 17 million returns. Tax professional use of e-file increased by 

almost 11 percent, with 47 million filing electronically. Five million taxpayers e-filed for 

free through the Free File Alliance, a partnership between the IRS and a consortium of 

tax software companies, a 46 percent increase from 2004. To assist taxpayers in filing 

their returns, the IRS answered 33.4 million telephone calls, and the automated telephone 

system handled nearly 25.7 million calls. The IRS correctly responded to 89 percent of

tax law questions and 91.5 percent of account questions. 

Additionally, tens of millions of taxpayers visited the IRS website to obtain forms, 

publications, and answers to their many tax questions. IRS employees made millions of

contacts, improving service to American taxpayers and businesses by reducing response 

times to taxpayer inquiries, improving communications with taxpayers, providing 

taxpayers and their paid preparers with needed resources, and reducing the paperwork 

burden. 

Beginning in FY 2006 and continuing in FY 2007, the IRS will increase the number of 

electronic interactions, including those with small business taxpayers, and will increase

the number of practitioners that offer taxpayers electronic filing and paying options. 

Efforts to increase electronic filing will include adding new forms and schedules to the 

business electronic portfolio, leveraging partner organizations such as state taxing 

authorities, and increasing volunteer presence to better serve taxpayer needs. 

IRS - 38
Shared Services Support 

3A – Budget Activity Description 

Shared Services Support ($1,504,247,000 from direct appropriation) This activity 

provides administrative services to all IRS employees, including facilities services, rent

payments, printing, postage, and security. This activity funds the following programs: 

• Facilities Services to provide services and supplies required to manage IRS facilities, 

• Personnel to support human resource programs including recruitment, labor and 

employee relations, workforce planning and evaluation, performance management, 

employee benefits, personnel security, and transaction processing, 

• Procurement to support the procurement function of the IRS, 

• EEO Field Operations to plan and manage the IRS EEO and Diversity Program, 

• Rent to provide resources for all of the IRS rent needs, 

• Space and Housing/Non-ADP Equipment to manage all IRS building services, 

maintenance, space alterations, guard services, custodial overtime, utility services 

needs, and non-ADP equipment, 

• Customer Support to plan and manage financial services including Travel

Reimbursement and Accounting System, relocation, travel, imprest fund, purchase 

cards, corporate express, and employee clearances, 

• Treasury Complaint Centers to plan and manage the Treasury Complaint Centers, 

• Shared Support not provided by Agency Wide Shared Services (AWSS) to provide 

resources for shared cross-functional support not provided by AWSS, such as copiers, 

postage meters, shredders, courier services, P. O. Boxes, etc., 

• Building Delegation to provide resources for all of the Service’s GSA delegated 

buildings, including cleaning, maintenance, utilities, protection, administrative, 

recurring and one-time repair costs, 

• Printing and Postage reside in the Media and Publication organization to provide 

printing and postage including shipping of taxpayer and internal use materials for all 

business operating divisions, 

• Security to support for the protection of IRS employees, facilities and assets, the 

availability of taxpayer services, and the confidentiality of taxpayer information, and 

• Shared Services not in Rent or Space and Housing to provide for more detailed 

tracking of costs not identified in Space and Housing and Rent such as Public Transit 

Subsidy and Career Counselor Contract. 

IRS - 39
3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Shared Services Support (BAC 24)

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

1

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $1,010,209 $1,185,842 $1,242,893 $1,210,874 $1,285,181 $1,484,366 $1,504,247

Offsetting Collection (Reimbursable) $8,417 $8,623 $8,697 $7,325 $9,712 $9,712 $11,169

Total Operating Level $1,018,626 $1,194,465 $1,251,590 $1,218,198 $1,294,893 $1,494,078 $1,515,416

Human Resources

Newly Appropriated FTE 4,968 4,917 4,710 3,591 3,567 3,609 3,609

Other FTE 63 70 37 0 146 146 163

Total FTE (direct and reimbursable) 5,031 4,987 4,747 3,591 3,713 3,755 3,772

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Resource Level

Performance Level

There are no externally reported performance 

measures associated with this activity (see 3B

for related performance data)

1

 The FY 2006 Operating Level includes alignment of printing and postage from Pre-Filing Taxpayer Assistance and Education as proposed in the FY 2006

 Operating Plan.

3B – Description of Performance 

The IRS will expand and improve services to its employees through programs that 

promote employee development and continuity such as training, succession planning, and 

workplace conflict prevention. Beginning in FY 2006 and continuing in FY 2007, the 

IRS will make the following improvements and adjustments:

• Rent Management – Restrain rent cost increases by: 1) designing, developing, and 

delivering rent reduction projects that promote space efficiency; 2) establishing 

partnership with GSA to ensure best value; and 3) finalizing delivery plan and 

implementing Treasury-delegated leasing authority. 

• Safety and Health – Successfully deliver Safety Health and Return to Employment 

(SHARE) initiatives that will result in a three percent reduction for both total case 

rates and lost time case rates. 

• IT Systems Implementation – Complete the implementation of the Strategic 

Accounting of IRS records and several other systems, such as the Electronic Project 

Investment Process and the Graphic Database Interface-Portal (GDI/Portal). A 

GDI/Portal database infrastructure will improve the collection, retention and 

management of the vast amounts of data associated with Real Estate and Facilities 

Management (REFM) programs. The system will integrate existing standalone 

IRS - 40
legacy systems/ applications and deliver new functionality as needed (data 

warehouse). This improvement project will reduce administrative burden to 

customers and employees, streamline processes, integrate support systems, and allow 

point-to-point information sharing, ultimately improving service to customers. 

• Competitive Sourcing Studies: The IRS will continue to use public-private

competition to achieve transformational change. Shown below is the status of studies

currently underway: 

Phase Project

Real Estate and Facilities Management

Seat Management

Files Activity

Fuel Compliance

Logistics

Implementation Building Delegation

Integrated Document Solutions Enterprise

National Distribution Center

Solicitation

Post Competition Accountability and Monitoring

Preliminary Planning

 

IRS - 41
General Management and Administration 

3A – Budget Activity Description 

General Management and Administration ($592,534,000 from direct appropriation) 

This activity includes resources for top-level management and IRS-wide support for 

strategic planning, communications and liaison, finance, human resources, legal services, 

and specific benefits programs. This activity funds the following programs: 

• Unit General Management and Administration to operate unit headquarters’ 

management activities of strategic planning, communications and liaison, finance, 

human resources, EEO and diversity, and business systems planning and embedded 

training, 

• National HQ Management and Administration to provide leadership and direction for 

the IRS and help build partner relationships with key stakeholders. It provides IRS 

policy guidance for conducting planning and budgeting strategies; analysis of 

programs and investments to support strategic decision making; and developing and 

managing of the human resources required to fulfill the IRS' mission, including career 

management, leadership and organizational development, and education and learning. 

It provides resources for official reception and representation expenses, 

• Communications and Liaison to set strategic direction IRS-wide for Communications, 

Governmental Liaison and Disclosure, Legislative Affairs and Public Liaison; 

coordinate local government and liaison relationships and initiatives with the 

Operating Divisions; handle Congressional, state and national stakeholder 

relationships and issues; represent the IRS to local Congressional offices to 

coordinate cross-cutting issues including managing audits and legislative 

implementation; handle national media contacts and local media relationships; 

develop marketing campaigns, messages and products; and handle Disclosure 

requests and ensure IRS compliance with Disclosure and Privacy Laws, 

• General Legal Services to provide advice to IRS on non-tax legal issues including 

procurement, personnel, labor relations, equal employment opportunity, fiscal law, 

tort claims and damages, ethics, and conflicts of interest, and 

• Benefit Payments to fund Workers’ Compensation benefits and Unemployment 

Compensation payments. 

IRS - 42
3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

General Management and Administration (BAC 25)

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $613,451 $521,286 $464,780 $596,241 $612,636 $602,178 $592,534

Offsetting Collection (Reimbursable) $2,529 $2,508 $2,411 $730 $910 $910 $1,046

Total Operating Level $615,980 $523,794 $467,191 $596,972 $613,546 $603,088 $593,580

Human Resources

Newly Appropriated FTE 3,504 3,242 3,258 4,267 4,236 4,272 4,264

Other FTE 23 15 13 1 14 14 15

Total FTE (direct and reimbursable) 3,527 3,257 3,271 4,268 4,250 4,286 4,279

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Resource Level

Performance Level

There are no externally reported performance

measures associated with this activity (see 3B

for related performance data)

3B – Description of Performance 

In FY 2005, the IRS developed and expanded educational products and communication 

efforts to assist taxpayers and practitioners in fulfilling their tax obligations; implemented 

multimedia strategic communications and marketing plans to encourage compliance and 

increase electronic filing of returns; and using customer satisfaction surveys to refine

objectives and critical measures. The IRS also increased media coverage of the benefits 

and availability of e-filing. 

The IRS will continue to devote budget resources toward maintaining an effective 

relationship with taxpayers through communication and outreach activities, and creating 

a long-term vision for the Nationwide Tax Forums. 

IRS - 43
Tax Law Enforcement 

(TLE) 

IRS - 44
Tax Law Enforcement 

The FY 2007 request is $4,762,327,000 in direct appropriation, supplemented by 

$2,627,000 in new user fee revenue, for a total operating level of $4,764,954,000. This is 

an increase of 1.8 percent from the enacted level. This appropriation funds activities 

related to the equitable application and enforcement of the tax laws. The TLE 

appropriation funds services to taxpayers, after returns are filed, to identify and correct 

possible errors through document matching, examinations of returns, field examinations, 

and enforcement of criminal statutes related to other financial, interagency crime and 

drug enforcement programs. In addition, this appropriation funds the Research and 

Statistics of Income program, which includes tax data and market-based research to 

identify compliance issues; and the Earned Income Tax Credit (EITC) program, which 

continues to provide EITC-eligible taxpayer services, outreach, support, and research to 

reduce erroneous filings. 

Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2006 President's Budget 51,121 $4,725,756

Congressional Adjustment

1% Rescission (561) ($47,258)

FY 2006 Enacted 50,559 $4,678,498

Base Realignment

FTE Adjustment (838)

FY 2006 Operating Level 49,721 $4,678,498

Maintaining Current Levels (MCLs)

Pay Annualizations $34,879

Proposed Pay Raise $84,284

Non-Pay Inflation $8,183

Sub-total, Maintaining Current Levels (MCLs) 0 $127,346

Base Reinvestment

Increase Returns Processing Efficiencies $4 Research & SOI F4A

Sub-total, Base Reinvestment 0 $4

Program Cost Savings

E-File Savings ($56) Research & SOI F4A

Improvement Project Savings (13) ($674) Compliance Services, Research & SOI F4A

Competitive Sourcing Savings ($4,246) Compliance Services F4A

Program Efficiencies (33) ($35,714) All BACs F4A

Sub-total, Program Cost Savings (46) ($40,690)

Transfers Out

Transfer to TIGTA ($204) Compliance Services F4A

Sub-total, Transfers Out 0 ($204)

Total, FY 2007 Base 49,675 $4,764,954

FY 2007 Request 49,675 $4,764,954

Offsetting Fees

New User Fees Revenue ($2,627)

Total, FY 2007 President's Budget Request 49,675 $4,762,327

Numbers may not add due to rounding

Appropriation: Tax Law Enforcement

IRS - 45
2A – Budget Increases and Decreases Description 

Maintaining Current Levels (MCLs) ..............................+$127,346,000 / 0 FTE 

This request funds the estimated cost of statutory pay and benefit increases and non-pay 

inflation. This amount includes: 

• Annualization of the FY 2006 Federal Pay Raise (3.1%) in FY 2007, +$34,879,000 

• Proposed FY 2007 Federal Pay Raise (2.2%), +$84,284,000 

• Non-Pay Inflation (2.2%), +$8,183,000 

Base Reinvestment ..............................................................+ $4,000 / 0 FTE 

Increase Returns Processing Efficiencies +$4,000 / 0 FTE

This base reinvestment will provide funding to continue consolidating Individual Master 

File returns processing into fewer Submission Processing sites. (For more information on 

this base reinvestment, see page 22.) 

Program Cost Savings ................................................- $40,690,000 / 46 FTE 

E-File Savings -$56,000 / 0 FTE

This savings results from increased electronic filing and a reduction in Individual Master 

File paper returns. (For more information on this savings, see page 22.) 

 

Improvement Project Savings -$674,000 / -13 FTE 

These are savings generated by the following projects: Contact Recording, Queuing 

Management, Correspondence Imaging Systems, and End-to-End Publishing. (For more 

information on this savings, see page 23.) 

 

Competitive Sourcing Savings -$4,246,000 / 0 FTE 

These savings are the result of six different competitive sourcing projects, which reduce 

costs through the development of a most efficient organization (MEO) or through private 

vendor efficiencies. (For more information on this savings, see page 24.) 

Program Efficiencies -$35,714,000 / -33 FTE 

Efficiencies are generated by a Servicewide reevaluation of overhead staffing and an 

increase of management’s span of control, as well as production efficiencies associated 

with improved processes, redistributing workload, and leveraging technology. (For more 

information on this savings, see page 24.) 

IRS - 46
Transfer to Treasury Inspector 

General for Tax Administration .......................................... - $204,000 / 0 FTE 

Transfer to TIGTA -$204,000 / 0 FTE 

This base transfer is comprised of TIGTA’s portion of the Working Capital Fund (WCF), 

which is currently paid directly by the IRS. 

Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

 Compliance Services 45,686 $4,104,471 $4 47,133 ,415,064 $4 46,344 ,414,935 46,315 $4,496,735 -0.06% 1.85%

Research and SOI 866 $94,474 863 $95,954 845 $96,754 835 $97,542 -1.13% 0.81%

EITC 2,580 $164,594 2,563 $167,481 2,532 $166,809 2,525 $168,050 -0.30% 0.74%

Subtotal Newly Appropriated Resources 49,132 $4,363,539 50,559 $4,678,498 49,721 $4,678,498 49,675 $4,762,327 -0.09% 1.79%

FY 2007 New Resources:

Mandatory Approp. - New User Fees $2,627

Subtotal FY 2007 New Resources 49,675 $4,764,954

Other Resources

Unobligated Balances Available, SOY $2,495 $2,289 $2,289

Offsetting Collections - Reimbursable 443 $105,189 376 $86,670 376 $86,670 418 $99,671 11.17% 15.00%

Mandatory Approp. - Existing User Fees $6,200

50% Carryover $12,450

Recoveries $8

Transfers In/Out $211 $4,409 2

Subtotal Other Resources 443 $126,554 376 $88,959 376 $88,959 418 $104,080 11.17% 17.00%

Total Resources Available for Obligation 49,575 $4,490,093 50,935 $4,767,457 50,097 $4,767,457 50,093 $4,869,034 -0.01% 2.13% 1 FY 2006 enacted level includes 1% across the board rescission.

Numbers may not add due to rounding

Resources Available for Obligation Enacted Enacted Operating Level Request to FY 2007

FY 2006 

2 Mandatory Transfer In - $4,409,000 - IRS estimated cost related to the Spectrum Relocation of all Treasury and Bureau wireless operations in the 1710 to 1755 Megahertz

 band.

FY 2005 FY 2006 FY 2006 Oper. 1 FY 2007

% Change

Tax Law Enforcement

Spectrum Relocation 

In December 2004, the Congress passed and the President signed the Commercial 

Spectrum Enhancement Act (CSEA, Title II of P.L. 108-494), creating the Spectrum

Relocation Fund (SRF) to streamline the relocation of federal systems from certain 

spectrum bands to accommodate commercial use by facilitating reimbursement to 

affected agencies of relocation costs. The Federal Communications Commission has 

allocated this spectrum for Advanced Wireless Services, and plans to auction it as early 

as June 2006. Funds will be made available to agencies following the crediting of 

auction receipts to the SRF, anticipated in fiscal year 2007. Following the transfer of 

funds from the SRF to agency accounts, system relocation efforts will commence. The 

amounts reported here are the agency’s estimated relocation costs, as approved by the 

Office of Management and Budget, and as reported to the Congress by the Department of 

Commerce in December 2005. Funds are mandatory and will remain available until 

expended, and agencies will return to the SRF any amounts received in excess of actual 

relocation costs. 

IRS - 47
Compliance Services 

3A – Budget Activity Description 

Compliance Services ($4,496,735,000 from direct appropriation and $2,627,000 from 

new user fees) This activity includes resources to provide services to a taxpayer after a 

return is filed and to identify and correct possible errors or underpayment. This activity 

funds the following programs: 

• Compliance Services Management to support management associated with 

compliance program activities, 

• Payment Compliance - Electronic/Correspondence Collection to support 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 to support the IRS’ centralized Automated 

Collection System (ACS). It initiates contact and collects delinquent taxpayer 

liabilities through automated means, 

• Payment Compliance - Field Collection to conduct 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 to execute 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 to operate the service 

center’s examination function which initiates correspondence with taxpayers related 

to tax issues arising from claims on their tax returns, 

• Tax Reporting Compliance - Field Exam to determine taxpayers’ correct income

levels and corresponding tax liabilities, 

• Criminal Investigations to provide for 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, 

• Fraud/Bank Secrecy Act to provide resources for enforcing the anti-money laundering 

provision of the Bank Secrecy Act (BSA) of 1970 and the USA Patriot Act of 2001. 

It supports the Fraud program aimed at following the “money trail” to support the 

criminal investigation of tax evasion operations, 

• Appeals to oversee an administrative review process that provides a channel for 

impartial case settlement prior to cases being docketed in a court of law, 

• Litigation to represent the IRS in litigation and to provide all other legal support for 

the IRS, 

IRS - 48
• Taxpayer Advocate Case Processing to ensure that taxpayers have an advocate to 

represent their interests within the IRS, to resolve taxpayers’ problems through 

prompt identification, referral, and settlement (a small amount of resource funding for 

TAS programs is in the PAM appropriation), 

• Specialty Programs – Exams to examine federal tax returns of businesses and 

individual responsible for filing and payment of employment, excise and estate and 

gift taxes, 

• Specialty Programs – Collection to support 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 

• Office of Professional Responsibility to set, communicate, and enforce standards of 

competence, integrity, and conduct as outlined in Treasury Circular 230 among those 

who represent taxpayers before the IRS. 

3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $3,684,170 $3,555,233 $3,790,455 $4,104,471 $4,204,544 $4,204,416 $4,283,013

New User Fees $2,627

Total New Resources $3,684,170 $3,555,233 $3,790,455 $4,104,471 $4,204,544 $4,204,416 $4,285,640

Offsetting Collection (Reimbursable) $2,239 $9,945 $10,599 $37,876 $71,388 $71,388 $82,637

Total Operating Level $3,686,409 $3,565,178 $3,801,054 $4,142,347 $4,275,932 $4,275,804 $4,368,277

Human Resources

Newly Appropriated FTE 45,362 43,730 44,451 45,686 47,674 45,034 45,005

Other FTE 487 532 555 443 369 369 410

Total FTE (direct and reimbursable) 45,849 44,262 45,006 46,129 48,043 45,403 45,415

Treasury Strategic Goal: Preserve the Integrity of Financial Systems (F3)

Treasury Strategic Objective F3A:

Financial Resources

Newly Appropriated Resources $103,005 $91,514 $111,965 $131,116 $210,519 $210,519 $213,722

Offsetting Collection (Reimbursable) $95,757 $93,147 $105,293 $66,245 $13,600 $13,600 $15,099

Total Operating Level $198,762 $184,661 $217,258 $197,361 $224,119 $224,119 $228,821

Human Resources

Newly Appropriated FTE 1,131 933 802 917 1,310 1,310 1,310

Other FTE 468 450 469 341000

Total FTE (direct and reimbursable) 1,599 1,383 1,271 1,258 1,310 1,310 1,310

Total:

Total Financial Resources

Total Newly Appropriated Resources $3,787,175 $3,646,747 $3,902,420 $4,235,587 $4,415,063 $4,414,935 $4,496,735

Total Offsetting Collection (Reimbursable) $97,996 $103,092 $115,892 $66,245 $84,988 $84,988 $97,736

Total Mandatory Appropriation - User Fees (New and Existing) $2,627

Total Operating Level $3,885,171 $3,749,839 $4,018,312 $4,301,832 $4,500,051 $4,499,923 $4,597,098

Total Human Resources

Total Newly Appropriated FTE 46,493 44,663 45,253 46,603 48,984 46,344 46,315

Total Other FTE 955 982 1,024 784 369 369 410

Total FTE (direct and reimbursable) 47,448 45,645 46,277 47,387 49,353 46,713 46,725

Numbers may not add due to rounding

Resource Level

Compliance Services (BAC 37)

IRS - 49
3.2 – Budget and Performance Plan Table (Continued) 

Dollars in Thousands 

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Examination Coverage - Individual Oe ^ N/A N/A N/A 1.4% 1.4% Discontinued Discontinued

Examination Coverage - Individual Oe (L) N/A N/A 0.8% 0.9% 0.9% 0.9% 1.0%

Examination Quality - Field 74.0% 75.0% 78.0% 80.0% 84.0% Discontinued Discontinued

Field Exam Embedded Quality (EQ) *** (L) N/A N/A N/A N/A N/A Baseline TBD

Examination Quality - Office 71.0% 76.0% 76.0% 77.0% 81.0% Discontinued Discontinued

Office Exam Embedded Quality (EQ) *** (L) N/A N/A N/A N/A N/A Baseline TBD

Examination Quality (LMSB) - Industry Oe (L) 69.0% 74.0% 74.0% 78.0% 77.0% 80.0% 84.0%

Examination Quality (LMSB) - Coordinated Industry Oe (L) 78.0% 89.0% 87.0% 90.0% 89.0% 92.0% 93.0%

Examination Coverage - Business (Corps. > $10 Million) Oe ††† 

(L) N/A 6.1% 7.5% 7.1% 7.8% 7.5% 8.4%

AUR Efficiency † (L) N/A N/A 1,514 N/A 1,701 1,759 1,834

AUR Coverage † (L) N/A N/A 1.9% 2.5% 2.2% 2.3% 2.3%

Examination Efficiency - Individual E N/A N/A N/A 219 222 Discontinued Discontinued

Examination Efficiency - Individual E *† (L) N/A N/A N/A N/A 121 121 128

Reduce the % of Taxpayers Who Think it Ok to Cheat on Their 

Taxes Oe (L) N/A 17.0% 12.0% N/A 10.0% 10.0% 10.0%

Improve Voluntary Compliance Oe (L) N/A N/A N/A N/A 83.0% N/A N/A

Collection Coverage - units Oe N/A N/A N/A 32% 39% Discontinued Discontinued

Collection Coverage - units Oe *† (L) N/A N/A N/A 57.0% 53.0% 52.0% 52.0%

Collection Efficiency - units E N/A N/A N/A 497 510 Discontinued Discontinued

Collection Efficiency - units E *† (L) N/A N/A N/A N/A 1,514 1,650 1,717 

Field Collection Quality of Cases Handled in Person 84.0% 84.0% 82.0% 84.0% 81.0% Discontinued Discontinued

Field Collection Embedded Quality Oe **** (L) N/A N/A N/A N/A N/A Baseline TBD

Automated Collection System (ACS) Accuracy Oe N/A N/A 87.8% 88.0% 88.5% 88.0% 89.0%

Criminal Investigations Completed Ot (L) 3,201 3,766 4,387 3,895 4,104 3,945 3,960 

Number of Convictions Ot (L) 1,926 1,824 2,008 2,048 2,151 2,260 2,305

Conviction Rate E (L) 91.5% 91.5% 91.2% 92.0% 91.2% 92.0% 92.0%

Conviction Efficiency Rate ($) E (L) 330,282 363,932 362,849 332,194 295,316 339,565 341,334

TEGE Determination Case Closures Ot 129,680 171,812 143,877 131,700 126,481 112,400 128,500

****Field Collection Embedded Quality represents a re-structuring of "Field Collection Quality of Cases Handled in Person Oe" in FY 2007

*† The FY2005-2007 data provided for these measures represents a change in definition and methodology effective in FY2006. 

^ Methodology Change - FY 2004 and FY 2005 performance reported as 2.3% and 1.4% (respectively) under old methodology 

††† Variance from PART in 2007 reflects a recent increase in the Exam plan for LMSB

Performance Level

† Measure includes data for SBSE and W&I. Total W & I Closures include Non-EITC and EITC Closures for FY 2004 - 2007. 

***Embedded Quality (EQ) represents a re-structuring of measures for "Collection Quality Management System (CQMS) and Examination Quality" Management System

 (EQMS) in FY 2007. EQ will be baselined in FY 2006 and will run concurrently with CQMS and EQMS during that year. 

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and (L) - Long-term Goal

IRS - 50
3B – Description of Performance 

The IRS collected more than two trillion dollars in revenue in FY 2005, with 

$47.3 billion collected through enforcement activities, a 10 percent increase from 

FY 2004. While most tax revenue is paid voluntarily, some of the revenue is collected 

through concerted efforts to detect and deter non-compliance of the tax code. The IRS 

enforcement efforts are targeted to reduce the tax gap – the difference between what 

taxpayers legally owe and what they voluntarily pay on time. 

The IRS completed more than 219,000 high-income audits, 33 percent more than the 

previous year, and more than twice as many as in FY 2001. Total audits of all taxpayers 

exceeded one million for the second consecutive year, a 20 percent increase from

FY 2004. The IRS audited 81 percent more small businesses and 15 percent more 

corporations, a significant achievement given the size (more than $10 million) and 

complexity of these corporate entities. The IRS generated more than $4.7 billion in 

revenue through two prominent settlement initiatives aimed at reducing examination and 

litigation expenses while deterring the use of abusive tax shelters. 

The FY 2007 Budget supports the IRS’ continued efforts to improve its enforcement 

through streamlining and centralizing work processes, improving workload selection 

techniques, increasing managerial involvement in casework, and implementing initiatives 

to reduce cycle time by refining case selection criteria. The IRS will enhance coverage of

high-risk compliance areas as well as address the tax gap associated with small business 

and self-employed taxpayers. Focused enforcement efforts in reporting, filing and 

payment compliance programs, highlighting abusive tax avoidance transactions and highincome individual examinations involving pass-through entities (e.g. partnerships, trusts) 

will result in more examinations. Increased emphasis on high-risk taxpayers in the 

collection program will result in the closing servicewide of an additional 163,000 

delinquent accounts and resolution of more than 40,000 delinquent investigations. In 

addition, the Private Collection Agency (PCA) effort will provide a cost-effective and 

efficient manner to increase revenue collection. The IRS will ensure that taxpayer rights 

are safeguarded. 

IRS - 51
Research and Statistics of Income 

3A – Budget Activity Description 

Research and Statistics of Income ($97,542,000 from direct appropriation) This 

activity funds research and statistical analysis support for the Service. This activity funds 

the following programs: 

• Research to provide resources for researching annual income, financial, and tax data 

from tax returns filed by individuals, corporations, and tax-exempt organizations, and 

• Statistics of Income to provide 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. 

3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $102,631 $88,671 $91,938 $94,474 $95,954 $96,754 $97,542

Offsetting Collection (Reimbursable) $1,041 $1,118 $1,140 $1,068 $1,682 $1,682 $1,934

Total Operating Level $103,672 $89,789 $93,078 $95,542 $97,636 $98,436 $99,476

Human Resources

Newly Appropriated FTE 913 906 896 866 863 845 835

Other FTE 14 16 13 0 7 7 8

Total FTE (direct and reimbursable) 927 922 909 866 870 852 843

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Research and Statistics of Income (BAC 38)

Resource Level

Performance Level

There are no externally reported performance 

measures associated with this activity (see 3B 

for related performance data)

IRS - 52
3B – Description of Performance 

The information gathered, analyzed, and published by the IRS is used internally and by a 

variety of federal agencies, academics, researchers, and other interested parties. 

Information generated by annual studies of individual, corporate, and other types of 

taxpayers is presented via the TaxStats website and in various IRS publications. The 

information is used to analyze tax policy, project tax revenues, and estimate the overall 

impact of tax law changes and their effects on tax collections. Research also produces 

environmental scan data critical to production of the strategic assessment. 

The IRS uses its National Research Program (NRP) data to develop filing and payment 

compliance measures. Underreporting of income taxes, employment taxes and other 

taxes represents about 80 percent of the tax gap, as noted in the March 2005 release of the 

IRS’ preliminary tax gap estimates for Tax Year 2001. The single largest sub-component 

of underreporting involves the individual income tax, resulting from individuals 

understating their incomes, taking improper deductions, overstating business expenses or 

erroneously claiming credits. The NRP study further confirmed that the majority of 

understated income comes from business activities, not wage or investment income. 

In FY 2006 and continuing in FY 2007, the IRS will continue its NRP to provide critical 

information on the tax gap. This research offers the IRS insight into the types of income

reporting that have the greatest compliance problems. The NRP data provides the 

misreporting rates, but also the data for annually updating the statistical formulas that 

assist IRS in selecting returns for examination. 

The IRS will continue to target its case work and enforcement activities to more 

effectively deliver results and drive down the tax gap through analysis of tax information 

and data from compliance research studies. The IRS will use the results of these efforts 

to better understand and counter the methods and means of those taxpayers who fail to 

report or pay what they owe. 

IRS - 53
Earned Income Tax Credit 

3A – Budget Activity Description 

Earned Income Tax Credit ($168,050,000 from direct appropriation) This activity funds 

customer service and public outreach programs, strengthened enforcement activities, and 

enhanced research efforts aimed at reducing erroneous claims and filings associated with 

the Earned Income Tax Credit (EITC). 

 

The EITC provides low-income taxpayers with a refundable credit, which is claimed by 

22 million families each year, and has proven effective in lifting families out of poverty. 

IRS is working to reduce the erroneous payment rate for this program, which is too high. 

In support of the program and the taxpayers who use it, the IRS provides dedicated tollfree assistance, community-based volunteer tax preparation services, and coordinated 

marketing and educational programs to help individuals determine their eligibility. The 

IRS also monitors credit claimant characteristics to look for patterns of non-compliance, 

allowing the Service to improve program products and mitigate EITC abuse. 

 

The IRS is striving to minimize the burden of program administration and usage on the 

taxpayer through enhanced communication and improved audit processes. It is hoped 

that by increasing outreach efforts and making the requirements for claiming the credit 

easier to understand, the Service can encourage more eligible taxpayers to claim the 

EITC. Compliance in the program is also a priority for the IRS. Through a focus on 

ineligible filers and programs such as the pilot effort to certify qualifying child residency, 

the IRS is making an effort to ensure that the program is fairly and consistently applied to 

all, while avoiding abuse by a small minority of taxpayers at the expense of the rest of the 

American public. 

3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Earned Income Tax Credit (BAC 80)

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $153,940 $145,051 $201,142 $164,594 $167,481 $166,809 $168,050

Offsetting Collection (Reimbursable)

Total Operating Level $154 $145 $201 $164,594 $167,481 $166,809 $168,050

Human Resources

Newly Appropriated FTE 2,353 2,353 2,823 2,580 2,563 2,532 2,525

Other FTE

Total FTE (direct and reimbursable) 2,353 2,353 2,823 2,580 2,563 2,532 2,525

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Percent of Eligible Taxpayers Who File for EITC - Ot N/A N/A 80.0% 80.0% * 80.0% 80.0%

Key: Ot - Output/Workload Measure

* Performance reported after close of calendar year

Resource Level

Performance Level

IRS - 54
3B – Description of Performance 

Beginning in FY 2006 and continuing in FY 2007, the IRS will combat EITC program 

error while increasing participation among eligible taxpayers. Additional effort will 

include: 

• Conducting approximately 500,000 examinations of EITC returns each of the two 

years based on enhanced case selection systems, 

• Issuing 617,000 math error notices during 2006 – automatically adjusting tax 

returns to prevent $270 million in incorrect refunds in 2006 by detecting and 

correcting errors during return processing, 

• Identifying paid tax return preparers with high EITC error rates and using 

education and enforcement procedures to improve their performance, 

• Studying the effectiveness of potential alternative treatment for noncompliance 

issues and testing the use of soft notices to prevent repeat behavior, 

• Conducting a nationwide marketing and education campaign for the 2006 filing 

season with emphasis on reducing EITC errors, 

• Continuing the third year of the Qualifying Child test to better understand the 

effect of certification on EITC participation, claim accuracy, and burden,

• Conducting the second phase of the return preparer compliance strategy designed 

to identify and deter preparers of large numbers of erroneous EITC returns, 

• Implementing data sharing and other partnering activities with states to improve 

compliance and prevent erroneous payments, and 

• Improving the methods used to select, assign, and examine returns and identify 

taxpayer groups that are at higher risk of noncompliance. This will help the IRS to 

target education and outreach where it is most needed. 

IRS - 55
Information Systems (IS) 

IRS - 56
Information Systems 

The FY 2007 request is $1,602,232,000 in direct appropriation, supplemented by 

$17,602,000 in new user fee revenue, for a total operating level of $1,619,834,000. This 

is a 2.3 percent increase from the FY 2006 enacted level. This appropriation funds 

information systems improvement projects and information services. Information systems 

support every aspect of tax administration and are essential tools for every taxpayer 

communication and transaction with the IRS. A detailed description of the budget and 

program activities is presented in Sections 3A and 3B. 

Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2006 President's Budget 7,032 $1,597,717

Congressional Adjustment $1,250

1% Rescission 0 ($15,990)

FY 2006 Enacted 7,032 $1,582,977

Base Realignment

FTE Adjustment 308

FY 2006 Operating Level 7,340 $1,582,977

Maintaining Current Levels (MCLs)

Pay Annualizations $5,954

Proposed Pay Raise $14,388

Non-Pay Inflation $19,799

Sub-total, Maintaining Current Levels (MCLs) 0 $40,141

Base Reinvestment

Increase Returns Processing Efficiencies 11 $4,537 Information Services F4A

Sub-total, Base Reinvestment 11 $4,537

Program Cost Savings

E-File Savings ($63) Information Services F4A

Improvement Project Savings ($541) Information Services F4A

Competitive Sourcing Savings ($2,548) Information Services F4A

Program Efficiencies ($24,461) All BACs F4A

Sub-total, Program Cost Savings 0 ($27,613)

Transfers Out

Transfer to TIGTA ($465) Information Services F4A

Sub-total, Transfers Out 0 ($465)

Total, FY 2007 Base 7,351 $1,599,577

Program Changes

Program Increases

Consolidate Philadelphia Campus $20,257 Information Services F4A

Sub-total, Program Increases 0 $20,257

FY 2007 Request 7,351 $1,619,834

Offsetting Fees

New User Fees Revenue ($17,602)

Total, FY 2007 President's Budget Request 7,351 $1,602,232

Numbers may not add due to rounding

Appropriation: Information Systems

IRS - 57
2A – Budget Increases and Decreases Description 

Maintaining Current Levels (MCLs) .................................+$40,141,000 / 0 FTE 

This request funds the estimated cost of statutory pay and benefit increases and non-pay 

inflation. This amount includes: 

• Annualization of the FY 2006 Federal Pay Raise (3.1%) in FY 2007, +5,954,000 

• Proposed FY 2007 Federal Pay Raise (2.2%), +$14,388,000 

• Non-Pay Inflation (2.2%), +$19,799,000 

Base Reinvestment .......................................................+ $4,537,000 / 11 FTE 

Increase Returns Processing Efficiencies +$4,537,000 / 11 FTE

This base reinvestment will provide funding to continue consolidating Individual Master 

File returns processing into fewer Submission Processing sites. (For more information on 

this base reinvestment, see page 22.) 

 

Program Cost Savings ...................................................- $27,613,000 / 0 FTE 

E-File Savings -$63,000 / 0 FTE

This savings results from increased electronic filing and a reduction in Individual Master 

File paper returns. (For more information on this savings, see page 22.) 

Improvement Project Savings -$541,000 / 0 FTE 

These are savings generated by the following projects: Contact Recording, Queuing 

Management, Correspondence Imaging Systems, and End-to-End Publishing. (For more 

information on this savings, see page 23.) 

Competitive Sourcing Savings -$2,548,000 / 0 FTE 

These savings are the result of six different competitive sourcing projects, which reduce 

costs through the development of a most efficient organization (MEO) or through private 

vendor efficiencies. (For more information on this savings, see page 24.) 

Program Efficiencies -$24,461,000 / 0 FTE 

Efficiencies are generated by a Servicewide reevaluation of overhead staffing and an 

increase of management’s span of control as well as production efficiencies associated 

with improved processes, redistributing workload, and leveraging technology. (For more 

information on this savings, see page 25.) 

IRS - 58
Transfer to Treasury Inspector 

General for Tax Administration .......................................... - $465,000 / 0 FTE 

Transfer to TIGTA -$465,000 / 0 FTE 

This base transfer is comprised of TIGTA’s portion of the Working Capital Fund (WCF), 

which is currently paid directly by the IRS.

Program Increases ......................................................+ $20,257,000 / 0 FTE 

Consolidate the Philadelphia Campus +$20,257,000 / 0 FTE 

This initiative requests funding to relocate multiple IRS activities from the remaining 

nine satellite sites located throughout Philadelphia into a single facility in the United 

States Postal Service (USPS) main building located in Philadelphia, PA. (For more 

information on this initiative, see page 27.) 

Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

 IS Improvement Programs 0 $49,002 0 $48,960 $49,302 0 $49,302 0.00%

Information Services 7,385 $1,528,766 7,032 $1,534,017 7,340 $1,533,675 7,351 $1,552,930 0.15% 1.26%

Subtotal Newly Appropriated Resources 7,385 $1,577,768 7,032 $1,582,977 7,340 $1,582,977 7,351 $1,602,232 0.15% 1.22%

FY 2007 New Resources:

Mandatory Approp. - New User Fees $17,602

Subtotal FY 2007 New Resources 7,351 $1,619,834

Other Resources

Unobligated Balances Available, SOY $8,659 $37,704 $37,704

Offsetting Collections - Reimbursable 5 $5,478 40 $10,000 40 $10,000 45 $11,500 12.50% 15.00%

Mandatory Approp. - Existing User Fees $112,800 $70,000 $70,000 $69,398

50% Carryover $3,000

Recoveries $1,028

Transfers In/Out $7,500

Subtotal Other Resources 5 $138,465 40 $117,704 40 $117,704 45 $80,898 12.50% -31.27%

Total Resources Available for Obligation 7,390 $1,716,233 7,072 $1,700,681 7,380 $1,700,681 7,396 $1,700,732 0.22% 0.00% 1

 FY 2006 enacted level includes 1% across the board rescission.

Numbers may not add due to rounding

Information Systems

Request to FY 2007

FY 2006 Oper.

Resources Available for Obligation

FY 2005 FY 20061 FY 2006 FY 2007

Operating Level

% Change

Enacted Enacted

IRS - 59
Information Systems Improvement Programs 

3A – Budget Activity Description 

Information Systems Improvement Programs ($49,302,000 from direct appropriation) 

This budget activity funds improvements or enhancements to essential business 

applications and internal management systems that conform to the modernized IRS 

architecture. Funding supports near-term improvements or enhancements to business 

applications for specific business units in the tax processing or administrative and internal 

management systems on which the IRS depends. These projects are small-to-medium 

investment projects and are of short duration (generally one to three years). Some of the 

improvement projects this activity has supported in the past are Contact Recording, 

Desktop Integration, and Correspondence Imaging. Among the projects this activity will 

support in FY 2007 are Contact Recording, the Examination Desktop Support System, 

and the Compliance Data Environment. (The Business Systems Modernization program, 

a separate appropriation, funds major, cross-business unit, tax administration systems.) 

3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $39,864 $49,302 $49,302 $49,002 $48,960 $49,302 $49,302

Total Operating Level $39,864 $49,302 $49,302 $49,002 $48,960 $49,302 $49,302

Human Resources

Newly Appropriated FTE 0 0 000 0 0

Other FTE

Total FTE (direct and reimbursable) 0 0 0 0 0 0 0

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

There are no externally reported performance 

measures associated with this activity (see 3B for

related performance data)

Resource Level

Performance Level

Information Systems Improvement Programs (BAC 93)

IRS - 60
3B – Description of Performance 

Beginning in FY 2006 and continuing in FY 2007, IRS efforts will focus on: 

• The Modernization Vision and Strategy to produce a unified approach to identify, 

select, and govern information technology investments and set the direction for 

investment priorities for the next five years, 

• Planned improvements for collection closures, 

• Developing and testing the automated Correspondence Imaging System and 

developing a long-range plan for enterprise-wide implementation, 

• Improving Federal Information Security Management Act compliance, and 

• Supporting Homeland Security Presidential Directive 12, which mandates a 

government-wide, uniform approach to employee authentication and access. 

Maintaining the infrastructure will support increases in program productivity and 

improve services – both to taxpayers and other government agencies – and strengthen 

enforcement by giving IRS employees better tools. Ultimately, the performance of all 

IRS programs relies heavily on the IT infrastructure to provide the speed, security, and 

functionality necessary to keep pace with a modern – and increasingly electronic –

economy. 

IRS - 61
Information Services 

3A – Budget Activity Description 

Information Services ($1,552,930,000 from direct appropriation, $17,602,000 from new 

user fees) This activity provides funding for salaries, benefits, 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 funds in 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 Service’s hardware infrastructure of mainframes, minicomputers, 

personal computers, networks, and a variety of management information systems. 

3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Information Services (BAC 99)

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $1,581,041 $1,607,315 $1,540,273 $1,528,766 $1,534,017 $1,533,675 $1,552,930

New User Fees $17,602

Total New Resources $1,581,041 $1,607,315 $1,540,273 $1,528,766 $1,534,017 $1,533,675 $1,570,532

Existing User Fees 1 $112,800 $70,000 $70,000 $69,398

Offsetting Collection (Reimbursable) $7,470 $5,968 $7,870 $5,478 $10,000 $10,000 $11,500

Total Operating Level $1,588,511 $1,613,283 $1,548,143 $1,647,044 $1,614,017 $1,613,675 $1,651,430

Human Resources

Newly Appropriated FTE 7,499 8,021 7,569 7,385 7,032 7340 7,351

Other FTE 10 9 10 5 40 40 45

Total FTE (direct and reimbursable) 7,509 8,030 7,579 7,390 7,072 7,380 7,396

1 User Fees data is excluded for FY 2002 through FY 2004

Numbers may not add due to rounding

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance Performance Level

There are no externally reported performance

measures associated with this activity (see 3B for

related performance data)

Resource Level

IRS - 62
3B – Description of Performance 

The IRS Information Services support America’s tax administration system. Today, no 

taxpayer contact occurs without the benefit of IRS desktop computers, telephones, and 

voice and data networks. Billions of taxpayer documents are received each year and 

added to more than 300 million taxpayer accounts that are stored on IRS mainframe 

computers. Eleven thousand different IRS computer software applications calculate tax 

debts, maintain taxpayer accounts, and manage examination and collection case loads. 

The requested funds will provide for the necessary expenses for IRS computing and data 

processing services, desktop hardware and software, and telecommunications equipment 

and services that are essential tools in providing taxpayer service and enforcing the tax 

law. 

Information technology solutions are the most effective and efficient means of increasing 

the number of IRS contacts with taxpayer entities, increasing the volume of transactions, 

offering taxpayers a greater variety of faster alternatives for satisfying their just tax debts, 

and combating the most egregious abusive tax avoidance schemes, all of which are 

essential steps to closing the tax gap. Information technology products and services are 

the media through which the IRS communicates with taxpayers, receives and processes 

tax returns, and assesses and collects tax debts. 

The Information Services Budget Activity includes funding for staff and related costs for: 

End User Support; Business Systems Development; Enterprise Network; Enterprise 

Operations; and Electronic Tax Administration, Web Services, and Management. 

B usiness 

Systems 

M o dernizatio n 

M anagement

$ 12.6M

End User

Support

$370.3 M

Enterprise

Network

$276.7 M

Business

Systems 

Development

$328.3 M

Security

$51.1 M

ETA, Web

Services, 

Management 

& Other

$194.5 M

Enterprise

Operations

$233.6 M

Enterprise

Services

$85.9 M $1.553 billion request: 

 24% End User Support 

 21% Business Systems 

Development 

 18% Enterprise Network 

 15% Enterprise Operations 

 12.5% ETA, Web Services, 

Management and Other 

 End User Support provides equipment, technical systems support, and 

applications software support to all IRS employees ("end users"). This program

IRS - 63
provides basic office equipment by maintaining computer workstations and 

printers for more than 100,000 employees across 570 cities and 760 facilities; 

enables taxpayer communications and collaboration on taxpayer issues by 

maintaining 82,000 e-mail accounts, 100,000 desk phones; and ensures access to 

information technology resources by offering help desk and on-site support for 

more than one million technology-related problems/requests reported by IRS 

employees. 

 Business Systems Development maintains more than 11,000 application programs, 

containing more than 68 million lines of computer code. This program

implements about 15,000 program changes each year, primarily to update IRS 

systems for legislated tax law changes. IRS software applications are essential 

tools for front-line tax administration personnel to process the more than 

224 million tax returns and to collect the estimated $2 trillion in revenue the IRS 

receives each year. 

 Enterprise Network provides telecommunications service delivery to taxpayers 

and IRS employees. This program provides: toll-free taxpayer service at 26 call 

sites; call receipt and routing to “next available” assistors for 78 million taxpayer 

calls per year; provides telephone access (dial tone) to more than 100,000 internal 

users; voice mail to more than 80,000 users; remote access through 7,261 cellular 

phones, 8,700 pagers; and remote access to the IRS data network for 35,000 users. 

 Enterprise Operations maintains 17 mainframe computers and 4,800 servers that 

support critical tax processing, taxpayer account maintenance, and financial and 

management support systems. IRS mainframe computers support the Individual 

and Business Master Files, Service Center mainframe processing, electronic tax 

processing, administrative systems, and all IRS print operations. IRS mainframes 

provide 217 terabytes of Direct Access Storage Device (DASD) storage, the 

equivalent of 60 billion pages of tax documents. During peak periods, IRS 

computing systems process almost 300 million taxpayer account transactions per 

month. 

 Electronic Tax Administration (ETA) enables taxpayers to interact more 

effectively and efficiently with the IRS by marketing and otherwise facilitating 

the IRS’ electronic filing program. The IRS expects 79.4 million individual tax 

returns will be filed electronically in 2007 in part due to ETA’s aggressive 

marketing. ETA also maintains the IRS website www.irs.gov, a critical data 

source for taxpayers, as evidenced by the 464 million downloads from this site 

that occur every year. 

 Web Services implements new web applications and technologies to bring workimprovement tools to all IRS employees, providing them the ability to share 

information more quickly and to reach a broader audience. This program 

supports the IRS Intranet, delivers e-learning to IRS employees, and supports 

IRS.gov. 

IRS - 64
 Enterprise Services centralizes management of cross-cutting Information 

Technology services, provides program management to IRS IT projects, and 

assures that adequate levels of service are provided to tax administration 

programs. Enterprise Services supports Business Systems Modernization

Management with the delivery of modernized information systems such as the 

Customer Account Data Engine, e-Services, and modernized e-File. 

 Information Security facilitates electronic filing and supports tax administration 

by assuring the security of IRS transactions and data. 

 

Special Analysis

IRS Information Systems Operate with a High Degree of Efficiency 

A comprehensive analysis performed by Dr. Howard Rubin, METAMeasurement, in 

December 2003, concluded that the IRS Information Technology organization was 

delivering service at costs significantly less than comparable large, private-sector 

financial institutions. The IRS allocated 16 percent (now 15 percent) of its total 

operating expenses to information technology, whereas equivalent private sector financial 

institutions averaged 22 percent. Equivalent private sector institutions spent 87 percent 

more on information technology per employee than the IRS: $28,000 per private sector 

employee compared with $15,000 per IRS employee. When compared to benchmark 

data, the IRS is supporting more lines of code and more customers at a lower cost than 

equivalent private sector organizations. Based on expenditures of benchmark 

organizations, IRS Information Technology staffing was 10 percent less and total IT 

funding was 45 percent lower than expected. 

By FY 2007, the IRS will have realized about $389 million in productivity savings in

information technology. The IRS has reinvested these savings - equivalent to nearly a 

quarter of the appropriation - to pay for six years of cost increases without appropriations 

increases. From FY 2002 to 2006, operating costs increased by $158 million. In 

FY 2007, Information Services will absorb $28 million (see Table 2.1 Program Cost 

Savings). Deployed, modernized information systems also have increased operating 

costs because the Service must run legacy systems and modernized systems concurrently 

for a period of time. 

Since 2001, deployed, modernized information systems have introduced: electronic filing 

options to corporations and tax exempt organizations (Modernized e-File), electronic 

transactions for tax practitioners (e-Services), customer self-service options via the 

Internet (Internet Refund Fact of Filing and Customer Communications), telephone call 

management and intelligent call routing (Customer Communications), and standardized 

tax computation software for Large and Mid-Sized Business (LMSB) Revenue Agents 

(Customer Relationship Management). As a result, the IRS has increased the 

effectiveness of tax administration personnel by preempting millions of refund assistance 

telephone calls, reducing error rates for corporate tax returns, and automating manual 

processes. The IRS has increased taxpayer service by issuing refunds faster, providing 

IRS - 65
more electronic transactions, increasing taxpayers’ access to their own account data, 

reducing wait time for telephone assistance, and allowing (corporate) taxpayers to 

independently verify calculations of their tax debts. Ultimately, modernized information 

systems will replace existing legacy systems and permanently reduce operating costs – 

but only as an indirect result of a program designed to improve and modernize tax 

administration operations. 

Demand for Information Technology services will continue to grow. Between 2005 and 

2007, the IRS expects returns filed electronically to increase by more than 11 million, and 

electronic filings of information returns to grow by more than 110 million. Increased 

electronic filings will reduce IRS personnel and rent costs, reduce error rates, and speed 

refunds to taxpayers, but it also will increase IS costs. More electronic filing will 

increase transmissions on IRS data networks, increase demand for storage on IRS servers, 

and increase the processing power required of IRS mainframes. Increased capacity can 

only come from new equipment, new software, and additional IT workers to maintain it. 

The following chart illustrates the impact of savings initiatives and shows how the IRS 

has realigned resources from management and overhead to front-line operations. End 

User Support and Enterprise Operations reduced operating costs through workforce 

restructuring efforts and Enterprise Network saved money through improved contract 

management. 

The IRS has continued to deliver IT services to IRS tax administration employees and 

taxpayers within constant funding levels by implementing a wide variety of initiatives 

targeted at driving down the costs of basic Information Technology operations. Cost 

savings are used to offset cost increases (pay raises, etc.) and to reinvest in improvement 

projects. These initiatives include: 

• Workforce Restructuring - The IRS completed three major restructurings of the 

Information Technology workforce in fiscal years 2004 and 2005. The IRS used 

competitive sourcing and business process re-engineering initiatives to permanently 

reduce operating costs and restructure the workforce to deliver better, more efficient 

service. These initiatives realigned 1,096 positions (15 percent of the IT workforce) 

and $110 million in program budgets. The combined results of all three initiatives 

increased technical support staffs by reducing overhead, management, and 

administrative positions. 

• Telecommunications savings - In FY 2005, the IRS began implementing a new 

technology solution for secure, remote access to IRS data networks for IRS 

employees. The Enterprise Network organization transitioned to a new system with 

lower equipment costs, lower maintenance costs, and higher connection speeds, 

which will save the IRS about $12.9 million per year by the end of FY 2006. VoiceOver-Internet-Protocol is another new technology being implemented at IRS 

facilities; this investment will allow the IRS to transmit voice and data over the same

set of wires, which is expected to permanently reduce operating costs by at least 

$2 million per year. Similarly, new software for monitoring network devices and 

IRS - 66
managing configuration of voice and data networks will reduce the number of

contractors and federal employees required to maintain IRS networks, saving an 

estimated $1.5 million per year beginning in FY 2006. 

• Contract Management - The IRS has realized program efficiencies and cost savings 

from more aggressive re-negotiation and consolidation of contracts. In fiscal years 

2004 and 2005, the IRS Enterprise Networks organization consolidated multiple cell 

phone contracts and re-competed contracts for pagers and calling cards, resulting in 

permanent cost savings in FY 2006 of $3.2 million. The IRS Information 

Technology organization has made a concerted effort to replace contract workers with 

federal employees where cost effective; this initiative saved $4.1 million in FY 2005 

and is expected to generate an additional $4.5 million in savings in FY 2006. 

Initiatives expected to achieve future savings include: 

• Infrastructure Roadmap - The IRS is currently developing a detailed plan for the 

orderly and cost-effective replacement of its aging infrastructure. Rather than 

replacing outdated equipment on a one-for-one basis, this plan will identify and 

prioritize opportunities to replace old equipment with new technology that will be less 

expensive to maintain and replace. This plan will be consistent with the Department 

of the Treasury’s Enterprise Architecture. 

• Replace aging infrastructure - IRS plans to establish a fund of $180 million per 

year to sustain and replace its aging Information Technology infrastructure. IRS calls 

this its “3-6-9” approach. The current amount available for infrastructure 

replacement is $45 million annually. To increase this amount, the IRS will identify 

and capture, for reinvestment, annual savings (from projects such as those described 

above) equal to 3 percent of the IS base budget each year, for three years. The first 

year will capture 3 percent, the second year 6 percent, and the third year 9 percent. 

This nine percent, $135 million, added to the original $45 million provides the 

$180 million needed to sustain and replace the IT infrastructure. Using an 

infrastructure roadmap, these annual savings will be applied to the highest priority 

infrastructure requirements. This approach is consistent with the Administration’s 

directive to manage infrastructure within existing resources and the effort will be

consistent with Treasury’s Enterprise Architecture and the Department’s efforts to 

manage the infrastructure. 

• Spend-to-Save - The IRS has initiated a program for identifying, prioritizing, and 

selecting one-time spending opportunities that will generate permanent reductions to 

operating costs. Using the adage, “Spend now to save later,” the IRS has leveraged 

non-recurring cost savings identified in other savings initiatives as well as User Fees 

to fund consolidations, equipment replacements, and other one-time expenditures to 

permanently reduce Information Technology operating costs. 

IRS - 67
 

Business Systems 

Modernization (BSM) 

IRS - 68
Business Systems Modernization 

The FY 2007 request is $167,310,000, 15.1 percent less than the FY 2006 enacted level. 

BSM 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. 

Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2006 President's Budget 0 $199,000

Congressional Adjustment

1% Rescission 0 ($1,990)

FY 2006 Enacted 0 $197,010

Base Realignment

FTE Adjustment 0

FY 2006 Operating Level 0 $197,010

Program Reduction

Business Systems Modernization Program Reduction ($29,700) Business Systems Modernization F4A

Sub-total, Program Reduction 0 ($29,700)

Total, FY 2007 Base 0 $167,310

Total, FY 2007 President's Budget Request 0 $167,310

Numbers may not add due to rounding

Appropriation: Business Systems Modernization

IRS - 69
2A – Budget Increases and Decreases Description 

Program Reductions...............................................-$29,700,000 / 0 FTE 

Business Systems Modernization Program Reduction -$29,700,000 / 0 FTE

This reduced level of funding continues to support the development and deployment of 

CADE, the Filing and Payment Compliance project, and the Modernized e-Filing project. 

Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

0 $203,360 0 $197,010 $197,010 0 $167,310 0.00% -15.08%

0 $203,360 0 $197,010 0 $197,010 0 $167,310 0.00% -15.08%

Other Resources:

Unobligated Balances Available, SOY $230,211 $115,777 $115,777 $80,787

Subtotal Other Resources 0 $230,211 0 $115,777 0 $115,777 0 $80,787 0.00% -30.22%

Total Resources Available for Obligation 0 $433,571 0 $312,787 0 $312,787 0 $248,097 0.00% -20.68% 1

 FY 2006 enacted level includes 1% across the board rescission.

Numbers may not add due to rounding

Resources Available for Obligation Enacted

FY 20061 FY 2005 FY 2007

Enacted Request to FY 2007

Business Systems Modernization

Subtotal Newly Appropriated Resources

Newly Appropriated Resources:

Operating Level

FY 2006 FY 2006 Oper.

Business Systems Modernization

% Change

IRS - 70
3A – Budget Activity Description 

Business Systems Modernization (BSM) ($167,310,000 from direct appropriation) The 

IRS Restructuring and Reform Act of 1998 mandated that the IRS modernize to meet the 

needs of taxpayers. This program funds that modernization effort. The costs of IRS staff 

supporting this effort are funded in the operating accounts, primarily the Information 

Systems account. 

As shown in the chart below, we are shifting budget presentations to show infrastructure 

and management activity funding as part of the business project these support projects 

enable. This gives a better sense of the cost of business projects such as Modernized eFile. It is also consistent with the levels of BSM appropriated funding reported for these 

projects in the OMB Exhibit 300s and the Exhibit 53. This change is intended to help 

simplify management and oversight of BSM by moving towards the single governmentwide project definition used in the Exhibit 300s. 

BSM Project/Activity FY 2005 FY 2006 FY 2007

e-Services $36,965 $0 $0

Filing & Payment Compliance (F&PC) 0 $28,125 $15,593

Modernized e-File (MeF) $60,966 $55,525 $42,628

Customer Account Data Engine (CADE) $99,656 $100,350 $106,779

Management Reserve $5,773 $13,010 $2,310

BSM Program Total $203,360 $197,010 $167,310

Business Systems Modernization (BSM)

Funding by Project

(Dollars in Thousands)

The chart below presents for informational purposes BSM spending in the traditional 

approach (i.e., separate line items for resources supporting Core Infrastructure Activities 

and Architecture, Integration, and Management). IRS will continue to provide this chart 

for informational purposes in budget and expenditure plan presentations as long as the 

Committees find it useful. 

BSM Project/Activity FY 2005 FY 2006 FY 2007

e-Services $9,600 $0 $0

Filing & Payment Compliance (F&PC) $10,000 $3,500

Modernized e-File (MeF) $26,750 $30,000 $20,000

Customer Account Data Engine (CADE) $54,237 $60,000 $58,500

Core Infrastructure Activities $62,000 $47,000 $43,500

Architecture, Integration, & Management $45,000 $37,000 $39,500

Management Reserve $5,773 $13,010 $2,310

BSM Program Total $203,360 $197,010 $167,310

Business Systems Modernization (BSM)

Funding by Project Per Expenditure Plan 

(Dollars in Thousands)

IRS - 71
3.2 – Budget and Performance Plan Table

Dollars in Thousands 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted OPlan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources $391,593 $363,621 $387,699 $203,360 $197,010 $197,010 $167,310

Offsetting Collection (Reimbursable)

Total Operating Level $391,593 $363,621 $387,699 $203,360 $197,010 $197,010 $167,310

Human Resources

Newly Appropriated FTE 0 0 000 0 0

Other FTE 0 0 000 0 0

Total FTE (direct and reimbursable) 0 0 0 0 0 0 0

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

BSM Project Cost Variance by

Release/Subrelease - E* N/A N/A N/A N/A N/A 10.0% 10.0%

BSM Project Schedule Variance by

Release/Subrelease - E* N/A N/A N/A N/A N/A 10.0% 10.0%

Contracted Program Cost and Schedule

Variance - E** N/A N/A N/A 15.0% Discontinued

Contracted Requirements Stability and 

Contracted Requirements Delivered - E N/A N/A N/A 10.0% Discontinued

Business Systems Modernization (BAC 86)

Resource Level

Performance Level

Key: E - Efficiency Measure

N/A: Not Applicable (measure not in place) for this fiscal year.

**Measure currently captures performance only at the task order level and has been discontinued.

*Measures represent enhancements to program cost and schedule variance measures introduced in FY2005 

IRS - 72
3B – Description of Performance 

The IRS is changing and enhancing its cost, schedule, and performance measurement to 

provide better insight. Measures will be based on each BSM business cases’ anticipated 

benefits and this will position the IRS to improve the transparency and utility of the 

performance results reported to Treasury and other oversight bodies. 

Within the past two years, the BSM program has begun to improve its performance on 

delivering projects and releases on time, on budget, and meeting or exceeding scope 

expectations. After several years of not completing project costs, scheduling, and 

performance goals, the IRS is realizing benefits to taxpayers and enhanced BSM program

management capabilities. As of the end of December 2005, key accomplishments 

include: 

• Customer Account Data Engine (CADE) will ultimately replace the IRS’ antiquated 

Master File system, which is the repository of taxpayer information. CADE allows 

faster refunds (processing refunds on a daily basis), improved taxpayer service, faster 

issue detection, more timely account settlement, and a robust foundation for 

integrated and flexible modernized systems. CADE posted more than 1.4 million 

returns and generated more than $427 million in refunds. In FY 2006, CADE should 

be able to process 4 million returns (with an anticipated 33 million by the following

year) and will be the single authoritative repository for account and return data for 

those returns. 

• Modernized e-Filing (MeF) received more than 265,000 accepted return submissions 

– twice the number of return receipts over projections - submitted by nearly 14,000 

participating Electronic Return Originators, processed these returns at much higher 

volumes than expected within performance parameters, and doubled the number of 

returns processed electronically as compared to 2004 volumes. Error fallout rates for 

MeF are significantly lower than paper processing. For corporate returns alone, MeF 

has a fallout rate of 4 percent as compared to 18 percent fallout rate for paper 

processing In January 2005, Modernized e-Filing (MeF) deployed Form 7004 

(filing extension for corporations) Form 990PF (information return for private 

foundations), and tax law changes for filing season 2004. This enabled the IRS to 

establish regulations requiring large corporations and tax-exempt organizations to file 

their income tax or annual information returns electronically beginning in 2005. 

• E-Services registered more than 101,000 users, a 130 percent increase from the same

time in 2004; processed more than140,000 Electronic Return Originator applications; 

serviced more than 209,000 online requests for Preparer Taxpayer Identification 

Numbers (PTINs); processed more than 63 million Bulk TIN Match requests; 

performed more than 2.3 million Interactive TIN Match requests; processed more 

than 172,000 transcript requests via the Registered User Portal and over 669,000 via 

the Employee User Portal; and received more than 34,000 Power of Attorney 

requests. 

IRS - 73
• The Integrated Financial System (IFS) processed more than 154,000 procurement 

commitments, obligations and receipt/acceptance documents through November 30, 

2005; eliminated 100 percent of payroll transaction backlogs; and met SF-224 and 

TIER file submission deadlines. 

In FY 2006 and continuing in FY 2007, BSM is revising its modernization strategy to 

emphasize incremental release of projects to deliver business value sooner and at a lower 

risk. BSM will concentrate on delivering three tax administration projects, along with 

infrastructure initiatives and continued improvement to program management operations. 

Each tax administration project will address a core IRS strategic priority: 

Service - Expand services provided and the number of taxpayers served by Modernized 

e-Filing, enabling MeF to become the primary interface for all business filings. During

2007, MeF will provide electronic filing capabilities for 1065 forms (Partnership Income) 

to nearly 2.7 million small business and self-employed taxpayers. MeF will remedy 

legacy electronic filing limitations, which did not allow partnerships to comply with the 

Taxpayer Relief Act of 1997 without having to seek waivers to avoid financial penalties. 

In addition, MeF will deliver new federal and state capabilities to allow major 

corporations and Tax Exempt organizations to file federal and state returns jointly via 

electronic means. Both of these efforts will significantly reduce taxpayer burden and 

simplify filing processes. 

Enforcement - Filing and Payment Compliance (F&PC) project will help the Service to 

analyze tax collection cases and separate cases requiring direct IRS involvement from 

those that can be handled by Private Collection Agencies (PCAs). Enabling PCAs to 

collect revenues owed by taxpayers is a cost-effective and efficient manner to increase

revenue collection. F&PC will deploy initial capabilities for routing collection cases to 

PCAs in FY 2006. 

 

Modernization – Phased in development of CADE continues. CADE will increase the

type and number of 1040 family of returns processed on modernized systems. The 

benefits of CADE are that the IRS updates taxpayer accounts daily and taxpayers receive 

their refunds sooner. 

BSM success is also dependent on continued investment in core infrastructure and 

architecture, integration and management activities that provide critical support to the 

projects. While initial investments provided a foundational set of tools, infrastructure and 

processes, there remain critical components to be developed. Continued investment in 

these activities will institutionalize these improved management processes and practices

into the modernization projects. This will result in a consistent and more effective 

management approach maximizing the impact of modernization investments by 

integrating projects with the key supporting infrastructure and program initiatives. 

The BSM program is demonstrating a record of accomplishment and is establishing 

additional foundational elements to further BSM’s ability to realize success. In FY 2007, 

IRS - 74
the BSM program will continue addressing internal and external priorities fully aligned 

with core IRS strategic priorities. 

• F&PC will complete deployment and begin operation of inventory management 

capabilities, better enabling IRS to match delinquent case inventory with available 

IRS and PCA resources. This will increase IRS production capacity to resolve the 

growing backlog of delinquent taxpayer cases. 

• Modernized e-File will develop, test and deploy modernized electronic filing for 

Form 1041 (individuals) and Form 990T (exempt organizations). The modernized 

platform speeds turnaround time for tax return submissions and uses the latest, secure

Internet technology. The enhanced system also will accept attachments (pdf files) as 

part of the filed return, eliminating one of the remaining barriers to electronic filing. 

• Customer Account Data Engine will process approximately 33 million Tax Year 2006 

returns during the 2007 filing season. 

IRS - 75
Health Insurance Tax 

Credit Administration 

(HITCA)

IRS - 76
Health Insurance Tax Credit Administration

The FY 2007 request is $14,846,000, a decrease of 25.8 percent from the FY 2006 

enacted level. HITCA provides resources to administer a refundable tax credit for health 

insurance to qualified individuals, which was enacted as part of the Trade Adjustment 

Assistance Reform Act of 2002. 

Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Dollars in Thousands 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2006 President's Budget 17 $20,210

Congressional Adjustment

1% Rescission 0 ($202)

FY 2006 Enacted 17 $20,008

Base Realignment

FTE Adjustment 0

FY 2006 Operating Level 17 $20,008

Maintaining Current Levels (MCLs)

Pay Annualizations $13

Proposed Pay Raise $57

Non-Pay Inflation $268

Sub-total, Maintaining Current Levels (MCLs) 0 $338

Program Cost Savings

HITCA Program Efficiency ($5,500) HITCA F4A

Sub-total, Program Cost Savings 0 ($5,500)

Total, FY 2007 Base 17 $14,846

Total, FY 2007 President's Budget Request 17 $14,846

Numbers may not add due to rounding

FY 2006 enacted level excludes rescission of unobligated balances ($9 million).

Appropriation: Health Insurance Tax Credit Administration

IRS - 77
2A – Budget Increases and Decreases Description 

Maintaining Current Levels (MCLs) ....................................+$338,000 / 0 FTE 

This request funds the estimated cost of statutory pay and benefit increases and non-pay 

inflation. This amount includes: 

• Annualization of the FY 2006 Federal Pay Raise (3.1%) in FY 2007, +$13,000 

• Proposed FY 2007 Federal Pay Raise (2.2%), +$57,000 

• Non-Pay Inflation (2.2%), +$268,000 

Program Cost Savings .....................................................- $5,500,000 / 0 FTE 

HITCA Program Efficiency -$5,500,000 / 0 FTE 

These savings reflect the program’s effort to align fiscal year costs with contract year 

expenditures. (For more information on this savings, see page 27.) 

IRS - 78
Budget and Performance Plan 

3.1 – Appropriation Detail Table 

Dollars in Thousands 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Health Insurance Tax Credit Administration 17 $34,562 17 $20,008 17 $20,008 17 $14,846 0.00% -25.80%

Subtotal Newly Appropriated Resources 17 $34,562 17 $20,008 17 $20,008 17 $14,846 0.00% -25.80%

Other Resources:

Unobligated Balances Available, SOY $5,117 $279 $279

Subtotal Other Resources 0 $5,117 0 $279 0 $279 0 $0 0.00% 0.00%

Total Resources Available for Obligation 17 $39,679 17 $20,287 17 $20,287 17 $14,846 0.00% -26.82% 1

 FY 2006 enacted level includes 1% across the board rescission and excludes rescission of unobligated balance ($9 million).

Numbers may not add due to rounding

FY 2006

Operating Level

% Change

Health Insurance Tax Credit Administration

Resources Available for Obligation Enacted

FY 2006

1 FY 2005 FY 2007

Enacted Request to FY 2007

FY 2006 Oper.

3A – Budget Activity Description 

Health Insurance Tax Credit Administration ($14,846,000 from direct appropriation) 

The Health Insurance Tax Credit Administration budget activity funds costs to administer 

a refundable tax credit for health insurance to qualified individuals. 

The Trade Act of 2002 required the IRS to develop and operate a system to provide an 

advance, refundable tax credit for 65 percent of the cost of qualified insurance 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 Health Insurance Tax Credit Administration Program Office and the staff 

charged with administering the program for the Service. 

IRS - 79
3.2 – Budget and Performance Plan Table 

Dollars in Thousands 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2006

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Operating FY 2007

Enacted Enacted Enacted Enacted Enacted Plan Request

Treasury Strategic Objective F4A:

Financial Resources

Newly Appropriated Resources N/A $69,545 $34,794 $34,562 $20,008 $20,008 $14,846

Offsetting Collection (Reimbursable) .

Total Operating Level N/A $69,545 $34,794 $34,562 $20,008 $20,008 $14,846

Human Resources

Newly Appropriated FTE N/A 17 17 17 17 17

Other FTE 0 000 0 0

Total FTE (direct and reimbursable) N/A 0 17 17 17 17 17

FY 2005 FY 2005 FY 2006 FY 2007

FY 2002 FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Historical Performance Performance Performance Performance

Health Insurance Tax Credit Administration (BAC 20)

Resource Level

Performance Level

There are no externally reported performance

measures associated with this activity (see 3B for 

related performance data)

3B – Description of Performance 

HITCA funds the cost to administer a refundable tax credit for health insurance to 

qualified individuals. Since implementation, the costs for the HITCA program have 

declined as a result of the IRS' active program oversight and management, as well as 

several cost-cutting initiatives implemented in 2004. The development of a 

comprehensive action plan outlining cost-reduction initiatives and aggressively 

monitoring planned actions to completion have shown significant savings. In FY 2005, 

the IRS completed a number of additional activities designed to reduce program costs. 

These included revamping HITCA's administrative approach, implementing a new 

technology-enabled service delivery model, and reducing overhead expenses. 

 

In FY 2006 and continuing in FY 2007, the IRS will identify potential improvements to 

reduce program costs. The IRS will implement new business processes designed to 

identify, prevent, and recover erroneous payments. The IRS will also evaluate the 

compliance aspects of the credit and develop new compliance procedures as necessary. 

Finally, the IRS will re-compete the contract for administration of the HITCA program. 

The contract will be awarded in mid 2006, which will afford ample time to ensure a 

smooth transition to a new contract for FY 2007.

IRS - 80
PMA and PART 

Evaluation

IRS - 81
PMA and PART Evaluation 

3C – PMA Evaluation Description

HUMAN CAPITAL: The IRS developed the final draft of the 2005-2009 Human 

Capital Strategic Plan and has begun work on its implementation. The Plan, which is 

based on the Office of Personnel Management’s (OPM) Human Capital Assessment and 

Accountability Framework, links directly to IRS and Department of Treasury strategic 

goals and the IRS’ strategic planning and budgeting processes and will serve as primary 

guidance for strategic management of human capital in the IRS. 

In FY 2005, the IRS continued its workforce restructuring and transition initiatives to 

achieve both the optimum mix of skills within the IRS and the optimum ratio of 

employees in Mission Critical Occupations (MCOs) that directly support tax processing, 

administration and compliance to non-MCO employees in supporting functions. For 

example, the IRS restructuring of its case processing and insolvency functions, as well as 

optimization of support functions, continues on schedule. 

The IRS refined its competency models for MCOs as part of the Service’s ongoing effort 

to improve its ability to field a workforce with the full range of competencies that are 

necessary for high quality performance. Results have been incorporated into the strategic 

recruitment marketing campaigns and into the assessment processes used to evaluate the 

competency of MCO applicants. 

To promote the IRS as the employer of choice, the IRS executed a new recruitment 

marketing contract, maintained an active media campaign, produced new multi-media job 

previews, updated the IRS Careers website, and continued fostering partner relationships 

with more than 200 colleges and universities. All IRS job vacancies are posted on the 

official government-wide site: www.usajobs.gov as required by statute. 

In addition, the IRS implemented its automated recruitment solution CareerConnector for 

external hiring of selected MCOs. Implementation of CareerConnector has helped enable 

the IRS to meet, for certain vacancies, the OPM recommended standard of filling 

vacancies within 45 days from the vacancy announcement. The IRS also improved the 

talent pool of external MCO hires and provided management with greater flexibility to 

select the most qualified candidates through the expanded use of category ratings to 

stratify the available applicant pool and also simulated job situation assessments. 

The Enterprise Learning Management System, a web-based application that managers, 

employees, and the Learning and Education community use to manage training and 

development, was implemented IRS-wide in January 2005 in partnership with the 

Administration’s E-Training initiative, managed by the Office of Personnel Management. 

IRS - 82
The IRS launched a comprehensive leadership succession planning initiative. The first 

phase of the initiative included assessment of 103 executives IRS-wide to measure and 

benchmark competency strengths and weaknesses. 

In addition, the IRS implemented a Servicewide human capital governance structure, 

including representatives from the IRS business units, support functions, and specialized 

units that: 

• provides a forum for all IRS entities to jointly address and propose solutions to 

human capital issues and challenges resulting from the implementation of large-scale 

human capital programs, policies, and initiatives

• ensures consistent and fair treatment of employees impacted by workforce change 

initiatives 

The IRS developed, at the direction of the Chief Human Capital Officer (HCO), an HCO 

Concept of Operations that articulates the HCO’s vision, mission, values, role, 

responsibilities, and lines of business. In addition, the HCO executed Service Level 

Agreements with internal customers describing services HCO will provide; HCO and 

customer commitments; and measurement of HCO performance. 

ELECTRONIC GOVERNMENT: In FY 2005, the IRS completed the security 

certification and accreditation of its network infrastructure general support systems. This 

effort has resulted in the IRS making substantial progress in improving the Federal 

Information System Management Act (FISMA) compliance status of all the IRS 

information systems. 

In addition, the IRS has expended sustained effort on the IRS Enterprise Architecture. 

This comprehensive Enterprise Architecture is used to inform, guide, constrain, and 

manage capital investments. The IRS Enterprise Architecture is applied at every stage of 

the system life cycle, including charting new projects, validating compliance at milestone 

reviews, and documentation of delivered systems in the As Built Architecture. The IRS 

has a strong Enterprise Architecture Division in place that is responsible for building and 

maintaining the IRS Enterprise Architecture, reviewing projects to certify compliance 

with the IRS Enterprise Architecture, program level engineering (e.g. alternatives 

analysis, prototyping, and technical reviews), and enterprise data management. 

The IRS Business Architecture is aligned with the Federal Enterprise Architecture 

Business Reference Model and Treasury Enterprise Architecture Business Reference 

Model. The IRS Business Architecture contains a performance model and performance 

requirements consistent with the Federal Enterprise Architecture Performance Reference 

Model. In addition, the IRS is completing an update of the IRS Modernization Vision 

and Strategy that will provide a line of sight from agency goals and objectives to business 

results and customer results that drive investment decisions. The Enterprise Transition 

Strategy and Modernization Vision and Strategy identify common business services and 

common technical services that are consistent with the Federal Enterprise Architecture

IRS - 83
Service Reference Model and can be leveraged to provide improvements in multiple 

business lines. The candidate services are coordinated with the Treasury Enterprise 

Architecture Council to enable leverage of service components or service component 

patterns across Treasury bureaus. The IRS Data Architecture is consistent with the 

Federal Enterprise Architecture Data Reference model, and the IRS is participating with 

Treasury Enterprise Architecture Council (TEAC) to achieve alignment across all 

Treasury Bureaus. The IRS Technical Architecture and Enterprise Standards are 

organized by the Technical Reference Model (TRM), which aligns with the Federal 

Enterprise Architecture TRM. The IRS As Built Architecture describes all the systems 

deployed in the IRS. 

The IRS Procurement organization has closely aligned any enhancements to their 

Procurement Automated Information Systems (PAIS) with the goals established by the

President's Management Agenda (PMA) and its Integrated Acquisition Environment 

(IAE), as currently managed by GSA. IRS was the first civilian agency to successfully 

interface its procurement system with the Federal Procurement Data System - Next 

Generation (FPDS-NG), automatically populating much of the required data. 

Additionally, IRS Procurement maintains a direct interface with the IAE's Business 

Partner's Network's (BPN) Central Contractor Registration (CCR) database, downloading 

real-time contractor data from CCR into its Integrated Procurement System (IPS) and into 

its Integrated Financial System (IFS). IRS also posts its requisite contracting 

opportunities on IAE's Federal Business Opportunity (FBO) website and posts sensitive 

solicitation information on the FedTeDS site. Since its origin, IRS has fully supported 

the IAE initiatives and maintains active membership on several committees working the 

IAE projects, i.e., eMarketplace (formerly eCatalog), FBO, and FedTeDS. 

Free File: The IRS is continuing to offer Free File under a renewed agreement with the 

Free File Alliance Operating Agreement for 2005 – 2008. More than 5 million taxpayers 

used this free on-line filing service in 2005. 

Expanding Electronic Tax Products for Business: The IRS also met the commitments 

established for this initiative under e-gov. Continuing to build on the original initiative, 

the IRS will expand this program by working with additional states interested in linking 

state registration applications to the federal Internet Employer Identification Number 

(EIN) application for a one-stop experience. In addition, the IRS continues to expand 

Modernized e-Filing to accept more forms and reach additional business taxpayers. 

Other e-gov initiatives: The IRS actively supports other e-gov initiatives, including the 

Business Gateway, by ensuring the IRS business-relevant content is accessible through 

the Business Gateway. Low Income Tax Clinic and Tax Counseling for the Elderly grant 

opportunities are posted each year on Grants.gov. Applicants have been able to apply online for Low Income Tax Clinic grants through Grants.gov. The IRS also has benefits 

information posted on GovBenefits.gov for more than fifteen programs. 

COMPETITIVE SOURCING: Two IRS competitive sourcing studies with exceptional 

results, Area Distribution Center and Campus Operations, were highlighted in meeting 

IRS - 84
material used at a briefing of the President, by the President’s Management Council, on 

July 28, 2005. Additionally, in December 2004 the IRS received the President’s Quality 

Award for Management Excellence for Innovative and Exemplary Practices in 

recognition of the Area Distribution Center initiative. For both competitions, the Most 

Efficient Organization (the IRS internal bid team) created the winning proposals, 

incorporating best practices through work process improvements, greater use of 

technology, and staffing efficiencies. The studies are projected to save taxpayers more 

than $185 million over the next five years in both budgetary and economic savings (cost 

avoidance). 

The IRS was recognized in March 2005 with the National Industries for the Severely 

Handicapped (NISH) 2004 Government Award for Services, which highlights the IRS’ 

support for expansion of service business lines under the Javits-Wagner-O'Day (JWOD) 

Program, a program that supports training and employment opportunities for Americans 

with severe disabilities. The IRS awarded the first-ever contracts for nationwide 

mailroom services and virtual call center which offered home-based employment for 

people with disabilities. Both initiatives provide first time job opportunities to hundreds 

of people with disabilities. 

 

The National Distribution Center (NDC), formerly Area Distribution Center, competitive 

sourcing initiative was fully implemented on March 5, 2005. All production processing 

ceased at the Eastern and Western Area Distribution Centers. The IRS cancelled 

commercial leases for the two sites releasing approximately 395,000 square feet. Career 

transition assistance was provided to impacted employees, including voluntary separation 

incentives. Employees who could not be placed were separated through a Reduction in 

Force. The NDC held stand-up ceremonies on April 20, 2005. 

The Integrated Document Solutions Enterprise (IDSE), formerly Campus Operations, 

competitive sourcing initiative was fully implemented mid September 2005. The robust 

HR mitigation strategies deployed had tremendous positive impacts—less than 20 

employees were involuntarily separated. 

Another MEO award was announced on August 12, 2005 for the Campus Files contract. 

However, a protest was filed which resulted in the award being withdrawn to permit the 

bids to be reopened for clarification and discussion. A final decision is expected within 

4 – 6 months. 

On August 31, 2005, the IRS announced the award of IAP World Services, Inc. as 

selected vendor in the Building Delegation competitive sourcing competition. 

The IRS developed and deployed an extensive Human Resource Mitigation strategy to

provide a robust suite of services to employees impacted by Competitive Sourcing. The 

approach included voluntary early retirement and voluntary separation incentive, 

partnership with local Department of Labor Rapid Response Teams who provided on-site 

career transition training (i.e. Interviewing Skills, Resume Writing), expanded Employee 

Assistance Program for providing emotional and financial counseling for employees and 

IRS - 85
their immediate family members, and offered internal job swaps to provide potential 

vacancies. Hundreds of employees were assisted through job placement and voluntary 

separation incentives. 

The IRS will continue to use public-private competition, where appropriate, to achieve 

transformational change. Studies underway during FY 2006 – 2007 include the 

following: Business Case Analysis phase – Real Estate and Facilities Management; 

Preliminary Planning Phase – Logistics, Seat Management and Fuel Compliance; and 

Implementation Phase – Building Delegation and Files Activity. Post competition 

accountability and monitoring will commence for both NDC and IDSE initiatives. 

The IRS continues to see innovative uses of technology, staffing options, and streamlined 

process engineering in bids and tenders. The IRS views Competitive Sourcing as a major 

modernization tool to bring about transformational change in organizations undergoing 

competition.

The IRS’ achievement in the competitive sourcing arena has enabled the Treasury 

Department to achieve its first green scorecard on the President’s Management Agenda 

initiatives. Additionally, the IRS has supported the Treasury Shared Services initiative 

by leading all other Treasury bureaus in the development of their Fair Act Inventory, 

which has resulted in a more accurate Treasury inventory. 

BUDGET AND PERFORMANCE INTEGRATION: 

The goal for the IRS is to develop a new budget structure – acceptable to the 

appropriation committees and other oversight bodies – which integrates support and 

operational costs to more correctly cost IRS activities and measure the outputs of IRS 

activity. The IRS will continue to perfect data to support the full allocation of program

costs across the Service. 

Correct cost allocations are impracticable within the financial system with the existing 

account structure (Processing, Assistance and Management; Tax Law Enforcement; and 

Information Systems). Fully costing activities must be handled off-line. During the next 

year, the IRS plans to meet with Appropriations staff to discuss approaches that would 

capture all costs within the financial system, resulting in more timely and more accurate 

costing data.

The IRS had two new PART evaluations for the FY 2007 Budget cycle: examination and 

criminal investigation; and one updated PART, submission processing. All three 

programs received “moderately effective” ratings from OMB. More than half of the IRS 

programs are expected to demonstrate improved performance/efficiency and the IRS 

expects to reach agreement with oversight bodies on long-term performance goals. 

Progress on reliable unit cost and performance measures, derived from the new system, 

are critical to the IRS improving its PART scores. 

IMPROVING FINANCIAL PERFORMANCE: In FY 2005, the IRS met a major 

milestone in systems development by implementing the new Integrated Financial System

IRS - 86
(IFS), which became the core accounting system, replacing systems used in budget 

preparation, general ledger, accounts payable, accounts receivable, financial reporting,

and purchasing. IFS implementation provided challenges for the IRS, but it still 

continued to meet Treasury’s TIER 3-day close financial reporting requirement each 

quarter. Also in FY 2005, the IRS received a clean audit opinion on the FY 2005 

financial statements, marking the sixth consecutive year for this achievement. 

System development efforts on the Custodial Accounting Project (CAP) were 

discontinued in FY 2005; however, in March 2005, the IRS introduced a new systems 

approach under a project named the Custodial Detail Data Base (CDDB) to serve as the 

sub-ledger of custodial financial information. This system, in combination with existing 

systems, addresses three custodial accounting items included in the IRS’ Federal 

Financial Management Improvement Act (FFMIA) Remediation Plan and for the 

custodial financial management material weakness. For FY 2006, the IRS will focus 

efforts on the development and testing of a new data base to store Trust Fund Recovery 

Penalty (TFRP) and Unpaid Assessment data, which will become the foundation of the 

CDDB and the subsidiary ledger for all unpaid assessments. When the CDDB revenue 

transaction database goes into production, it will become possible to test reports. 

Addressing material weaknesses is a top priority for the IRS. The IRS made significant 

progress during FY 2005 to ensure accountability and advancement in resolving our 

material weaknesses. An IRS Financial and Management Controls Executive Steering 

Committee ensures that outstanding material weaknesses and reportable conditions are 

addressed by instituting more aggressive action plans, realistic due dates, and timely 

implementation of meaningful corrective actions. Remediation plans are in place to 

address FFMIA issues. No new material weaknesses were identified in FY 2005. In 

FY 2005, Measuring Taxpayer Compliance was downgraded to a reportable condition. 

ELIMINATING IMPROPER PAYMENTS: The Earned Income Tax Credit (EITC) 

program has been identified as a high-risk program due to the amount of improper 

payments. The EITC is a refundable federal income tax credit for low-income working 

individuals and families. For Tax Year 2004 (through December 2005), approximately 

22 million families received credits of over $40 billion, making the EITC one of the 

nation’s largest anti-poverty programs. 

To better administer the EITC, the IRS has developed a detailed, long-term EITC 

business plan in the form of a Concept of Operations with a focus on a balanced EITC 

Program – one that reduces erroneous payments while increasing participation among 

eligible taxpayers. In keeping with the goals of the EITC program throughout FY 2005 

and into FY 2006, the IRS will implement new, technology-enabled business process 

improvements as well as continue to test and evaluate new approaches to reduce 

improper payments. These tests will be used to make data-driven decisions about 

improvements to each segment of the program including customer service, outreach, and 

compliance. 

IRS - 87
This plan is consistent with the IRS Commissioner’s five-point initiative announced in 

June 2003 to reduce the burden on taxpayers, improve the IRS audit processes, increase 

outreach efforts, address unreported income, and test new approaches to reducing EITC

error. Efforts continue to improve EITC compliance activities; decreased the time it 

takes to complete an EITC examination by 6.4 percent, or 12 days, over the past year. 

As part of the Commissioner’s initiative, in FY 2005, the IRS continued several tests to 

evaluate new ways of reducing erroneous EITC payments while maintaining participation 

by eligible taxpayers. 

• Qualifying Child Test: Requires certain EITC claimants to certify that they meet 

qualifying child residency requirements before paying out the refund. Initial testing 

results showed that a certification requirement had a significant effect on improper 

EITC claims. 

• Filing Status Test: Reviews filing status claims to ensure they are correct. The IRS 

selected claimants whose filing status had changed to one that increased the value of 

the credit (generally, from married filing joint to head of household). The first test 

indicated that the IRS needed to modify its selection methodology to ensure a better 

focus on non-compliant taxpayers. 

• Misreporting Income (Automated Underreporter) Test: Enhances error detection 

through the automated under-reporter program. This test focused on improved 

selection methodologies and immediately proved successful. 

Based on the results of the Misreporting Income (Automated Underreporter) test, in early 

FY 2005, the IRS implemented the improved selection methodologies for Automated 

Underreporter cases. During 2006, the IRS will complete the final phase of the 

Qualifying Child test. The IRS will evaluate the results of the Filing Status and 

Qualifying Child tests on reducing erroneous EITC payments and maintaining 

participation by eligible taxpayers, before determining whether to implement either on a 

broader scale. 

The IRS is examining potential error rate measures that will satisfy Improper Payments 

Information Act and Recovery Act (IPIA) requirements. Other FY 2005 and FY 2006 

initiatives include implementation of a program to focus education and compliance 

efforts, as appropriate, on EITC paid preparers. As a part of the EITC Return Preparer 

Strategy, the IRS completed over 400 due diligence compliance visits to paid tax 

preparers with a probability/ record of preparing erroneous EITC returns. The IRS also 

implemented the selection of amended EITC returns for examination using the 

Dependent Database, and the IRS Criminal Investigation Division completed evaluating 

the use of a National Directory of New Hires (NDNH) database match in its EITC Fraud 

Detection Centers. 

The IRS is striving to simplify the EITC claim process. The IRS is improving 

communications, making the credit clearer, and providing potential claimants and their 

paid preparers with resources to help them determine whether they are eligible. During 

FY 2005, the IRS launched the EITC Assistant, a web-based eligibility calculator on 

IRS - 88
IRS.gov; implemented enhancements to the EITC Online Toolkit for tax professionals for 

FY 2005 and FY 2006; and distributed EITC educational materials to 45,000 Western 

Union locations in FY 2006. Also in FY 2005, the IRS partnerships and coalitions 

prepared nearly two million tax returns for low-income families, in addition to making 

countless taxpayer contacts through an array of EITC educational products and messages. 

IRS - 89
3.3 – PART Evaluation Table 

PART Program Name Submission Processing 

Bureau Internal Revenue Service

Strategic Goal Manage the U.S. Government’s Finances Effectively 

Rating Moderately Effective 

Major Findings/Recommendations 

Using a single cost-based efficiency measure by 2008 (cost per return processed). 

Actions Planned or Underway 

The IRS plans to allocate overhead costs based on proven business methodologies that are consistently 

applied, easy to maintain and will support internal and external audits with the goal of using a single 

cost-based efficiency measure by 2008 (cost per return processed). 

Major Findings/Recommendations

Seek legislative changes to promote electronic filing; including greater authority to require electronically 

filed returns 

Actions Planned or Underway 

The FY 2007 President’s Budget includes legislation to enhance IRS’ authority to require electronic 

filing in some cases. 

Major Findings/Recommendations 

By 2007, IRS will establish goals to reduce taxpayer burden (time and expense of preparing and filing 

returns)

Actions Planned or Underway 

The IRS has established an Office of Taxpayer Burden and has begun developing measures of taxpayer 

burden that will show improvement goals for both hour and expense for preparing returns 

Performance Measures 

FY 2004 

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

Percent of Individual Returns 

Processed Electronically † 46.5% 51.1% 55.0% 58.8%

Percent of Business Returns 

Processed Electronically † 17.4% 17.8% 18.6% 20.6%

Deposit Timeliness 

(lost opportunity cost) $416 $405 $396 $386

Refund Timeliness - Individual Paper 98.3% 99.2% 99.2% 99.2% 

IMF Returns Processed Per Staff Year 14,129 14,965 15,622 16,403

BMF Returns Processed Per Staff Year 16,006 17,946 18,500 19,000

Percent of Tax Payments Processed

Electronically 35.1% 36.3% 37.1% 37.6%

*Bold identifies PART measures included in the budget

† Variance from PART and 80% statute goal 

IRS - 90
PART Program Name Taxpayer Service 

Bureau Internal Revenue Service

Strategic Goal Manage the U.S. Government’s Finances Effectively 

Rating Adequate 

Major Findings/Recommendations 

Set Long-Term Goals during 2005 

Actions Planned or Underway 

Long-term goals for the Service are included in the FY 2007 President’s budget submission. The longterm goals track the level-of-service provided to taxpayers, accuracy of both tax law and account 

responses, and the Taxpayer Self Assistance Rate. 

Major Findings/Recommendations

Convert efficiency measures to cost-based, rather than staff-year-based metrics as accounting systems 

improve and use them in the 2007 performance budget (e.g., cost per call answered). The IRS will add 

efficiency measures for each taxpayer service process for internal management purposes. 

Actions Planned or Underway 

The deployment of the Integrated Financial System (November 2004) and the associated cost modules 

captures data enabling the IRS to view direct expense data (labor, supplies, travel, etc.), FTEs and onrolls data captured at the lowest cost center (group or work unit) level; in addition to running allocations 

to distribute support costs to the operational business units. 

The IRS is allocating overhead costs based on business methodologies that are consistently applied, easy 

to maintain, and will support internal and external audits. Developing efficiency measures (e.g., cost per 

call answered) and adding efficiency measures for service processes for management is delayed until 

2008. 

Major Findings/Recommendations 

Use Customer Satisfaction measures in its published performance budget. 

Actions Planned or Underway 

The IRS continues to monitor Customer Satisfaction measures internally, but is working under Treasury 

guidelines to reduce the number of measures reported externally and report on those high-value 

measures. The IRS will continue to monitor Customer Satisfaction information as part of the balanced 

measures used to manage its programs and is considering other avenues (such as IRS.gov) to report its 

levels of Customer Satisfaction. 

Major Findings/Recommendations 

Explore the mix of service options (phones, walk-in, Internet, volunteer services) to ensure that the 

most efficient and effective means are used to deliver service. 

Actions Planned or Underway 

In FY 2005, the IRS made program changes to provide the most efficient and effective means necessary

to deliver service, e.g., enhancements to the Internet Fact-of-Filing (IRFOF) application and e-services. 

The IRFOF enhancements included on-line refund trace initiation capabilities. The IRS operates 38 

self-help kiosks in 20 states, and increased service options during the filing season, by offering service in 

additional locations such as shopping malls, libraries and other government offices. 

 

The IRS' "Where's my Refund?" on-line application allowed more than 22 million taxpayers to check on 

the status of their refunds this past filing season, a 49 percent increase over last year. IRS added a new 

feature to enable taxpayers to generate replacement checks if the first one was lost or undeliverable due 

to an out-of-date address. “Hits” on IRS.gov total more than 4.8 billion, up 20 percent over the same 

time last year. 

IRS - 91
In FY 2005, the IRS deployed the EITC Assistant on IRS.gov. EITC Assistant is a web-based 

application to help taxpayers determine eligibility, filing status and estimated EITC amount. The 

EITC Assistant is available in English and Spanish and reflects the EITC tax law changes, including 

new income limits for EITC eligibility as well as the option to include nontaxable combat pay in 

earned income for the earned income credit. The IRS also deployed telephone and web self-service 

applications on IRS.gov to help taxpayers determine their certification status and explain 

determinations made during the certification process.

Major Findings/Recommendations 

Improve the accuracy of information provided to taxpayers. 

Actions Planned or Underway 

IRS launched an improved interactive Probe and Response Guide in December 2004. In addition to 

improved training materials such as the guide, the IRS continues to hold conference calls to focus the 

sites on correcting common errors. The IRS set up Six Sigma teams to review and develop 

improvement actions related to the work processes and procedures used to address taxpayer issues. The 

IRS implemented Embedded Quality (EQ), a review system that standardizes criteria for evaluating 

employee performance, pinpoints training opportunities, and links to business measures to improve the 

accuracy of responses to customers. 

The IRS will improve the accuracy of tax law telephone information provided to taxpayers to 90 percent 

accuracy by 2010. 

Major Findings/Recommendations 

Research the impact of taxpayer service programs on voluntary compliance. 

Actions Planned or Underway 

The IRS will also explore efforts to study customer service impacts as part of its FY 2006 Research 

Plan. 

The IRS will research the impact of taxpayer service programs on voluntary compliance and report 

findings by 2007. 

Major Findings/Recommendations 

Improve financial information as part of the IRS-wide financial management improvements. 

Actions Planned or Underway 

Using the Integrated Financial System, the IRS plans to allocate overhead costs based on proven

business methodologies, consistently applied, and easy to maintain to support internal and external

audits. The IRS will track and control resources to a specific organizational unit and level of 

responsibility, and provide both direct and indirect cost data to help move the Service forward in

transitioning to a performance-based budget. Efforts are underway to identify and report the full cost 

of each program activity. 

Major Findings/Recommendations 

The 2006 budget streamlined taxpayer service programs by reducing dependence on less efficient walkin centers and increasing reliance on telephone and Internet service. 

IRS - 92
Actions Planned or Underway 

Taxpayer Assistance Centers (TACs) provide an option for customers preferring personal, face-to-face

tax help. In FY 2005, the IRS provided details of a comprehensive study to reduce costs by reducing 

the number of TACs and publicly announced plans to close a determined number of offices. However, 

the planned closures were suspended per P.L. 109-115 and the IRS is now working with the Treasury 

Inspector General for Tax Administration (TIGTA) to determine the future of the proposal. To

support modernization efforts, use of free on-line services, such as "Free File" and "Where's My 

Refund?" is promoted. Additionally, the IRS is delivering enhancements to the Internet Fact-of-Filing 

(IRFOF) application and e-services. 

The IRS will continue to research the impact of taxpayer service programs on voluntary compliance and 

report findings by 2007. 

Performance Measures 

FY 2004 

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

Customer Contacts Resolved Per 

Staff Year 8,015 7,585 7,477 7,555

Telephone Level of Service 87.0% 82.6% 82.0% 82.0%

Tax Law Accuracy for Telephone 

Service 

80.0% 89.0% 90.0% 90.5%

Tax Law Accuracy for Walk-in Service † 75.0%

Accounts Accuracy for Telephone 

Service 

89.0% 91.5% 92.0% 92.6%

Customer Accuracy - Customer

Accounts Resolved (Adjustments)

87.0% 85.7% 86.3% 86.7%

Customer Satisfaction with Telephone 

Service 

93.0% 94.0% 94.0% 94.0%

Customer Satisfaction with 

Correspondence Service 

66.0% 69.0% 66.7% 68.4%

Customer Satisfaction with Walk-in 

Service 

89.0% 91.0% 88.0% 89.0%

*Bold identifies PART measures included in the budget

† Comparable data is unavailable after 2004

IRS - 93
PART Program Name Taxpayer Advocate Service

Bureau Internal Revenue Service

Strategic Goal Manage the U.S. Government’s Finances Effectively 

Rating Moderately Effective 

Major Findings/Recommendations 

Develop a unit cost measure for its casework by 2006 (delayed to 2007). 

Actions Planned or Underway 

The National Taxpayer Advocate (NTA) established a task force to develop a new, time-reporting

system to associate hours worked with specific cases in inventory as a precursor to a unit cost measure, 

which is expected by the end of FY 2006 (delayed to 2007). 

Major Findings/Recommendations

Explore other means to measure its effectiveness in solving systemic problems leading to taxpayer 

hardship. The IRS will report its findings in 2006 for possible inclusion in its 2008 budget. 

Actions Planned or Underway 

TAS will continue to utilize research staff to develop other ways to measure its effectiveness in solving 

systemic problems leading to taxpayer hardships. 

The NTA staff utilized a number of sources to determine which problems might rise to the level of a 

“most serious problem,” including solicitations from all local taxpayer advocates, research of the

Taxpayer Advocate Management Information System (TAMIS) database, research from the Systemic 

Advocacy Management System (SAMS) database, and research of concerns expressed by taxpayers and 

practitioners. As a result, TAS now has a list of the ARC projects and is working with the operating

divisions on these issues. 

Development of SAMS Phase II continues. Phase II includes improved tools for recording Systemic 

Advocacy project development, numerous system enhancements, and a new Taxpayer Advocacy Panel 

(TAP) feature - a version of the SAMS application tailored to track Taxpayer Advocate Panel (TAP) 

projects. 

Major Findings/Recommendations 

Improve financial information as part of the IRS-wide financial management improvements. 

Actions Planned or Underway 

The IRS implemented IFS in October 2004 and completed historical data conversion from its current

financial system in November 2004. 

Major Findings/Recommendations 

Improve case quality to 91.5 percent by 2006, 93 percent by 2009 and 95 percent by 2014. 

Actions Planned or Underway 

Through FY 2005, TAS cumulative quality index stands at 91.6 percent, up from FY 2000 when quality 

was 67 percent. Maintaining this high level of quality will be challenging this year due to increasing 

inventory levels, the impact of numerous natural disasters and IRS increased enforcement activities and 

initiatives. However, TAS expects to meet its FY 2006 goal of 91.5 percent by continuing to focus on 

exceptional quality and customer service. The joint improvement team that addressed timely actions 

and provided suggestions on more effective communications and inventory management appears to 

have had a positive impact. 

Each TAS area/local office analyst has been trained and empowered to analyze their quality results and 

evaluate national trends for improvement. Process changes such as the systemic tracking of customer 

IRS - 94
follow-up dates, use of a buddy system or similar approach to make critical contacts even if the advocate 

is away, use of TAMIS enhancements to properly reflect the audit trail utilizing radio buttons, etc., have 

been adopted by many offices. An annual report on quality captures area/local office enhancements. 

TAS initiated a "Quality Visitation Program" that provides targeted training and skills transfer to local 

and area analysts. This effort equips analysts with consistent skills to evaluate and report data, 

promoting quality improvement at all levels of the organization. 

TAS Management provided a presentation to the Local Taxpayer Advocate Leadership conference 

titled, “A Holistic View of Quality, Kicking it up a Notch." The presentation celebrated current 

accomplishments and outlined requirements to excel, focusing on critical leadership competencies in 

customer service, quality and leadership. References to the Malcolm Baldridge Quality Award were 

outlined and examples of using common sense processing cases were shared. The key leadership and 

quality messages included discussions around communication, targeting customers’ unique needs,

building customer relationships with a focus on quality/service, and passionately focusing on TAS 

mission. 

Performance Measures 

FY 2004 

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

TAS Cumulative Quality Index 90.5% 91.6% 91.5% 92.0%

IRS - 95
PART Program Name Criminal Investigation 

Bureau Internal Revenue Service

Strategic Goal Preserve the Integrity of Financial Systems (F3) 

Managing the Government’s Finances Effectively (F4) 

Rating Moderately Effective 

Major Findings/Recommendations

IRS will explore methods for measuring the impact of Criminal Investigation on Tax Compliance. The 

IRS will report on its progress by the end of 2006. 

Actions Planned or Underway 

Planned actions will be identified in the FY 2008 budget. 

Major Findings/Recommendations

IRS will implement a new information management system in 2006 to enhance investigative case 

tracking and improved efficiency. 

Actions Planned or Underway 

Planned actions will be identified in the FY 2008 budget.

Major Findings/Recommendations

IRS will develop methods to improve case prioritization in 2006 to ensure that cases yield the greatest 

impact on compliance. 

Actions Planned or Underway 

Planned actions will be identified in the FY 2008 budget. 

Performance Measures 

FY 2004 

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

Percent of Taxpayers stating that 

no cheating is acceptable on their 

taxes 

12.0% 10.0% 10.0% 10.0%

Improve Voluntary Compliance N/A 83.0% N/A N/A

Number of Convictions 2,008 2,151 2,260 2,305

Conviction Rate 91.2% 91.2% 92.0% 92.0%

Conviction Efficiency Rate ($) 362,849 295,316 339,565 341,334

*Bold identifies PART measures included in the budget

N/A: Measure not applicable for this fiscal year 

IRS - 96
PART Program Name Examination 

Bureau Internal Revenue Service

Strategic Goal Manage the U.S. Government’s Finances Effectively 

Rating Moderately Effective 

Major Findings/Recommendations 

IRS will introduce cost based efficiency measure by 2008 (e.g. enforcement revenue/program budget). 

Actions Planned or Underway 

Planned actions will be identified in the FY 2008 budget. 

Major Findings/Recommendations

The IRS will improve tools for selecting the most productive audit cases by 2007 using the detailed 

compliance information gathered in the recent individual tax gap study. 

Actions Planned or Underway 

 Planned actions will be identified in the FY 2008 budget. 

Major Findings/Recommendations

IRS will research the tax compliance of S-Corporations based on a statistically valid sample of the filing 

populations. 

Actions Planned or Underway 

Planned actions will be identified in the FY 2008 budget. 

Major Findings/Recommendations

IRS will set a voluntary compliance goal with specific targets and develop a plan for periodically (every 

few years) measuring progress against this goal. This measurement plan should include both corporate 

and individual compliance. 

Actions Planned or Underway 

 Planned actions will be identified in the FY 2008 budget. 

Performance Measures 

FY 2004

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

Correspondence Examinations Closed 

Per FTE 185 351 264 271

Field and Office Examination Closed

Per FTE 32 37 35 37

AUR Cases Per FTE † 2,350 2,414 Discontinued Discontinued

AUR Efficiency 1,514 1,701 1,759 1,834

AUR Coverage 1.9% 2.2% 2.3% 2.4%

Examination Coverage – 

Business (Corps. > $10Million)†† 7.5% 7.8% 7.5% 8.3%

Cycle Time for Large Corporation 42 40 39 38

Improve Voluntary Compliance N/A 83.0% N/A N/A

Reduce % of taxpayers who think it 

is OK to cheat on their taxes 12.0% 10.0% 10.0% 10.0%

*Bold identifies PART measures included in the budget

† Beginning in FY 2006 “AUR Cases per FTE” is subsumed under “AUR Efficiency.” 

†† Variance from PART in 2007 reflects a recent increase in the Examination Plan for LMSB 

IRS - 97
PART Program Name Earned Income Tax Credit (EITC)

Bureau Internal Revenue Service

Strategic Goal Manage the U.S. Government’s Finances Effectively

Rating Ineffective

Major Findings/Recommendations 

The IRS will delay refunds on returns deemed high risk for filing status or income errors while agents take 

action to resolve cases. High-risk returns will be identified by researching taxpayer historical compliance and 

by requiring new information on EITC returns. 

Actions Planned or Underway, Completed & Ongoing 

The IRS revamped the way it approaches EITC administration. The IRS broadened its mission for the 

program - maximize participation and minimize error - and is testing a number of "pre-refund" approaches 

to reduce filing status and income errors. These tests are all part of a broader plan to redesign the entire

EITC program. 

Major Findings/Recommendations

As part of a test, the IRS will require high-risk EITC applicants to pre-certify that the children claimed on

their return are really qualifying children under EITC. Incorrectly claimed children have been a major 

source of EITC error. High-risk applicants will be identified through databases such as the Federal Case 

Registry (information on child custody) and by focusing on taxpayers with characteristics linked to high 

error rates in compliance studies (e.g., relatives other than parents who claim a child for EITC purposes). 

Actions Planned or Underway 

Results of the FY 2004 Proof of Concept (POC) tests (Qualifying Child Residency Certification, Filing 

Status and Automated Underreporter) designed to evaluate new ways of reducing erroneous EITC payments 

while maintaining participation by eligible taxpayers were finalized, and the IRS initiated implementation of

the Automated Underreporter process. An interim report on these results was issued to Congress on April 

12, 2005, and the final report in mid-October, 2005. 

In FY 2006, the IRS will continue POC testing. In FY 2007, the IRS expects to implement additional 

enhancements based on the evaluation and analysis of the certification and filing status tests. In addition, 

technology-enabled business process improvements are being designed to augment the efficiency and 

effectiveness of compliance activities. 

Major Findings/Recommendations 

Conduct approximately 500,000 examinations of EITC returns per year based on enhanced case selection 

systems. 

Actions Planned or Underway 

Planned actions will be identified for the FY 2008 budget submission 

Major Findings/Recommendations 

Prevent $270,000 million in incorrect refunds in 2006 by detecting and correcting errors during return 

processing. 

Actions Planned or Underway 

Planned actions will be identified for the FY 2008 budget submission 

Major Findings/Recommendations 

Identify paid tax return preparers with high EITC error rates using education and enforcement procedures 

to improve their performance. 

Actions Planned or Underway 

Planned actions will be identified for the FY 2008 budget submission 

IRS - 98
Performance Measures 

FY 2004 

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

Percent of Eligible Taxpayers Who File 

for EITC 80.0% † 80.0% 80%

 *Bold identifies PART measures included in the budget 

 † Information is based on Calendar Year (CY) information and will not be available until census data is updated. 

 

IRS - 99
PART Program Name Tax Collection 

Bureau Internal Revenue Service

Strategic Goal Manage the U.S. Government’s Finances Effectively 

Rating Results Not Demonstrated

Major Findings/Recommendations 

Increase staffing by 537 FTE. 

Actions Planned or Underway 

The FY 2004 President's Budget proposed this increase. The President's Budget for FY 2005 included an 

initiative for an additional 66 revenue officers (32 Equivalent [FTE]) in Field Collection and 250 collection 

representative hires (125 FTE) in Electronic/Correspondence Collection. The FY 2005 Budget also included 

an additional 66 FTE for the Automated Collection System initiative. However, the final enacted levels for 

FY 2004 and FY 2005 provided only partial funding for these hiring initiatives. The FY 2006 President's 

Budget included a request for resources to hire an additional 518 collection employees as well as 46 tax 

examiners.

Major Findings/Recommendations

Reengineering and technology modernization efforts are ongoing to introduce risk-based targeting of specific 

taxpayers with the most effective collection procedures (i.e., notice, phone call or field visit). 

Actions Planned or Underway 

Reengineering teams were formed with one team focused on implementing models to conserve Automated 

Collection System (ACS) and field resources by identifying the non-filer and balance due accounts that have 

the highest collection probability to accelerate contact and to identify other accounts for limited contact. The 

team has developed models to better identify high-priority work, monitoring and confirming the success of 

the collection reengineering models through several research projects. A second team focused their efforts in 

ACS, making better use of the predictive dialer, realigning the workforce to core hours and analyzing ACS 

treatments. This team created a performance support tool to provide employees with technical guidance 

while handling a call, improving telephone operations and the expansion of ACS scripts and leveraging 

service delivery. The team also implemented a refocused Collection training syllabus that included new tools 

to assist collection employees, e.g., contact recording and desktop integration, which improved program 

efficiency. In addition, the team re-wrote IRS.gov web pages to encourage Direct Debit and convey payment 

options to taxpayers. 

The Internal Revenue Manual (IRM) for ACS and toll-free operations has been re-written. New procedures 

place emphasis on Direct Debit benefits and the use of automatic and electronic methods of payment over 

traditional installment payment methods. 

New efficiency and outcome measures, Collection Efficiency (units) and Collection Coverage (units), were

established in FY 2005. The target for Collection Efficiency is 497 cases disposed per FTE and Collection 

Coverage is 32 percent disposed. 

Effective January 2005, the IRS began receiving levy sources from Electronic Filing returns and from State 

Employment Commissions and implemented programming changes that increased the number of levy 

sources provided. Systemic changes were made to prevent the systemic passing of erroneous levy sources 

(e.g., invalid bank routing numbers, missing addresses) reducing the number of unproductive levy responses. 

In July 2005, a multi-functional summit was held to approve the Collection Corporate Governance Board put 

in place to address alternative treatments to the non-filer inventory. New IMF non-filer models have been

developed to assist in selecting the most productive work. A non-filer strategy was developed, focusing on 

improved identification of non-filers, appropriate outreach and education efforts to address the non-filing 

segment and identify sustained return filing through balanced, appropriate compliance actions. 

IRS - 100
To assist in the collection of delinquent taxes and reduce the size and growth of the collection inventory, 

legislation to authorize contracts with private collection agencies was signed into law in October 2004. The 

IRS has begun development of business requirements and a release strategy for implementation (September 

2005) of the Private Debt Collection effort, including initial work in the development of a methodology to 

identify accounts that have potential for resolution. Planned actions include: 

• Improve the process to better align resources and demand under the enterprise call routing technology

by implementing a telephone forecast and work plan. (July 2006) 

• Develop and implement Call Segmentation to increase the number of ACS calls that can be handled in 

an automated environment, thus allowing Collection representatives to handle calls that require personal 

interaction with taxpayers. (July 2006) 

• Develop an Internet electronic funds withdrawal application for notice payments. (September 2006 - 

Contingent on additional funding.) 

• Develop a funds withdrawal (Direct Debit) application for installment agreements. (September 2006 - 

Contingent on additional funding.) 

The FY 2006 Request level provides resources to hire additional collection employees and tax examiners to 

meet the need for continued compliance. 

Major Findings/Recommendations 

Implementing new tools in 2007 to segment Collection workload according to risk to ensure IRS takes the 

right action to secure delinquent taxes. 

Actions Planned or Underway 

Planned actions will be identified for the FY 2008 budget submission 

Major Findings/Recommendations 

Implement legislation including strong taxpayer rights protections - allowing the IRS to hire private collection 

agents to help secure delinquent tax debt.

Actions Planned or Underway 

The legislation passed but the implementation actions still need to be defined. Planned actions will be 

identified for the FY 2008 budget submission. 

Major Findings/Recommendations 

Review 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 FY 2008 budget. 

Actions Planned or Underway 

Planned actions will be identified for the FY 2008 budget submission 

Performance Measures 

FY 2004 

Actual 

Performance 

FY 2005 

Actual 

Performance 

FY 2006 

Planned 

Performance 

FY 2007 

Planned 

Performance 

Collection Coverage - units Oe †

 N/A 53.0% 52.0% 52.0%

Collection Efficiency - units E †† N/A 1,514 1,650 1,717

 *Bold identifies PART measures included in the budget

 † Methodology change - prior performance reported as 39%. FY 2005 (from 54%) adjusted to eliminate duplicate counting of deferral cases 

 †† Methodology change - prior performance reported as 510 

 N/A: Not applicable for this fiscal year. 

IRS - 101
Performance Measures Associated with PARTed Programs 

IRS Tax Collection

Collection Coverage - Units 

Collection Efficiency - Units 

Earned Income Tax Credit

Percent of Eligible Taxpayers Who File for EITC 

Submission Processing

Percent of Individual Returns Processed Electronically 

Percent of Business Returns Processed Electronically 

Deposit Timeliness 

Refund Timeliness - Individual Paper

IMF Returns Processed Per Staff Year 

BMF Returns Processed Per Staff Year 

Percent of Tax Payments Processed Electronically 

Taxpayer Service

Customer Contacts Resolved Per Staff Year 

Telephone Level of Service 

Tax Law Accuracy for Telephone Service 

Tax Law Accuracy for Walk-in Service 

Accounts Accuracy for Telephone Service

Customer Accuracy - Customer Accounts Resolved (Adjustments)

Customer Satisfaction with Telephone Service 

Examination

Correspondence Examinations Closed Per FTE 

Field and Office Examination Closed Per FTE 

AUR Cases Per FTE 

Examination Coverage – Individual 

Examination Coverage – Business (Corps. > $10Million) 

AUR Efficiency 

AUR Coverage 

Large Corporation Examination Coverage Rate 

Cycle Time for Large Corporation 

Investigation

Percent of Taxpayers stating that no cheating is acceptable on their taxes 

Improve Voluntary Compliance 

Number of Convictions 

Conviction Rate 

Conviction Efficiency Rate 

Taxpayer Advocate Service

TAS Cumulative Quality Index 

Bold identifies PART measures included in the budget 

IRS - 102
Supporting Materials

IRS - 103
Supporting Materials 

4A – Human Capital Strategy Description 

The IRS Human Capital Strategic Plan is designed to establish links between the 

Service’s mission and strategic management of its human capital. The plan sets forth a 

clear line of direction between the achievement of the Treasury Human Capital Strategic 

Goals (THCSG), IRS Strategic Goals (ISG) and IRS Human Capital Strategic Goals. 

The plan also aligns with the President’s Management Agenda (PMA) and the Human 

Capital Assessment and Accountability Framework (HCAAF). (See Strategic Goal 

Planning Matrix) With this strategic direction clearly established, the plan further 

identifies the differences in the current and desired future state of human capital and sets 

forth strategies to bridge the gaps. 

IRS - 104

Human Capital Strategic Alignment of Goals and Objectives - FY 2007 

STANDARDS FOR 

SUCCESS 

TREASURY IRS 

Human Capital 

Assessment &

Accountability 

Framework

(HCAAF) 

Treasury Strategic Goals 

(TSG) *

Treasury Human 

Capital Strategic 

Goals (THCSG) 1

IRS Strategic Goals 

(ISG) 

IRS Human Capital 

Strategic Goals 

1. Strategic 

Alignment 

E1. Promote Prosperous US 

and World Economics 

1. Organizational 

Effectiveness 

1. Improve Taxpayer 

Service 

• `Linkage to: TSG,

F4A, E1m E2

1. Reshape the Workforce 

to Efficiently Accomplish 

the Service’s Mission 

• Linkage to: ISG 3; 

Treasury’s HCSG 1, 

2; HCAAF 2, 5, 6

2. Workforce and 

Deployment 

E2. Promote Stable US and

World Economics

2. 

Recruitment/Diversity 

2. Enhance Enforcement 

of the Tax Law 

• Linkage to: TSG 

F3A, F4A, E1, E2

2. Increase Employee 

Proficiency and 

Engagement to Enhance 

Tax Law Compliance 

• Linkage to: ISG 1, 2,

3; Treasury’s 

HCASG 1, 3;

HCAAF 1, 3 

3. Leadership & 

Knowledge 

Management 

F3. Preserve the integrity of 

Financial Systems 

F3A. Disrupt and dismantle 

financial infrastructure of 

terrorists, drug traffickers, and 

other criminals and isolate 

their support networks **

3. Employee 

Retention/Satisfaction 

3. Modernize the IRS 

through its People,

Processes and Technology 

• Linkage to: TSG,

F4A, E1, E2

3. Leverage HR 

Technology to Reduce 

Burden 

• Linkage to: ISG 3;

Treasury’s HCSG 4; 

HCAAF 1, 3 

4. Results-Oriented 

Performance Culture 

F4. Manage the US 

Government’s Finances 

Effectively 

F4A. Collect federal tax 

revenue when due through a 

fair and uniform application 

of the law **

4. Technology Skills 

• Linkage to: 

TSG F4A 

 

4. Enable Quick and 

Agile Management Action 

to Achieve Business Goals 

• Linkage to: ISG 1, 3;

Treasury’s HCSG 1; 

HCAAF 1, 5

5. Talent M5. Ensure Professionalism,

Excellence, Integrity and 

Accountability in the 

Management & Conduct of 

the Department of the 

Treasury 

6. Accountability M5. Ensure Professionalism,

Excellence, Integrity and 

Accountability in the 

Management & Conduct of 

the Department of the 

Treasury 

Note: The categories for Treasury’s Strategic Goals are: E = Economic; F = Financial; M = Management 

* Treasury Strategic Plan is linked to PMA Initiatives: 1) Strategic Alignment, 2) Competitive Sourcing, and 5) Budget and Performance 

Integration 

** These Treasury Strategic Plan Objectives are specifically linked to the IRS Strategic Plan and its Human Capital Strategic Plan.
Recruitment

The IRS established a trained recruiter cadre responsible for maintaining a recruiting 

presence across the country. The 23 full-time recruiters support the IRS human capital 

strategy by focusing recruitment efforts on mission critical and other hard-to-fill 

occupations. The cadre of recruiters works to maintain partnerships with over 200 

colleges and universities and annually attends more than 800 paid campus and 

commercial events across the country to ensure that the IRS is viewed as an employer of 

choice. 

In anticipation of increased hiring the IRS recruiter cadre has begun to leverage use of the 

intern program to expand the applicant pool and grow talent at different levels of 

competency. 

Retention

The IRS looks at employee engagement as an indicator of retention. The IRS has 

contracted an outside agency to study the relationship between employee engagement and 

business results, as measured by Gallup’s “Q12.” “This Last Year I have had 

opportunities at work to learn and grow.” 

The “Q12” measures employee engagement levels at a particular point in time. The IRS 

has established a process for addressing employee engagement and overall satisfaction 

issues through workgroups. For employees to become fully engaged, managers are 

expected to develop regular dialogue with workgroup members. This dialogue is 

intended to meet the needs of employees and help them reach their potential. 

Treasury’s Seven Key Areas of Human Capital 

Strategic Alignment 

As mentioned above, the IRS Human Capital Strategic Plan is the tool designed to 

establish links between the Service’s mission and the strategic management of our human 

capital, aligns with the PMA, HCAAF and Department of Treasury’s strategic guidance. 

Workforce Planning and Deployment 

Workforce planning is a significant challenge facing the IRS. The Service has a diverse 

population of more than 100,000 employees, and 700 plus duty stations across the 

country. The IRS is constantly working to ensure that its employees are in the right place 

at the right time with the skills and competencies needed to accomplish the Service’s

mission. 

To improve this process, the IRS developed the Integrated Workforce Planning System 

(IWPS) to help model and project future workforce needs. IWPS is designed to forecast 

workforce needs based on projected attrition, retirement eligibility and migration. IWPS 

enables management to make informed decisions about recruitment, retention and sharing 

IRS - 105
of employees based upon reliable projections. The IRS continues to expand this system 

and integrate IWPS across the Service. 

Leadership and Knowledge Management 

The IRS has proactively begun training its existing workforce to mitigate the anticipated 

impact from the looming retirement bubble, and training its current and potential leaders 

to ensure they have the needed competencies for the future. The cornerstone for this 

training is the establishment of an IRS Leadership Competency Model which describes 

the behaviors required for leadership success in the Service. The competencies are 

directly linked to IRS Managers’ Performance Plan Core Responsibilities and drive all 

aspects of IRS leadership, selection, development, evaluation and compensation. This 

year the IRS continues to work on the succession planning efforts with a new Executive 

Succession initiative designed to further explore and implement ways to support the IRS 

Strategic Plan and achieve the desired future state of the leadership cadre.

Results-Oriented Performance Culture 

One of the methods the IRS uses to link performance with compensation is pay banding. 

The IRS implemented pay for performance pay band systems for its Department 

Managers, Senior Managers, and Senior Executives. Under the new pay band systems, 

compensation is linked to performance ─ the higher the performance, the greater the 

compensation ─ and performance bonuses will replace lump-sum performance awards 

paid under the Federal General Schedule pay system. 

The Senior Manager (SM) pay band system places GS-14 and GS-15 Senior Managers 

who report to an executive (SES) or who manage one or more subordinate managers into 

a single SM pay band created by merging the GS-14 and 15 pay scales and the 

Department Manager (DM) pay band system places GS-11, 12, and 13 Department 

Managers into a single pay band created by merging the GS-11, 12, and 13 pay scales. 

Additionally, a pay band has been implemented for Senior Executives, in accordance 

with the National Defense Authorization Act of FY 2004, which replaces the former 

Executive Service pay levels 1-6 with a single pay band. Expansion of the pay band is 

currently underway to include front line managers. 

Diversity 

The current IRS workforce is quite diverse, with participation rates exceeding the 

Civilian Labor Force (CLF) percentage for many minorities including women, AfricanAmericans, Native-Americans, Asian-Americans, and physically-challenged workers. 

This diversity is demonstrated geographically as well as internally with several work 

schedules and a broad range of occupations. 

While the structure and size of our organization has changed over the past four years, the 

participation rates among women, African-Americans, Native-Americans have remained 

consistently above the CLF. 

Statistics reflect gradual increases in the employment of Latinos and Asian-Americans in 

the IRS in previous fiscal years. Between FY 2001 and FY 2004 the participation rate of 

IRS - 106
Latinos increased by four-fifths of a percent. Between FY 2002 and FY 2004, AsianAmerican representation in the IRS increased by one-half of a percent. The IRS’ active 

diversity recruitment strategy makes it likely that the participation rates of these groups 

will continue to increase in the future. 

Talent 

The IRS has made significant strides in the identification of the competencies needed 

both by its leadership and mission critical occupations throughout the Service. The 

identified competencies are used for recruitment, selection, and development purposes. 

Career path information is made available online to employees that include identification 

of the competencies needed to successfully qualify for and perform in the career of their 

choice. 

To further our evaluation of our workforce’s competencies, a Competency Assessment 

Center (CAC) is being designed as a portal where IRS employees can go to take online 

competency assessments. The project is currently in the development phase, with the 

competency assessments for one occupation, Taxpayer Resolution Representative, 

scheduled to be piloted in June 2005. 

Accountability 

The IRS human capital strategy is directly linked to the IRS’ Human Capital outcome 

metrics. The metrics set addresses each of the seven aforementioned areas with a set of

measures designed to describe the bureau’s overall management of its human capital 

asset. The outcome metrics are part of the IRS human capital management strategy and 

several measures from the outcome metrics set are included as indicators of the success 

of the strategic plan. 

In addition to the aforementioned challenges, the IRS is further examining the following

challenges: 

• Reshaping the Service’s workforce to more efficiently accomplish the IRS’ mission 

• Increasing employee proficiency and engagement to enhance tax law compliance 

• Leveraging human resources technology to reduce burden 

• Enabling quick and agile management action to achieve business goals 

IRS - 107
4.1 – Human Resources Table 

CHANGES IN FULL-TIME EQUIVALENTS FTEs

(Direct and Reimbursable)

PY CY BY

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year or Estimated FTEs 98,735 95,299 96,736

Increases:

Reason #1: Adjusted to enacted level 2/ 727

Reason #2: Initiative Reinvestment/Increases 1,652

Reason #3: Increase in reimbursable work 681 153

Reason #4: Base Reinvestment 11

Subtotal, Increases 0 3,060 164

Decreases:

Reason #1: Adjusted to enacted level 2/ (1,295)

Reason #2: Adjusted to operating plan/under utilization (2,141)

Reason #3: FY 2006 Rescission (605)

Reason #4: Operating Plan Adjustment (1,018)

Reason #5: Productivitiy Savings (2,405)

Subtotal, Decreases (3,436) (1,623) (2,405)

End of Year (EOY) Actual/Estimated FTEs

PY CY BY

FY 2005 FY 2006 FY 2007

Budgeted FTEs 1 102,392 97,678 94,495

Enacted FTEs 2 97,440 97,678 -

Actual/Projected FTE 95,299 96,736 94,495

Net Change from prior year (PY) SOY to budget year (BY) EOY (4,240)

1 Budgeted FTE - FTE requested in Congressional Justification. 2 Enacted FTE authorized by Congress.

1/

IRS - 108
Bureau: Internal Revenue Service Appropriation Title: Total Summary of all Appropriations FTE $ FTE $ FTE $ FTE $ FTE $ FTE $ F

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (

11.1 Full-time permanent 81,146 $5,054,134 82,575 $5,388,566 - $0 82,575 $5,388,566 (588) ($53,886) (289) $17,227 811.3 Other than full-time perm. 13,136 419,829 14,434 483,115 - - 14,434 483,115 (17) (4,831) (729) (44,869) 1

11.5 Other personnel comp. - 224,992 - 230,417 - - - 230,417 - (2,304) - 19,834 

11.8 Spec. personal serv. paym'ts - 15,899 - 13,753 - - - 13,753 - (138) - 3,137 

Total Personnel Comp. 94,282 $5,714,854 97,009 $6,115,852 - $0 97,009 $6,115,852 (605) ($61,159) (1,018) ($4,671) 9

12.0 Personnel Benefits - 1,526,585 - 1,610,039 - - - 1,610,039 - (16,100) - 23,944 

13.0 Benefits Former Personnel - 88,684 - 36,927 - - - 36,927 - (369) - (12,916) 

21.0 Travel - 176,066 - 210,082 - - - 210,082 - (2,101) - 2,224 

22.0 Transportation of Things - 27,977 - 26,208 - - - 26,208 - (262) - 425 

23.1 Rental payments to GSA - 619,763 - 717,974 - - - 717,974 - (7,180) - (29,930) 

23.2 Rental payments to others - 568 - 381 - - - 381 - (4) - 415 

23.3 Commun., util. & misc. charges - 372,184 - 399,298 - - - 399,298 - (3,993) - (27,397) 

24.0 Printing & Reproduction - 70,425 - 72,679 - - - 72,679 - (727) - (4,765) 

25.1 Advisory & assist. services - 187,789 - 51,938 - - - 51,938 - (519) - 90,707 

25.2 Other services - 721,667 - 756,544 - 1,250 - 757,794 - (7,578) - (107,380) 

25.3 Other purchases - Gov't accts - 166,017 - 54,256 - - - 54,256 - (543) - 29,781 

25.4 Oper, & maint. of facilities - 130,354 - 148,880 - - - 148,880 - (1,489) - 41,561 

25.5 R&D contracts - 6,272 - 6,984 - - - 6,984 - (70) - 555 

25.6 Medical care - 10,753 - 11,208 - - - 11,208 - (112) - (1,090) 

25.7 Oper, & Maint. of equipment - 88,063 - 92,647 - - - 92,647 - (926) - 8,576 

25.8 Subsist. & Support of Persons - 2,175 - 5,683 - - - 5,683 - (57) - (536) 

26.0 Supplies & Materials - 48,727 - 55,769 - - - 55,769 - (558) - 9,298 

31.0 Equipment - 392,906 - 289,017 - - - 289,017 - (2,890) - (19,112) 

32.0 Lands & Structures - 30,424 - - - - - - - - - - 

33.0 Investments & Loans - 0 - - - - - - - - - - 

41.0 Grants, Subsidies - 11,950 - 12,065 - - - 12,065 - (121) - (0) 

42.0 Insurance Claims & Indemn. - 1,865 - 1,017 - - - 1,017 - (10) - 272 

43.0 Interest & Dividends - 0 - - - - - - - - - - 

44.0 Refunds - 0 - - - - - - - - - - 

91.0 Unvouchered Expenses - 2,605 - 3,814 - - - 3,814 - (38) - 38 

TOTAL Object Classes 94,282 $10,398,674 97,009 $10,679,261 - $1,250 97,009 $10,680,511 (605) ($106,805) (1,018) $0 9

FY 2006 Rescission

Anticipated 

Reprogrammings

and Inter-Approp. 

Transfers

FY 2006 ENACTED LEVEL OF FUNDING AND OPERATING PLAN

(Dollars in Thousands)

FY 2005 Actual FY 2006 Budget Request FY 2006 Enacted Level FY 

Congress'l Adjustments

Object Class

IRS - 109
Bureau: Internal Revenue Service Appropriation Title: Processing, Assistance and Management Account Number(s): 2060912 FTE $ FTE $ FTE $ FTE $ FTE $ FTE $ 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

11.1 Full-time permanent 27,941 $1,556,778 27,836 $1,652,364 - $0 27,836 $1,652,364 (43) ($16,524) (728) ($38,996) 

11.3 Other than full-time perm. 10,769 319,470 11,003 337,289 - 0 11,003 337,289 - (3,373) 239 (3,957) 

11.5 Other personnel comp. - 87,655 68,967 - 0 - 68,967 - (690) - 17,989 

11.8 Spec. personal serv. paym'ts - $3 $0 - 0 - 0 - - - 0 

Total Personnel Comp. 38,710 $1,963,907 38,839 $2,058,620 - $0 38,839 $2,058,620 (43) ($20,586) (488) ($24,964) 

12.0 Personnel Benefits - 581,622 606,407 - 0 - 606,407 - (6,064) - 9,866 

13.0 Benefits Former Personnel - 46,354 21,701 - 0 - 21,701 - (217) - (5,072) 

21.0 Travel - 47,923 51,453 - 0 - 51,453 - (515) - (1,731) 

22.0 Transportation of Things - 24,236 22,092 - 0 - 22,092 - (221) - 425 

23.1 Rental payments to GSA - 619,572 717,783 - 0 - 717,783 - (7,178) - (29,932) 

23.2 Rental payments to others - 158 46 - 0 - 46 - (0) - (45) 

23.3 Commun., util. & misc. charges - 162,815 161,103 - 0 - 161,103 - (1,611) - (1,835) 

24.0 Printing & Reproduction - 67,141 69,507 - 0 - 69,507 - (695) - (4,394) 

25.1 Advisory & assist. services - 53,500 23,805 - 0 - 23,805 - (238) - 10,714 

25.2 Other services - 78,933 169,840 - 0 - 169,840 - (1,698) - (24,620) 

25.3 Other purchases - Gov't accts - 109,213 28,974 - 0 - 28,974 - (290) - 27,065 

25.4 Oper, & maint. of facilities - 129,434 147,236 - 0 - 147,236 - (1,472) - 38,831 

25.5 R&D contracts 0 - 0 - 0 - 0 - - - - 

25.6 Medical care - 10,750 11,062 - 0 - 11,062 - (111) - (951) 

25.7 Oper, & Maint. of equipment - 1 19 - 0 - 19 - (0) - (7) 

25.8 Subsist. & Support of Persons - 407 1,996 - 0 - 1,996 - (20) - (510) 

26.0 Supplies & Materials - 16,480 15,426 - 0 - 15,426 - (154) - 10,166 

31.0 Equipment - 63,718 17,037 - 0 - 17,037 - (170) - (3,270) 

32.0 Lands & Structures - 29,553 - 0 - 0 - 0 - - - - 

33.0 Investments & Loans - 0 - 0 - 0 - 0 - - - - 

41.0 Grants, Subsidies - 11,950 12,060 - 0 - 12,060 - (121) - (0) 

42.0 Insurance Claims & Indemn. - 825 411 - 0 - 411 - (4) - 263 

43.0 Interest & Dividends - 0 - 0 - 0 - 0 - - - - 

44.0 Refunds - 0 - 0 - 0 - 0 - - - - 

91.0 Unvouchered Expenses - 0 - 0 - - - 0 - - - - 

 TOTAL Object Classes 38,710 $4,018,490 38,839 $4,136,578 - $0 38,839 $4,136,578 (43) ($41,366) (488) $0 

1) Pre-filing Taxpayer Assistance &

Education 3,089 546,005 2,835 522,936 - 0 2,835 522,936 (23) (5,229) 108 (187,171) 

2) Filing & Account Services 28,429 1,673,341 28,181 1,696,654 - 0 28,181 1,696,654 - (16,967) (674) (1,556) 

3) Shared Services Support 3,175 1,244,330 3,567 1,298,163 - 0 3,567 1,298,163 - (12,982) 42 199,184 

4) General Management &

Administration 4,017 554,814 4,256 618,824 - 0 4,256 618,824 (20) (6,188) 36 (10,458) 

TOTAL Programs 38,710 $4,018,490 38,839 $4,136,578 - $0 38,839 $4,136,578 (43) ($41,366) (488) $0 

Object Class

Program

FY 2006 ENACTED LEVEL OF FUNDING AND OPERATING PLAN

(Dollars in Thousands)

FY 2005 Actual Congress'l Adjustments FY 2006 Enacted Level FY 2006 Rescission

Anticipated

Reprogrammings 

and Inter-Approp. 

Transfers

FY 2006 Budget Request 

IRS - 110
Bureau: Internal Revenue Service Appropriation Title: Tax Law Enforcement Account Number(s): 2060913 FTE $ FTE $ FTE $ FTE $ FTE $ FTE $ 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

11.1 Full-time permanent 46,279 $2,959,056 47,792 $3,188,593 - $0 47,792 $3,188,593 (545) ($31,886) 112 $21,4

11.3 Other than full-time perm. 2,265 95,669 3,329 141,164 - 0 3,329 141,164 (17) (1,412) (950) (40,03

11.5 Other personnel comp. - 119,053 - 136,588 - 0 - 136,588 - (1,366) - 4,95

11.8 Spec. personal serv. paym'ts - 15,896 - 13,753 - 0 - 13,753 - (138) - 3,13

Total Personnel Comp. 48,544 $3,189,674 51,121 $3,480,098 - $0 51,121 $3,480,098 (562) ($34,801) (838) ($10,48

12.0 Personnel Benefits - 817,825 872,926 - 0 - 872,926 - (8,729) - 3,83

13.0 Benefits Former Personnel - 35,761 4,124 - 0 - 4,124 - (41) - 44

21.0 Travel - 112,963 141,915 - 0 - 141,915 - (1,419) - 3,35

22.0 Transportation of Things - 3,432 3,943 - 0 - 3,943 - (39) - (3

23.1 Rental payments to GSA - 191 - - 0 - 0 - - - 

23.2 Rental payments to others - 410 335 - 0 - 335 - (3) - 

23.3 Commun., util. & misc. charges - 48,223 45,073 - 0 - 45,073 - (451) - 1,19

24.0 Printing & Reproduction - 2,584 2,251 - 0 - 2,251 - (23) - (12

25.1 Advisory & assist. services - 24,266 20,686 - 0 - 20,686 - (207) - 1,76

25.2 Other services - 61,145 95,681 - 0 - 95,681 - (957) - (4,54

25.3 Other purchases - Gov't accts - 39,081 12,278 - 0 - 12,278 - (123) - 2,47

25.4 Oper, & maint. of facilities - 686 486 - 0 - 486 - (5) - 

25.5 R&D contracts - 6,272 4,897 - 0 - 4,897 - (49) - 55

25.6 Medical care - 0 0 - - - 

25.7 Oper, & Maint. of equipment - 1,937 6,613 - 0 - 6,613 - (66) - 20

25.8 Subsist. & Support of Persons - 1,687 3,326 - 0 - 3,326 - (33) - (2

26.0 Supplies & Materials - 16,988 20,518 - 0 - 20,518 - (205) - 72

31.0 Equipment - 8,354 6,180 - 0 - 6,180 - (62) - 61

32.0 Lands & Structures - 440 - 0 - 0 - - - 

33.0 Investments & Loans - - 0 - - - 41.0 Grants, Subsidies - 5 - 0 - 5 - (0) - 

42.0 Insurance Claims & Indemn. - 872 606 - 0 - 606 - (6) - 

43.0 Interest & Dividends - - 0 - 0 - - - 

44.0 Refunds - - 0 - 0 - - - 

91.0 Unvouchered Expenses - 2,605 3,814 - 0 - 3,814 - (38) - 3

 TOTAL Object Classes 48,544 $4,375,396 51,121 $4,725,756 - $0 51,121 $4,725,756 (562) ($47,258) (838) 

1) Compliance Services 45,308 4,119,151 47,675 4,459,660 - 0 47,675 4,459,660 (542) (44,597) (788) (12

2) Research and SOI 826 92,313 866 96,923 - 0 866 96,923 (3) (969) (18) 80

3) Earned Income Tax Credit 2,410 163,932 2,580 169,173 - 0 2,580 169,173 (17) (1,692) (32) (67

TOTAL Programs/Project/Activities 48,544 $4,375,396 51,121 $4,725,756 - $0 51,121 $4,725,756 (562) ($47,258) (838) 

FY 2006 ENACTED LEVEL OF FUNDING AND OPERATING PLAN

(Dollars in Thousands)

FY 2005 Actual Congress'l Adjustments FY 2006 Enacted Level FY 2006 Rescission

Anticipated

Reprogrammings

and Inter-Approp

Transfers

FY 2006 Budget

Request

Object Class

Program

IRS - 111
Bureau: Internal Revenue Service Appropriation Title: Information Systems Account Number(s): 2060919 and 206/70919 FTE $ FTE $ FTE $ FTE $ FTE $ FTE $ 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

11.1 Full-time permanent 6,913 $537,044 6,930 $545,369 - $0 6,930 $545,369 ($5,454) 327 $34,744 

11.3 Other than full-time perm. 102 4,690 102 4,663 - 0 102 4,663 (47) (19) (875) 

11.5 Other personnel comp. - 18,246 - 24,840 - 0 - 24,840 - (248) - (3,112) 

11.8 Spec. personal serv. paym'ts - - - - 

Total Personnel Comp. 7,015 $559,980 7,032 $574,872 - $0 7,032 $574,872 - ($5,749) 308 $30,756 

12.0 Personnel Benefits - 126,806 - 130,357 - 0 - 130,357 - (1,304) - 10,238 

13.0 Benefits Former Personnel - 6,569 - 11,102 - 0 - 11,102 - (111) - (8,290) 

21.0 Travel - 15,057 - 16,572 - 0 - 16,572 - (166) - 600 

22.0 Transportation of Things - 298 - 173 - 0 - 173 - (2) - 36 

23.1 Rental payments to GSA - - - 0 - 0 - 0 - (0) - 0 

23.2 Rental payments to others - 1 - 0 - 0 - 0 - (0) - 451 

23.3 Commun., util. & misc. charges - 161,145 - 193,122 - 0 - 193,122 - (1,931) - (26,754) 

24.0 Printing & Reproduction - 450 - 920 - 0 - 920 - (9) - (252) 

25.1 Advisory & assist. services - 110,024 - 7,447 - - - 7,447 - (74) - 78,231 

25.2 Other services - 287,573 - 324,276 - 1,250 - 325,526 - (3,255) - (77,686) 

25.3 Other purchases - Gov't accts - 17,704 - 13,003 - - - 13,003 - (130) - 240 

25.4 Oper, & maint. of facilities - 234 - 1,158 - - - 1,158 - (12) - 2,725 

25.5 R&D contracts - - - 2,087 - - - 2,087 - (21) - 2 

25.6 Medical care - 3 - 146 - - - 146 - (1) - (139) 

25.7 Oper, & Maint. of equipment - 73,201 - 80,315 - - - 80,315 - (803) - 8,320 

25.8 Subsist. & Support of Persons - 75 - 361 - - - 361 - (4) - 0 

26.0 Supplies & Materials - 15,231 - 19,818 - - - 19,818 - (198) - (1,588) 

31.0 Equipment - 293,665 - 221,988 - - - 221,988 - (2,220) - (16,892) 

32.0 Lands & Structures - 431 - - - - - - - - 

33.0 Investments & Loans - - - - - - - - 

41.0 Grants, Subsidies - - - - - - - - 

42.0 Insurance Claims & Indemn. - 168 - - - - - - - 3 

43.0 Interest & Dividends - - - - - - - - 

44.0 Refunds - - - - - - - - 

91.0 Unvouchered Expenses - - - - - - - - 

 TOTAL Object Classes 7,015 $1,668,612 7,032 $1,597,717 - $1,250 7,032 $1,598,967 - ($15,990) 308 $0 

1) IS Improvement Projects - 41,990 - 49,454 - - - 49,454 - (495) - 342 

2) Information Services 7,015 1,626,622 7,032 1,548,262 - 1,250 7,032 1,549,512 (15,495) 308 (342) 

TOTAL Programs/Project/Activities 7,015 $1,668,612 7,032 $1,597,717 - $1,250 7,032 $1,598,967 - ($15,990) 308 $0 

FY 2006 Budget

Request

Object Class

Program

FY 2006 ENACTED LEVEL OF FUNDING AND OPERATING PLAN

(Dollars in Thousands)

FY 2005 Actual Congress'l Adjustments FY 2006 Enacted Level FY 2006 Rescission

Anticipated

Reprogrammings

and Inter-Approp.

Transfers

IRS - 112
Bureau: Internal Revenue Service Appropriation Title: Business Systems Modernization Account Number(s): 206/80921 FTE $ FTE $ FTE $ FTE $ FTE $ FTE $ 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

11.1 Full-time permanent - - - - - 

11.3 Other than full-time perm. - - - - 

11.5 Other personnel comp. - - - - - 

11.8 Spec. personal serv. paym'ts - - - - - 

Total Personnel Comp. - - - - - - - - - - - 

12.0 Personnel Benefits - - - - - 

13.0 Benefits Former Personnel - - - - - 

21.0 Travel - - - - - 

22.0 Transportation of Things - - - - - 

23.1 Rental payments to GSA - - - - - 

23.2 Rental payments to others - - - - - 

23.3 Commun., util. & misc. charges - - - - - 

24.0 Printing & Reproduction - - - - - 

25.1 Advisory & assist. services - - - - - 

25.2 Other services $276,586 $149,489 $0 - $149,489 - ($1,495) - ($4

25.3 Other purchases - Gov't accts - - - - - 

25.4 Oper, & maint. of facilities - - - - - 

25.5 R&D contracts - - - - - 

25.6 Medical care - - - - - 

25.7 Oper, & Maint. of equipment 12,924 5,700 0 - 5,700 - (57) - 

25.8 Subsist. & Support of Persons - - - - - 

26.0 Supplies & Materials - - - - - 

31.0 Equipment 27,169 43,812 0 - 43,812 - (438) - 4

32.0 Lands & Structures - - - - - 

33.0 Investments & Loans - - - - - 

41.0 Grants, Subsidies - - - - - 

42.0 Insurance Claims & Indemn. - - - - - 

43.0 Interest & Dividends - - - - - 

44.0 Refunds - - - - - 

91.0 Unvouchered Expenses - - - - - 

 TOTAL Object Classes - $316,678 - $199,000 - $0 - $199,000 - ($1,990) - 

1) Business Systems Modernization 316,678 199,000 - 199,000 - (1,990) - 

TOTAL Programs/Project/Activities - $316,678 - $199,000 - $0 - $199,000 - ($1,990) - 

FY 2006 ENACTED LEVEL OF FUNDING AND OPERATING PLAN

(Dollars in Thousands)

FY 2005 Actual Congress'l Adjustments FY 2006 Enacted Level FY 2006 Rescission

Anticipated 

Reprogrammin

and Inter-Appro

Transfers

FY 2006 Budget

Request

Object Class

Program

IRS - 113
Bureau: Internal Revenue Service Appropriation Title: Health Insurance Tax Credit Administration Account Number(s): 2060928 FTE $ FTE $ FTE $ FTE $ FTE $ FTE $ 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 

11.1 Full-time permanent 13 $1,256 17 $2,241 17 $2,241 - ($22) - 

11.3 Other than full-time perm. 0 0 - - - 

11.5 Other personnel comp. 38 22 22 - (0) - 

11.8 Spec. personal serv. paym'ts - 

Total Personnel Comp. 13 $1,294 17 $2,262 - $0 17 $2,262 - ($23) - 

12.0 Personnel Benefits 333 349 349 - (3) - 

13.0 Benefits Former Personnel - - - 

21.0 Travel 123 143 142 - (1) - 

22.0 Transportation of Things 12 0 - - - 

23.1 Rental payments to GSA 191 191 - (2) - 

23.2 Rental payments to others - - - 

23.3 Commun., util. & misc. charges 1 - - - 

24.0 Printing & Reproduction 250 - - - 

25.1 Advisory & assist. services - - - 

25.2 Other services 17,431 17,259 17,259 - (173) - 

25.3 Other purchases - Gov't accts 19 - - - 

25.4 Oper, & maint. of facilities 0 - - - 

25.5 R&D contracts - - - 

25.6 Medical care - - - 

25.7 Oper, & Maint. of equipment - - - 

25.8 Subsist. & Support of Persons 7 - - - 

26.0 Supplies & Materials 28 7 7 - (0) - 

31.0 Equipment - - - 

32.0 Lands & Structures - - - 

33.0 Investments & Loans - - - 

41.0 Grants, Subsidies - - - 

42.0 Insurance Claims & Indemn. - - - 

43.0 Interest & Dividends - - - 

44.0 Refunds - - - 

91.0 Unvouchered Expenses - - - 

 TOTAL Object Classes 13 $19,498 17 $20,210 - $0 17 $20,210 - ($202) - 

1) Health Insurance Tax Credit 

Administration 13 19,498 17 20,210 - - 17 20,210 - (202) - 

TOTAL Programs/Project/Activities 13 $19,498 17 $20,210 - $0 17 $20,210 - ($202) - 

FY 2006 ENACTED LEVEL OF FUNDING AND OPERATING PLAN

(Dollars in Thousands)

FY 2005 Actual Congress'l Adjustments FY 2006 Enacted Level FY 2006 Rescission

Anticipated 

Reprogrammin

and Inter-Appro

Transfers

FY 2006 Budget 

Request

Object Class

Program

IRS - 114
4.4 – IRS Performance Measures Summary Table and Data Dictionary Link 

FY 2005 FY 2005 FY 2006 FY 2007

FY 2003 FY 2004 Planned Actual Planned Planned

Historical Historical Performance Performance Performance Performance

Oe N/A 76.0% 80.0% 91.4% 92.0% 93.0%

Timeliness of Critical Other Tax Products to the Public Oe N/A 76.0% 80.0% 80.0% 85.0% 86.0%

Taxpayer Self Assistance Rate Oe * (L) 51.0% 46.4% Baseline 42.5% 45.7% 47.5%

Refund Timeliness - Individual (paper) 98.8% 98.3% 98.4% 99.2% 99.2% 99.2%

Percent of Eligible Taxpayers Who File for EITC Ot N/A 80.0% 80.0% ** 80.0% 80.0%

Percent Individual Returns Processed Electronically Oe (L) ‡‡ 40.3% 46.5% 51.0% 51.1% 55.0% 58.8%

Percent of Business Returns Processed Electronically Oe (L) ‡‡ N/A 17.4% 17.0% 17.8% 18.6% 20.6%

Customer Accuracy - Tax Law Phones Oe 82.0% 80.0% 82.0% 89.0% 90.0% 90.5%

Customer Accuracy - Accounts (Phones) Oe 88.0% 89.0% 89.8% 91.5% 92.0% 92.6%

Customer Contacts Resolved per Staff Year E 8,318 8,015 7,261 7,585 7,477 7,555

Customer Service Representative (CSR) Level of Service Oe 80.0% 87.3% 82.0% 82.6% 82.0% 82.0%

Examination Coverage - Individual Oe N/A N/A 1.4% 1.4% Discontinued Discontinued

Examination Coverage - Individual Oe (L) N/A 0.8% 0.9% 0.9% 0.9% 1.0%

Examination Quality - Field 75.0% 78.0% 80.0% 84.0% Discontinued Discontinued

Field Exam Embedded Quality (EQ) *** (L) N/A N/A N/A N/A Baseline TBD

Examination Quality - Office 76.0% 76.0% 77.0% 81.0% Discontinued Discontinued

Office Exam Embedded Quality (EQ) *** (L) N/A N/A N/A N/A Baseline TBD

Examination Quality (LMSB) - Industry Oe (L) 74.0% 74.0% 78.0% 77.0% 80.0% 84.0%

Examination Quality (LMSB) - Coordinated Industry Oe (L) 89.0% 87.0% 90.0% 89.0% 92.0% 93.0%

Examination Coverage - Business (Corps > $10 M) Oe (L)††† 6.1% 7.5% 7.1% 7.8% 7.5% 8.4%

AUR Efficiency † (L) N/A 1,514 N/A 1,701 1,759 1,834

AUR Coverage † (L) N/A 1.9% 2.5% 2.2% 2.3% 2.4%

Examination Efficiency - Individual E N/A N/A 219 222 Discontinued Discontinued

Examination Efficiency - Individual E *† (L) N/A N/A N/A 121 121 128

Collection Coverage - units Oe N/A N/A 32% 39% Discontinued Discontinued

Collection Coverage - units Oe *† (L) N/A N/A 57.0% 53.0% 52.0% 52.0%

Collection Efficiency - units E N/A N/A 497 510 Discontinued Discontinued

Collection Efficiency - units E *† (L) N/A N/A N/A 1,514 1,650 1,717 

Field Collection Quality of Cases Handled in Person 84.0% 82.0% 84.0% 81.0% Discontinued Discontinued

Field Collection Embedded Quality Oe **** (L) N/A N/A N/A N/A Baseline TBD

Automated Collection System (ACS) Accuracy Oe N/A 87.8% 88.0% 88.5% 88.0% 89.0%

Criminal Investigations Completed Ot (L) 3,766 4,387 3,895 4,104 3,945 3,960 

Number of Convictions Ot (L) 1,824 2,008 2,048 2,151 2,260 2,305

Conviction Rate E (L) 91.5% 91.2% 92.0% 91.2% 92.0% 92.0%

Conviction Efficiency Rate ($) E (L) 363,932 362,849 332,194 295,316 339,565 341,334

TEGE Determination Case Closures Ot 171,812 143,877 131,700 126,481 112,400 128,500

Reduce the Percent of Taxpayers Who Think it is OK to Cheat on 

Their Taxes Oe (L) 17.0% 12.0% N/A 10.0% 10.0% 10.0%

Improve Voluntary Compliance (L) ‡ N/A N/A N/A 83.0% N/A N/A

Contracted Program Cost and Schedule Variance E N/A N/A 15.0% Discontinued Discontinued Discontinued

BSM Project Cost Variance by Release/Subrelease †† N/A N/A N/A N/A 10.0% 10.0%

Contracted Requirements Stability and Contracted Requirements 

Delivered E N/A N/A 10.0% Discontinued Discontinued Discontinued

BSM Project Schedule Variance by Release/Subrelease †† N/A N/A N/A N/A 10.0% 10.0%

‡ FY 2005 projection based on Tax Year 2001 data 

‡‡ 80% remains the long-term goal for Electronic Filing as identified by statute. It will not be achieved in the legislative timeframe

N/A: Not applicable for this fiscal year

† Measure includes data for SBSE and W&I. Total W & I Closures include Non-EITC and EITC Closures for FY 2004 - 2007. 

****Field Collection Embedded Quality represents a re-structuring of "Field Collection Quality of Cases Handled in Person Oe" in FY 2007

*† The FY2005-2007 data provided for these measures represents a change in definition and methodology effective in FY2006. FY 2005 actual adjusted to eliminate

 duplicate counting of deferral cases.

††† Variance from PART in 2007 reflects a recent increase in the Examination plan for LMSB

IRS Performance Measures - Summary 

Performance Level

†† Measures represent enhancements to program cost and schedule variance measures introduced in FY2005 

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and (L) - Long-term Goal

*FY 2003-2004 data based on a methodology developed in FY 2005

** Performance reported after close of calendar year

***Embedded Quality (EQ) represents a re-structuring of measures for "Collection Quality Management System (CQMS) and Examination Quality" Management System (EQMS) in

 FY 2007. EQ will be baselined in FY 2006 and will run concurrently with CQMS and EQMS during that year. 

IRS - 115
Data Dictionary Link for Performance Measures: 

http://www.irs.gov/pub/irs-utl/data_dictionary.pdf

IRS - 116
4C – Appropriation Language Sheet, Justification of Changes, and Legislative 

Proposals

DEPARTMENT OF THE TREASURY 

INTERNAL REVENUE SERVICE 

Federal Fund 

General and special Fund: 

PROCESSING, ASSISTANCE, AND MANAGEMENT 

[(INCLUDING RESCISSION OF FUNDS)] 

For necessary expenses of the Internal Revenue Service for pre-filing taxpayer assistance 

and education, filing and account services, shared services support, general management 

and administration; and services as authorized by 5 U.S.C. 3109, at such rates as may be 

determined by the Commissioner, [$4,136,578,000] $4,045,122,000, of which up to 

$4,100,000 shall be for the Tax Counseling for the Elderly Program, of which $8,000,000 

shall be available for low-income taxpayer clinic grants, [of which $1,500,000 shall be 

for the Internal Revenue Service Oversight Board;] and of which not to exceed $25,000 

shall be for official reception and representation expenses[: Provided, That of unobligated 

amounts available under this heading from previous appropriations Acts, $20,000,000 

shall be rescinded]. (Department of the Treasury Appropriations Act, 2006.) 

Justification of Language Changes (other than the request amount): The specific 

funding level for the Oversight Board is deleted. The IRS commits to funding the Board, 

but the $1,500,000 is significantly more than the Board has spent in prior years. As a 

result, any remaining balance is not available for other, critical tax administration 

activities. The provision that rescinded $20,000,000 from FY 2005 unobligated balances 

is deleted as no longer applicable.

TAX LAW ENFORCEMENT 

[(INCLUDING TRANSFER OF FUNDS)] 

For necessary expenses of the Internal Revenue Service for determining and establishing

tax liabilities; providing litigation support; conducting criminal investigation and 

enforcement activities; securing unfiled tax returns; collecting unpaid accounts; 

conducting a document matching program; resolving taxpayer problems through prompt 

identification, referral and settlement; expanded customer service and public outreach 

programs, strengthened enforcement activities, and enhanced research efforts to reduce 

erroneous filings associated with the earned income tax credit; compiling statistics of

income and conducting compliance research; purchase (for police-type use, not to exceed 

850) and hire of passenger motor vehicles (31 U.S.C. 1343(b)); and services as 

IRS - 117
authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, 

[$4,725,756,000] $4,762,327,000, of which not to exceed $1,000,000 shall remain 

available until September 30, [2008] 2009, for research; and of which $55,584,000 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 the IRS Processing, 

Assistance, and Management appropriation or the IRS Information Systems appropriation 

solely for the purposes of management of the Interagency Crime and Drug Enforcement 

Program: Provided further, That up to $10,000,000 may be transferred as necessary from

this account to the IRS Processing, Assistance, and Management appropriation or the IRS 

Information Systems appropriation solely for the purposes of management of the Earned 

Income Tax Credit compliance program and to reimburse the Social Security 

Administration for the cost of implementing section 1090 of the Taxpayer Relief Act of 

1997 (Public Law 105-33): Provided further, That this transfer authority shall be in 

addition to any other transfer authority provided in this Act]. (Department of the 

Treasury Appropriations Act, 2006) 

Justification of Language Changes (other than the request amount): Three-year 

funding for research is preserved (changing 2008 to 2009). The authority to transfer 

funds from the appropriation to other appropriations is deleted because it has not been

necessary for the effective management of those programs. 

 

HEALTH INSURANCE TAX CREDIT ADMINISTRATION 

[(INCLUDING RESCISSION OF FUNDS)] 

For expenses necessary to implement the health insurance tax credit included in the Trade 

Act of 2002 (Public Law 107-210), [$20,210,000: Provided, That of unobligated amounts 

available under this heading from previous appropriations acts, $9,000,000 shall be 

rescinded] $14,846,000. (Department of the Treasury Appropriations Act, 2006) 

Justification of Language Changes (other than the request amount): The provision 

that rescinded $9,000,000 from FY 2005 unobligated balances is deleted as no longer 

applicable.

INFORMATION SYSTEMS 

For necessary expenses of the Internal Revenue Service for information systems and 

telecommunications support, including developmental information systems and 

operational information systems; 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, [$1,598,967,000] $1,602,232,000, of which 

$75,000,000 shall remain available until September 30, [2007] 2008. (Department of the 

Treasury Appropriations Act, 2006) 

IRS - 118
Justification of Language Changes (other than the request amount): Two-year 

funding for investment spending is preserved (changing 2007 to 2008). 

BUSINESS SYSTEMS MODERNIZATION 

For necessary expenses of the Internal Revenue Service, [$199,000,000] $167,310,000, to 

remain available until September 30, [2008] 2009, for the capital asset acquisition of 

information technology systems, including management and related contractual costs of 

said acquisitions, including contractual costs associated with operations authorized by 5 

U.S.C. 3109: Provided, That none of these funds may be obligated until the Internal 

Revenue Service submits to the Committees on Appropriations[, and such Committees 

approve,] 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. (Department of the Treasury 

Appropriations Act, 2006) 

Justification of Language Changes (other than the request amount): Requiring 

Committee approval contravenes INS v. Chada, 462 U. S. 919 (1983). 

IRS - 119
ADMINISTRATIVE PROVISIONS--INTERNAL REVENUE SERVICE 

(INCLUDING TRANSFER OF FUNDS) 

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 

“Tax Law Enforcement” may be transferred to any other Internal Revenue Service 

appropriation upon the advance [approval] notification of the Committees on 

Appropriations. 

Justification of Language Changes: Requiring Committee approval contravenes INS v. 

Chada, 462 U. S. 919 (1983). 

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. Funds made available by this or any other Act to the Internal Revenue Service 

shall be available for improved facilities and increased manpower to provide sufficient 

and effective 1-800 help line service for taxpayers. The Commissioner shall continue to 

make the improvement of the Internal Revenue Service 1-800 help line service a priority 

and allocate resources necessary to increase phone lines and staff to improve the Internal 

Revenue Service 1-800 help line service.] 

Justification of Language Changes: The provision is deleted because the Service has 

achieved significant improvements in toll-free service and directing resources to continue 

improvements is no longer needed. In addition, the directive limits the Commissioner’s 

ability to manage taxpayer service programs in the most effective manner. 

[SEC. 205. None of the funds appropriated or otherwise made available in this or any 

other Act or source to the Internal Revenue Service may be used to reduce taxpayer 

services as proposed in fiscal year 2006 until the Treasury Inspector General for Tax 

Administration completes a study detailing the impact of such proposed reductions on 

taxpayer compliance and taxpayer services, and the Internal Revenue Service's plans for 

providing adequate alternative services, and submits such study and plans to the 

Committees on Appropriations of the House of Representatives and the Senate for 

approval: Provided, That no funds shall be obligated by the Internal Revenue Service for 

such purposes for 60 days after receipt of such study: Provided further, That the Internal 

Revenue Service shall consult with stakeholder organizations, including but not limited 

to, the National Taxpayer Advocate, the Internal Revenue Service Oversight Board, the 

Treasury Inspector General for Tax Administration, and Internal Revenue Service 

employees with respect to any proposed or planned efforts by the Internal Revenue 

Service to terminate or reduce significantly any taxpayer service activity.]

IRS - 120
Justification of Language Changes: The provision is deleted because the provision

applied to FY 2006 and no longer is necessary. 

SEC. [206] 204. Of the funds made available by this Act to the Internal Revenue Service, 

not less than [$6,447,000,000] $6,824,070,000 shall be available only for tax 

enforcement. 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 [$446,000,000] 

$137,275,000 shall be available for [enhanced] tax enforcement. 

Justification of Language Changes: The first amount specified now includes the 

entirety of the amount appropriated as available for tax enforcement in FY 2006. The 

second amount specified reflects increased resources requested for enhanced tax 

enforcement. 

[SEC. 207. Of the funds made available by this Act to the Internal Revenue Service, not 

less than $166,249,000 shall be available for operating expenses of the Taxpayer 

Advocate Service, of which not less than $141,311,650 shall be made available from the 

“Tax Law Enforcement” account.] 

Justification of Language Changes: The provision is deleted because it is not 

necessary. Taxpayer Advocate Service funding traditionally has been funded primarily 

from the Tax Law Enforcement account. 

[SEC. 208. The Internal Revenue Service shall submit its fiscal year 2007 congressional 

budget justifications to the Committees on Appropriations of the House of

Representatives and the Senate using the identical structure provided under this Act and 

only in accordance with the direction specified in the report accompanying this Act.] 

Justification of Language Changes: The provision is deleted because the provision

applied to FY 2006 and no longer is necessary. 

[SEC. 209. Section 3 under the heading `Administrative Provisions--Internal Revenue 

Service' of title I of Public Law 103-329 is amended by striking the last proviso.] 

(Department of the Treasury Appropriations Act, 2006) 

Justification of Language Changes: The provision is deleted because the provision

applied to FY 2006 and no longer is necessary. 

[SEC. 5021, For the purposes of compliance with section 205 of Public Law 109-115, a 

reduction in taxpayer service shall include, but not be limited to, any reduction in 

available hours of telephone taxpayer assistance on a daily, weekly and monthly basis 

below the levels in existence during the month of October 2005.] (Emergency 

Supplemental Appropriations Act to Address Hurricanes in the Gulf of Mexico and 

Pandemic Influenza, 2006) 

IRS - 121
Justification of Language Changes: The provision is deleted because the provision is 

inconsistent with SEC. [206] 204 and it limits the Commissioner’s ability to manage 

taxpayer service programs in the most effective manner. 

LEGISLATIVE PROPOSALS 

The Administration is proposing five new legislative changes that will reduce the tax gap 

and is reproposing four legislative changes that will improve tax administration 

efficiency. The changes strategically target areas where 1) research reveals the existence 

of significant compliance problems, 2) improvements can be made with as little burden to 

taxpayers as possible, and 3) the changes support the Administration’s broader focus on 

identifying legislative and administrative changes to reduce the tax gap. These nine 

legislative changes are: 

CLOSE THE TAX GAP 

1. Implement standards clarifying when employee leasing companies can be 

held liable for their clients’ federal employment taxes: The Administration’s 

proposal would set forth standards for holding employee leasing companies 

jointly and severally liable with their clients for federal employment taxes. The 

proposal would also provide standards for holding employee leasing companies 

solely liable for such taxes if they meet specified requirements. 

2. Increase information reporting for payment card reimbursements: The 

Administration’s proposal would provide the Secretary with authority to 

promulgate regulations requiring payment card issuers to report to the IRS

annually the aggregate reimbursement payments made to merchants in a calendar 

year, and to require backup withholding for card issuers in the event that a 

merchant fails to provide a taxpayer identification number (TIN), or if the IRS 

notifies the card issuer that the TIN furnished by the merchant is incorrect. 

3. Require increased information reporting for certain government payments 

for goods and services: The Administration’s proposal would authorize the 

Secretary to promulgate regulations requiring information reporting and backup 

withholding on all non-wage payments by federal, state and local governments to 

procure property and services. It is expected that certain categories of payments 

would be excluded from the new information reporting and withholding 

requirements, including payments of interest, payments for real property, 

payments to tax-exempt entities or foreign governments, intergovernmental 

payments, and payments made pursuant to a classified or confidential contract. 

4. Amend collection due process procedures for employment tax liabilities: 

The Administration's proposal would expand the exception to the requirement for 

pre-levy collection due process (CDP) proceedings to include levies issued to 

collect federal employment taxes. Taxpayers would retain existing rights to seek 

review of collection activity through managerial appeal and the formal Collection 

IRS - 122
Appeal Process. As with the current procedures applicable to levies issued to 

collect a federal tax liability from State tax refunds, the taxpayer would be 

provided an opportunity for a CDP hearing within a reasonable period of time 

after the levy. The Collection by levy would be allowed to continue during the 

CDP proceedings. 

5. Expand the signature requirement and penalty provisions applicable to paid 

tax return preparers: The Administration’s proposal would expand preparer 

identification and penalty provisions to non-income tax returns and non-income

tax return-related documents prepared for compensation. In addition, it would 

subject paid preparers to penalties for preparing non-income tax return-related 

documents that contain false, incomplete, or misleading information or contain 

frivolous positions that delay collection. 

IMPROVE TAX ADMINISTRATION

1. Implement IRS administrative reforms: The proposed modification to the IRS 

Restructuring and Reform Act of 1998 is comprised of five parts. The first part 

modifies employee infractions subject to mandatory termination and permits a 

broader range of available penalties. It strengthens taxpayer privacy while 

reducing employee anxiety resulting from unduly harsh discipline or unfounded 

allegations. The second part adopts measures to curb frivolous submissions and 

filings that are intended to impede or delay tax administration. The third part 

allows the IRS to terminate installment agreements when taxpayers fail to make 

timely tax deposits and file tax returns on current liabilities. The fourth part 

streamlines jurisdiction over collection due process cases in the Tax Court, 

thereby simplifying procedures and reducing the cycle time for certain collection 

due process cases. The fifth part eliminates 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. 

2. Initiate IRS cost saving measures: The Administration has two proposals to 

improve IRS efficiency and performance from current resources. The first 

proposal modifies the way the Treasury Department’s Financial Management 

Service (FMS) recovers its transaction fees for processing IRS levies by 

permitting FMS to retain a portion of the amount collected before transmitting the 

balance to the IRS, thereby reducing government transaction costs. The offset 

amount would be included as part of the 15 percent limit on levies against income

and would also be credited against the taxpayer's liability. The second proposal 

would encourage increased electronic filing of income tax returns by businesses 

and exempt organizations. The proposal also would provide the IRS additional 

authority to require electronic filing. This proposal would allow the IRS to 

process more returns and payments efficiently. 

IRS - 123
3. Allow IRS to access information in the National Directory of New Hires for 

tax administration purposes: The National Directory of New Hires (NDNH), 

an electronic database maintained by the Department of Health and Human 

Services, contains timely, uniformly compiled employment data from State 

agencies across the country. Currently, the IRS may obtain data from the NDNH, 

but only for limited purposes. Access to NDNH data for tax administration 

purposes generally would make the IRS more productive by reducing the amount 

of resources it must dedicate to obtaining and processing data. The Administration 

proposes to amend the Social Security Act to allow the IRS access to NDNH data 

for general tax administration purposes, including data matching, verification of 

taxpayer claims during return processing, preparation of substitute returns for 

non-compliant taxpayers, and identification of levy sources. Data obtained by the 

IRS from the NDNH would be protected by existing taxpayer privacy law, 

including civil and criminal sanctions. The proposal would be effective on the 

date of enactment. 

4. Extend IRS authority to fund undercover operations: Current law places the 

IRS on equal footing with other Federal Law enforcement agencies by permitting 

the IRS to fund certain necessary and reasonable expenses of undercover 

operations. These undercover operations include international and domestic 

money laundering and narcotics operations. The Administration proposes to 

extend this funding authority, which expires on December 31, 2006, through 

December 31, 2010. 

IRS - 124
4D – User Fee Summary

In December 2005, the IRS announced several increases in selected user fees to reflect 

the full cost of providing the service. Total revenue resulting from these increased fees is 

estimated at $135 million for FY 2007. The FY 2007 Budget seeks to use these increased 

revenues to offset its operating requirements in FY 2007 and beyond. 

The following chart and information summarizes the new and increased fees and 

projected revenue for FY 2007. 

FY 2007 User Fees

(Dollars in Thousands)

New Installment Agreements: $69,000 $75,000 $144,000

New Installment Agreements $69,000 $54,000 $123,000

Disclosure of Return Information $0 $21,000 $21,000

Restructured Installment Agreements: $14,300 $12,700 $27,000

General User Fees (Miscellaneous): $7,800 $47,200 $55,000

Letter Rulings and Determinations $7,800 $47,100 $54,900

Technical Training $100 $100

Enrolled Agent Fee Increase: $8,800 $100 $8,900

Offer-In-Compromise $7,800 $0 $7,800

Enrolled Agents and Actuaries $1,000 $100 $1,100

Total Receipts and Collections: $99,900 $135,000 $234,900

Existing New Total

New Installment Agreements and Disclosure of Return Information

• New Installment Agreements – Agreements with taxpayers to pay past due 

amounts over a period of time without further collection activity. The fee for 

these agreements will be increased from $43 to $105. The IRS will offer a 

reduced fee of $52 for new agreements where a taxpayer agrees to participate in a 

direct debit program for payment of the amount due. New revenue of $54 million 

is dependent upon timely changes to legacy systems. Existing revenue of $69 

million assumes a ten percent increase in the volume of agreements over FY 2005 

with 10 percent of new agreements electing to use the direct debit program. 

• Disclosure of Return Information – Disclosure of certain tax return information to 

third parties requested by a taxpayer and certification of filing of U.S. tax returns 

for taxpayers subject to certain tax treaties. New revenue of $21 million is 

dependent upon implementation of legacy system changes and assumes a constant 

volume of requests from FY 2005. 

IRS - 125
Restructured Installment Agreements - Agreements where the terms are modified 

at the request of the taxpayer. The fee for these agreements will be increased from

$24 to $45. New revenue of $12,700 million is dependent on legacy system changes. 

Existing revenue of $14.3 million assumes a ten percent increase in the volume of 

agreements over FY 2005.

General User Fees (Miscellaneous) 

• Letter Rulings and Determinations – Administration of programs which provide 

private letter rulings and determinations in response to requests from taxpayers 

for: interpretations of tax law; advance pricing agreements; pension plan 

determinations; and applications for tax exempt status. New revenue of 

$47.1 million is dependent upon timely changes to legacy systems. Existing 

revenue of $7.8 million assumes a ten percent increase in volume of requests over 

FY 2005. 

 

• Technical Training – Sale of internally developed course on certain tax subjects. 

New revenue of $0.1 million is dependent on requests from the public for the 

course offerings. 

Offer-In-Compromise Programs and Enrolled Agent and Actuary 

• Offer-In-Compromise – Program that compromises a taxpayer’s liability for past 

due taxes based on the taxpayer’s adverse financial condition. There is no 

increase to the user fee for this service. Existing revenue of $7.8 million assumes 

a 10 percent increase in the number of applications over the volume of 

applications received in FY 2005. 

• Enrolled Agent and Actuary – Program that enrolls individuals to practice before 

the IRS on behalf of taxpayers. To enroll, a candidate must pass an examination. 

To continue enrollment, the enrollee must complete continuing professional 

education and reenroll on a triennial basis. New revenue of $.1 million is 

dependent upon implementation of new regulations. Existing revenue of 

$1.0 million assumes a ten percent increase in volume of enrollments and 

reenrollments received in FY 2005. 

IRS - 126
4E - IRS Oversight Board Proposed FY 2007 Budget Request for the IRS

In accordance with the Internal Revenue Service Restructuring and Reform Act of 1998, 

the IRS Oversight Board has reviewed and approved the budget proposal on the 

following pages. In conducting its review, the Board sought to ensure that the budget 

request supports the annual and long-range strategic plans of the IRS, as required by 26 

U.S.C. §7802(d). This proposal was forwarded to the Office of Management and Budget 

and is hereby transmitted, without changes, to the Congress for its consideration. The 

FY 2007 Oversight Board recommendation for the IRS is $11,815 million.

IRS - 127
FY2007 IRS Budget Recommended by IRS Oversight Board (dollars in thousands) 

Tax Administration and Operations (TAO) 

FY2006 President’s Budget $10,236,087

Transfer to TIGTA ($941)

FY2007 Base TAO Budget $10,459,111

FY2007 Maintaining Current Levels (MCLs) Adjustments 

 Labor Annualization $56,293 

 Labor MCL (2.7 %) $174,708

 Non-Labor MCL (1.5 %) $29,794 

Total MCL Adjustments $260,795

Savings and Reinvestments ($2,738)

Total, FY2007 Base Changes $10,600,501

Tax Administration Operations Program Increases 

 Taxpayer Service $43,637

 Enforcement $367,768

 Modernization $266,339

Total, Program Increases Above 2006 Base $677,744

Total, FY2007 TAO Recommended Budget $11,394,911

Growth over FY2006 Base $934,860

Percent Growth 8.94%

Business Systems Modernization (BSM) 

FY2006 President’s Budget $199,000

Program Increases to Fund BSM in Line with Current Strategy $201,000

FY2007 BSM Recommended Budget $400,000

Growth over FY2006 Base $201,000

Percent Growth 101%

Health Insurance Tax Credit Administration (HITCA) 

FY2006 Appropriation $20,210

FY2007 Maintaining Current Levels (MCLs) Adjustments 

 Labor Annualization $13 

 Labor MCL (2.7 %) $57 

 Non-Labor MCL (1.5 %) $261

FY2007 HITCA Recommended Budget $20,541

Growth over FY2006 Base $331

Percent Growth 1.64%

Total FY2007 Recommended Budget 

TAO $11,394,911

BSM $400,000

HITCA $20,541 

TOTAL Recommended Budget $11,815,452

Growth over FY2006 Base $1,136,191

Percent Growth 10.64%

IRS - 128
Recommended IRS FY2007 TAO Program Increases (dollars in thousands) 

Taxpayer Service Total Enforcement 

Related 

Customer

Service 

Related

Increase Accounts Management Efficiencies $8,657 $8,657

Restore Customer Service to FY2004 levels

Customer Service - (W&I) $32,000 $32,000

Customer Service - (TEGE) $2,980 $2,980

Subtotal Taxpayer Service $43,637 $43,637

Enforcement Program Increases 

Combat Egregious Non-Compliance and Prevent Tax Gap Growth $135,518 $132,696 $2,822

Increase Individual Taxpayer Filing and Payment Compliance $7,773 $6,968 $805

Detect and Deter Non-Compliant Enterprise Structures $37,008 $37,008 

Increase Individual Taxpayer Reporting Compliance $10,821 $8,808 $2,013

Enhance Enforcement in the Tax-Exempt and Governmental

Sectors $12,941 $12,941

Intensify Tax Enforcement $27,570 $27,570 

Attack Fraudulent Payments $26,998 $26,837 $161

Improve Compliance With the Bank Secrecy and PATRIOT Acts $25,858 $25,858 

Strengthen Regulatory Compliance $6,616 $6,376 $241

Improve Enforcement of Circular 230 $4,104 $4,104 

Improve Tax Gap Estimates, Measurement and Detection of NonCompliance $45,942 $45,942 

Study EITC Compliance $6,822 $6,822 

Improve Compliance Through Data-Driven Workload Identification $4,796 $4,796

Customer Service Research $15,000 $15,000

Subtotal Enforcement $367,768 $356,931 $10,837

Modernization Program Increases 

Implement Critical Upgrades to IT Infrastructure $85,700 $53,886 $31,814

Enhance Computer System Security Capability $43,000 $27,038 $15,962 

Enhance Enterprise Network Security Capability $24,400 $15,342 $9,058

Expand IT Security - Personal Identity Verification $20,000 $12,576 $7,424

Close Financial Management Material Weaknesses - Custodial

Detail Data Base 

$4,743

$2,982 $1,761

Fund Modernization Information Systems (Major Investments) 

O&M

$15,000

$9,432 $5,568

Fund Business Unit IT Solutions (Non-Major Investments) O&M $9,972 $7,121 $2,851

Implement e-Travel $10,000 $6,288 $3,712

Fund HR Connect $11,900 $7,482 $4,418

Consolidate Philadelphia Campus $20,900 $14,215 $6,685

Accommodate Kansas City Site Consolidation and Workload

Growth

$8,523

$1,279 $7,245

Restoration of Leadership Training to FY2003 levels $12,200 $7,564 $4,636

Subtotal Modernization $266,339 $165,204 $101,134

Total Program Increases $677,744 $522,135 $155,609

IRS - 129
Financial Management Service 

Mission 

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.

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Payments $141,287 $144,135 $147,358 $3,223 2.24%

Collections 16,693 16,931 17,396 465 2.75

Debt Collection 9,855 10,162 5,250 (4,912) -48.34

Government-wide Accounting

and Reporting 61,248 62,653 63,650 997 1.59

Total Appropriated Resources $229,083 $233,881 $233,654 ($227) -0.10%

(Dollars in Thousands)

Appropriation Summary

Table 1.1

FY 2007 Priorities 

• Continue to make paper check and electronic funds transfer payments 

accurately and on time. 

• Process 79 percent of all Treasury payments and associated information 

electronically. 

• Collect 84 percent of all federal government receipts electronically. 

• Collect over $3.2 billion dollars in delinquent debt. 

• Continue to issue all government-wide accounting reports accurately and 

timely. These reports include the following: the Daily Treasury Statement, 

Monthly Treasury Statement, and the Combined Statement of Receipts, 

Outlays, and Balances of the U.S. Government. 
Table of Contents 

Section 1 – Purpose ......................................................................................... 3

1A – Description of Bureau Vision and Priorities.......................................................... 3 

1B – Previous Highlights and Accomplishments ........................................................... 4 

1C – Future Outlook ....................................................................................................... 6 

Section 2 – Explanation of Increases and Decreases ....................................... 8

2.1 – Budget Increases and Decreases Table .................................................................. 8 

2A – Budget Increases and Decreases Description......................................................... 8 

Section 3 – Budget and Performance Plan ....................................................... 9

3.1 – Appropriation Detail Table .................................................................................... 9 

3A – Budget Activity Description ................................................................................ 10 

3.2 – Budget and Performance Plan Table.................................................................... 13 

3B – Description of Performance ................................................................................. 14 

3C – PMA Evaluation Description ............................................................................... 16 

3.3 – PART Evaluation Table....................................................................................... 19 

Section 4 – Supporting Materials ................................................................... 20

4.1 – Human Resources Table ...................................................................................... 20 

4A – Human Capital Strategy Description ................................................................... 21 

4.3 – Operating Levels Table........................................................................................ 23 

4C – Appropriations Language..................................................................................... 24 

4D – Permanent, Indefinite Appropriations.................................................................. 26 

4.4 – Permanent, Indefinite Appropriations Table........................................................ 26

FMS - 2
Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

FMS is the Federal government’s financial manager. 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 administers the world’s largest collection system, collecting approximately $2.7 

trillion annually. FMS also provides cash management guidance to FPAs and compiles 

and publishes government-wide financial information used to monitor the government’s 

financial status. Finally, FMS serves as the government’s central debt collection agency 

for delinquent non-tax debt. 

FMS’ top priorities, as reflected in its strategic goals, are: 

1. Providing timely and accurate payment and collection services of federal funds 

while minimizing transaction costs by moving towards an all electronic Treasury. 

2. Maximizing the collection of government delinquent debt through efficient and 

centralized debt collection services.

3. Producing accurate, reliable, and timely government-wide financial information and 

reports which contribute to improved financial decision making. 

4. Achieving a clean audit opinion on the Financial Report of the United States 

Government through FMS’ internal operations and support to government agencies, 

and 

5. Establishing policies and processes that integrate e-commerce technologies into 

FMS’ business programs and infrastructure. 

FMS’ goals are accomplished through four budget activities: 

Payments - The Payments activity 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). The activity also includes controlling and providing

financial integrity to the payments process through reconciliation, accounting, and claims

activities. 

Collections - The Collections activity collects revenues needed to operate the federal 

government through the effective management of the government’s collections 

infrastructure. FMS administers the world's largest collections system, collecting 

approximately $2.7 trillion annually through a network of more than 10,000 financial 

institutions. 

Debt Collection - The Debt Collection activity recovers delinquent government debt by 

providing centralized debt collection, oversight and operational services to FPAs and 

States as required by the Debt Collection Improvement Act of 1996 and related 

legislation. 

FMS - 3
Government-wide Accounting and Reporting - 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. 

1B – Previous Highlights and Accomplishments

FMS provides critical services to millions of U.S. taxpayers and other customers. FMS 

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. Previous highlights and accomplishments, by 

budget activity, include: 

Payments

In FY 2005, FMS issued over 952 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 veterans’ benefits. Approximately 76 percent of these transactions were 

issued by EFT. In response to Hurricane Katrina and other hurricanes that hit the Gulf

Coast in 2005, FMS issued over 2.49 million disaster relief payments valued at over $5.9 

billion dollars on behalf of the Federal Emergency Management Agency through 

December 2005. FMS has undertaken considerable efforts to modernize its payment 

systems by incorporating the latest technologies and making full use of the Internet. The 

results of these efforts include: 

• Secure Payment System (SPS) is a leading edge, web-based system which replaces 

the technologically obsolete Electronic Certification System. SPS is the cornerstone 

of the payments process in which agencies certify the accuracy, validity and legality 

of their payments. 

• Stored Value Card (SVC) is a smartcard, similar to a credit/debit card, which uses an

encrypted computer chip to process "electronic money" stored on the card. The SVC 

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 FY 2005, over 3.5 

million EFT transactions representing a dollar value in excess of $595 million have 

been processed via the SVC programs. 

• ASAP.gov (Automated Standard Application for Payments) is a web-based system

built by FMS in coordination with the Federal Reserve Bank of Richmond. It is an 

all-electronic grants payment system through which organizations including states, 

universities, for-profits, and non-profits receive Federal funds from accounts preauthorized by Federal agencies. Total disbursements for CY 2005 were over $440 

billion dollars. 

The Payments activity received an “Effective” rating in a recent PART (Program

Assessment Rating Tool) review. 

FMS - 4
Collections

FMS manages the Electronic Federal Tax Payment System (EFTPS) which is the largest 

tax collection system in the world, processing 95 percent (over $1.7 trillion) of U.S. tax 

dollars. EFTPS allows businesses and individuals to enroll and pay all Federal taxes 

through a variety of ways – computer-to-computer link, personal computer, telephone or 

through a secure website. EFTPS accelerates the collection of tax dollars and information 

and reduces reporting errors in the tax collection system, which benefits both the taxpayer 

and the Federal government. 

FMS manages Pay.gov, a government collection portal that provides a single platform for 

e-government services and allows citizens, businesses and Federal agencies to conduct 

business via the Internet. In FY 2005, Pay.gov collected over $6 billion, an increase of 

more than $2 billion over FY 2004. In the first quarter of FY 06, FMS began 

implementation of a cash flow from Customs and Border Protection on Pay.gov that will 

include $20 billion annually in collections. 

FMS also implemented paper check conversion at its lockbox sites to reduce paper 

processing at lockbox banks and improve the efficiency of the lockbox system. 

The Collections activity received an “Effective” rating in its 2004 PART review. 

Debt Collection

FMS’ delinquent debt collection program continues to exceed performance goals as a 

result of continued improvements to its Debt Management Program. For FY 2005, FMS 

collected over $3.25 billion which is a record amount of collections for the program. 

Debt referrals from creditor agencies also continue to increase, reaching 97 percent in FY 

2005. Since given this authority in 1996, FMS has collected over $24 billion. Virtually 

all collection tools, including the payment offset and levy programs, have shown 

increasing collection trends over the last few years. 

FMS underwent a PART review on its Debt Collection Program in 2003. The program 

received an “Effective” rating and was stated as being a well designed, well managed 

program with a clear purpose which meets or exceeds its annual performance targets. As 

a result, the FY 2005 enacted budget included the following legislative changes to 

increase and enhance opportunities to collect delinquent debt: 

• Information Comparisons and Disclosure to Assist in Federal Debt Collection - This 

change authorizes the Secretary of Health and Human Services (HHS) to match 

information, provided by the Secretary of the Treasury with respect to persons owing 

delinquent debt to the federal government, with information contained in the HHS 

National Directory of New Hires, and to disclose to Treasury information obtained 

from such matches. Information obtained from the National Directory of New Hires 

facilitates FMS’ debt collection efforts by providing employment information about 

debtors enabling FMS to issue wage garnishment orders in appropriate cases. FMS is 

working on implementing this change and anticipates full implementation in late 

calendar year 2006. 

FMS - 5
• Increase in Continuous Levy for Certain Federal Payments - This change allows the 

Internal Revenue Service (IRS) to continuously levy up to 100 percent of a Federal 

vendor payment to collect outstanding tax obligations. Under previous law, IRS was 

authorized to continuously levy up to 15 percent of specified Federal payments. At 

the end of April 2005, FMS implemented 100 percent levy for those tax debts 

authorized by the IRS. 

Government-wide Accounting and Reporting

The Office of Management and Budget (OMB) requires agencies to issue their financial 

statements by November 15, 2005, 45 days after the fiscal year-end. FMS issued the 

Fiscal Year 2005 Financial Report of the U. S. government on December 15, 2005, 75 

days after the close of the fiscal year. FMS used the government-wide Financial Report 

System (GFRS) to collect agency financial statement information directly from Federal 

agencies' audited financial statements as it did last year. For FY 2005, FMS enhanced 

GFRS to provide better data security during the consolidation process, to provide 

additional features in the Notes modules, and to automate the year to year rollover 

process. 

The Government-wide Accounting and Reporting activity is scheduled to undergo a 

PART review in 2006. 

1C – Future Outlook 

FMS will continue to work towards an "all-electronic Treasury." Streamlining the 

payments and collections processes while continually investing in state-of-the-art 

technology is integral in processing payments and collections accurately, timely, 

and more safely and securely for the taxpayer. In FY 2007, FMS will continue to expand 

the use of electronic media to deliver federal payments. These efforts help decrease the 

number of paper checks issued, which minimizes costs and inefficiencies associated with 

the non-electronic delivery of benefits. 

FMS develops and operates a variety of collection mechanisms and systems, such as 

EFTPS, lockboxes, Treasury General Accounts, debit/credit cards, and Pay.gov. In FY 

2007, FMS will continue to provide electronic collection mechanisms that use the most 

advanced collection technologies and are flexible enough to accommodate the varying 

needs and technical sophistication of all taxpayers and FPAs. FMS will direct its EFTPS 

marketing efforts to the tax practitioner community and small businesses to further 

expand the use of the EFTPS. FMS will also assist agencies in converting collections

from paper to electronic media. Security oversight efforts will increase at financial agent 

processing facilities and banking institutions as a way to proactively identify security 

control weaknesses and recommend ways to detect and deter fraud, waste, theft, and 

unauthorized access associated with the collection of government remittances and 

protection of sensitive information. 

FMS will focus on incorporating all non-Treasury disbursed salary and vendor payments 

into FMS’ offset programs for collecting delinquent debt. In October 2005, FMS replaced 

FMS - 6
the current debt program Cross-Servicing system with FedDebt. FedDebt provides a 

single point of entry for agencies to refer their debts to FMS for collection and to access 

the delinquent debtor database. During FY 2007, Integrated FedDebt will combine the 

Cross-Servicing application and the Treasury Offset Program (TOP). This will eliminate 

the need for separate and distinct databases and will allow FMS to streamline data, 

reduce redundancies and improve data integrity. FMS will also continue to roll out Debt 

Check, FMS’ program to help agencies bar delinquent debtors from obtaining new loans 

or loan guarantees. 

The following legislative proposals will be submitted as part of the FY 2007 President’s 

Budget Request. These proposals are part of FMS’ recommended follow-up actions to 

the Program Assessment Rating Tool (PART) review of the Debt Collection activity and 

its collaborative effort with the Office of Management and Budget to increase the amount 

of delinquent debt FMS collects: 

1. Allow offsets of Past-Due, Legally Enforceable State Unemployment 

Compensation Overpayment Debts (included as part of the Department of Labor’s 

Unemployment Insurance Integrity initiative). 

2. Eliminate the 10-year Limitations Period on Offset. 

Finally, FMS will continue to revamp government-wide accounting processes to provide 

more useful and reliable financial information on a regular basis. This will involve the 

continued rollout of the new government-wide Accounting system. This system will 

significantly reduce agency reporting requirements and reconciliation burdens. As part of 

the system redesign, FMS will provide agencies with a web-based account statement 

resembling a bank statement which will contain summarized Treasury fund account 

balance activity. Agencies will have daily 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. As a result, 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 - 7
Section 2 – Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 1,818 $230,930

Rescission (P.L. 108-447) (1,847)

FY 2005 Enacted 1,818 229,083

FY 2006 President's Budget (P.L. 109-115) 1,818 236,243

Rescission (P.L. 109-148) (2,362)

FY 2006 Enacted 1,818 233,881

Changes to Base

Proposed Pay Rate 3,496

Non-Pay Adjustment 1,964

Pay Annualization 1,183

Total FY 2007 Base 1,818 240,524

Program Changes

Decreases:

Debt Fee Revenue (57) (5,311) Debt

Payments Capital Investments (763) Payments

Accounting Architecture (840) GWA

Increases:

FASAB 44 GWA

Subtotal FY 2007 Program Changes (57) (6,870)

Total FY 2007 Request 1,761 $233,654

Budget Increases and Decreases

Table 2.1

(Dollars in Thousands)

Appropriation: FMS Salaries and Expenses

2A – Budget Increases and Decreases Description 

Changes to Base................................................................................... +6,643,000 / 0 FTE 

Adjustments to Maintain Current Levels ............................................+$6,643,000 / 0 FTE 

Funds are requested for: the FY 2007 costs of the January 2006 pay increase; the 

proposed January 2007 pay raise; other labor related benefits; and non-labor related items 

such as contracts, travel, supplies, equipment, and GSA rent. 

Program Changes..............................................................................-6,870,000 / -57 FTE 

FMS - 8
Program Decreases .........................................................................-$6,914,000 / -57 FTE 

a. Re-engineer Funding from Debt Collection Activity .............-$5,311,000 / -57 FTE

As a result of projected increased debt revenues, FMS is able to redirect funds 

previously allocated to the debt collection activity without adversely impacting the 

program. 

b. Payments Capital Investment....................................................... -$763,000 / 0 FTE

FMS can non-recur $379,000 from the FY 2006 Pre-Sort initiative. As a result of the 

purchase of this equipment, FMS is able to sort payment files according to zip codes, 

which qualifies the daily mail pieces for a discount postage rate. FMS anticipates 

realizing a postage savings in FY 2007 of approximately $384,000. 

c. Non-Recur to GWA Budget Activity..............................................-$840,000 / 0 FTE

FMS has identified funds in the GWA Budget Activity from prior year’s initiatives 

that can be non-recurred in FY 2007. 

Program Increases................................................................................... +44,000 / 0 FTE 

a. Federal Accounting Standards Advisory Board (FASAB) ............+$44,000 / 0 FTE 

Additional funds are provided to cover the increased cost of payments to FASAB.

Section 3 – Budget and Performance Plan 

3.1 – Appropriation Detail Table 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Payments 1,173 $141,287 1,173 $144,135 1,173 $147,358 0.00% 2.24%

Collections 113 16,693 113 $16,931 113 $17,396 0.00% 2.75%

Debt Collection 113 9,855 113 $10,162 56 $5,250 -50.44% -48.34%

Governmentwide Accounting and Reporting 419 61,248 419 $62,653 419 $63,650 0.00% 1.59%

Subtotal Newly Appropriated Resources 1,818 $229,083 1,818 $233,881 1,761 $233,654 -3.14% -0.10%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 316 $151,135 320 $167,770 370 $196,282 15.63% 16.99%

Available multi-year/no-year funds

Transfers In/Out

Subtotal Other Resources 316 151,135 320 167,770 370 196,282 15.63% 16.99%

Total Resources Available for Obligation 2,134 $380,218 2,138 $401,651 2,131 $429,936 -0.33% 7.04%

Appropriation Detail

(Dollars in Thousands)

Table 3.1

% Change

Enacted Enacted Request to FY 2007

FY 2006

Resources Available for Obligation

FY 2005 FY 2006 FY 2007

FMS - 9
3A – Budget Activity Description 

Payments ($147,358,000 from direct appropriations and $135,031,000 from offsetting 

collections and reimbursements) The Payments activity 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 activity also includes controlling 

and providing 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. 

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. 

These efforts help decrease the number of paper checks issued and minimize costs 

associated with postage, the re-issuance of lost, stolen, and misplaced checks, and 

inefficiencies associated with the non-electronic delivery of benefits. In addition to the 

many benefits to beneficiaries, direct deposit generates significant cost savings to the 

Government. 

FMS faces challenges in increasing growth in electronic payments. The direct deposit 

growth rate for Federal benefit payments has leveled off to a rate of less than one percent 

a year, a decrease of almost two-thirds since 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. FMS and the Federal Reserve initiated a market research effort to find 

barriers to conversion and ways to encourage people to receive payments electronically. 

A six-month pilot marketing program was conducted in markets in Texas, Illinois, 

Tennessee and Puerto Rico based on this research. As a result of the success of this pilot, 

the Go Direct campaign was expanded to markets nationwide in September 2005. 

Other Resources

Offsetting collections and reimbursements totaling $135,031,000 are collected for 

disbursement of Federal agency payments to beneficiaries, including Social Security 

payments, Railroad Retirement Board payments, tax refunds and Department of Veteran's 

Affairs benefit payments. 

Collections ($17,396,000 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 collects approximately $2.7 trillion 

annually through a network of more than 10,000 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 - 10
FMS continues to promote the use of electronics in the collections process and assist 

agencies in converting collections from paper to electronic media. For example, EFTPS 

offers all businesses and individuals the convenience of making their Federal tax 

payments electronically 24 hours a day, 7 days a week. EFTPS is required for businesses 

with annual federal tax obligations above $200,000. As of November 2005, over 6.2 

million taxpayers were enrolled in EFTPS. EFTPS has collected more than $12.8 trillion 

since inception, with $490 billion of those collections made over the web through 

EFTPS-Online. 

FMS manages Pay.gov, a government collection portal that provides a single platform for 

e-Government 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, Pay.gov has 

collected over $20 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. FMS is focusing on converting FPAs with large dollar cash flows to Pay.gov. 

The Paper Check Conversion (PCC) program converts paper checks into EFT debits 

against the check writer’s bank account. PCC is being used at both over the counter 

(OTC) locations for agency deposits and lockbox facilities. During FY 2004, PCC OTC 

processed more than 1.5 million items representing more than $687.4 million. 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. 

Debt Collection ($5,250,000 from direct appropriations and $61,251,000 from offsetting 

collections and reimbursements) The Debt Collection activity collects delinquent 

Government debt by providing debt collection oversight and operational services to FPAs 

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 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. Under FedDebt, which replaced the Cross-Servicing 

system in October 2005, Federal agencies refer delinquent debt to FMS for collection 

through a variety of cross-servicing tools, including offset, demand letters to debtors, 

repayment agreements, administrative wage garnishment, referrals to the Department of 

Justice, credit bureau reporting, reporting discharged debts to the IRS, and use of private 

collection agencies. 

FMS - 11
FMS will continue to roll out Debt Check, FMS’ program to help agencies bar delinquent 

debtors from obtaining new loans or loan guarantees; continue development of FedDebt 

which will include replacing the existing TOP program; and continue enhancements to 

mission-critical systems to provide better service to agencies that refer debts for 

collection. 

Other Resources 

Offsetting collections of $49,570,000 and reimbursements of $11,681,000 totaling 

$61,251,000 are used to fund debt collection services for Federal agencies and States. 

Government-wide Accounting and Reporting ($63,650,000 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 FPAs in improving their Governmentwide accounting and reporting responsibilities. FMS gathers and publishes governmentwide 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. 

FMS is building and implementing a system to improve the exchange of financial 

information among FMS, FPAs, 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. 

FMS - 12
3.2 – Budget and Performance Plan Table 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Requested

Treasury Strategic Objective F4A:

Budget Activities: Collections and Debt Collection

Financial Resources

Newly Appropriated Resources $27,173 $26,413 $25,208 $20,705 $21,167 $16,557

Other Resources $23,978 $41,196 $54,037 $33,675 $40,185 $61,251

Total Operating Level $51,151 $67,609 $79,245 $54,380 $61,352 $77,808

Human Resources

Newly Appropriated FTE 153 160 183 186 186 129

Other FTE 252 282 315 273 273 330

Total FTE (direct and reimbursable) 405 442 498 459 459 459

Treasury Strategic Objective F4B:

Budget Activity: Collections

Financial Resources

Newly Appropriated Resources $597 $722 $874 $835 $847 $870

Other Resources

Total Operating Level $597 $722 $874 $835 $847 $870

Human Resources

Newly Appropriated FTE 5566 6

Other FTE

Total FTE (direct and reimbursable) 5566 6

Treasury Strategic Objective F4C:

6

6

Budget Activities: Payments and Collections

Financial Resources

Newly Appropriated Resources $146,672 $143,596 $137,379 $146,295 $149,214 $152,577

Other Resources 132,010 136,886 132,845 116,960 127,085 135,031

Total Operating Level $278,682 $280,482 $270,224 $263,255 $276,299 $287,608

Human Resources

Newly Appropriated FTE 1,141 1,160 1,028 1,207 1,207 1,207

Other FTE 30 34 33 39 43 40

Total FTE (direct and reimbursable) 1,171 1,194 1,061 1,246 1,250 1,247

Treasury Strategic Objective F4D:

Budget Activity: Government-wide Accounting and Reporting

Financial Resources

Newly Appropriated Resources $48,935 $54,887 $65,196 $61,248 $62,653 $63,650

Other Resources 900 500 500 500 500 0

Total Operating Level $49,835 $55,387 $65,696 $61,748 $63,153 $63,650

Human Resources

Newly Appropriated FTE 401 424 437 419 419 419 

Other FTE 4 4 4 4 4 -

Total FTE (direct and reimbursable) 405 428 441 423 423 419

Treasury Strategic Goal F4:

Total Financial Resources

Total Newly Appropriated Resources $223,377 $225,618 $228,657 $229,083 $233,881 $233,654

Total Other Resources 156,888 178,582 187,382 151,135 167,770 196,282

Total Operating Level $380,265 $404,200 $416,039 $380,218 $401,651 $429,936

Total Human Resources

Total Newly Appropriated FTE 1,700 1,749 1,654 1,818 1,818 1,761

Total Other FTE 286 320 352 316 320 370

Total FTE (direct and reimbursable) 1,986 2,069 2,006 2,134 2,138 2,131

Budget and Performance Plan

Table 3.2

(Dollars in Thousands)

Resource Level

1/

FMS - 13
Strategic Objective: Collect Federal Tax Revenue When Due Through a Fair and Uniform

Application of the Law - F4A

Budget Activity: Debt Collection

Performance Goal: Maximize collection of government delinquent debt by providing efficient and effective

centralized debt collection services

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Amount of delinquent debt collected per $1 spent ($) (E)

Target 41.09 36.4 36.5

Actual 36.23

Target Met? N/A N/A N/A N

Amount of delinquent debt collected through all available tools (Billions $) (Ot)

Target 2.6 2.9 2.9 3 3.1 3.2

Actual 2.84 3.1 3 3.25

Target Met? Y Y Y Y

Percentage of delinquent debt referred to FMS for collection compared to amount eligible for referral (%)

(Ot)

Target 75 85 90 92 93 94

Actual 93 92 99 97

Target Met? Y Y Y Y

Strategic Objective: Make Collections and Payments on Time and Accurately, Optimizing Use of

Electronic Mechanisms - F4C

Budget Activity: Payments

Performance Goal: Provide Federal payments timely and accurately, move toward an all-electronic Treasury

for payments, and determine the optimal payment processing environment for the future

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of Treasury Payments and associated information made electronically (%) (Oe)

Target 73 74 75 76 78 79

Actual 73 74 75 76

Target Met? Y Y Y Y

Percentage of paper check and Electronic Funds Transfer (EFT) payments made accurately and on time (%)

(Oe)

Target 100 99.9999 100 100 100 100

Actual 100 99.9999 100 100

Target Met? Y Y Y Y

Unit cost for Federal Government payments ($) (E)

Target Baseline .35 .35 .35

Actual .35 .355

Target Met? N/A N/A N N

Budget Activity: Collections

Performance Goal: Provide timely collection of Federal Government receipts, at the lowest cost, through an

all-electronic Treasury

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage collected electronically of total dollar amount of Federal government receipts (%) (Oe)

Target 80 80 81 82 83 84

Actual 79 80 81 79

Target Met? N Y Y N

FMS - 14
Strategic Objective: Manage Federal Debt Effectively and Efficiently - F4B

Budget Activity: Collections

Performance Goal: Provide timely collection of Federal Government receipts, at the lowest cost, through an

all-electronic Treasury

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Unit cost to process a Federal revenue collection transaction ($) (E)

Target Baseline 1.4 1.37 1.33

Actual 1.4 1.2

Target Met? N/A N/A N Y

Strategic Objective: Optimize Cash Management and Effectively Administer the Government's

Financial Systems - F4D

Budget Activity: Government-wide Accounting and Reporting

Performance Goal: Produce accurate, accessible, and timely Governmentwide financial information and

reports, which contribute to the improved quality of the Nation's financial decision

making.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of Governmentwide accounting reports issued accurately (%) (Oe)

Target 100 98 100 100 100 100

Actual 100 98 100 100

Target Met? Y Y Y Y

Percentage of Governmentwide accounting reports issued timely (%) (E)

Target 100 100 100 100 100 100

Actual 100 100 100 100

Target Met? Y Y Y Y

Unit Cost to Manage $1 Million Dollars of Cash Flow ($) (E)

Target Baseline 6.4

Actual

Target Met? N/A N/A N/A N/A

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

FY 2004

Unmet 3

Met 7

Total 10

Performance Summary Table

Performance Summary Table

3

7

012345678

Unmet

Met

Number of Performance Measures

FMS - 15
3B – Description of Performance 

In FY 2005, FMS met or exceeded seven of its performance measures. In addition, of the 

1,385,000 check claims submitted, FMS adjudicated 100 percent of check forgery and

non-receipt claims within 12 days, exceeding its internal performance target by 6 percent. 

FMS also loaded 71 percent more dollars onto stored value cards over the baseline, 

exceeding its internal performance target by 21 percent. 

 

Workload Data On FMS’ Payments

FY 2004 

Actual 

FY 2005 

Actual 

FY 2006 

Estimate 

FY 2007 

Estimate 

In thousands 

Number of Electronic 

Payments 705,966 724,996 748,749 783,396

Number of Check 

Payments 234,967 227,642 211,186 208,244

Number of Check 

Claims Submitted 1,438 1,385 1,300 1,200

 

FMS issued 100 percent of government-wide accounting reports accurately and timely, to 

include producing the consolidated Financial Report 75 days after the end of the fiscal 

year, and accelerating the issuance of the Monthly Treasury Statement to the 8th workday 

from the 14th workday the previous year. FMS also received an unqualified audit opinion 

on non-entity assets, costs, custodial revenues, and cash. 

FMS’ material weakness on general computer controls was closed at the end of FY 2004 

and reduced to a reportable condition. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

The FMS FY 2007 Budget provides significant support for the President’s Management 

Agenda to improve the financial performance of the federal government and for key 

activities that are part of the nation’s critical infrastructure (payments, collections, and 

cash balance and forecasting) so that they can continue to be performed in an 

uninterrupted fashion at an outstanding level of service. 

Competitive Sourcing

FMS is one of the strongest proponents of commercial outsourcing of any Federal 

government agency. Over half of FMS’ funding resources are associated with 

commercial activities, including internal commercial positions, direct contracts for 

commercial services and Interservice Support Agreements (ISSAs), and programs 

conducted through our fiscal and financial agents. FMS also contracts with private 

collection agencies to collect delinquent non-tax debt, and approximately 500 contractor 

FMS - 16
employees work on-site at FMS facilities. There are also over 6,000 private sector 

employees who work on FMS’ tax collection lockbox operations. In addition, within the 

last several years, FMS has outsourced its administrative accounting and travel functions 

and our support systems for procurement and audit tracking to the Bureau of the Public 

Debt (BPD). We have also begun to outsource selected IT platform operations and webdevelopment projects under our IT transformation. As a result of our extensive use of 

outsourcing and leveraging the resources of the commercial sector, we have been able to 

perform our complex mission with a remarkably small career workforce of approximately 

2,075 FTEs. FMS has made and will continue to make decisions to outsource work on the 

business value proposition of where it can best be done at the most efficient cost. 

Budget and Performance Integration

FMS’ strategic management process reflects its senior management team’s vision and 

engages the executive team in a continuous planning effort. Senior managers meet, at 

least quarterly, in order to examine relevant reports that detail the activities of FMS’ four 

program areas. FMS has an activity based costing (ABC) program that identifies the full 

cost of products/services within each budget activity. This system has been in use for 

five years. In FY 2004, FMS implemented a new accounting system that improved FMS’ 

ability to accomplish ABC accounting, track multi-year funding, and clearly track 

reimbursable activity to the interagency agreement it supports. FMS’ activity based 

costing information is briefed to its Executive Board on a periodic basis, but no less than 

annually, and enables the agency to report the full cost of achieving performance goals 

accurately. In addition, FMS has instituted policies which ensure that 100 percent of 

agency employees are required to maintain individual performance plans. These plans 

are linked to organizational objectives, hold the individual accountable for results 

appropriate to their level of performance and differentiate between various levels of 

performance that arise from the individuals results. Finally, all of FMS program areas 

have at least one efficiency measure. 

Human Capital

The OMB/Office of Personnel Management (OPM) collaboration on standards and 

measures for Human Capital has supported expanding the availability and functionality 

of automated human resources systems that are critical to making any significant 

improvements to the efficiency of human capital processes. OPM leadership has provided 

FMS the opportunity to improve recruitment and expand retention flexibilities that have 

enabled us to attract and retain high caliber employees with the skills essential to 

accomplishing mission demands. Workforce surveys have highlighted issues of concern 

to employees and allowed FMS to focus on what is most important to employees in terms 

of enhancing the quality of their work environment. 

In the area of competencies, succession planning, training, and development, the 

President’s Management Agenda provides a framework to ensure FMS can maintain a 

steady supply of well qualified, high performing staff throughout the organization. 

FMS - 17
One of the more pronounced changes in the Human Capital arena has been the shift of 

responsibility for managing the workforce from human resources departments to the firstline supervisor and management staff. This, accompanied by enhanced automation 

capability, has provided quicker and more direct management of employees. 

E-Gov

FMS has a structured IT Governance system that includes integrated Enterprise 

Architecture and Capital Planning Investment Control processes. This structured 

approach has allowed FMS to identify opportunities to improve efficiency and provide 

cost savings. Specifically, FMS has completed a review of all technical components 

(hardware/software) associated with FMS applications as well as enterprise-wide 

licensing opportunities and identified those that should be phased out. 

FMS has also developed and matured a structured Entity-wide IT Security Program that 

includes the centralized management of certification and accreditation of all FMS Major 

applications and general support systems, as well as establishing quarterly reporting on 

Plans of Actions and Milestones for each major application/general support system. FMS 

has completed the certification and accreditation activities for all major applications and 

general support systems in accordance with appropriate standards. In addition, FMS’ 

material weakness on general computer controls was closed at the end of FY 2004 and 

reduced to a reportable condition. 

As part of fulfilling the PMA e-Government initiative, E-Travel, FMS has implemented 

Northrop Grumman’s GovTrip system. The implementation was completed in June 

2005. The implementation of GovTrip provides a streamlined process for travel 

authorization, reservation, and voucher processing for FMS employees.

Financial Performance

FMS uses the BPD Administrative Resources Center (ARC) as its service provider for 

governmental accounting. ARC has recently been identified as a Center for Excellence 

for financial management services. FMS maintains a small staff which provides 

oversight of the accounting and financial data. The use of ARC has proven to be 

beneficial to both FMS and ARC. Financial and performance information is available to 

program managers on a continuous basis via FMS’ accounting system. 

FMS - 18
3.3 – PART Evaluation Table 

PART Name: Debt Collection

Strategic Goal: Manage the Government’s Finances Effectively (F4)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

4. FMS has submitted two legislative proposals which will enable FMS to significantly enhance our debt collection 

opportunities.

Table 3.3

PART Evaluation

1. Develop a more ambitious long-term performance measure.

1. Continuously review the trend in debt collection and revise/update the long-term measure as necessary.

2. FMS establishes annual performance measures for collections and referrals of debt by agencies. FMS has reduced its 

salary and expenses appropriated funding requirements for this program in recent years and is funding the program through 

fee revenue. These interim targets/measures and actions are part of the overall long-term strategy to maximize collections for

the Federal Government and to improve the efficiency and effectiveness of the debt collection program. These 

targets/measures and actions help direct efforts to achieve our long-term measure.

3. Operate within budgetary resources. Analyze projected collections and fees with the goal of maintaining or reducing the 

fees charged to customers for FMS debt collection services.

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.

4. Propose legislation to increase and enhance debt collection opportunities.

PART Name: Collections

Strategic Goal: Manage the Government’s Finances Effectively (F4)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

4. Operate within budgetary resources. 

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.

1. Work with program partners to explore opportunities to better reduce paper-based collections.

2. Level fund the collections program for 2005.

1. FMS is working with Federal agencies participating in the General Lockbox Network to eliminate the paper checks that are 

received by converting paper checks into electronic Auomated 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.

PART Name: Payments

Strategic Goal: Manage the Government’s Finances Effectively (F4)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. The assessment found that the Program has a clear purpose, is well managed, and generally meets its annual performance

targets.

2. The Program must continue its efforts toward an all electronic Treasury.

1. FMS is working with Federal agencies to reduce the number of paper check payments and increasing the number of more 

efficient and secure electronic payments.

2. Implementing Go Direct, a nationwide campaign to encourage current Federal check recipients to switch to direct deposit.

FMS - 19
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 1,654 1,645 1,818

Increases:

Reason #1: 118

Reorganization/Restructuring

Reason #2: 90

Normal Accession

Subtotal, Increases 0 208 0

Decreases:

Reason #1: -35

FMS has been approved by OPM to offer

targeted voluntary buyout and voluntary 

early retirement programs for FY 2006.

Reason #2:

Redirection of FTE to Reimbursable Fund -57

Reason #3:

Normal Attrition -9

Subtotal, Decreases -9 -35 -57

Year-end Actual/Estimated FTEs 1,645 1,818 1,761

Net Change from prior year SOY to budget year EOY 116

CHANGES IN FULL-TIME EQUIVALENTS

Table 4.1

FY 2007 Budget Submission

Human Capital Exhibits

Full Time Equivalent Budget vs. Actual

Actual Full-Time Equivalent vs. Budgeted FTE

1818 1818 1818 1761 1818

1818 1761 1645 1654 1749

294 316 320 370 311 320 319 320 370 352

0

500

1000

1500

2000

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Bud. Direct Act. Direct Bud. Reimb. Act. Reimb.

FMS - 20
4A – Human Capital Strategy Description 

By properly managing its human capital needs, FMS supports Treasury’s strategic goal to 

"Manage the U.S. Government’s Finances Effectively." 

FMS is an organization that is on the technology forefront in the performance of its 

mission. To accomplish and fulfill both FMS’ and Treasury’s strategic plans, FMS has 

taken several steps to improve the quality of its professional workforce. FMS has 

developed a Human Capital Strategic Plan to identify weaknesses in its current structure 

and build upon its strengths. FMS’ Human Capital Strategic Plan identifies the following 

objectives to support and strengthen its work force: 

1. Work Environment – FMS will create and maintain a positive work environment, 

where teamwork, achievement and accountability are valued, an atmosphere of 

continuous striving for improvement and excellence is maintained, 

communications are open and clear, encouragement and support exists for 

diversity and equal opportunity, and where employees can maintain a meaningful 

balance between their work and personal lives. 

2. Workforce – FMS will maintain a professional workforce sufficient to meet the 

challenges of its present mission, maintain the highest standards of public service, 

anticipate and take advantage of advanced technological developments, and 

exercise the vision by which the agency will remain at the forefront of national 

leadership in the areas of expertise. 

3. Managerial Excellence – FMS will develop managers who can effectively lead 

the organization to achievement of its mission, goals and objectives while 

maintaining a positive and effective work environment. 

4. Performance Accountability – FMS will create and maintain a diverse, results 

oriented, high performance organizational culture. 

5. Continuous Learning – FMS will maintain a continuous program of training and 

development for employees. 

6. Human Capital Support – FMS will ensure that human capital management is 

recognized, valued, and supported as an integral part of mission accomplishments 

and organizational success. 

These objectives allowed FMS to accomplish several goals in order to strengthen its 

human capital position. FMS has been proactive in identifying the challenges it faces in 

replacing vacated positions as well as recruiting and retaining new talent. FMS promotes 

and utilizes available hiring and pay flexibilities, especially those designed to achieve 

appropriate compensation for varying levels of performance. FMS encourages and 

utilizes all available work scheduling and location flexibilities and pay retention tools, 

such as tuition reimbursement, tuition assistance, and recruitment and retention bonuses, 

in order to maintain and augment our current workforce. FMS made extensive use of 

Delegated Examination and student intern program authorities which allow FMS to 

attract talent from some of the best colleges and universities. FMS also realizes the need 

FMS - 21
to recruit and bring talent on board and has worked to improve the hiring process. FMS’ 

average number of days to hire is currently 45 work days. 

FMS has identified several challenges in its human capital plan. These challenges range 

from having an aging workforce where 40 percent are eligible to retire, to integrating new 

hires which will represent 20 percent of the entire workforce by 2007. FMS faces major 

competitive challenges from the private sector in attracting new talent. This is especially 

the case for positions in program management, financial administration/program analysis, 

accounting, and information technology. To address changing needs, FMS offered a 

targeted early-out/buyout in FY 2006. FMS has 66 people taking advantage of this 

opportunity. 

FMS believes that a diverse workforce is vital to achieve its mission. FMS monitors 

recruitment and diversity goals to improve areas of under-representation and actively

supports programs and initiatives to recruit minority college students. FMS has put in 

place the following programs to ensure we have a diverse workforce: 

♦ SES candidate program was developed to create a diverse pipe-line of future 

senior executives; 

♦ Special emphasis programs were expanded and 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; 

♦ Participation in the Washington Internship for Native Students (WINS) 

Program was increased; 

♦ Participation in the Department of Labor’s Workforce Recruitment Program 

for students with disabilities was established; and

♦ The use of Federal Career Internship Program (FCIP) was increased to 

facilitate and accelerate the hiring of qualified and talented minority student 

interns across the board. 

In November 2004, FMS conducted an all-employee survey which had an 80 percent 

response rate. FMS conducted the survey to gain a better understanding of employees’ 

views and how to strengthen FMS. Survey responses were above average compared to 

other government agencies and the private sector in the majority of the areas covered by 

the survey. FMS is taking action to address critical issues/concerns raised by the survey. 

FMS has put into place a solid and viable Human Capital Strategy which enables the 

agency to fulfill its primary mission to not only other federal agencies but other 

customers as well, including taxpayers. 

FMS - 22
4.3 – Operating Levels Table 

Appropriation Title: FMS Salaries & Expenses FY 2005

Enacted

FY 2006

President's

Budget as

Amended

Cong.

Action or

Rescission

Transfers or

Supplementals

FY 2006

Enacted

Level

FY 2006

Proposed

Operating

Level

FY 2007

Proposed

Operating

Level

FTE 1,818 1,818 1,818 1,818 1,761

Object Classification:

11.1 Full-Time Permanent Positions........................ $113,550 $117,054 $117,054 $117,054 $117,054

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 2,500

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

11.9 Personnel Compensation (Total)..................... 117,550 121,054 121,054 121,054 121,054

12.0 Personnel Benefits........................................... 25,075 25,950 25,950 25,950 26,000

13.0 Benefits to Former Personnel.......................... 175 175 175 175 175

21.0 Travel.............................................................. 1,753 1,753 (200) 1,553 1,553 1,553

22.0 Transportation of Things.................................. 195 195 195 195 195

23.1 Rental Payments to GSA................................. 15,600 15,300 (350) 14,950 14,950 14,900

23.2 Rent Payments to Others................................ 365 365 365 365 365

23.3 Communications, Utilities, & Misc.................... 12,795 12,658 12,658 12,658 12,858

24.0 Printing and Reproduction............................... 700 700 700 700 700

25.1 Advisory & Assistance Services....................... 4,000 4,750 4,750 4,750 4,750

25.2 Other Services................................................. 24,000 23,419 (1,262) 22,157 22,157 22,443

25.3 Purchase of Goods/Serv. from Govt. Accts...... 5,000 6,250 (250) 6,000 6,000 6,000

25.4 Operation & Maintenance of Facilities............. 950 950 950 950 1,000

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

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

25.7 Operation & Maintenance of Equipment.......... 6,500 7,500 7,500 7,500 7,500

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

26.0 Supplies and Materials.................................... 4,300 4,300 (50) 4,250 4,250 4,250

31.0 Equipment....................................................... 9,600 10,399 (250) 10,149 10,149 9,386

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

0

. 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

44.0 Refunds........................................................... 0 0 0 0 0

Total Budget Authority....................................... $229,083 $236,243 ($2,362) $0 $233,881 $233,881 $233,654

Budget Activities:

Payments......................................................

0

... $141,287 $145,591 ($1,456) $144,135 $144,135 $147,358

Collections......................................................... 16,693 17,102 (171) 16,931 16,931 17,396

Debt Collection................................................... 9,855 10,264 (102) 10,162 10,162 5,250

Government-wide Accounting and Reporting............ 61,248 63,286 (633) 62,653 62,653 63,650

Total Budget Authority....................................... $229,083 $236,243 ($2,362) $0 $233,881 $233,881 $233,654

Operating Levels

Table 4.3

(Dollars in Thousands)

FMS - 23
4C – Appropriations Language 

DEPARTMENT OF THE TREASURY 

FINANCIAL MANAGEMENT SERVICE 

Federal Funds 

General and Special Funds: 

SALARIES AND EXPENSES

For necessary expenses of the Financial Management Service, [$236,243,000] 

$233,654,000, of which not to exceed $9,220,000 shall remain available until September 

30, [2008] 2009, for information systems modernization initiatives; and of which not to 

exceed $2,500 shall be available for official reception and representation expenses. 

 (Department of the Treasury Appropriations Act, 2006) 

DEBT REVENUE LEGISLATIVE PROPOSALS 

Offsets of Past-Due, Legally Enforceable State Unemployment Compensation Debts 

against Overpayments (26 U.S.C. 6402)

This proposal, as included as part of the Department of Labor’s Unemployment Insurance 

Integrity initiative, would allow the offset of past-due, legally enforceable state 

unemployment compensation debts against overpayments. This would allow FMS to 

offset Federal tax refunds to collect past-due state unemployment compensation debts. 

Presently, FMS offsets Federal tax refunds to collect delinquent debt owed to Federal 

agencies, delinquent child support obligations, and delinquent state income tax debt. 

FMS would match information about state unemployment compensation debts with 

Federal tax refunds, deduct amounts due from Federal income tax refunds, and credit 

those amounts to the appropriate state unemployment insurance trust fund maintained by 

Treasury. This proposal will enable FMS to collect an estimated $482 million in the first 

year after enactment and approximately $3.8 billion over 10 years. 

Eliminate the 10-year Limitations Period on Offset (31 U.S.C. 3716) 

This proposal would eliminate the 10-year limitation on the collection of delinquent nontax Federal debts by administrative offset. This would ensure that delinquent debts can 

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. 

The proposal would be consistent with the Supreme Court’s decision to allow the 

Department of Education to offset social security benefits to collect student loans over 10 

FMS - 24
years old. This proposal will enable FMS to collect an estimated $11 million in the first 

year after enactment and $6 million per year thereafter. 

Legislative Proposal 

TECHNICAL CORRECTION/CLARIFICATION OF 31 U.S.C. 3333 

 

Treasury is seeking a technical correction/clarification of an amendment it proposed, 

which was included in the President’s FY 2005 budget submission. The proposal 

amended 31 U.S.C. 3333, a decades-old statute relieving Treasury from liability for 

payments it makes, in due course and without negligence, of U.S. Treasury checks and 

other items. Specifically, the proposal (1) updated the statute to include payments which 

Treasury makes via electronic funds transfer (EFT); and (2) provided a funding source to 

charge payments for which the statute relieves Treasury from liability, i.e., the Check 

Forgery Insurance Fund (CFIF) (31 U.S.C. 3343). In proposing the amendment, 

Treasury’s intent was to provide a funding source for such administrative errors (both 

disbursing and post-presentment) made in the normal course of business during the check 

and EFT payment processes. While the justification accompanying the amendment 

contained a similar reference, the amendment itself did not specifically so state. 

An issue has arisen regarding potential discord with another statute (31 U.S.C. 3527) 

under which Federal entities seek relief from the Government Accountability Office 

(GAO) for disbursing errors. Relief granted is charged to a specified funding source, or 

if none, to available appropriations. Treasury has, in the past, sought relief for disbursing 

errors under this statute. Although Treasury intended in its recently enacted amendments 

to specify the CFIF as the funding source for relief of disbursing errors, the enacted 

amendments did not specifically reference relief granted under 31 U.S.C. 3527. The 

technical correction/clarification would so reference this statute and, consistent with 

Treasury’s intentions, specifically provide that the CFIF is the appropriate funding source 

for disbursing errors for which relief has been granted under 31 U.S.C. 3527. 

The technical correction/clarification would amend 31 U.S.C. 3333(a)(3) by adding the 

following italicized language, so the provision reads: “[T]he amount of the relief, and the 

amount of any relief granted to an official or agent of the Department of the Treasury 

under 31 U.S.C. 3527, shall be charged to the Check Forgery Insurance Fund (31 U.S.C. 

3343). A recovery or repayment for which replacement is made out of the fund shall be 

credited to the fund and is available for the purposes for which the fund was established.” 

This proposal is included as new provision. Treasury’s Administrative Provisions which 

reads as follows: SEC. 217. Section 3333(a) of Title 31, United States Code, is amended 

by deleting paragraph (3) and inserting in lieu thereof the following: 

‘‘(3) The amount of the relief, and the amount of any relief granted to an official or agent 

of the Department of the Treasury under 31 U.S.C. 3527, shall be charged to the Check 

Forgery Insurance Fund (31 U.S.C. 3343). A recovery or repayment of a loss for which 

replacement is made out of the fund shall be credited to the fund and is available for the 

FMS - 25
purposes for which the fund was established.’’ (Department of the Treasury 

Appropriations Act, 2006.)

4D – 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 of FMS’ program activities, 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 2007 will be approximately $245 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 U.S. government. The 

services are in support of such programs as EFTPS, the Lockbox Networks, plastic cards, 

e-commerce systems, and CA$HLINK, a deposit reporting and cash concentration 

system. These and other programs are vital to FMS’ Strategic Goals, the government’s 

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 2007 will be

approximately $311 million. 

4.4 – Permanent, Indefinite Appropriations Table 

Permanent, Indefinite Appropriations

Table 4.4

(Dollars in Thousands)

FY 2005 FY 2006 FY 2007

Actual Enacted Request

Federal Reserve Bank $238,939 $220,000 $245,000

Financial Agent Services $343,385 $322,000 $311,000

Permanent, Indefinite Appropriation

FMS - 26
Bureau of the Public Debt 

Mission 

To borrow the money needed to operate the federal government and to 

account for the resulting debt. 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Appropriation Enacted Enacted Request to FY 2007 to FY 2007

Salaries and Expenses

Wholesale Securities Services $11,905 $11,812 $11,986 $174 1.47%

Government Agency Investment Services 13,360 13,255 13,451 196 1.48%

Retail Securities Services 147,298 147,529 149,711 2,182 1.48%

Summary Debt Accounting 5,602 5,558 5,641 83 1.49%

Total Appropriated Resources $178,165 $178,154 $180,789 $2,635 1.48%

(Dollars in Thousands)

Appropriation Summary

Table 1.1

FY 2007 Priorities 

• Conduct approximately 220 marketable securities auctions that will issue more 

than $5 trillion in Treasury bills, notes, bonds and inflation-protected securities 

(TIPS). 

• Administer approximately $3.5 trillion in investments for over 230 federal trust 

funds. 

• Manage approximately 7,000 State and local government accounts valued at 

approximately $250 billion. 

• Shorten response standard for retail customer service transaction processing 

times from 13 to 12 business days. 

• Produce daily financial statements. 

• Reconcile more than $78 trillion in securities transactions. 
Table of Contents 

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

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

1B – Previous Highlights and Accomplishments ........................................................... 2 

1C – Future Outlook ....................................................................................................... 3 

Section 2 – Explanation of Increases and Decreases .............................................. 5

2.1 – Budget Increases and Decreases Table.................................................................. 5 

2A – Budget Increases and Decreases Description......................................................... 5 

Section 3 – Budget and Performance Plan................................................................. 8

3.1 – Appropriation Detail Table.................................................................................... 8 

3A – Budget Activity Description .................................................................................. 8 

3.2 – Budget and Performance Plan Table.................................................................... 13 

3B – Description of Performance ................................................................................. 15 

3C – PMA Evaluation Description ............................................................................... 18 

3.3 – PART Evaluation Table....................................................................................... 20 

Section 4 – Supporting Materials ............................................................................... 21

4.1 – Human Resources Table ...................................................................................... 21 

4A – Human Capital Strategy Description ................................................................... 22 

4.2 – Summary of IT and Non-IT Resources Table...................................................... 24 

4B – Information Technology and Non-Information Technology Strategy ................. 24 

4.3 – Operating Levels Table........................................................................................ 26 

4.4 – Required Annual Systems Modernization Report to Congress ........................... 27 

4C – Appropriations Language..................................................................................... 28 

Reimbursements to the Federal Reserve Banks............................................................ 29 

Government Losses in Shipment .................................................................................. 29 
Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

The Bureau of the Public Debt (BPD) annually auctions and issues more than $4 trillion 

in Treasury bills, notes and 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 78 million savings bonds each year; administers 

approximately $3.4 trillion in investments for 232 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 borrowings and deliver securities services to investors. 

To that end, Public Debt is working to enhance its automated auction system to take 

advantage of the benefits of current technology while continuing to develop 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 new technological advances to ensure that its systems remain secure. 

Wholesale Securities Services – This activity involves the announcement, auction, and 

issue of marketable Treasury bills, notes, and TIPS. This program ensures that the 

government’s critical financing needs are met and that a robust and secure infrastructure 

is in place for the custody and transfer of Treasury securities in the wholesale market. 

Also included is the administration of regulations to ensure the integrity and efficiency of 

the primary and secondary markets in Treasury securities. 

Government Agency Investment Services – This activity supports federal, state, and local 

agency investments in non-marketable Treasury securities as well as federal agency 

borrowing from Treasury. The two major non-marketable special purpose securities 

involved are the Government Account Series (GAS) and the State and Local Government 

Series (SLGS). GAS securities are issued only to funds managed by federal agencies 

with statutory investment authority. SLGS securities are offered to State and local 

governments as investment alternatives to assist issuers of tax-exempt securities in 

complying with yield restriction and arbitrage rebate provisions of the Internal Revenue 

Code. 

Retail Securities Services – This activity serves more than 50 million retail customers 

who hold marketable and savings securities directly with Treasury. It includes the 

processing of marketable and savings bond issues in book-entry form. It also includes 

the servicing of outstanding definitive marketables and savings bonds in paper form. 

While relatively few marketable securities remain in paper form, there are approximately 

BPD - 1
700 million paper savings bonds outstanding. The program also enables holders of paper 

securities to convert their holdings to the more convenient and efficient book-entry form. 

Summary Debt Accounting – Through this activity, Public Debt accounts for and reports 

on all financial activity related to the Public Debt of the United States. The program

provides accounting controls for funds received from the sale of securities, funds 

disbursed as interest and principal payments, and for the accurate and timely reporting of 

debt financing operations in compliance with all requirements. 

1B – Previous Highlights and Accomplishments

With the resources appropriated to Public Debt, it: 

• Conducts some 200 marketable securities auctions annually, resulting in the issue of 

more than $4 trillion in Treasury bills, notes, and TIPS, 

• Administers approximately $3.4 trillion in GAS investments, which comprise about 

42 percent of the public debt outstanding, 

• Manages approximately 6,400 active SLGS accounts valued at $225 billion,

• Serves more than 50 million retail customers holding marketable and savings securities, 

• Accounts for and reports on the balance and composition on the more than $8 trillion 

public debt, the single largest liability on the federal government’s balance sheet, and 

reconciles more than $76 trillion in securities transactions reported from numerous 

systems to cash flowing in and out of the federal government annually, and 

• Receives clean audit opinions on the Schedules of Federal Debt every year since it was 

required to produce financial statements. 

BPD - 2
1C – Future Outlook 

Public Debt’s vision is to lead the way for responsible, effective government through 

commitment to service, efficient operations, openness to change, and values-based 

behavior. In keeping with this vision, BPD is dedicated to maintaining high levels of 

performance, and its budget is structured so as to programmatically align resources with 

performance. 

Public Debt will continue to improve the process for submitting auction bids and 

enhancing auction systems. Future investments in technology and continuity of 

operations will ensure that payments to investors will be made timely with 100percent 

accuracy. BPD 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. 

Public Debt will continue to provide efficient mechanisms that will enable federal, state 

and local government entities to easily invest in Treasury securities. Its goal is to conduct 

65 percent of customer transactions online by FY 2006 and 75 percent by FY 2007. 

Additionally, BPD will continue to provide accurate accounting data with 

intragovernmental payments and implement other procedures to reduce/eliminate 

reconciliation problems in the federal government-wide financial statements. 

Public Debt developed TreasuryDirect as the centerpiece of Treasury’s effort to achieve 

all-electronic issuance of the securities it offers to retail customers. In TreasuryDirect, no 

paper securities are issued, and investors conduct their investment and account 

management activities online. Currently, Series EE and Series I bonds are available in 

TreasuryDirect for purchase. Holders of TreasuryDirect accounts are now being offered 

the option of converting their paper savings bonds to a more efficient electronic form. 

Since October 2005, customers have also been able to purchase marketable Treasury 

securities through their TreasuryDirect accounts. Additionally, investors with marketable 

holdings in Public Debt’s legacy direct-access system can request their securities be

transferred to TreasuryDirect. Planned enhancements to TreasuryDirect include adding 

the capability for establishing accounts for “non-individuals”, such as fiduciaries, trust, 

and organizations. A key challenge for Public Debt will be communicating with its retail 

customers about the benefits of managing their purchases and holdings of Treasury 

securities securely via the Internet through TreasuryDirect. 

While the timetable to meet the goal of issuing all Treasury securities electronically will 

depend on a number of factors, the end point is clear: Treasury is committed to 

withdrawing paper savings bonds from sale. As the public becomes increasingly 

comfortable with conducting financial business online, BPD believes its customers will 

appreciate the benefits of dealing directly with Treasury to learn about the services 

provided, securities available, and managing their investments online. 

BPD - 3
Public Debt is working to improve the clarity, utility and availability of Federal debt 

financial information. BPD’s goal is to produce monthly public debt financial statements 

by FY 2006 and daily public debt financial statements by FY 2007. This supports the 

President’s Management Agenda goal of providing accurate and timely financial 

information to program managers. Public Debt will also continue its focus on providing 

financial statements that receive clean audit opinions and support improved 

government-wide accounting. 

BPD - 4
Section 2 – Explanation of Increases and Decreases 

2.1 – Budget Increases and Decreases Table 

Treasury

Budget Strategic

FTE Amount Activity Objective

FY 2005 Consolidated Appropriations (P.L. 108-447) 1,390 $179,566

Rescission (P.L. 108-447) (1,401)

FY 2005 Enacted 1,390 178,165

FY 2006 Appropriation (P.L. 109-115) 1,390 179,923

Rescission (P.L.109-148) (1,769)

FY 2006 Enacted 1,390 178,154

Changes to Base

Proposed Pay Raise 2,249

Pay Annualization 868

Non-Pay Inflation Adjustment 1,545

Non-Recurs (5,113)

Base Reinvestments 5,113

Program Reduction

Revised Customer Service Practices (2,027)

Total FY 2007 Base 1,390 180,789

Total FY 2007 Request 1,390 180,789

Program Changes

Offsetting Fees 

User Fees ($3,000)

Total Net FY 2007 Request 1390 $177,789

Budget Increases and Decreases

Table 2.1

(Dollars in Thousands)

Appropriation: BPD Salaries and Expenses

2A – Budget Increases and Decreases Description 

Changes to Base............................................................................................... +$4,662,000 

Adjustments to Maintain Current Levels +$4,662,000/ 0 FTE Funds are requested for: 

the FY 2007 cost of the January 2006 pay increase of $868,000; the proposed January 

2007 pay raise of $2,249,000; other labor related benefits; and non-labor related items 

such as contracts, travel, supplies, equipment, and GSA rent adjustments of $1,545,000. 

Program Reduction..........................................................................................-$2,027,000 

BPD - 5
Until the formation of the Citizen Service Levels Interagency Committee (CSLIC) in the 

spring of 2005, there were no Government-wide standards or metrics to measure citizen 

satisfaction or improvements to service delivery. The CSLIC, operating under the 

auspices of the President’s Management Agenda and managed by the General Services 

Administration’s USA Services E-Gov initiative, has recommended response times for 

federal agencies to various types of customer inquiries. 

In its FY 2005 Program Assessment Rating Tool (PART) Review, Public Debt developed 

an aggressive long-term goal to process 90 percent of customer service transactions 

within 10 business days by the end of FY 2010. When comparing its responsiveness to 

customer inquiries to the standards developed by the CSLIC, Public Debt found that it 

was not only meeting but also often exceeding them. 

By bringing its responsiveness to retail customer service inquiries more in line with the 

CSLIC standards, Public Debt will be able to forego slightly more than $2 million in 

overtime expenses beginning in FY 2007. 

Program Reinvestments ..................................................................................................$0 

Program Increases...........................................................................................................$0 

FY 2006 Budget Adjustments 

Public Debt continuously reviews its operations to identify opportunities to realign 

resources to fund priority requirements, meet mission objectives and support Treasury’s 

goal of Managing the Government’s Finances Effectively within available resources. In 

preparing for FY 2006, BPD became aware of several new requirements and funding 

shortfalls. Following past practice, Public Debt conducted an internal review of its 

programs to identify potential funding sources. As a result of this review, BPD was able 

to redirect funding to higher mission critical needs, while remaining within current 

funding levels. 

Savings of $5,113,000 were identified for 1) non-recurs of miscellaneous printing, 

supplies and equipment items ($1,370,000) and 2) a non-recur of litigation support 

($3,743,000). 

The identified savings of $5,113,000 was used to fund the FY 2006 rescission of 

$1,769,000 and reinvested in the items outlined below. 

Federal Protective Service Guard Contract......................................$1,256,000 

In July 2005, the Federal Protective Service (FPS) assumed the responsibility for 

providing guard services for all of Public Debt’s facilities located in Parkersburg, West 

Virginia. Due to the regional contract developed and implemented by the FPS, BPD will 

incur a substantial increase in costs associated with guard services. 

Homeland Security Presidential Directive (HSPD) 12............................$700,000 

HSPD-12 requires federal agencies to comply with specific requirements dealing with 

personal identity verification and access to federal facilities. In order to comply with the 

BPD - 6
directive, Public Debt is setting aside funding for its anticipated share of a Treasury 

enterprise solution that is currently unfunded. 

Pay Raise Absorption......................................................................$585,000 

Public Debt must fund the difference between the President’s proposed FY 2006 pay 

raise of 2.3 percent and Congress’s enacted pay raise of 3.1 percent. 

New Auction System Travel..............................................................$482,000 

The replacement of Treasury’s automated auction system, used by Public Debt to auction 

trillions of dollars in Treasury securities to finance the federal government, necessitates 

an increase in travel expenses to allow Public Debt staff to monitor and manage 

development of the new system. Additionally, increases in travel expenses caused by

rising fuel prices have exceeded the 1.5 percent non-pay inflation increase approved by 

Congress. 

HR Connect.................................................................................$321,000 

HR Connect is Treasury’s human resources enterprise system that allows all HR-related 

processing to be totally web-based. For example, employees can use HR Connect to 

update personal information, view benefits and produce an online resume. Managers use 

HR Connect to submit personnel actions and use reports to assist in strategic human 

capital decision-making. Public Debt’s assessment from Treasury for its share of HR 

Connect costs have increased with the elimination of Treasury’s initial project funding 

provided by Congress. 

BPD - 7
Section 3 – Budget and Performance Plan 

3.1 – Appropriation Detail Table 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

Newly Appropriated Resources:

Wholesale Securities Services 92 $11,905 98 $11,812 98 $11,986 0.00% 1.48%

Government Agency Investment Services 105 13,360 112 13,255 112 13,451 0.00% 1.48%

Retail Securities Services 1,060 147,298 1,134 147,529 1,134 149,711 0.00% 1.48%

Summary Debt Accounting 44 5,602 46 5,558 46 5,641 0.00% 1.48%

Subtotal Newly Appropriated Resources 1,301 $178,165 1,390 $178,154 1,390 $180,789 0.00% 1.48%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable 17 $7,181 64 $16,732 64 $16,919 0.00% 1.12%

Available multi-year/no-year funds 5,463

Transfers In/Out

Subtotal Other Resources 17 12,644 64 16,732 64 16,919 0.00% 1.12%

Total Resources Available for Obligation 1,318 $190,809 1,454 $194,886 1,454 $197,708 0.00% 1.45%

Request to FY 2007

FY 2006

Resources Available for Obligation

FY 2005 FY 2006 FY 2007

Appropriation Detail

(Dollars in Thousands)

Table 3.1

% Change

Enacted Enacted

3A – Budget Activity Description 

Wholesale Securities Services ($11,986,000 from direct appropriations and 

$952,000 from reimbursements) The Wholesale Securities Services program involves the 

announcement, auction and issue of marketable Treasury bills, notes, and TIPS. It also

provides an efficient infrastructure for the transfer, custody and redemption of these 

securities. Large market participants buy, at auction, most of Treasury’s marketable 

securities. In FY 2005, Public Debt conducted 220 marketable securities auctions

resulting in the issuance of more than $4.4 trillion in Treasury bills, notes, and TIPS. Its 

commercial book-entry system holds approximately $4 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. About $1.23 trillion per day in Treasury securities are transferred 

among account holders in the commercial book-entry system. 

 

One of BPD’s goals is to support Treasury’s objective of financing the government at the 

lowest possible borrowing cost to taxpayers over time. To help achieve this goal, BPD 

continuously improves its auction and debt management systems to provide investors 

with critical auction-related information faster and to enhance customers’ abilities to 

participate easily and securely in Treasury auctions. Also, BPD will seek opportunities, 

in global markets, to listen and learn from holders of its securities and to share 

BPD - 8
information with them. The Bureau will also educate investors about Treasury’s debt

financing policies and the auction process and its securities. 

Over the years, Public Debt has dramatically reduced the time 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 release times reduce the period of 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 substantially 

lowered. 

In addition, substantial upgrades were made to BPD’s auction processing system and 

network to eliminate single points of failure in auction processing, which provides for 

more robust and reliable auctions. Finally, BPD has expanded its ability to provide 

contingency processing at three auction processing sites and provided a new feature to 

allow large bidders to submit their bids in a secure Internet environment. 

 

Another responsibility the Bureau has is regulating the market for Government securities. 

Public Debt administers 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 regulatory initiatives was to rewrite, in plain language, the 

Uniform Offering Circular, which explains Treasury’s marketable securities auctions 

rules. 

Other Resources 

Reimbursements totaling $952,000 are collected for providing: administrative and IT 

support for the Treasury Franchise Fund Administrative Resource Center, Public Key 

Infrastructure (PKI) operations for Treasury and training request processing for the 

Alcohol and Tobacco Tax and Trade Bureau. 

Government Agency Investment Services ($13,451,000 from direct appropriations and 

$3,469,000 from reimbursements) 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. GAS securities are issued only to federal agencies with statutory 

investment authority. There are currently about 232 trust and investment funds held by 

some 80 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 included in this group are the four Social Security and 

BPD - 9
Medicare Funds, as well as the Unemployment and Highway Trust Funds. With more 

than $3.4 trillion in investments, federal government and other entities’ holdings of GAS 

securities comprise approximately 42 percent of the public debt outstanding. 

SLGS securities are issued to State and local governments and municipalities across the

nation. At approximately $225 billion outstanding, the SLGS program is important to 

over 6,400 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 $212 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. 

Public Debt is committed to continuously improving service to its agency customers who 

purchase GAS and SLGS securities and borrow money from Treasury. The Bureau will 

continue to encourage customers to conduct business online. BPD will also encourage 

federal agencies to use the optional services it offers to simplify their financial reporting 

and streamline the reconciliation processes associated with producing government-wide 

financial statements. 

 

The systems for GAS, SLGS, and Borrowings securities represent significant steps 

forward in automation and expanded online services. These systems have already 

improved service to government agency customers, and planned improvements will offer 

additional investment and borrowing management capabilities. BPD is also exploring 

opportunities to consolidate Government Agency Investment Services systems to reduce 

costs and facilitate future enhancements. 

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 $3,469,000 are collected for providing: investment accounting 

performed on behalf of the Secretary of Treasury, administrative and IT support for the 

Treasury Franchise Fund Administrative Resource Center, Public Key Infrastructure 

(PKI) operations for Treasury and training request processing for the Alcohol and 

Tobacco Tax and Trade Bureau. 

BPD - 10
Retail Securities Services ($149,711,000 from direct appropriations including $3,000,000 

from user fee collections, and $12,050,000 from reimbursements) Public Debt’s Retail 

Securities Services program serves more than 50 million retail customers who hold 

marketable and savings securities directly with Treasury. The focus of this program is to 

deliver Treasury securities services online at the lowest reasonable operational cost. By 

enabling investors to manage their savings bond and marketable securities holdings 

through the Internet-accessible TreasuryDirect system, Public Debt will serve customers 

more efficiently and manage resources more effectively. 

TreasuryDirect offers savings bonds in book-entry form and will be expanded to include 

all Treasury securities offered to the public. Since electronic Series EE and I savings 

bonds were introduced, a payroll deduction feature was added in August 2004. This 

allows investors to send funds withheld from their pay to their TreasuryDirect accounts to 

purchase securities. In December 2004, a conversion feature was added in anticipation of 

inviting the owners of more than 700 million paper savings bonds to transfer them to 

electronic form. In early 2005, that invitation was extended and investors have started 

converting their paper bonds. The conversion effort will be a multi-year undertaking, but 

it will substantially accelerate the efficiencies that will result from paperless investing.

BPD began issuing marketable Treasury bills and notes in TreasuryDirect in October 

2005. TreasuryDirect will eliminate the paper-based processing inherent in the Bureau’s 

legacy direct-access system. The 417,000 investors who hold marketable securities in the 

legacy system will also be able to convert them to TreasuryDirect accounts. By doing so, 

they will enjoy an expanded range of Internet-based services not available in the legacy 

system. 

 

Throughout this multi-year push toward book-entry and all-electronic processing, Public 

Debt will examine its current products and delivery systems, and when the time is right, 

BPD will introduce new services and discard systems that become outdated or do not fit 

into its vision for the future. These changes build on Public Debt’s tradition of 

continuous operational improvement and position the Bureau to offer high quality and 

easy-to-use investment services to millions of retail customers. 

Other Resources 

Offsetting collections totaling $3,000,000 are collected for definitive securities issue and 

TreasuryDirect Investor Account maintenance fees, while $12,050,000 in 

reimbursements are collected for providing: administrative and IT support for the 

Treasury Franchise Fund Administrative Resource Center, Public Key Infrastructure 

(PKI) operations for Treasury and training request processing for the Alcohol and 

Tobacco Tax and Trade Bureau, and computer matches for the Social Security 

Administration. 

Summary Debt Accounting ($5,641,000 from direct appropriations and $448,000 from 

reimbursements) 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 

BPD - 11
summary level accounts represent the control totals for dozens of subordinate investment 

systems. Each year, Public Debt reconciles more than $76 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 and 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 

Reimbursements totaling $448,000 are collected for providing: administrative and IT 

support for the Treasury Franchise Fund Administrative Resource Center, Public Key 

Infrastructure (PKI) operations for Treasury and training request processing for the 

Alcohol and Tobacco Tax and Trade Bureau. 

 

BPD - 12
3.2 – Budget and Performance Plan Table 

Treasury Strategic Goal: Managing the Government's Finances Effectively (F4)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Enacted Enacted Enacted Enacted Enacted Requested

Treasury Strategic Objective F4B:

Budget Activities: Wholesale Securities Services, Government Agency Investment Services, and Retail Securities Services

Financial Resources

Newly Appropriated Resources N/A $187,776 $171,239 $172,563 $172,596 $175,148

Other Resources N/A 5,932 6,064 12,501 16,287 $16,471

Total Operating Level N/A $193,708 $177,303 $185,064 $188,883 $191,619

Human Resources

Newly Appropriated FTE N/A 1,431 1,289 1,257 1,344 1,344

Other FTE N/A 5 5 17 62 62

Total FTE (direct and reimbursable) N/A 1,436 1,294 1,274 1,406 1,406

Treasury Strategic Objective F4D:

Budget Activity: Summary Debt Accounting

Financial Resources

Newly Appropriated Resources N/A $5,457 $5,788 $5,602 $5,558 $5,641

Other Resources N/A 111 131 143 445 448

Total Operating Level N/A $5,568 $5,919 $5,745 $6,003 $6,089

Human Resources

Newly Appropriated FTE N/A 47 44 44 46 46

Other FTE N/A 2 2

Total FTE (direct and reimbursable) N/A 47 44 44 48 48

Treasury Strategic Goal F4:

Total Financial Resources

Total Newly Appropriated Resources N/A $193,233 $177,027 $178,165 $178,154 $180,789

Total Other Resources N/A 6,043 6,195 12,644 16,732 16,919

Total Operating Level N/A $199,276 $183,222 $190,809 $194,886 $197,708

Total Human Resources

Total Newly Appropriated FTE N/A 1,478 1,333 1,301 1,390 1,390

Total Other FTE N/A 5 5 17 64 64

Total FTE (direct and reimbursable) N/A 1,483 1,338 1,318 1,454 1,454

Budget and Performance Plan

Table 3.2

(Dollars in Thousands)

Resource Level 1/

BPD - 13
Strategic Objective: Manage Federal Debt Effectively and Efficiently - F4B

Budget Activity: Wholesale Securities Svcs.

Performance Goal: Minimize the cost of the Federal Government’s borrowing activities

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Cost per debt financing operation ($) (E)

Target Baseline 133,683 141,380

Actual 126,828

Target Met? N/A N/A N/A Y

Percent of auction results released in 2 minutes +/- 30 seconds (%) (Oe)

Target 95 95 95 95

Actual 99.53 95

Target Met? N/A N/A Y Y

Budget Activity: Gov't Agency Investment Svcs.

Performance Goal: Fulfill customer expectations

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Cost per federal funds investment transaction ($) (E)

Target Baseline 90.15 91.41

Actual 88.74

Target Met? N/A N/A N/A Y

Percentage of Government Agency customer initiated transactions conducted online (%) (Oe)

Target Baseline 65 75

Actual 72.7

Target Met? N/A N/A N/A Y

Budget Activity: Retail Securities Svcs.

Performance Goal: Fulfill customer expectations

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Cost per TreasuryDirect assisted transaction ($) (E)

Target Baseline 7.75 7.08

Actual 8.51

Target Met? N/A N/A N/A Y

Cost per TreasuryDirect online transaction ($) (E)

Target Baseline 2.99 2.25

Actual 3.43

Target Met? N/A N/A N/A Y

Percentage of retail customer service transactions completed within 13 business days (%) (Oe)

Target 90 90 90 90

Actual 92.5 88.7

Target Met? N/A N/A Y N

Strategic Objective: Optimize Cash Management and Effectively Administer the Government's

Financial Systems - F4D

Budget Activity: Summary Debt Accounting

Performance Goal: Effectively account for the debt of the Federal Government

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Cost per summary debt accounting transaction ($) (E)

Target Baseline 12.82 13.00

Actual 12.62

Target Met? N/A N/A N/A Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

BPD - 14
3B – Description of Performance 

In the Wholesale Securities Services budget activity, Public Debt met its FY 2005 

performance goal of releasing auction results within two minutes plus or minus 30 

seconds 95percent of the time and plans to continue that effort into FY 2006 and FY 

2007. In addition, substantial upgrades to BPD’s auction processing system and network 

to eliminate single points of failure in auction processing have been made, which 

provides for more robust and reliable auctions. Public Debt has expanded its ability to 

provide contingency processing at the three major auction processing sites and provided a 

new feature that will allow large non-primary dealer auction participants to submit their 

bids in a secure Internet environment. 

Public Debt established an efficiency measure to address the cost per debt financing 

operation (i.e., each Treasury security auction or buyback). Costs are incurred in Public 

Debt’s annual appropriation as well as in a permanent indefinite appropriation used to 

reimburse Federal Reserve Banks that act as the Department’s fiscal agents. The roughly 

$127,000 cost of each operation amounts to approximately 0.0008 percent (eight tenthousandths of one percent) of the amount raised in an average $16 billion auction. The 

cost of each operation is projected to increase to $133,683 in FY 2006 and $141,380 in 

FY 2007 to account for Public Debt and Federal Reserve costs associated with replacing 

the current automated auction system and inflation. 

In the Government Agency Investment Services budget activity, Public Debt is 

committed to ensuring that its applications supporting federal agency transactions will 

interface with the Government-Wide Accounting application that is being developed by

the Financial Management Service to process intra-governmental transfers of funds more 

efficiently and effectively. BPD has established a long-term goal to expand automation 

to its customers. Currently, less than a quarter of all investment transactions are provided 

to the Bureau offline. The Bureau will enhance the online services provided to federal, 

state, and local government customers so that BPD will meet its long-term goal of 

conducting 80 percent of customer-initiated transactions online by the end of FY 2008. 

Public Debt’s goal for FY 2006 is 65 percent and for FY 2007 is 75 percent. 

Public Debt established an efficiency measure to address the cost per federal funds 

investment transaction. Federal investments are special-purpose securities issued only to 

federal agencies that manage trust, deposit and other special funds. Public Debt handles 

issuing, paying interest on, and redeeming the securities held by each fund, as well as 

handling all of the debt-related accounting and reporting for the securities on the 

Consolidated Financial Statement of the Federal government. In FY 2005, the cost of an 

investment transaction was $88.74. Due to inflation, Public Debt projects the cost per 

investment transaction to reach $90.15 in FY 2006 and $91.41 in FY 2007. 

In the Retail Securities Services budget activity, BPD’s goal of processing 90 percent of 

retail customer service transactions within 13 business days for FY 2005 was narrowly 

missed by 1.3percent. Two things contributed to this: abnormally high volumes of 

BPD - 15
transaction requests were received during the year and the normal workflow was 

disrupted temporarily as a result of a planned business process reengineering. On the 

transaction side, the announced termination of the offering of Series HH bonds and the 

exchange of Series EE/E bonds for Series HH bonds resulted in a huge spike in 

transaction requests, particularly for the more complex exchanges. BPD believes that its 

efforts to reengineer the customer service business processes and workflow, while 

disruptive in the short-term, will produce substantial benefits for the long-term, including 

expediting the delivery of customer service. BPD expects to meet its customer service 

goal for FY 2006, largely due to its strategic reengineering and adoption of best practices. 

For FY 2007, the Bureau’s goal will be to complete 90 percent of retail customer service 

transactions within 12 business days and strive toward a long-term goal of completing 

90 percent of retail customer service transactions within 10 business days by FY 2010. 

With its TreasuryDirect system serving as the centerpiece of Treasury’s effort to achieve 

all-electronic issuance of Treasury securities, Public Debt baselined two efficiency 

measures that gauge the systems impact on its Retail Securities Services program. The 

first measure is the cost per TreasuryDirect online transaction. With investors having 

online access to their holdings and self-service capability, it is important for Public Debt 

to know the cost of online transactions. These include establishing accounts in the 

system, purchasing and redeeming securities, and changing payment instructions online. 

In FY 2005, the cost of a TreasuryDirect online transaction was $3.43. In spite of 

expected inflation in both years, Public Debt projects productivity-related unit cost 

reductions to $2.99 in FY 2006 and $2.25 in FY 2007. 

The second measure is the cost per TreasuryDirect assisted transaction. Although 

TreasuryDirect promotes self-sufficiency, there are times when assistance from a 

customer service representative is necessary. Representatives handle phone and email 

inquiries, offline authentication forms processing, and deceased-owner cases. In 

FY 2005, the cost of a TreasuryDirect assisted transaction was $8.51. In spite of 

expected inflation in both years, Public Debt projects productivity-related unit cost 

reductions to $7.75 in FY 2006 and $7.08 in FY 2007. 

In the Summary Debt Accounting budget activity, Public Debt will continue its efforts to 

obtain unqualified audit opinions on the Schedules of Federal Debt as well as strive 

toward BPD’s goal to produce monthly financial statements within three business days

after the close of the quarter. 

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. In FY 2005, the 

cost of a Summary Debt accounting transaction was $12.62. Public Debt projects 

BPD - 16
productivity to partially offset the expected inflation for both years, resulting in summary 

debt accounting transactions to reach $12.82 in FY 2006 and $13.00 in FY 2007. 

 

In support of both the Budget and Performance Integration component of the President’s 

Management Agenda and Departmental guidance, Public Debt established at least one 

efficiency measure for each budget activity. These measures will more sharply focus 

BPD’s attention on achieving the lowest possible operational cost while maintaining high 

quality operations. 

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

BPD - 17
3C – PMA Evaluation Description

Competitive Sourcing

• Public Debt has met all competitive sourcing expectations. The Bureau has prepared an 

inventory of commercial and inherently governmental functions that is continually 

refined and updated. 

• Public Debt has met all interim goals for job competitions using direct conversions and 

a streamlined competition process. 

E-Government

• Before the push for expanding electronic government, Public Debt had adopted a 

citizen-centered approach to offering securities and services to its customers by providing 

convenient electronic access to information and transactions. The Bureau will continue

to leverage technology and partner with other federal agencies to provide information to 

citizens faster, cheaper and securely. 

• In all of Public Debt’s major program areas, customers can process transactions 

electronically. In the future, Public Debt will ensure that its customers benefit as much as 

possible from additional electronic access and that the Bureau benefits through reduced 

operating costs. 

 

• Because much of the information that Public Debt maintains relates to financial 

transactions and the investments of customers, BPD is especially aware of the sensitivity 

of the information. The Bureau will continue to take the necessary measures to safeguard 

data, protect confidentiality, and ensure that systems are secure. 

Human Capital Management

• Most of Public Debt’s employees are located in Parkersburg, West Virginia, where the 

Bureau ranks as a major employer. BPD is able to draw from a strong and relatively deep 

talent pool for positions in this location. As a result of this strong competitive position

and the meaningful work that the Bureau performs, it is rare that BPD experiences 

significant difficulties in filling positions and retaining capable and dedicated people. 

• Public Debt is sensitive to employee concerns and expectations and manages in a 

manner that supports recruitment and increases retention, productivity, and morale. 

Diversity is important and its benefits are valued. BPD’s recruitment programs, 

relocation policies, and diversity programs are designed to introduce new ideas, 

experiences, and perspectives into its workforce. 

BPD - 18
Improved Financial Performance

• All of Public Debt’s financial systems are well controlled; the financial systems used to 

account for the public debt comply with the Federal Financial Management Improvement 

Act and are audited routinely. The Bureau’s systems are subject to both external audit 

and review by the Government Accountability Office and other auditors, as well as 

periodic examination as part of BPD’s internal review program. Public Debt has received 

unqualified opinions on all financial statement audits as a result of its attention to 

financial performance. 

Budget and Performance Integration

• For more than 20 years, Public Debt has used a formal strategic planning process. 

BPD's planning team, comprised of senior program officials, develops the strategic plan 

and annual performance targets as part of an ongoing planning and program evaluation 

process. The program evaluation process is supported by financial reports, linking cost to 

performance, which the planning team discusses on a regular schedule. BPD received an 

"Effective" PART rating from the Office of Management and Budget and has 

implemented all suggested recommendations including developing efficiency measures 

for every budget activity. During Public Debt’s FY 2007 PART Review, the Bureau 

added a recommendation to identify long-term goals to improve efficiency and 

effectiveness.

BPD - 19
3.3 – PART Evaluation Table 

PART Name: Administering the Public Debt

Strategic Goal: Manage the Government’s Finances Effectively (F4)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

Public Debt is identifying 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.

Table 3.3

PART Evaluation

1. Continue to improve annual performance measures.

BPD - 20
Section 4 – Supporting Materials 

4.1 – Human Resources Table 

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Bud. Direct 1478 1333 1301 1390 1390

Act. Direct 1394 1251 1206 1390 1390

Bud. Reimb. 5 5 17 64 64

Act. Reimb. 5 5 14 64 64

Actual Full Time Equivalent vs. Budgeted FTE

1,478

1,251 1,206

5 5 17 64 64 5 5 14 64 64

1,394 1,333 1,301 1,390 1,390 1,390 1,390

0

200

400

600

800

1000

1200

1400

FY2003 FY 2004 FY 2005 FY 2006 FY 2007

FTEs

Bud. Direct Act. Direct Bud. Reimb. Act. Reimb.

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 1,256 1,220 1,454

Increases:

Reason #1: Increase in direct FTE due to realignment of core 234

administrative, policy, and IT functions back into Public

Debt from the Franchise Fund as well as an increase in

reimbursable FTE offset by a decrease in direct FTE due to

productivity savings.

Subtotal, Increases 0 234 0

Decreases:

Reason #1: Underutilization of direct FTE due -14

to hiring lags.

Reason #2: Decrease in direct FTE due to acceptance -22

of buyouts for consolidation of Information

Technology functions offset by an

increase in reimbursable FTE.

Subtotal, Decreases -36 0 0

Year-end Actual/Estimated FTEs 1,220 1,454 1,454

Net Change from prior year SOY to budget year EOY 234

CHANGES IN FULL-TIME EQUIVALENTS

(Break-out the FTE changes by as many reasons for the change as possible, and include a

description for each the increase or decrease)

(Break-out the FTE changes by as many reasons for the change as possible, and include a

description for each the increase or decrease)

BPD - 21
4A – Human Capital Strategy Description 

Public Debt’s strategic management of human capital is consistent with its goals, visions, 

and priorities and supports not only the President’s Management Agenda, but also the 

Treasury strategic goal of Managing the Government’s Finances Effectively. 

More specifically, 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 Public Debt’s 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. The Bureau offers extensive in-house 

training and many opportunities to use the Office of Personnel Management’s (OPM) 

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 Cadre Program, a Management 

Candidate Development Program, and a SES Candidate Development Program that were 

designed and implemented to provide Public Debt with a trained, capable pool of 

managers and executives to fill future vacancies. All of these programs use Individual 

Development Plans (IDPs), 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. The 

Bureau attends approximately 20 career fairs per year. Much of its recruitment occurs at 

colleges and universities with a diverse population or at diversity specific career fairs. 

Recruiting efforts are constantly refined to attract highly qualified diverse candidates to 

become part of its workforce. BPD values diversity and recognizes its benefits to the 

organization. 

Public Debt uses the full realm of pay flexibilities to recruit and retain high quality 

candidates. Specifically, BPD uses recruitment bonuses, superior qualifications 

appointments, and retention allowances. The Bureau also uses special employment 

programs to hire quality candidates. The Federal Career Intern Program, Outstanding 

Scholar Hiring Authority, Student Career Experience Program, Veterans’ Recruitment 

Act, etc. provide a source of highly qualified applicants. Public Debt developed a 

Student Loan Repayment Program and is using it as an added recruitment/retention 

incentive. The Bureau’s recognition of the need for a balanced family and work life 

BPD - 22
makes it an attractive employer. The use of Flexi-time, Alternative Work Schedule 

(AWS), and Flexi-place schedules assist BPD in recruiting and retaining highly talented 

individuals. 

Public Debt believes that training is critical to keep employees’ skills current and prevent 

skill gaps. Human Resources Specialists work with training focus groups created within 

each Public Debt Office to assess training needs, evaluate the effectiveness of completed 

training events, and develop future training opportunities. 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. 

Public Debt is taking steps to improve its hiring statistics as they relate to the 45-day 

hiring model initiated by the OPM and adopted by the Department of the Treasury. In 

FY 2005, Public Debt implemented Treasury’s automated staffing system, 

CareerConnector, to increase efficiencies in the area of hiring. As a result, the average 

time to fill positions through delegated examining decreased from 81 calendar days to 

44 calendar days. Eighty percent of the Bureau’s public hires meet the 45-day hiring 

model.

Public Debt is in the process of completing a Human Capital Strategic Plan in FY 2006 to 

formalize its policies and practices to promote and support Treasury’s Human Capital 

Strategic Plan. Continual adjustment of BPD processes to match workforce needs and

technology changes ensure that its Human Capital initiatives are being met. 

Improvements to Public Debt’s policies, programs, procedures, and operations are 

ongoing processes. Though improvement is always expected and sought, Public Debt 

believes that its current processes are meeting the intent of the President’s Management 

Agenda. As Human Capital programs continue to grow and evolve, Public Debt will 

strive to achieve further improvements in this arena.

 

BPD - 23
4.2 – Summary of IT and Non-IT Resources Table 

FY 2005

Obligations

FY 2006

Enacted

FY 2007

Request

Information Technology:

Wholesale Securities Services

0.192 0.220 0.263

Government Agency Investment Services

InvestOne 1.728 1.785 1.845

Oracle Federal Financials 0.215 0.247 0.295

Special Purpose Securities System 1.720 1.776 1.836

Retail Securities Services

Oracle Federal Financials 2.422 2.750 3.288

Savings Bond Replacement System 4.206 4.344 4.873

TreasuryDirect 4.442 5.013 5.191

Summary Debt Accounting

Oracle Federal Financials 0.091 0.103 0.123

Public Debt Accounting and Reporting System 1.971 2.038 2.109

Subtotal $16.987 $18.276 $19.824

Non-Information Technology:

N/A

Subtotal $0.000 $0.000 $0.000

Total Major Investments $16.987 $18.276 $19.824

Oracle Federal Financials

Summary of IT and Non-IT Resources

(Dollars in Millions)

Table 4.2

Major Investments

4B – Information Technology and Non-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 they achieve objectives and address 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 

BPD - 24
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 is comprised of certified and accredited applications, most of 

which are in a steady-state. Systems development expenses are being incurred for the 

continued development of the TreasuryDirect System, 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 - 25
4.3 – Operating Levels Table 

Appropriation Title: BPD Salaries & Expenses FY 2005

Enacted

FY 2006

President's

Budget as

Amended

Cong.

Action or

Rescission

Transfers or

Supplementals

FY 2006

Enacted

Level

FY 2006

Proposed

Operating

Level

FY 2007

Proposed

Operating

Level

FTE 1,301 1,390 1,390 1,390 1,390

Object Classification:

11.1 Full-Time Permanent Positions........................ $70,126 $82,940 $439 $83,379 $83,379 $85,736

11.3 Other than Full-Time Permanent Positions...... 192 198 1 199 199 205

11.5 Other Personnel Compensation....................... 3,843 4,259 23 4,282 4,282 2,883

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

11.9 Personnel Compensation (Total)..................... 74,161 87,397 463 87,860 87,860 88,823

12.0 Personnel Benefits........................................... 18,541 22,300 122 22,422 22,422 22,549

13.0 Benefits to Former Personnel.......................... 16 16 16 16 16

21.0 Travel.............................................................. 1,188 1,206 1,206 1,206 1,233

22.0 Transportation of Things.................................. 7 7 7 7

23.1 Rental Payments to GSA................................

70

. 4,158 6,120 6,120 6,120 6,900

23.2 Rent Payments to Others................................ 95 96 96 96 98

23.3 Communications, Utilities, & Misc.................... 18,156 16,528 16,528 16,528 16,892

24.0 Printing and Reproduction............................... 2,521 2,051 2,051 2,051 2,096

25.1 Advisory & Assistance Services....................... 210 213 213 213 218

25.2 Other Services................................................. 30,631 24,582 24,582 24,582 24,467

25.3 Purchase of Goods/Serv. from Govt. Accts...... 16,377 10,623 (1,584) 9,039 9,039 9,238

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.......... 2,094 2,125 2,125 2,125 2,172

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

26.0 Supplies and Materials.................................... 2,623 2,662 2,462 2,462 2,516

31.0 Equipment....................................................... 7,336 3,946 3,376 3,376 3,450

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

(200)

(570)

. 33 33 33 33 34

33.0 Investments & Loans....................................... 0 0 0 0 0

41.0 Grants, Subsidies............................................ 0 0 0 0 0

42.0 Insurance Claims & Indemn............................. 4 4 4 4 4

43.0 Interest and Dividends................................. 14 14 14 14 14

44.0 Refunds........................................................... 0 0 0 0 0

Total Budget Authority....................................... $178,165 $179,923 $0 $178,154 $178,154 $180,789

Budget Activities:

Wholesale Securities Services...........................

($1,769)

... $11,905 $12,306 $11,812 $11,812 $11,986

Government Agency Investment Services............

($494)

... 13,360 13,812 13,255 13,255 13,451

Retail Securities Services.................................... 147,298 148,014 147,529 147,529 149,711

Summary Debt Accounting.................................. 5,602 5,791 5,558 5,558 5,641

Total Budget Authority....................................... $178,165 $179,923 $0 $178,154 $178,154 $180,789

NOTE: Total Budget Authority includes $3,000,000 in user fees for FY 2006 & FY 2007

Operating Levels

Table 4.3

(Dollars in Thousands)

(557)

(485)

(233)

($1,769)

BPD - 26
4.4 – Required Annual Systems Modernization Report to Congress 

No-Year Account

FY 05 Beginning Balance $5,463

FY 05 Actual Expeditures ($1,959)

FY 05 Recoveries $69

Balance at End of FY 05 $3,573

FY 06 Beginning Balance $3,573

FY 06 Planned Funds Transfer $0

FY 06 Planned Expenditures ($2,200)

 Mainframe and Architecture Upgrades ($1,000)

 Enterprise Network Management Product ($700)

 Contingency Upgrades ($500)

Balance at End of FY 06 $1,373

FY 07 Beginning Balance $1,373

FY 07 Planned Funds Transfer $0

FY 07 Planned Expenditures ($1,373)

 Mainframe and Architecture Upgrades ($473)

 Enterprise Network Management Product ($400)

 Contingency Upgrades ($500)

Balance at End of FY 07 $0

*As required by Conference Report 106-319 on H.R. 2490.

Public Debt relies on its Systems Modernization account to maintain and continually upgrade its 

information technology infrastructure, fully implement a comprehensive IT enterprise architecture, 

and provide for critical operational continuity to ensure reliable and uninterrupted financing

of the Federal government. Enhancements ensure that a wide range of servicing transactions are 

completed effectively, trillions of dollars in customer payments are made timely,

and the public debt is accounted for accurately. Additionally, this funding is essential to secure

billions of dollars in TreasuryDirect customer account balances from evolving security

threats including identity theft.

BUREAU OF THE PUBLIC DEBT

ANNUAL REPORT ON SYSTEMS MODERNIZATION*

(Dollars in thousands)

BPD - 27
4C – Appropriations Language 

DEPARTMENT OF THE TREASURY 

BUREAU OF THE PUBLIC DEBT 

Federal Funds 

General and Special Funds: 

SALARIES AND EXPENSES

For necessary expenses connected with any public-debt issues of the United States 

[$179,923,000] $180,789,000, 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 [expended] September 30, 2009 for systems modernization: 

Provided, That the sum appropriated herein from the General Fund for fiscal year [2006] 

2007 shall be reduced by not more than $3,000,000 as definitive securities issue fees and 

TreasuryDirect Investor Account Maintenance fees are collected, so as to result in a final 

fiscal year [2006] 2007 appropriation from the general fund estimated at [$176,923,000] 

$177,789,000. 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. 

(Department of Treasury Appropriations Act, 2006) 

BPD - 28
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 2007 funding to support FRB reimbursements 

is $123,497,688. 

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 are 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 2007, the funding estimated to 

support payments for the replacement of valuables is $500,000. 

BPD - 29
Treasury Franchise Fund 

Mission 

To offer world-class administrative solutions that provide value to federal 

customers while allowing them to concentrate on their core missions. 

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Obligated Estimated Estimated to FY 2007 to FY 2007

Consolidated / Integrated Administrative Mgt. $697,996 $785,288 $879,523 $94,235 12.00%

Financial Management Administrative Support $72,598 $82,335 $90,569 8,234 10.00%

Financial Systems, Consulting & Training 13,299 12,740 13,250 510 4.00%

Total Resources $783,893 $880,363 $983,342 $102,979 11.70%

(Dollars in Thousands)

Resources Summary

Table 1.1

FY 2007 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 ............................................................................................................. 3

1A – Description of Bureau Vision and Priorities.......................................................... 3 

1B – Previous Highlights and Accomplishments ........................................................... 4 

1C – Future Outlook ....................................................................................................... 6 

Section 2 – Not Applicable for Non-appropriated Bureaus.................................................... 7

Section 3 – Budget and Performance Plan ........................................................................... 8

3.1 – Activity Summary Table........................................................................................ 8 

3A – Budget Activity Description .................................................................................. 8 

3.2 – Budget and Performance Plan.............................................................................. 12 

3B – Description of Performance ................................................................................. 15 

3C – PMA Evaluation Description ............................................................................... 15 

3.3 – PART Evaluation Table....................................................................................... 17 

Section 4 – Supporting Materials........................................................................................ 17

4.1 – Human Resources Table ...................................................................................... 17 

4A – Human Capital Strategy Description ................................................................... 18 

4.2 – Summary of IT and Non-IT Resources Table...................................................... 18 

4B – Information Technology and Non-Information Technology Strategy ................. 19 

4.3 – Operating Levels Table........................................................................................ 20 

4C – Appropriations Language..................................................................................... 21 

Franchise - 2 
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’s mission is to provide the best value in administrative system platforms and 

services with a focus on accounting, procurement, travel, and HR services. 

Financial Systems, Consulting and Training – Includes Treasury Agency Services (TAS)

and the Federal Consulting Group (FCG)

The mission of TAS is to help agencies improve the quality of government financial 

management. TAS, hosted by the Financial Management Service, is a reimbursable 

provider of information, advice, assistance, and training that is customized to meet 

today’s environment and client agencies’ requirements. 

Franchise - 3 
FCG’s mission is to consult with other Federal government agencies to facilitate 

transformation efforts to being a more efficient, results-oriented agency. FCG focuses on 

customer satisfaction measurement using the American Customer Satisfaction Index 

(ACSI). 

1B – Previous Highlights and Accomplishments

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, an OMB-approved Center of Excellence for Financial Management, 

now provides: 

• 28 organizations with administrative accounting services 

• 28 organizations with travel services 

• 32 organizations with procurement services 

• 17 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 

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’ 

Franchise - 4 
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 3rd 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. The Treasury Franchise Fund has received eight straight 

“clean” audit opinions. Externally, ARC has helped its customers receive over 40 

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 

total revenue. The increase in revenue has outpaced the increase in operating costs. As a 

Franchise - 5 
result, FedSource’s operating percentage has steadily decreased from 7.0percent in FY

1998 to 2.7percent in FY 2004 representing a 61percent 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 10 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, OMB recognized the Administrative Resource Center 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 mLINQS commercial, off-the-shelf 

software (moveLINQ) to automate the relocation process as part of the eTravel 

implementation.

1C – Future Outlook 

Through FY 2007 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 from the Administrative Resource Center, Federal 

Consulting Group, and FedSource. 

Corporate Structure 

The Treasury Department has been looking at the management structure of the Treasury 

Franchise Fund. In the past, the Fund has been managed through the participation of 

several Bureaus that directed the businesses they sponsored within the Fund. As the Fund 

has grown more and more in the shared services environment, Treasury is taking the 

opportunity to align the management of the Fund to create synergy with other Treasury 

policy makers. 

Changes in the Businesses 

Treasury’s Financial Management Service (FMS), the host bureau for Treasury Agency 

Services (TAS), has made the initial decision to move TAS from the Treasury Franchise 

Fund back into FMS’ Government-Wide Accounting Office. The initial plan is to phase 

out TAS by the end of FY 2006; however, it is too early to project the impact of this 

decision. As a result, the Franchise Fund budget figures continue to straight-line the 

TAS budget through 2007. TAS makes up less than 1percent of the total budget for the 

Franchise - 6 
Franchise Fund, so this should have little impact. As the phase-out plan becomes clearer, 

Franchise Fund will reflect changes in future budget submissions. 

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 2006 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 

the bar in the industry once again. OMB’s 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 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. Franchise Fund is optimistic about its 

long-term growth opportunities. 

Section 2 – Not Applicable for Non-appropriated Bureaus 

Franchise - 7 
Section 3 – Budget and Performance Plan 

3.1 – Activity Summary Table 

Dollars in Thousands 

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Description Actual Estimated Estimated to FY 2007

Summary of Revenue and Expenses:

Revenue:

Consolidated / Integrated Administrative Mgt. $ 697,996 $785,288 $879,523 12.00%

Financial Management Administrative Support $ 72,598 82,335 90,569 10.00%

Financial Systems, Consulting & Training $ 13,299 12,740 13,250 4.00%

Total Revenue $783,893 $880,363 $983,342 11.70%

Expenses:

Consolidated / Integrated Administrative Mgt. 687,936 $777,112 $870,365 12.00%

Financial Management Administrative Support 72,558 81,675 89,843 10.00%

Financial Systems, Consulting & Training 11,884 12,688 13,196 4.00%

Total Expenses 772,377 $871,475 $973,404 11.70%

Net Results $11,516 $8,888 $9,938 11.81%

Customer Growth

Consolidated / Integrated Administrative Mgt. 2,769 3,184 3,566 12.00%

Financial Management Administrative Support 61 64 68 6.25%

Financial Systems, Consulting & Training 251 357 393 10.08%

Total Customer Growth 3,081 3,605 4,027 11.71%

(Dollars in Thousands)

Table 3.1

Activity Summary

3A – Budget Activity Description 

Consolidated/Integrated Administrative Management ($879,523 from reimbursable 

funding)

The purpose of this budget activity is to provide voluntary 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 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 

one price. They were able to give the customer one agreement for multiple services 

eliminating the need for the agency to seek several vendors. In another example, 

Franchise - 8 
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. 

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 their operating 

(overhead) costs. FedSource is able to give a price reduction when obtaining large orders 

because in most instances their operating costs remain fairly constant. This is best 

illustrated by looking at their operating percentage, which quantifies operating costs as 

percentage of total revenue. The increase in revenue has outpaced the increase in 

operating costs. As a result, FedSource’s operating percentage has steadily decreased 

from 7.0percent in FY 1998 to 2.7percent in FY 2004 representing a 61percent reduction. 

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 10 days of staff time each month. In addition 

FedSource receives many invoices electronically, which allows its 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. 

FedSource expects to continue to be one of the most efficient procurement options for the 

federal government. As FedSource grows that can demand even lower prices from their 

vendors based on their increased buying power derived from all their customers. 

FedSource is also working on a reorganization plan that will make it more efficient in its 

ability to deliver administrative services. At the core of their reorganization is the 

centralization of an Acquisition Center that will help FedSource ensure compliance with 

the many rules and regulations in the procurement arena. 

Financial Management Administrative Support Services ($90,569 from reimbursable 

funding)

The purpose of the Financial Management Administrative Support Activity is to offer 

value to its customers through cost savings (system acquisitions and O&M) and quality 

services. The Financial Management Administrative Support Services activity includes 

the Administrative Resources Center. ARC provides traditional administrative support 

functions with a focus on accounting, procurement, travel, and 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. 

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 

Franchise - 9 
shared service provider for many customers providing full-service transaction processing 

and reporting. ARC, an OMB-approved Center of Excellence for Financial Management, 

now provides: 

• 28 organizations with administrative accounting services 

• 28 organizations with travel services 

• 32 organizations with procurement services 

• 17 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 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. 

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, travel and various system platforms. Each 

organization trained separate staffs to manage their systems and process the 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. 

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 3rd 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. The Treasury Franchise Fund has received eight straight 

“clean” audit opinions. Externally, ARC has helped its customers receive over 40 

consecutive clean audit opinions. You can also count on the internal control structure that 

ARC maintains. 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 those auditors can rely on the work done 

during ARC’s SAS 70 Audit. 

ARC already has agreements in place to add customers through FY 2007. ARC is in 

discussions with several agencies (small and large) to ensure work beyond FY 2007. 

ARC will generate substantial cost savings to these new customers through the year-one 

Franchise - 10 
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 

2007. 

As ARC matures as a business they continue to add experienced personnel to their expert 

staffs. ARC can use the solutions that are implemented by one customer to help similar 

issues encountered by other customers. This “economies of skill” 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. They are making great 

strides in developing internal output and efficiency measures. 

Financial Systems, Consulting and Training ($13,250 from reimbursable funding)

The purpose of the Financial Management Administrative Support 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 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 Financial Management 

Service expertise combined with entrepreneurial initiative. 

The mission of the Federal Consulting Group is to consult with other Federal government 

agencies to facilitate transformation efforts to being a more efficient, results-oriented 

agency. The FCG achieves its mission through its three Service Centers: Customized 

and Collaborative Consulting and Facilitation Services, Executive Coaching through its 

National Network of Qualified Coaches, and Strategies for Customer Service 

Improvement. Through its Service Centers customers are provided facilitation services, 

business process redesign, strategic planning, executive coaching, and team building. 

The FCG partners with both political and senior career leaders to create solutions 

specifically designed to meet unique organizational needs. 

The Federal Consulting Group reduced the number of contractual actions, administrative 

steps, and management oversight required to assess and improve customer satisfaction in 

agencies throughout the federal government. By providing a “turn key” capability that 

includes access to best-of-breed analytical models, experienced program management, 

Franchise - 11 
unsurpassed quality control and timely clearances from the Office of Management and 

Budget to conduct surveys of the public, the Federal Consulting Group provides 

unprecedented access to customer assessment and improvement services. These services 

are being used by over 200 federal agencies and programs to make important 

improvements in the widest possible variety of communication and service channels, 

including websites, call centers, and intranets. 

Agencies in all departments of the government, as well as many small independent 

agencies, have taken advantage of this “one-stop” service. The service is saving time at

all levels of government and reducing administrative costs significantly. Agencies 

pursuing their own customer assessment work often pay much higher prices and can 

spend months getting approval for their surveys through the Office of Management and 

Budget. In addition, many client agencies have realized reduced pricing and volume 

discounts. One prominent client, the National Institutes of Health, saved $800,000 in one 

year based on prices negotiated by the Federal Consulting Group or a savings of nearly 

$2 million over commercial prices. What’s more, the Federal Aviation Administration, 

Social Security Administration, and Internal Revenue Service have reportedly saved 

dozens of manpower positions by using the services provided through the Federal 

Consulting Group to direct customers into more efficient channels of communication. 

Almost all bureaus in the Department of the Treasury are using the service to guide 

redesign and evolution of their websites. 

Federal Consulting Group continues to function as one of the most cutting edge 

consulting options in the federal government. As the pressure grows to achieve results, 

measure performance, increase trust and confidence toward government in the minds of 

citizens, and prepare the next generation of leaders, the demand for and related value of 

the services provided to client agencies will continue to climb. FCG’s mantra of

experience meeting government’s challenges makes to big difference to client agencies, 

who want to work with those. Further, through several cross-government communities of 

practice and training activities, the Federal Consulting Group is emerging as an important 

influence and knowledge center on matters ranging from customer assessment and 

mentoring to business process improvement and Baldridge-based strategic planning. 

These forums not only focus on lessons learned and sharing best practices but also serve 

as an effective tool for enhancing communication between departments and generating 

enthusiasm and demand for FCG services. 

3.2 – Budget and Performance Plan 

Franchise - 12 
Dollars in Thousands 

Treasury Strategic Goal: Ensure Professionalism, Excellence, Integrity, and Accountability in the Mgt and Conduct of the Dept of Treasury (M5)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Obligated Obligated Obligated Obligated Estimated Estimated

Treasury Strategic Objective M5B:

Revenue by Budget Activities

Consolidated / Integrated Administrative Mgt. $258,718 $351,860 $480,478 $701,150 $785,288 $879,523

Financial Management Administrative Support 38,966 49,904 64,450 74,850 $82,335 $90,569

Financial Systems, Consulting & Training 12,059 12,182 12,920 12,250 12,740 13,250

Total Operating Level $309,743 $413,946 $557,848 $788,250 $880,363 $983,342

FTE by Budget Activity

Consolidated / Integrated Administrative Mgt. 49 52 80 80 86 93

Financial Management Administrative Support 362 418 531 580 626 677

Financial Systems, Consulting & Training 62 58 50 50 50 50

Total FTEs (reimbursable) 473 528 661 710 762 820

Budget and Performance Plan

Table 3.2

(Dollars in Thousands)

Resource Level

Franchise - 13 
Baseline

Strategic Objective: Manage Treasury Resources Effectively to Accomplish the Mission and

Provide Quality Customer Service - M5B

Performance Goal: Ensure Business Activities are Self-Sufficient and Efficient

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Operating expenses as a percentage of revenue--Consolidated/Integrated Administrative Management

(%)(E)

Target Baseline 4 12 12

Actual 4 4

Target Met? N/A N/A N Y

Operating expenses as a percentage of revenue--Financial Management Administrative Support (%) (E)

Target Baseline 11 12 12

Actual 9 9

Target Met? N/A N/A N Y

Operating expenses as a percentage of revenue--Financial Systems, Consulting and Training (%) (E)

Target Baseline 12 12 12

Actual 14 11

Target Met? N/A N/A N Y

Performance Goal: Ensure Customers are Satisfied with all Aspects of Service Provided - 

 Quality of Products/Services, Delivery, Price and Conduct of Business 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Customer Satisfaction Index - Financial Mgmt Admin Support Services (%) (Oe)

Target TBD 

Actual

Target Met? N/A N/A N/A N/A

Baseline

Customer Satisfaction Index - Financial System, Consulting & Training (%) (Oe)

Target TBD 

Actual

Target Met? N/A N/A N/A N/A

Baseline

Customer Satisfaction Index - Consolidated/Integrated Administrative Mngmnt (%)(Oe)

Target TBD 

Actual

Target Met? N/A N/A N/A N/A

Customer satisfaction approval rating--Financial System, Consulting & Training (%) (Ot) [DISCONTINUED FY

2006]

Target 80 80 80 80 Discontinued Discontinued

Actual 93 87 87 88

Target Met? Y Y Y Y

Customer satisfaction approval rating-Financial Management Administrative Support Services (%) (Ot)

[DISCONTINUED FY 2006]

Target 80 80 80 80 Discontinued Discontinued

Actual 90 94 85 96

Target Met? Y Y Y Y

Customer satisfaction approval ratings--Consolidated/Integrated Administrative Management (Ot) (%)

[DISCONTINUED FY 2006]

Target 80 80 80 80 Discontinued Discontinued

Actual 93 81 87 81

Target Met? Y Y Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure

Franchise - 14 
3B – Description of Performance 

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 80percent benchmark because of the 

scales used by the businesses to assess customer satisfaction. In FY 2005, 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. 

In FY 2005, the Franchise Fund adopted the American Customer Satisfaction Index 

(ACSI) as its method for evaluating customer satisfaction. As a result, the Fund's 

previous Customer Satisfaction measure has been suspended and replaced with the 

Customer Satisfaction Index. 

3C – PMA Evaluation Description

Improved Financial Management

• Accelerated Close (Timeliness): The Administrative Resource Center quickly 

puts timely financial data (such as unobligated balances) in the hands of federal 

mangers for decision-making by closing their customer’s books by the 3rd

business day following each month. By closing the year-end books five business 

days after year-end, ARC’s customers have the data necessary to meet the agency 

deadline of producing financial statements by November 15th and governmentwide deadline of December 15th. These accelerated closing dates are available to 

all 28 accounting customers. 

• Audited Year-End Financial Statements (Reliable & Accurate): There is no better 

test for the accuracy and quality of financial data than an annual financial 

statement audit. The Treasury Franchise Fund has received eight straight “clean” 

audit opinions. Externally, ARC has helped its customers receive over 40 

consecutive clean audit opinions. These results are due to the expert staff that 

ARC has been able to attract being located in Parkersburg, WV. ARC has hired 

over 36 Certified Public Accountants making up roughly 23percent of their total 

accounting staff. 

Franchise - 15 
• Strengthening Management's Responsibility for Internal Controls: 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 those auditors can rely on the work 

done during ARC’s SAS 70 Audit. ARC has received 2 consecutive clean 

opinions since it began requesting these independent 3rd party reviews. 

• Reducing Improper Payments: In FY 2004 the government-wide improper 

payment rate was 3.9percent. For non-Medicare programs the improper payment 

rate was 2.7percent (from OMB’s “Improving the Accuracy and Integrity of 

Federal Payments” 1/25/05). While the Treasury Franchise Fund’s payments, as 

well as the payments made on behalf of their customers, are not material to the 

government-wide figures, ARC’s improper payment rate was 0.2percent in FY 

2004 for its Treasury customers (35 of 19,687 payments). Please note: All 35 

improper payments were recovered. ARC assists their customers in implementing 

the Improper Payments Act of 2002 by helping them with their risk assessments 

and compiling some of their data. 

Expanded E-Government

• Financial Management Line of Business: The Franchise Fund has taken a 

leadership role in the cross-servicing arena. As an industry leader Franchise Fund 

have served as the model of the Financial Management Line of Business 

initiative. The Franchise Fund’s Administrative Resource Center (ARC) has been 

providing financial services to its customers since FY 1998. Based on their 

demonstrated success, ARC was selected by the Office of Management and 

Budget as one of the Centers of Excellence for Financial Management in FY 

2004. By allowing customers to share the same systems platform, the Fund has 

allowed agencies to reduce their initial investment costs and ongoing operation 

and management costs involved with financial management. ARC has reduced 

the number of federal administrative systems by providing access to an integrated 

system platform for accounting, travel, procurement, and personnel functions. 

ARC’s core financial system is the Joint Financial Management Improvement 

Program compliant Oracle Financials 11i. Through ARC’s efforts as a leader in 

federal financial management, the Fund is helping all of its customers improve 

their financial management performance. ARC’s role as a Center of Excellence 

has allowed it to achieved the results listed under PMA-3 Improved Financial 

Management. 

• E-Travel: ARC led the Treasury initiative to rollout Northup Grumman’s 

GovTrip, which makes Treasury one of the first agencies to meet this portion of 

the PMA’s E-Government initiative. ARC was the first provider to place an ETravel task order. ARC enabled Treasury to be the first agency to successfully 

implement E-Travel from end-to-end including an interface to the financial 

system. Additionally, ARC received the Certificate of Achievement for a 

Government Travel Management Program from the Society of Government 

Franchise - 16 
Travel Professionals (SGTP) for implementing the mLINQS commercial, off-theshelf software automate the relocation process as part of the eTravel 

implementation. ARC has successfully migrated all their customers to E-travel. 

3.3 – PART Evaluation Table (not applicable to the Franchise Fund) 

Section 4 – Supporting Materials 

4.1 – Human Resources Table 

Franchise - 17 
FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 686 710 762

Increases:

Reason #1:

All due to Shared Services (such as

providing admin services for another

agency/bureau). 24 52 58

Subtotal, Increases 24 52 58

Decreases:

Subtotal, Decreases 0 0 0

Year-end Actual/Estimated FTEs 710 762 820

Net Change from prior year SOY to budget year EOY 110

CHANGES IN FULL-TIME EQUIVALENTS

4A – Human Capital Strategy Description 

The Fund relies heavily on its host Bureaus (BPD, FMS, and DO) to provide the basis of 

its human capital strategy. Each bureau has does 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 36 Certified Public Accountants making up roughly 

23percent of their total accounting staff. 

The Treasury Franchise Fund recently unveiled its “EthicSmart” initiative that will 

increase 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. 

4.2 – Summary of IT and Non-IT Resources Table 

Franchise - 18 
The Treasury Franchise Fund does not have any IT or Non-IT investments that meet the 

identified criteria. 

4B – Information Technology and Non-Information Technology Strategy 

The 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 Bureau of the 

Public Debt, while Treasury Agency Service’s portfolio is managed by the Financial 

Management Service. 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. 

Franchise - 19 
4.3 – Operating Levels Table 

Dollars in Thousands 

FY 2005 Actuals FY 2006 Estimated FY 2007 Estimated

 710 762 820

Object Classification:

11 Personnel Compensation............................... $43,172,786 $56,389,599 $62,984,975

12 Personnel Benefits...................................................................... 15,216,248 15,336,871 17,130,685

13 Ben. Former Personnel............................................... (918) 78,181 87,325

21 Travel and Transportation of Persons.......... 1,281,088 1,779,150 1,987,241

22 Transportation of Things........................................... 209,018 374,197 417,963

23 Rents Communications, Utilities, and Misc. Charges................. 4,462,759 6,058,487 6,767,093

24 Printing and Reproduction.......................................... 233,891 2,773,931 3,098,372

25 Other Services.................................................... 698,400,182 772,393,756 862,733,589

26 Supplies and Materials............................... 1,241,709 2,935,630 3,278,984

31 Equipment....................... 7,973,740 11,592,168 12,947,997

32 Land and Structures.............................. 170,428 1,763,031 1,969,236

42 Insurance Claims and Indemnities 5,000 - -

43 Interest 10,706 - -

Total................................................................. $772,376,637 $871,475,000 $973,403,460

Budget Activities:

Consolidated/Integrated Administrative Management 687,935,554 777,112,000 870,365,440

Financial Systems, Consulting and Training 11,883,508 12,688,000 13,195,520

Financial Management Administrative Support Services 72,557,575 81,675,000 89,842,500

Total................................................................... $772,376,637 $871,475,000 $973,403,460

(Dollars in Thousands)

Table 4.3

Operating Levels

Franchise - 20 
4C – Appropriations Language 

DEPARTMENT OF THE TREASURY 

FRANCHISE FUND 

The Treasury Franchise Fund was made permanent by P.L. 108-447 and codified as 31 

U.S.C. 322, note. 

Justification of Language Changes

No Changes 

Legislative Proposals (if any)

No Legislative Proposals 

Changes to budget structure (if any)

No Changes 

Franchise - 21 
United States Mint

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Obligated Estimated Estimated to FY 2007 to FY 2007

Manufacturing and Sales $979,159 $1,849,265 $1,894,045 $44,780 2.4%

Protection 34,984 36,889 36,013 (876) -2.4%

Total Resources $1,014,143 $1,886,154 $1,930,059 $43,904 2.3%

(Dollars in Thousands)

Resources Summary

Table 1.1

FY 2007 Priorities

 In 2007, the United States Mint will produce and ship coins as legislated in the 

Presidential $1 Coin Act of 2005 (Public Law 109-145): Presidential $1 coins

and Sacagawea-design $1 coins, First Spouse Bullion coins, and Buffalo Gold 

Bullion coins.

 In 2007, the United States Mint will continue to produce and sell the new 24-

karat gold bullion coins (to be introduced in 2006).

 The United States Mint plans to produce and distribute 15.7 billion coins for 

circulation during FY 2007.

 The United States Mint expects to sell $451 million in numismatic products 

directly to the general public, and $981 million in bullion investment products.

 In 2007, the 50 State Quarters Program® will depict designs for Montana, 

Washington, Idaho, Wyoming, and Utah.

 The United States Mint will improve performance, with targets to reduce 

conversion cost per 1,000 coin equivalents to $6.18 and to improve cycle time 

to 64 days in FY 2007.

Mission

To apply world-class business practices in manufacturing, selling, and 

protecting the nation’s coinage and assets.
Mint - 2

Table of Contents

FY 2007 Priorities....................................................................................................... 1

Section 1 – Purpose ....................................................................................................3

1A – Description of Bureau Vision and Priorities........................................................ 3

1B – Previous Highlights and Accomplishments ......................................................... 4

1C – Future Outlook.................................................................................................... 5

Section 2 – Not Applicable for Non-appropriated Bureaus....................................9

Section 3 – Budget and Performance Plan ............................................................10

3.1 – Activity Summary Table................................................................................... 10

3A – Budget Activity Description ............................................................................. 10

3.2 – Budget and Performance Plan........................................................................... 13

3B – Description of Performance............................................................................... 14

3C – PMA Evaluation Description ............................................................................ 15

3.3 – PART Evaluation Table.................................................................................... 17

Section 4 – Supporting Materials ............................................................................19

4.1 – Human Resources Table ................................................................................... 19

4A – Human Capital Strategy Description................................................................. 20

4.2 – Summary of IT and Non-IT Resources Table.................................................... 21

4B – Information Technology and Non-Information Technology Strategy................. 21

4.3 – Operating Levels Table..................................................................................... 23

4C – Appropriations Language.................................................................................. 24
Mint - 3

Section 1 – Purpose

1A – Description of Bureau Vision and Priorities

Mission

The United States Mint is the world’s largest coin manufacturer with operations in California, 

Colorado, Kentucky, New York, Pennsylvania, and Washington, D.C. The United States Mint’s 

mission is to apply world-class business practices in manufacturing, selling, and protecting the 

nation’s coinage and assets.

Since FY 1996, the United States Mint has operated 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 to the United States Mint. Proceeds from the sales of 

circulating coins to the Federal Reserve Bank (FRB) system and numismatic items to the public 

are the sole source of funding for United States Mint operations. This includes funding for costs 

associated with the production of circulating and numismatic coins and coin-related products, and 

protective services for both operating expenses and capital investments. Revenues in excess of 

costs are returned to the United States Treasury General Fund. The United States Mint remains 

committed to holding down costs, streamlining operations, and providing value to the American 

people.

Strategic Focus

The United States Mint continues its strategic focus on realizing world-class performance, 

maximizing taxpayer value, and developing a model workplace. For the United States Mint, 

world-class performance translates to a smart, agile, efficient organization that is in position to 

successfully take on new initiatives, produce new, innovative products using new technologies, 

sell products in new markets, and speed the development of new products. In order to maximize 

taxpayer value, United States Mint operations require continuous improvement to become faster 

and leaner in order to reduce costs. Exploiting opportunities to reduce costs results in more funds 

returned to the Treasury General Fund. A model workplace is one in which all United States 

Mint employees are treated with dignity and respect, valued for their contributions, rewarded 

fairly for their achievements, and receive training and assignments for the future.

Priorities

The United States Mint has established three priorities to align activities and initiatives to achieve 

progress toward the strategic focus. The priorities are:

 Developing New Products and Programs

 Staying Competitive

 Fostering a Model Workplace, Developing Skills in the Workforce

See Section 1C Future Outlook (page Mint – 6) for more information on these priorities and 

associated initiatives.
Mint - 4

Budget Activities

Manufacturing and Sales –The United States Mint manufactures and sells coins and coin-related 

products. These products are grouped into three programs: Circulating Coinage, 50 State 

Quarters®, and Numismatic.

Protection –The United Sates Mint Police protects over $100 billion in Treasury and other 

government assets, over 2,000 employees and the many visitors who tour the Denver and 

Philadelphia facilities each year.

1B – Previous Highlights and Accomplishments

Growing Revenue

The Mint’s total revenues and collections increased to $1,770.9 million in FY 2005 from $1,650.4 

million in FY 2004. Total operating results and profits before protection costs increased to 

$823.5 million in FY 2005 from $688.1 million in FY 2004. Total margins before protection 

costs increased to 46.5 percent compared to 41.7 percent in the prior year despite a rise in the 

prices of the metals that are used in the fabrication of coins. The Mint was able to increase 

margins by shipping more coins, improving time to market and reducing manufacturing and 

selling, general and administrative costs. As a result of the improved operating results and 

profits, the Mint returned $775 million to the Treasury General Fund in FY 2005, compared with 

$665 million in FY 2004.

The Mint’s strategic plan focuses on adding value, ensuring integrity and realizing world-class 

performance. To direct these efforts, the Mint identified key performance measures that cut 

across the entire organization. Two performance measures that improved in FY 2005 are cost per 

1,000 coin equivalents and cycle time. The cost per 1,000 coin equivalents decreased 6% to $7.42 

in FY 2005 from $7.93 in FY 2004, missing the target of $7.03. The Mint plans to continue to 

reduce conversion costs for given production volumes through further implementation of lean 

manufacturing techniques at the manufacturing facilities and has set a cost per 1,000 equivalent 

target of $6.18 in FY 2007. Cycle time improved to 69 days as of September 2005 from 85 days 

in September 2004, but missed the target of 53 days. The Mint is currently working with the 

Federal Reserve Banks, the armored carrier industry, and commercial banking industry to reduce 

and balance coin inventories to further improve cycle time to a target of 64 days in FY 2007.

Awards and Recognition

Customer Satisfaction: The United States Mint continued to rank as a top federal agency in the 

University of Michigan’s American Customer Satisfaction Index (ACSI) with a rating of 88 in 

2005. This score is an improvement from 86 in 2004 and ranks among the top in government 

agencies and private sector companies.

ISO 14001 Certification: The United States Mints at Denver, Philadelphia and West Point have 

been examined in detail for conformance to the requirement of International Organization for 

Standardization (ISO) 14001, First Edition, 1996-09-01, and have been determined to be in 

conformance with all provisions of this international standard. The ISO 14001 Certification 

provides recognition of a working Environmental Management System (EMS) and measures 
Mint - 5

environmental performance against the set of international standards developed by the ISO. The 

EMS at Denver, Philadelphia and West Point were registered to ISO 14001 during FY 2005. This 

certification is increasingly used by private organizations to emphasize their commitment to 

environmental performance.

OSHA’s Highest Award for Safety: The Occupational Safety and Health Administration (OSHA) 

awarded the United States Mint at Philadelphia the Voluntary Protection Program (VPP) Star 

status flag on June 6, 2005. OSHA’s Star status is the highest honor a worksite can achieve under 

the VPP safety program. In 2002, the United States Mint at Philadelphia was cited for 81 OSHA 

violations with 139 specific examples of unsafe and potentially unsafe conditions. At that time, 

coin production was suspended at the facility for six weeks to improve conditions. Employees, 

managers and two unions worked closely with OSHA to improve standards and strengthen 

procedures. The facility conducted inspections, self-audits, re-training, and maintenance. 

Employee injury rates improved dramatically, falling 86 percent from 2000 to 2004. The Star 

status flag recognizes the United States Mint at Philadelphia as one of the safest worksites in the 

country. Only five federal facilities from around the world have received this award.

1C – Future Outlook

Future demand for circulating coins is expected to remain relatively flat. The sales of numismatic 

products are expected to increase significantly and the sales of bullion products are expected to 

increase substantially with the introduction of the 24-karat gold bullion program. In FY 2007, the 

United States Mint plans to produce 15.7 billion coins for circulation, sell $451 million in 

numismatic products, and sell $981 million in bullion products. Total revenues from all products 

are estimated to be $2.7 billion with an estimated total operating cost of $1.9 billion. Net results 

from operations and the corresponding transfer to the Treasury General Fund are estimated to 

increase from $775 million in FY 2005 to $782 million in FY 2006 and $816 million in FY 2007. 

In response to flat demand for circulating coins, plans for FY 2006 and FY 2007 call for rightsizing the organization to realign resource needs. The United States Mint plans to reduce Full 

Time Equivalent (FTE) usage and associated personnel costs by approximately five percent per 

year from FY 2005 plan levels. The metal cost component of the FY 2006 and FY 2007 budgets 

increases to $1,480 million and $1,529 million respectively from $653 million in FY 2005, 

primarily in response to the introduction of the new 24-karat gold bullion coins starting in FY 

2006.

Developing New Products

 In 2007, the United States Mint will develop new designs as legislated in the Presidential 

$1 Coin Act of 2005 (Public Law 109-145). This act includes new dollar coin designs 

featuring the presidents of the United States, and accompanying First Spouse Gold 

Bullion coins. Also included are Buffalo Gold Bullion coins (to be released in 2006) 

bearing the original designs by James Earle Fraser that appeared on the 5-cent coin 

“Buffalo Nickel”.

 In 2006 the United States Mint will introduce the new 24-karat gold bullion coins 

currently being developed. The new 24-karat gold bullion coins will complement the 

popular 22-karat American Eagle gold bullion coins. The new coins will give investors a 

second option backed by the United States Government in the global precious metal 

market. This budget submission includes substantial revenue growth expected from the 
Mint - 6

24-karat gold bullion program of $754 million in FY 2006 and FY 2007. Metal costs are 

high since this is a precious metal investment coin and are estimated at $721 million in 

both FY 2006 and FY 2007.

 The United States Mint plans to introduce other new coins in FY 2006 and FY 2007. The 

Westward Journey Nickel SeriesTM has launched the final 2005-dated coin design “Ocean 

in View” on August 1, 2005. In 2006, the nickel will revert to one design, with an image 

of Monticello on the reverse. Other new designs will include commemorative coins, 

medals, and any changes to circulating coins as legislated by Congress.

 The 50 State Quarters® Program will introduce quarters representing Nevada, Nebraska, 

Colorado, North Dakota, and South Dakota in 2006. The 2007 quarters will depict 

designs for Montana, Washington, Idaho, Wyoming, and Utah. Looking forward in the 

longer term, the 50 State Quarters® program will conclude in 2008. The United States 

Mint is assessing strategies for fostering the health of numismatics products in light of the 

conclusion of this program.

 The United States Mint Artistic Infusion Program includes 27 artists (seven visual art 

students and 20 professional visual artists) who submit designs for selected new coin and 

medal programs. This program augments the contributions of the United States Mint 

sculptor-engravers. In their first assignments, the artists of the program submitted 

beautiful and evocative proposed designs for the 2005-dated nickels in the Westward 

Journey Nickel SeriesTM. The artist pool will continue to be relied upon to contribute 

design proposals for upcoming new coins.

Staying Competitive

Initiatives toward improving competitiveness include new technologies and new materials, 

reducing the time to market, implementing lean manufacturing techniques at all facilities, and 

continuing to streamline administrative and related support services. All of these initiatives are 

aimed at allowing the United States Mint to operate more efficiently, reduce overall costs, and 

improve performance. By holding costs down, the United States Mint will return more funds to 

the Treasury General Fund – providing value to the American public.

 The United States Mint is researching and developing new technologies and new 

materials in order to achieve greater capabilities and efficiencies in the design and 

manufacture 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.

 The United States Mint is working to reduce the time to market for new products. 

Speeding the process to bring coins from legislation or authorization to sale and delivery 

to the customer leads to increased revenues and profits. Customers are presented with 

increased product offerings, available more times throughout the year, increasing the 

opportunities for revenue. Less time and money are spent on activities that occur before 

the United States Mint receives revenues from sales, making products more profitable.

 The United States Mint continues to implement lean manufacturing and improved 

supplier partnerships to increase efficiency and cut costs. Lean manufacturing is focused 

on achieving productivity improvements throughout the entire supply chain. The United 
Mint - 7

States Mint is currently working with the FRB, the armored carrier industry, and 

commercial banking industry to reduce and balance coin inventories and reduce the costs 

of coin production and inventories management. Initiatives include improving 

circulating coin inventory management by implementing a coin supply chain pilot with 

the Cleveland Federal Reserve district, and taking a broad look at opportunities to 

reengineer the manufacturing process, inventory handling, and procurement methods for 

purchasing precious metals.

 The United States Mint plans to cut overall Sales, General and Administrative (SG&A) 

costs by about five percent each year through FY 2007 even as sales continue to increase. 

Examples of SG&A expenses are overhead and marketing costs. In a manufacturing 

organization like the United States Mint, the focus is on minimizing SG&A costs where 

practicable to improve financial performance and to return more funds to the Treasury 

General Fund. 

 In an effort to streamline administrative and related support services, the United States 

Mint is planning to continue to right-size the work force given current coin demand. 

Estimated FTE usage is forecasted to decrease by 213 from the start of FY 2005 of 2,115 

to 1,902 in FY 2007 (see Section 4.1 page Mint – 19). Process improvements will 

continue to lead to productivity gains at the manufacturing facilities. Lean administration 

techniques will complement the lean manufacturing initiatives in the production facilities. 

 In the first quarter of FY 2006, the United States Mint transferred some of its human 

resource support functions to the Bureau of the Public Debt’s Administrative Resource 

Center (ARC). In FY 2006 the United States Mint will transfer some of its simplified 

procurement support, and its e-travel support to ARC to take advantage of economies of 

scale, and other business improvements resulting from increased standardization and 

transparencies of a shared services environment. Beginning in FY 2007, the United States 

Mint will transfer more of its procurement functions and its finance and accounting 

functions to ARC as the business case supports. Federal agencies are expected to 

provide certain services as a Center of Excellence (COE) or migrate to a designated COE 

to share services. ARC is a designated COE, serving 11 of 14 Treasury bureaus and other 

federal agencies.

Model Workplace

A model workplace is necessary to accomplish the previously identified initiatives. The United 

States Mint continues to foster a model workplace in which all employees are treated with dignity 

and respect; are valued for their contributions; are rewarded fairly for their achievements; and 

receive training and assignments for the future.

 The United States Mint conducted a workforce planning study in the First Quarter FY 

2006 that will be used to identify the organization’s human capital needs and workforce 

levels over the next five years. This will be done in the context of the strategic plan and 

projected business environment and direction. There will be a comparison of the current 

skill profile to future skill needs, with recommended strategies that specifically address 

overcoming identified skill gaps.
Mint - 8

 The United States Mint will continue improving communications between managers and 

employees, and continue efforts to reduce Alternative Dispute Resolution (ADR) and 

Equal Employment Opportunity (EEO) cases. 

 Rotational assignments will broaden employee understanding of the organization, much 

like those used by other federal organizations and private companies to familiarize 

employees with other employees’ jobs.

 The United States Mint will continue to administer the “Pulse Check” survey – a 

quarterly assessment of employees’ attitudes concerning their workplace. In FY 2005, 

the scores showed that the United States Mint is at or exceeds the industry benchmark in 

10 of 14 measured areas.

Other Initiatives

 The budget also includes funding to accomplish improvements in information technology 

(IT) capabilities and management. The United States Mint plans to comply with 

Homeland Security Presidential Directive (HSPD)–12, “Policy for a Common Identity 

Standard for Federal Employees and Contractors.” This directive mandates a common 

form of identification for all federal employees and contractors. The end vehicle for this 

implementation is a smart-ID card containing physical and logical access factors that can 

be easily adapted to accommodate facility and information system access across the 

government.

 An IT strategic plan will be developed to provide a framework and set of strategies to 

ensure the effective utilization and management of information technology within the 

context of the United States Mint’s strategic plan. The IT strategic plan will outline 

actions to achieve compliance with the Clinger-Cohen Act. The plan will apply to all 

United States Mint activities that provide or use IT, and that administer, plan, manage, 

develop, acquire, or operate information capabilities across the United States Mint. It 

will set forth the mission, vision, key results, and measures to evaluate the success of the 

United States Mint in applying IT to improve program delivery and ensure proper 

alignment with the business needs of the stakeholders. These efforts will enable the 

United States Mint to respond to changing environments and to make sound decisions 

regarding the future application of emerging technologies.

Challenges

Circulating coin shipments, which have declined over the last five years, are forecasted to hold 

steady or grow moderately over the next few years. The increased use of electronic transactions, 

coin counting machines, and improved distribution will likely moderate demand for newly minted 

coins. Rising metal prices present a challenge to the profitability of circulating coins. The United 

States Mint continually assesses and analyzes operations to monitor the per-unit costs of 

production.

Continued success will demand new products, new markets, new technologies, greater 

efficiencies, and most important, commitments to and from the United States Mint’s employees 

and partners. The United States Mint’s success in achieving world-class business practices would 

not be possible without the contributions of its people. The United States Mint is strongly 

committed to its people, their skills and knowledge, and will build upon the progress already 
Mint - 9

made in fostering a model workplace. The future results of coin manufacturing and sales will 

depend upon the expertise and flexibility of the United States Mint in use of new technology and 

the application of job experience.

Efforts to migrate to shared services arrangements are expected to lead to cost savings in the long 

term. The immediate challenge will be to handle the migration of the proposed functions 

smoothly and appropriately, with no impact on the level and quality of service provided to the 

customers of these functions.

Section 2 – Not Applicable for Non-appropriated Bureaus
Mint - 10

Section 3 – Budget and Performance Plan

3.1 – Activity Summary Table

Dollars in Thousands

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Description Actual Estimated Estimated to FY 2007

Summary of Revenue and Expenses:

Revenue:

Circulating $480,971 $529,732 $536,421 1.3%

Comm. Quarters 663,873 757,118 778,817 2.9%

Numismatic 626,083 1,381,414 1,431,279 3.6%

Total Revenue $1,770,927 $2,668,263 $2,746,517 2.9%

Expenses:

Manufacturing and Sales

Circulating $163,703 $181,209 $182,126 0.5%

Comm. Quarters 322,148 386,437 390,438 1.0%

Numismatic 493,309 1,281,619 1,321,481 3.1%

Subtotal Manufacturing and Sales $979,159 $1,849,265 $1,894,045 2.4%

Protection 34,984 36,889 36,013 -2.4%

Total Expenses $1,014,143 $1,886,154 $1,930,059 2.3%

Net Results $756,784 $782,109 $816,459 4.4%

Coin Shipments (in Millions):

Circulating:

Pennies 7,224 7,734 7,767 0.4%

Nickels 1,417 1,887 1,837 -2.6%

Dimes 2,669 2,831 2,872 1.4%

Quarters 2,655 3,028 3,115 2.9%

Half-Dollar 2 - - NA

Dollar 70 75 80 6.4%

Total Circulating 14,037 15,555 15,671 0.7%

Numismatic 11 13 13 0.0%

Bullion 9 11 11 0.0%

3A – Budget Activity Description

Manufacturing and Sales ($1,894,045,200 from reimbursable funding) The United States Mint 

manufactures and sells products. These products are grouped into three programs: Circulating 

Coinage, 50 State Quarters, and Numismatic. Budgetary information is presented in detail for 

each of these three programs.

Circulating Coinage

Circulating Coinage includes the penny, nickel, dime, half-dollar and dollar used to conduct trade 

and commerce. The focus of this program is to produce and deliver coins for circulation in a cost 

efficient and safe manner with state of the art manufacturing technology and equipment. The 
Mint - 11

United States Mint delivers the circulating coinage to the FRB for distribution as demanded by 

commerce.

The United States Mint is working hard to implement performance based budgeting practices. 

The numbers in Table 3.1 include metal and manufacturing costs for the forecasted units plus 

administrative overhead and other non-production costs. FY 2007 is over a year away and these 

estimates will be revised up or down as economic conditions change and the plan year 

approaches. The current FY 2007 budget estimate includes resource needs of $182 million to 

produce and ship 12.6 billion coins and generate $536 million in revenues.

In 2005, the United States Mint continued the new designs for the nickel that honors the 

bicentennial of the Louisiana Purchase and the subsequent Lewis and Clark Expedition. The 

obverse design for the 2005 nickels bears a new likeness of Thomas Jefferson. The “Liberty”

inscription on the coin is based upon Jefferson’s own handwriting. On August 1, 2005, the 

United States Mint introduced the fourth and final nickel design in the series. Depictions of 

Monticello and Thomas Jefferson will return to the nickel in 2006.

By spending $182 million on circulating coinage in FY 2007, the United States Mint will 

accomplish the following:

 Produce and ship approximately 7.8 billion pennies, generating revenue of $78 million.

 Produce and ship approximately 1.8 billion nickels, generating revenue of $91 million.

 Produce and ship approximately 2.9 billion dimes, generating revenue of $287 million.

 Produce approximately 20 million and ship approximately 80 million dollar coins, 

generating revenue of $80 million1, 

50 State Quarters® Program

A significant facet of United States Mint operations is the 50 State Quarters® Program, which 

was launched 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 planned releases for 2006 are Nevada, 

Nebraska, Colorado, North Dakota, and South Dakota. The 2007 quarters will depict designs for 

Montana, Washington, Idaho, Wyoming, and Utah. The quarters are circulating coins. However, 

by statute the revenue from the 50 State Quarters Program is considered numismatic for 

budgetary purposes. The program is displayed separately in the narrative and the financial 

schedules to present a clearer picture of the program’s impact. The United States Mint plans to 

spend $390 million to produce and ship approximately 3.1 billion quarters, generating revenues 

of $779 million dollars in FY 2007.

Numismatic Program

The Numismatic program includes five 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) 

1 These dollar coin production and shipment estimates were generated prior to The Presidential $1 Coin Act

of 2005, Public Law 109-145 (December 22, 2005). The impact of the legislation on dollar coin volume 

estimates is being evaluated, and subsequent budget submissions will be revised to show the impact in FY 

2007 and beyond.
Mint - 12

Recurring Coin Programs, 4) Commemorative Coins and 5) Medals. The program focuses on 

providing quality products and services, expanding markets and supporting the long-term. The 

current FY 2007 budget estimate includes resource needs of $1,321 million to generate $1,431 

million in revenues from the sale of numismatic products.

Bullion coins, also known as the American Eagle Uncirculated products, are largely bought by 

precious metal dealers and sold to consumers who desire precious metals as part of an investment 

portfolio. The bullion products include platinum, gold, and silver coins issued in uncirculated 

quality. 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 demand for bullion coins can be greatly affected by the performance of other 

investment options such as equities markets or currency markets, and therefore is highly 

unpredictable.

In 2006 the United States Mint will introduce the new 24-karat gold bullion coins currently being 

developed. The new 24-karat gold bullion coins will 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 will give investors a second option backed by the United States 

Government in the global precious metal market. The Manufacturing and Sales activity includes 

about $721 million in metal cost to produce approximately 1,650,000 ounces of 24-karat gold 

bullion coins. Current statutory authority at 31 U.S.C. section 5112(i) (4) authorizes the 

Secretary of the Treasury to mint 24-karat gold bullion coins.

American Eagle Proof coins are the United States Mint’s premier collectible products. American 

Eagle Proof coins are platinum, gold, and silver coins 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; and 

rolls and bags of nickels, quarters, 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 goes to the designated recipient organizations or 

projects that benefit the community. In FY 2006, the United States Mint will offer the Benjamin 

Franklin Commemorative Coins. Public Law 108-464, dated December 21, 2004, authorizes the 

production of two silver dollar designs with a mintage limit of 250,000 coins for each design, 

limiting the total for the program to 500,000 coins. Surcharges from the sale of these coins are 

authorized to be paid to the Franklin Institute for the purposes of the Benjamin Franklin 

Tercentenary Commission.

Protection ($36,013,300 from reimbursable funding) The United States Mint secures over $100 

billion in market value of the nation’s gold and silver reserves. The United States Mint Police 

protect assets while safeguarding United States Mint employees against potential threats at United 

States Mint facilities across the country. The United States Mint Police respond to possible 

threats by ensuring good perimeter security at all sites, increasing coordination with various 

federal, state and local law enforcement agencies, and ensuring that proper policies are in place 

and procedures followed in handling the assets used to produce and transport coinage. Plans 
Mint - 13

include efforts to leverage new technology to enhance security by automating entry and exit 

procedures at United States Mint facilities. The United States Mint needs to continue to pursue 

innovative threat assessment strategies to effectively prevent and counteract any security threats 

against United States Mint operations.

3.2 – Budget and Performance Plan

Dollars in Thousands

Treasury Strategic Goal: Preserve the Integrity of Financial Systems (F3)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Obligated Obligated Obligated Obligated Estimated Estimated

Treasury Strategic Objective F3C:

Budget Activities

Manufacturing and Sales $704,914 $805,744 $956,173 $979,159 $1,849,265 $1,894,045

Protection 28,977 34,964 38,975 34,984 36,889 36,013

Total Operating Level $733,891 $840,708 $995,148 $1,014,143 $1,886,154 $1,930,059

Human Resources

Manufacturing and Sales 2,086 1,946 1,764 1,681 1,638 1,556

Protection 335 355 351 334 364 346

Total FTEs (direct and reimbursable) 2,421 2,301 2,115 2,015 2,003 1,902

Resource Level

Strategic Objective: Increase the Reliability of the U.S. Financial System - F3C

Budget Activity: Manufacturing & Sales

Performance Goal: Meet or exceed the needs of the Federal Reserve and the public by designing, selling,

and delivering quality circulating and numismatic coins.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Cost per 1000 Coin Equivalents ($)(E)

Target Baseline 9.78 7.03 6.62 6.18

Actual 9.96 7.93 7.42

Target Met? N/A N Y N

Cycle Time (E)

Target Baseline 150 53 53 67 64

Actual 112 73 85 69

Target Met? N Y N N

Order Fulfillment (%)(Oe)

Target Baseline 95 96

Actual 94

Target Met? N/A N/A N/A Y

Budget Activity: Protection

Performance Goal: Protect assets entrusted to the United States Mint and ensure a secure environment is

provided to design, sell, and deliver quality products.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Protection Cost Per Square Foot ($) (E)

Target Baseline 31.86 32 31

Actual 32.51 32.43

Target Met? N/A N/A N N

Total Losses ($) (Oe)

Target Baseline 250,000 15,000 10,000

Actual 3,109 1,135

Target Met? N/A N/A N Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure 
Mint - 14

3B – Description of Performance

Cycle Time

The United States Mint wants to minimize the amount of time it takes to process raw materials 

into finished goods by eliminating non-value added steps from the processes and reducing the 

amount of raw material in inventory. The cycle time measure assesses the time it takes material 

to flow through the United States Mint's processes, from raw material to order fulfillment. As of 

September 2005 the United States Mint’s cycle time was 69 days, an improvement of 16 days 

from 85 days as of September 2004. The targeted cycle time was 53 days. The primary cause for 

not reaching the target is the size of the dollar coin inventory maintained by the United States 

Mint. No new production of dollar coins is taking place for circulation; demand is currently 

being met by existing inventory. Measured without the dollar coin, Cycle Time improved to 48 

days in FY 2005 compared with 55 days in FY 2004.

The United States Mint plans to continue improving the cycle time of circulating coinage through 

further implementation of lean manufacturing techniques. The United States Mint is currently 

working with the Federal Reserve Banks, the armored carrier industry, and commercial banking 

industry to reduce and balance coin inventories. Initiatives include improving circulating coin 

inventory management by implementing a coin supply chain pilot with the Cleveland Federal 

Reserve district, and taking a broad look at opportunities to reengineer the manufacturing process 

and inventory handling. 

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 1000 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 during FY 2005 was $7.42, an improvement of 6 percent from 

$7.93 in FY 2004. The performance did not meet the target of $7.03. This ambitious target was 

an 11 percent drop from the FY 2004 actual result and was set based upon forecasted volume and 

cost estimates. Differences in the actual volumes from forecast may impact the achievement of 

specific targets in any given year. Coin equivalent production increased to 19.9 billion in FY 

2005 compared with 17.8 billion in FY 2004 (12 percent). The associated conversion cost 

increased at a lesser rate (4 percent) to $147 million from $141 million in FY 2004 due to cost 

cutting initiatives and process improvements.

The United States Mint plans to continue to reduce conversion costs for given production 

volumes through further implementation of lean manufacturing techniques at the manufacturing 

facilities.

Order Fulfillment

Order Fulfillment is a new measure that tracks the overall order fulfillment for the circulating 

coins shipped to the Federal Reserve and the numismatic coins sold to the public. The Order 

Fulfillment was 94 percent in FY 2005. Essentially, this means that 94 percent of the United 

States Mint’s revenue was earned from products that were shipped to the customer in a timely 
Mint - 15

fashion. This is a new performance measure and will continue to be tracked for appropriateness 

and for setting future targets.

Total Losses

Total Losses in FY 2005 were $1,135 compared with $3,109 in FY 2004. This performance beat 

the target of $250,000. Total Losses measures the results of fraud cases (e.g. credit card fraud 

during the purchase of Mint products by the public), theft cases, or intrusions that cause damage 

to Mint property. The result is from cases that have been investigated and closed during the fiscal 

year. The United States Mint also keeps track of exposure, or the dollar amount of open cases. 

As of September 2005, the exposure is $276,295. The FY 2005 target was set based on prior 

exposure levels; the United States Mint has revised its future targets to be more in line with the 

recent actual performance.

Protection Cost per Square Foot

Protection cost per square foot in FY 2005 was $32.43, a slight improvement from $32.51 in FY 

2004. FY 2005 performance is 2 percent higher than the targeted $31.86. Protection expenses are 

highly labor intensive, which results in continual upward pressure on costs. The Protection 

function requires that adequate staffing and coverage must be maintained at all times. The ability 

to apply downward pressure on costs is taken with a long-term view and must be tempered by the 

level of readiness necessary to fulfill the Protection mission. 

The United States Mint Protection office is analyzing future personnel needs and budget 

requirements in order to look for ways to keep costs manageable while maintaining adequate 

protection of assets and employees. Plans include efforts to leverage new technology to enhance 

security by automating entry and exit procedures at United States Mint facilities.

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

Competitive Sourcing

•Powered Industrial Trucks competition was completed in September 2005. Anticipated annual 

savings are $1.5 million.

•Blanking, Annealing, and Upsetting competition is anticipated to be complete by May 2006. 

Anticipated annual savings are $5.1 million.

E-Government

•The United States Mint maintains a robust information security program through its Office of 

Information Security, which is charged with ensuring compliance with the federal Information 

Security Management Act, OMB requirements and Treasury Directives. This program has 

previously been rated by Treasury Security Compliance at 99 percent Performance/Exceed 

Requirements (2004), and continues to contribute GREEN status to Treasury's FISMA 

scorecard.
Mint - 16

•Treasury assessed the United States Mint’s Enterprise Architecture (EA) program maturity at 

level Green using the OMB EA Maturity Assessment Framework v1.5. The Mint continues to 

support Treasury EA to move all Treasury scores to Green.

Budget & Performance Integration

•As of FY 2005 all United States Mint programs have been reviewed by OMB’s PART process. 

The Protection program was reviewed in FY 2005, following the “Coinage Production” and 

“Numismatics” programs which received high scores and the “Effective” rating. 

• Improved performance in efficiency and outcome measures –cycle time, cost per 1,000 coin 

equivalents, order fulfillment, total losses, and protection cost per square foot are key efficiency

and outcome measures that are used in management decision making.
Mint - 17

3.3 – PART Evaluation Table

Coin Production (PART conducted FY 2003)

PART Name: Coin Production

Strategic Goal: Increase the reliability of the U.S. financial system (F3)

Rating: Effective

FY 2004 OMB Review

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

FY 2005 OMB Review

Bureau Actions Planned or Underway

Completed

Update on follow-up actions

In order to reduce maintenance down time of coin manufacturing currency, the Mint is implementing an information system in 

manufacturing facilities that allows the Mint toidentify, quantify, and analzye equipment downtime and implement improvements.

Recommended Follow-up Actions Status

Reducing the maintenance down time of coin manufacturing machinery. Action taken but not completed

Establishing a performance target to reduce the time required to process raw materials into finished goods.

3. Establishing a performance target to reduce the time required to process raw materials into finished goods.

• The Mint has shown some efficiency improvements in achieving reduced manufacturing costs (19 percent reduction since 

1997)

1. Reducing the maintenance down time of coin manufacturing machinery.

The Mint is implementing a series of reforms to address these findings. These reforms include:

2. Competing customer service and order mailing staff to determine if contractors could handle these functions more 

efficiently.

This assessment of the Mint found that the Mint has established performance measures focused on customer satisfaction and 

improving cost efficiencies.

• The Mint needs to improve customer satisfaction survey scores
Mint - 18

Numismatic (PART conducted FY 2004)

PART Name: Numismatic Program

Strategic Goal: Increase the reliability of the U.S. financial system (F3)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

2. Continue substantial progress toward reaching the Mint’s target goal for inventory turnover. In 2005, the Mint will focus 

on reducing the time from when a product concept is developed to when the product goes into production, and on improving 

production planning.

• The Mint 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.

• 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 

needs.

• 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.

The assessment of the Mint’s numismatic program found that the Mint has established performance measures focused on 

customer satisfaction and improved cost efficiencies.

1. Ensure a smooth transition for the Mint’s call center as it moves to an outside contractor so that customer service is not 

significantly interrupted.

• In 2003, the Mint’s numismatic program scored an 87 on the American Customer Satisfaction Index (CSI). This CSI score 

was the highest of any government agency, and second highest of all entities (public and private) evaluated. In 2004, the 

Mint’s CSI score dropped to 78 percent. The lower score was the result of an increase in call center volume at the same 

time call center staff reductions were made in anticipation of outsourcing this function in 2005.

Note on OMB Major Findings/Recommendations

In the third bullet above, OMB discussed the United States Mint customer satisfaction 

performance. There is a difference between the American Customer Satisfaction Index (ACSI) 

and the United States Mint’s internal performance measure Customer Service Index (CSI). The 

United States Mint has continued to rank as a top federal agency in the University of Michigan’s 

American Customer Satisfaction Index (ACSI) with ratings of 86 in 2004 and 88 in 2005. The 

result of 87 in 2003 actually represents the internal measure “customer service index” (CSI) 

which combines factors of the rates of timely order fulfillment and product returns. The internal 

CSI increased to 91 in FY 2005 from 78 in FY 2004.
Mint - 19

Protection (PART conducted FY 2005) 

PART Name: Protection Program

Strategic Goal: Increase the reliability of the U.S. financial system (F3)

Rating: Effective

OMB Major Findings/Recommendations

Bureau Actions Planned or Underway

1. Continue to assess and implement ways in which the cost of protection per square foot can be minimized.

2. Continue to improve employee confidence in the Mint protection program.

• The Mint has developed adequate long-term performance measures with ambitious targets and timeframes. The Mint's 

target for total losses is $250,000 in 2005 and $0 in 2010.

•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.

• The 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 Mint is a participant in the multi-agency Counter-Terrorism Program.

Section 4 – Supporting Materials

4.1 – Human Resources Table

Actual Full Time Equivalents vs. Budgeted FTE

2,601

2,420

2,108

2,302

2,115 2,015

1,902

2,003

1,902

2,003

0

500

1000

1500

2000

2500

3000

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

F

T

E

s

Budgeted Reimb. Actual Reimb.
Mint - 20

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 2,115 2,015 2,003

Increases:

Reason #1: N/A

Subtotal, Increases 0 0 0

Decreases:

Reason #1: Normal Attrition, Shared Services -100 -12 -101

Subtotal, Decreases -100 -12 -101

Year-end Actual/Estimated FTEs 2,015 2,003 1,902

Net Change from prior year SOY to budget year EOY -213

CHANGES IN FULL-TIME EQUIVALENTS

(Break-out the FTE changes by as many reasons for the change as possible, and include a description 

for each the increase or decrease)

(Break-out the FTE changes by as many reasons for the change as possible, and include a description 

for each the increase or decrease)

4A – Human Capital Strategy Description

To best position the United States Mint for the future, the bureau undertook a major workforce 

planning effort led by the United States Mint Workforce Planning Steering Committee comprised 

of senior leaders and managers, which will identify the organization’s human capital needs and 

workforce levels over the next five years. The effort resulted in:

 Identification of the organization’s human capital needs and workforce levels over the 

next five years in the context of the Mint’s strategic plan and projected business 

environment and direction

 Comparison of the agency’s current skill profile to its future skill needs and identify the 

gaps that result 

 Recommended strategies that specifically address overcoming identified skill gaps

 Forward-looking analysis of factors and expected trends affecting occupations specific to 

the Mint that may affect retention, recruitment, and employee development.

The workforce plan will link to the agency strategic plan and the projected business environment 

and direction. The plan included the organization’s current and future human capital needs and 

workforce levels over the next five years, the competencies needed to fulfill the mission, and 

specific strategies to mitigate identified skill gaps. Workforce planning will be conducted on an 

on-going basis.
Mint - 21

4.2 – Summary of IT and Non-IT Resources Table

Dollars in Millions

FY 2005 

Obligations

FY 2006 

Estimated

FY 2007 

Estimated

Information Technology:

Coins ERP System 4.312 7.666 6.751

RS2 (ESPII - Electronic Commerce) 11.618 4.783 4.849

Subtotal $15.930 $12.449 $11.600

Non-Information Technology:

Total Non-IT Capital - 20.000 20.000

Subtotal $0.000 $20.000 $20.000

Total Major Investments $15.930 $32.449 $31.600

Major Investments

Infrastructure funding is consolidated into the Treasury Departmental Integrated IT Infrastructure 

Exhibit 300.

4B – Information Technology and Non-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 investments are 

planned for 2007:

COINS Enterprise Resource Planning (ERP) System 

The Mint COINS System consists primarily of PeopleSoft ERP functionalities that control and 

integrate both manufacturing and financial operations. Data is produced in real time with better 

accuracy, due to single point of data entry that eliminates redundant transactions and minimizes 

data errors. This enables personnel to focus more on process improvements and less on problem 

resolution. A system that is not fully integrated would slow the reconciliation and decisionmaking processes, especially as it relates to controlling cost.

Retail Sales System (RS2)

The United States Mint’s 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 the United 

States Mint's business requirements. RS2 was designed to meet high public demand for EGovernment 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 as well as the President's E-Government initiative.
Mint - 22

FY 2005 

Obligations

FY 2006 

Estimated

FY 2007 

Estimated

Circulating & Protection Capital Investments

Circulating Information Technology & Other $3.16 $7.48 $6.67

Circulating Building Improvements 3.95 4.10 4.85

Circulating Equipment 3.01 4.05 4.78

Protection 3.70 3.31 3.46

Total Circulating and Protection $13.81 $18.93 $19.75

Numismatic Capital Investments

Numismatic Information Technology & Other $2.52 $1.98 $1.73

Numismatic Building Improvements 0.80 4.85 8.53

Numismatic Equipment 2.42 7.00 1.85

Total Numismatic $5.74 $13.83 $12.11

Total Capital Investments $19.55 $32.76 $31.86

Capital Investments

The Mint’s FY 2007 circulating and protection capital request is $19.8 million, which is $10.4 

million below the forecasted circulation and protection depreciation (capital limit) amount of 30.2 

million. Therefore, no additional budget authority is needed in FY 2007 for capital investments.

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 $31.9 million in FY 2007. This includes approximately 

$16.3 million for circulating projects, $3.5 million for security improvement projects, and $12.1 

million for numismatic projects. 
Mint - 23

4.3 – Operating Levels Table

Dollars in Thousands

FY 2005 

Obligated

FY 2006 

Estimated

FY 2007 

Estimated

FTEs 2,015 2,003 1,902

Object Classification:

11.1 Full-Time Permanent Positions..................................... 121,568 121,363 115,295

11.3 Other than Full-Time Permanent Positions.............. 1,152 160 152

11.5 Other Personnel Compensation................................... 10,146 5,442 5,170

11.8 Special Personal Services Payments..................... 421 96 91

11.9 Personnel Compensation (Total)............................. - - -

12.0 Personnel Benefits...................................................................... 34,476 37,679 35,795

13.0 Ben. Former Personnel............................................... 154 1,330 1,264

21.0 Travel.................................................................................. 2,422 2,868 2,912

22.0 Transportation of Things........................................... 19,637 24,202 26,505

23.1 Rental Payments to GSA................................................ 793 32 29

23.2 Rent Payments to Others............................................... 17,757 19,038 19,608

23.3 Commun., Util., & Misc...................................................... 13,324 13,451 14,868

24.0 Printing and Reprod.......................................................... 2,282 2,370 3,474

25.1 Advisory & Assistance Services.................................................... 38,474 48,833 53,346

25.2 Other Services.................................................................... 10,657 41,236 45,642

25.3 Purchase of Goods/Serv. from Govt. Accts...... 2,582 - -

25.4 Operation & Maintenance of Facilities................... 4,032 - -

25.5 Research & Development Contracts................................ 2,986 - -

25.6 Medical Care............................................................................. - - -

25.7 Operation & Maintenance of Equipment...................... 8,180 11,835 12,014

25.8 Subsistence & Support of Persons.................................... - - -

26.0 Supplies and Materials.................................................... 24,208 31,116 32,827

26.0 Metal and Fabrication.................................................... 653,163 1,480,343 1,520,605

31.0 Non-Capital Equipment.......................................................................... 1,360 1,009 1,014

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

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

42.0 Insur. Claims & Indemn................................................. 45 144 148

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

44.0 Refunds.............................................................................. - - -

 - Depreciation..............................................................................44,324 43,607 39,299

Total Operating.................................................................$1,014,143 $1,886,154 $1,930,059

Object Classification:

31.0 Capital Equipment.......................................................................... 14,643 23,808 18,482

32.0 Lands and Structures................................................... 4,906 8,950 13,375

Total Capital................................................................. $19,549 $32,758 $31,857

Budget Activities:

Manufacturing and Sales.................................... $979,159 $1,849,265 $1,894,045

Protection...................................................................... 34,984 36,889 36,013

Total................................................................... $1,014,143 $1,886,154 $1,930,059
Mint - 24

4C – Appropriations Language

DEPARTMENT OF THE TREASURY

UNITED STATES MINT PUBLIC ENTERPRISE FUND

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 [2006] 2007 under such section 5136 for circulating 

coinage and protective service capital investments of the United States Mint shall not exceed 

[$26,768,000] $30,200,000. (Department of the Treasury Appropriations Act, 2006.)
Bureau of Engraving and Printing 

Resources Summary

Table 1.1

Dollars in Thousands

$ Change % Change 

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Obligated Estimated Estimated To FY 2007 to FY 2007

 Manufacturing $436,000 $445,000 $493,000 $48,000 9.7%

 Protection and Accountabiltiy of Assets. 56,000 61,000 63,000 2,000 3.2%

Total Resources $492,000 $506,000 $556,000 $50,000 9.0%

FY 2007 Priorities

 Produce and deliver the most secure currency for the nation in the most cost 

effective manner possible. BEP expects to produce and deliver 9.0 billion notes 

to the Federal Reserve System in 2007, an increase of nearly 10 percent over 

the 2006 program. 

 Redesign the $100 note, as part of the current multi-year initiative to implement 

the most ambitious currency redesign in U.S. 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.

 Attain ISO 14001 certification for its environmental management systems to 

institutionalize its commitment to sound environmental stewardship.

 Research possible state-of-the-art counterfeit deterrent features for use in future 

currency notes in support of the Bureau’s program of continuous currency 

redesign efforts.

Mission

To design and manufacture high quality security documents that meet 

customer requirements for quality, quantity and performance, including 

counterfeit deterrence. 
BEP - 2

Table of Contents

Section 1 – Purpose ......................................................................................................... 3

1A – Description of Bureau Vision and Priorities........................................................ 3

1B – Previous Highlights and Accomplishments ......................................................... 4

1C – Future Outlook.................................................................................................... 5

Section 2 – Not Applicable for Non-appropriated Bureaus.................................................. 6

Section 3 – Budget and Performance Plan......................................................................... 7

3.1 – Activity Summary Table..................................................................................... 7

3A – Budget Activity Description ............................................................................... 7

3.2 – Budget and Performance Plan Tables.................................................................. 8

3B –Description of Performance................................................................................. 9

3C – PMA Evaluation Description ............................................................................ 10

3.3 – PART Evaluation Table.................................................................................... 12

Section 4 – Supporting Materials..................................................................................... 13

4.1 – Human Resources Table ................................................................................... 13

4A – Human Capital Strategy Description................................................................. 14

4.2 – Summary of IT and Non-IT Resources Table.................................................... 15

4B – Information Technology and Non-Information Technology Strategy................. 15

4.3 – Operating Levels Table..................................................................................... 17
BEP - 3

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. The Bureau 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.

The Bureau’s top priorities for FY 2007 include the introduction of the redesigned $100 

notes. The new note will contain enhanced security features including subtle background 

colors. Background colors help consumers, particularly those who are visually impaired, 

to tell the denominations apart. The Bureau is currently evaluating additional counterfeit 

deterrent features for possible inclusion in the $100 note. In addition, 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.

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 its 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 Office of Security primary mission is to preserve the 
BEP - 4

integrity of and safeguard critical Bureau resources and assets such as personnel, 

products, facilities and equipment.

1B – Previous Highlights and Accomplishments

Redesigned Federal Reserve Notes

The redesigned $10 note was unveiled on September 28, 2005 at a ceremony held at the 

Statue of Liberty in New York Harbor. The ceremony’s location was in keeping with one 

of the symbols of freedom depicted on the new note, Lady Liberty’s torch. The $10 note, 

which will enter circulation in March 2006, is the third denomination in the new currency 

series which incorporates enhanced security features, subtle background colors and 

symbols of freedom into their design. 

Work is continuing on the development of new counterfeit deterrent features and the 

redesign of the $100 note. The redesigned $100 is expected to be introduced to the public 

in FY 2007. The $1 and $2 notes will not be redesigned. 

The continued redesign of U.S. currency is an ongoing effort to stay ahead of the 

technological advances available to counterfeiters. The redesigned notes retain three 

important counterfeit deterrent features that were first introduced in the late 1990’s and 

are easy for consumers and merchants to verify: 

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 -- also 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. To stay ahead of counterfeiters as advances in 

technology make counterfeiting of currency less difficult, the Bureau expects to redesign 

U.S. currency every seven to ten years.

Because the improved security features in the redesigned currency are more effective 

only if the public knows about and uses the features, a broad, public education program is 

an integral part of the anti-counterfeiting effort. This program ensures that people all 

over the world recognize and use the enhanced security features of the new currency. 

With nearly $700 billion in U.S. currency in circulation worldwide, public education is 

crucial to counterfeit deterrence.
BEP - 5

Cost Reduction Efforts

The Bureau strives to provide its customers with superior products for the lowest possible 

price. The Bureau continuously looks for ways to cut costs without compromising 

quality. During 2005, performance on all key program performance measures was

favorable. Direct manufacturing costs for both the currency and postage stamp programs 

were below established standards for cost and spoilage. As a result of lower than 

anticipated spoilage rates, improved operating efficiency and staff reductions in 

administrative and support areas, the Bureau was able to reduce its average currency 

billing rate to the Federal Reserve.

1C – Future Outlook

The Bureau is committed to developing state-of-the-art counterfeit deterrent features for 

use in future currency notes through new, more innovative technologies. For the long

term, the Bureau is committed to a program of continuous currency design enhancement 

that deters counterfeiting and is easier to authenticate.

The redesigned $100 note is scheduled to be introduced to the public in 2007. A public 

education campaign will be conducted for the new $100 note following the successful 

campaigns for the redesigned $20, $50 and $10 notes. No paid media in the U.S. will be 

included in the $100 campaign. 

In addition, the Advanced Counterfeit Deterrent (ACD) Steering Committee, which 

includes members from BEP, the Department of the Treasury, the U.S. Secret Service, 

and the Federal Reserve Board, is evaluating additional counterfeit deterrent features for

possible use in a redesigned $100 note to further protect it. Eleven companies submitted 

prototype samples in the dimensions proposed for use on currency notes. Evaluations of 

the prototypes, including adversarial analysis of the counterfeit deterrent features and 

tests on the durability of the new features will be completed and provided to the ACD 

committee. The most feasible features will then be presented to the Secretary of the 

Treasury for approval.

Along with innovative, cutting-edge designs, BEP will maintain its focus on producing 

high quality security products in the most cost effective manner possible. The Bureau 

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 Bureau plans to attain ISO 

14001 certification for its environmental management systems to institutionalize its 

commitment to sound environmental stewardship. 

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 high-
BEP - 6

technology workplace. Strategic investment in people and technology will continue to be 

the critical factors in maintaining the Bureau’s status as a world class securities 

manufacturer.

Section 2 –Not Applicable for Non-appropriated Bureaus
BEP - 7

Section 3 – Budget and Performance Plan

3.1 – Activity Summary Table

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Description Actual Estimated Estimated to FY 2007

Revenue:

Federal Reserve Notes $476,800 $500,000 $550,000 10.0%

Postage Stamps 17,300 0 0 0.0%

Other Security Products 17,900 6,000 6,000 0.0%

Total Revenue $512,000 $506,000 $556,000 9.9%

Expenses:

Direct Manufacturing

Paper and Ink $143,000 $125,000 $175,000 40.0%

Direct Labor 35,000 32,000 33,000 3.1%

Other Direct Mfg Costs 7,000 6,000 7,000 16.7%

Subtotal Direct Manufacturing Costs 185,000 163,000 215,000 31.9%

 Indirect Manufacturing Support 290,000 282,000 278,000 -1.4%

 Total Manufacturing Activity Costs 475,000 445,000 493,000 10.8%

Total Protection & Accountability of Assets Activity Costs 56,000 61,000 63,000 3.3%

Total Expenses $531,000 $506,000 $556,000 9.9%

Net Results ($19,000) 0.0 0.0 0.0%

Federal Reserve Notes Manufactured (in Billions) 8.5 8.2 9.0 9.8%

Postage Stamps Manufactured (in Billions) 5.0 0.0 0.0 0.0%

(Dollars in Thousands)

3A –Budget Activity Description

Manufacturing – ($493,000,000 from reimbursable funding) BEP’s Manufacturing 

Activity supports Treasury’s strategic objective, Increase the Reliability of the U.S. 

Financial System. The mission of the Bureau is to design and manufacture high quality 

security documents that meet customer requirements for quality and performance, 

including counterfeit deterrence. BEP utilizes 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 2005, the Bureau delivered 8.5 billion Federal Reserve Notes to the Federal Reserve 

Banks. In addition, the Bureau delivered 5.0 billion postage stamps to the United States 

Postal Service. This was the last year of postage stamp production at the Bureau in 
BEP - 8

accordance with a five-year agreement with the U.S. Postal Service. The currency and 

stamp orders were fulfilled on schedule, at lower cost and spoilage than anticipated. The 

Federal Reserve has ordered 8.2 billion notes for delivery in FY 2006. The order is 

estimated at 9 billion notes for FY 2007. 

Protection and Accountability of Assets – ($63,000,000 from reimbursable funding) 

The Bureau’s Protection and Accountability of Assets Activity also supports Treasury’s 

strategic objective, Increase the Reliability of the U.S. 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 

nations’ currency. 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 between BEP 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 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 –Budget and Performance Plan Tables

Dollars in Thousands

Treasury Strategic Goal: Preserve the Integrity of Financial Systems (F3)

 Resource Level FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Obligated Obligated Obligated Obligated Estimated Estimated

Treasury Strategic Objective F3C

Budget Activities

 Manufacturing $412,000 $462,000 $481,000 $436,000 $445,000 $493,000

 Protection and Accountability of Assets 51,000 56,000 58,000 56,000 61,000 63,000

Total Operating Level $463,000 $518,000 $539,000 $492,000 $506,000 $556,000

Human Resources

 Manufacturing 1,973 1,942 1,841 1,787 1,800 1,800

 Protection and Accountability of Assets 469 485 490 495 500 500

Total FTE's (direct and reimbursable) 2,442 2,427 2,331 2,282 2,300 2,300
BEP - 9

Strategic Objective: Increase the Reliability of the U.S. Financial System - F3C

Budget Activity: Protection and Accountability of Assets

Performance Goal: Maintain an accurate and cost-effective system of accountability for Bureau products,

which will ensure that products are accounted for during production and that customers

receive the correct quantities of product

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Currency shipment discrepancies per million notes ($) (Oe)

Target .01 .01 .01 .01 .01 .01

Actual 0 0 .01 0

Target Met? Y Y Y Y

Security costs per 1000 notes delivered ($) (E)

Target Baseline 5.95 6.25 6

Actual 5.95 5.75

Target Met? N/A N/A N Y

Budget Activity: Manufacturing

Performance Goal: Meet customer's delivery requirements cost effectively.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Manufacturing costs for currency (dollar costs per thousand notes produced) ($) (E) 

Target 25 31 35 31 28.5 32.5

Actual 30.03 29.14 28.06 28.83

Target Met? N Y Y Y

Budget Activity: Manufacturing

Performance Goal: Produce consistently high quality counterfeit deterrent notes

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of currency notes delivered to the Federal Reserve that meet customer quality requirements (%)

(Oe)

Target Baseline 99.9 99.9 99.9 99.9 99.9

Actual 100 99.9 100 99.9

Target Met? Y Y Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure 

3B – Description of Performance

Manufacturing Costs for Currency (dollar cost per 1000 notes produced)

Manufacturing Costs for Currency is an indicator of currency manufacturing efficiency 

and effectiveness of program management. This standard is developed annually based on 

the past year’s performance, contracted price factors, and anticipated productivity 

improvements. Actual performance against the standard depends on BEP’s ability to 

meet annual spoilage, efficiency, and capacity utilization goals established for this 

product line. The formula used to calculate this measure is the total cost of production 

divided by the number of notes produced divided by 1000. 
BEP - 10

Percent of currency notes delivered to the Federal Reserve that meet customer quality 

requirements

This measure is an indicator that reflects the Bureau’s ability to provide a quality product. 

All notes delivered to the Federal Reserve go through rigorous quality inspections. These 

inspections ensure that all counterfeit deterrent features, both overt and covert are 

functioning as designed. Any discrepancies found are reported to BEP on a per shipment 

basis. Reviews are performed by BEP on all Federal Reserve inspection systems as well 

as the procedures followed in reporting data to BEP. These reviews are conducted on an 

annual basis with additional reviews performed upon request by the Federal Reserve 

Banks. 

Currency Shipment Discrepancies

This measure is 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. Any 

discrepancies are reported on a monthly basis based on information provided by the 

customer. All discrepancies are researched and if necessary, procedures are corrected. 

Security costs per 1000 notes delivered

Security costs are an indicator reflecting the cost of providing effective and efficient 

product security and accountability. This measure is developed annually based on the 

past year’s cost performance and anticipated cost changes. The formula used to calculate 

this measure is the total cost of security divided by the number of notes produced divided 

by 1000.

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C –PMA Evaluation Description

Competitive Sourcing

● To date, all standard competitions were completed in a 12-month timeframe; and 

all streamlined competitions were done within a 90-day timeframe.

● BEP has completed 17 competitions since January 2001 involving 217 FTEs. 

E-Government

● BEP is conducting a pilot, using Treasury’s Public Key Infrastructure (PKI) to 

evaluate a digital signature capability.
BEP - 11

● In conjunction with the PKI initiative BEP is piloting the use of a smart card and 

fingerprint biometric for network authentication. In addition, BEP is currently 

using the smart card/biometric and the Treasury Certificate Authority as a 

resource to encrypt and transmit sensitive images between our facilities.

● BEP is implementing the standard Treasury eTravel system. 

● BEP recently implemented a commercial off-the-shelf ePayroll solution designed 

for Federal agencies that use services provided by the USDA National Finance

Center. This internet-based program automates time submission and provides

electronic signature functionality.

● BEP partnered with the Financial Management Service (FMS) to pilot the Internet 

Payment Platform (IPP). This system successfully processed E-commerce 

transactions for purchase orders, invoices and payments to providers of goods and 

services to the government. BEP continues to work with FMS in the development

of specifications for the Next Generation Disbursement Platform (NGDP), the 

successor to IPP.

Human Capital Management

● 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.

● As part of its succession planning, the Bureau selected seven individuals for a 

Senior Executive Service (SES) Developmental Program in 2005.
BEP - 12

3.3 –PART Evaluation Table

PART Name: New Currency Manufacturing 

Strategic Goal: Increase the reliability of the U.S. financial system (F3)

Rating Effective 

OMB Major Findings/Recommendations

 1. Monitor design and overhead costs related to the manufacture of New Currency to 

 ensure the most efficient production and distribution of future denominations. 

 2. Continue to work with Federal partners to assess the impact of New Currency on

 counterfeiting performance measures across government. 

Bureau Actions Planned or Underway

 1. BEP works closely with the ACD Steering Committee to indentify and evaluate 

 future counterfeit deterrent designs.

 2. BEP/Treasury/Federal Reserve/U.S. 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 the reliability of the 

 manufacturing process in incorporating advanced counterfeit deterrent features in bank 

 notes and the effectiveness of these features through the course of daily cash transactions. 
BEP - 13

Section 4 – Supporting Materials

4.1 – Human Resources Table

Actual Full Time Equivalents vs. Budgeted FTE

2,400 2,400

2,300

2,331

2,282

2,300 2,300 2,300

2220

2240

2260

2280

2300

2320

2340

2360

2380

2400

2420

FY 2004 FY 2005 FY 2006 FY 2007

F

T

E

s

Budgeted Reimb. Actual Reimb.

FY 2005 FY 2006 FY 2007

BASE: Year-end Actual from Prior Year 2,331 2,282 2,300

Increases: 

Reason #1: Production of Redesign $100 (possible 0 45 0

additional production Step)

Subtotal, Increases 0 45 0

Decreases

Reason #1 Competitive Sourcing- Machine Shop Services -7 0 0

Reason #2 Competitive Sourcing- Ink Production -17 0 0

Reason #3 Competitive Sourcing- Security Screening 0 -10 0

(non-add, reflects overtime FTE savings)

Reason #4 FY 2005 Buyouts -25 -27 0

Subtotal, Decreases -49 -27 0

Year end Actual/Estimated FTEs 2,282 2,300 2,300

Net Change from prior year SOY to budget year EOY: 18

CHANGES IN FULL-TIME EQUIVALENTS

Table 4.1
BEP - 14

4A – Human Capital Strategy Description

The Bureau of Engraving and Printing’s human capital strategy has been improved in the 

following ways: 

 All performance elements are directly linked to the goals and objectives of the BEP 

Strategic Plan.

 Successfully utilized human capital flexibilities to encourage voluntary separations 

for employees impacted by downsizing due to program termination and Fair Act (A76) competitions. Utilized a combination of retirement incentives, early retirements, 

reassignments, and cross training, which resulted in avoiding the use of Reduction in 

Force procedures. As a result, over 300 BEP employees retired in FY 2004 and FY 

2005.

 Commensurate with succession planning goals, the BEP recruited and made seven 

selections for its 2005 Senior Executive Service (SES) Candidate Development 

Program. In addition, the Bureau is finalizing procedures to launch Management 

Intern and Procurement Trainee Programs. In FY 2004, succession planning 

achievements included the conversion of three (3) cooperative education students to 

competitive positions, appointment of (3) graduates of the SES Candidate 

Development Program into mission critical positions without interruption in 

leadership, and the enrollment of four managers into the Federal Executive Institute 

to develop the future BEP management team.

 Successfully utilized pay incentive flexibilities to retain unique expertise that enabled 

the Bureau to fully implement a $1 million dollar automation application.

 Established the Bureau’s first Career Transition and Resources Center in order to 

assist displaced employees in conducting job searches and making successful career 

changes as appropriate.
BEP - 15

4.2 – Summary of IT and Non-IT Resources Table

FY 2005 FY 2006 FY 2007

Major Investments (In millions) Obligations Estimated Estimated

Information Technology 

 Subtotal 0 0 0

Non-Information Technology 

 Tour Upgrade (DC) 7

 Currency Press Line Replacment (DC) 10 40 25

 Window/Door Replacement 15

 Subtotal 10 40 47

Total Major Investments 10 40 47

Summary of IT and Non-IT Resources

Table 4.2

(Dollars in Millions)

Infrastructure funding is consolidated into the Treasury Departmental Integrated IT 

Infrastructure Exhibit 300.

4B – Information Technology and Non-Information Technology Strategy

The Bureau of Engraving and Printing’s capital projects are focused on improving 

processes, developing new counterfeit deterrent 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 

customer demands. 

Currency Press Line Replacement

Currency press line replacement in the D.C. facility will allow the Bureau to more cost 

effectively meet customer requirements for existing advanced counterfeit deterrent 

features. The project includes the acquisition of intaglio presses and processing and 

finishing equipment. This initiative will enable the Bureau to better meet requirements 

for counterfeit deterrence, improve product quality and satisfy any new technical 

demands. It will also provide more flexibility in the manufacturing process, while 

significantly reducing production costs, release of volatile organic compounds, and 

waste. 
BEP - 16

Tour Upgrade

The Bureau has plans to renovate and modernize its Washington, D.C. tour facility. Over 

the past twenty years there have been few enhancements made to the tour facility; it has 

only seen refurbishments and minor renovations. Already encased in an 85 year old 

building, the tour is dated in appearance and requires modifications to the visitor flow 

route to accommodate the increased number of visitors since the 1980’s.
BEP - 17

4.3 – Operating Levels Table

Dollars in Thousands

FY 2005 FY 2006 FY 2007

Obligated Estimated Estimated

Object Classification 

11.1 Full-Time Permanent Positions $ 168,000 $ 167,000 $ 170,000

11.2 Other than Full- Time Permanent Positions 1,500 1,500 1,500

11.5 Overtime 10,000 8,000 8,500

11.5 Other Personnel Compensation 2,000 2,000 2,000

11.8 Special Personal Services Payments - - -

11.9 Personnel Compensation (Total) 181,500 178,500 182,000

12.0 Personnel Benefits 47,000 43,500 46,000

13.0 Ben. Former Personnel - - -

21.0 Travel 2,300 1,750 1,750

22.0 Transportation of Things 200 100 150

23.1 Rental Payments to GSA 2,000 2,000 2,000

23.2 Rent Payments to Others 1,000 1,000 1,000

23.3 Communications, Utilities & Misc. 13,000 13,000 14,000

24.0 Printing and Reproduction 3,000 850 800

25.1 Advisory & Assistance Service 3,000 4,000 5,000

25.2 Other Services 53,000 50,000 51,000

25.3 Purchase of Goods/Services from Govt. Accts. - - -

25.4 Operation & Maintenance of Facilities 5,200 8,200 8,200

25.5 Research & Development Contracts 3,500 3,000 3,000

25.6 Medical Care - - -

25.7 Operation & Maintenance of Equipment 4,200 6,000 7,000

25.8 Subsistence & Support of Persons - - -

26.0 Supplies & Materials 150,000 134,000 184,000

31.0 Equipment 23,000 60,000 50,000

32.0 Lands & Structures - - -

33.0 Investments & Loans - - -

41.0 Grants, Subsidies - - -

42.0 Insurance Claims & Indemn/ 100 100 100

43.0 Interest and Dividends - - -

44.0 Refunds - - -

TOTAL $ 492,000 $ 506,000 $ 556,000

Budget Activities 

Manufacturing $ 436,000 $ 445,000 $ 493,000

Protection and Accountability of Assets 56,000 61,000 63,000

TOTAL $ 492,000 $ 506,000 $ 556,000
Comptroller of the Currency

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Obligated Estimated Estimated to FY 2007 to FY 2007

Supervise 408,091 488,450 510,169 21,719 4.4%

Regulate 64,011 72,579 75,887 3,308 4.6%

Charter 15,011 18,372 19,190 818 4.5%

Total Resources $487,113 $579,401 $605,246 $25,845 4.5%

(Dollars in Thousands)

Resources Summary

Table 1.1

FY 2006 Priorities

 Regulate and supervise approximately 1,933 national banks and 51 Federal 

branches with assets exceeding $5.8 trillion,

 Conduct risk-based 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,

 Combat fraud and money laundering and protect the integrity of the financial 

system by ensuring national banks’compliance with the Bank Secrecy Act, antimoney laundering and USA PATRIOT Act laws and regulations,

 Work with other Federal banking regulators on the implementation of Basel II

Capital Accord,

 Support interagency efforts on regulatory burden relief, and

 Fill key examiner positions in the Large Bank Supervision program and continue 

recruitment of entry-level examiners.

Mission:

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. 
OCC - 2

Table of Contents

Section 1 – Purpose ......................................................................................................... 3

1A – Description of Bureau Vision and Priorities........................................................ 3

1B – Previous Highlights and Accomplishments ......................................................... 4

1C – Future Outlook.................................................................................................... 6

Section 2 – Not Applicable for Non-appropriated Bureaus.................................................. 7

Section 3 – Budget and Performance Plan......................................................................... 8

3.1 – Activity Summary Table..................................................................................... 8

3A – Budget Activity Description ............................................................................... 8

3.2 – Budget and Performance Plan........................................................................... 11

3B – Description of Performance............................................................................... 12

3C – PMA Evaluation Description ............................................................................ 14

3.3 – PART Evaluation Table.................................................................................... 15

Section 4 – Supporting Materials..................................................................................... 16

4.1 – Human Resources Table ................................................................................... 16

4A – Human Capital Strategy Description................................................................. 17

4.2 – Summary of IT and Non-IT Resources Table.................................................... 17

4B – Information Technology and Non-Information Technology Strategy................. 19

4.3 – Operating Levels Table..................................................................................... 20
OCC - 3

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. 

As of September 30, 2005, the OCC supervised 1,933 banks and 51 Federal branches of 

foreign banks in the United States. At that time, commercial national bank assets totaled 

approximately $5.8 trillion or 67 percent of total commercial banking assets. The 

number of institutions continues to decrease, but the size and complexity of the 

institutions in the national banking system continue to grow, creating increasing 

challenges for the OCC. 

The OCC has its headquarters in Washington, D.C. 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 (97 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) a flexible legal regulatory framework that enables the national 

banking system to provide a full competitive array of financial services, 3) fair access to 

financial services and fair treatment of bank customers and 4) an expert, highly motivated 

and diverse workforce and efficient utilization of other agency resources. To achieve the 

goals and objectives outlined in its strategic plan, OCC organizes its activities under three

programs: Supervise, Regulate and Charter.

The OCC’s FY 2006 priorities include supervisory issues related to: potential adverse 

changes in banks’ credit and liquidity risk profiles, the effect of Basel II implementation 

on capital requirements for national banks, compliance with Bank Secrecy Act/Antimoney laundering (BSA/AML) and USA PATRIOT Act requirements, consumer 

protection and reputation risk. Filling key examiner positions in the Large Bank 

Supervision program and the continued recruitment of entry-level examiners are also 

critical initiatives for the OCC. 
OCC - 4

1B – Previous Highlights and Accomplishments

Basel II

Along with the other Federal bank and thrift regulators, OCC worked to implement the 

“International Convergence of Capital Measurement and Capital Standards: A Revised 

Framework,” generally known as Basel II. A key aspect of this work was the fourth 

quantitative impact study completed in FY 2005. This study was designed to provide the 

financial regulators with a better understanding of how implementation of the Basel II 

Framework might affect minimum required risk-based capital within the U.S. banking 

system. The study was one of the key features of the implementation plan, one other 

being the solicitation of public comments through a notice of proposed rulemaking 

(NPR).

Preliminary analysis of the QIS4 results caused the agencies to delay the publication of 

the NPR until further analysis is completed. This delay will ensure that any proposed 

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 

In October 2005, the Treasury Office of Inspector General cited Anti-Money Laundering

(AML) and Terrorist Financing/Bank Secrecy Act (BSA) Enforcement as one of the five

challenges facing the Department. 

During FY 2005, the OCC took numerous actions to improve its BSA/AML compliance 

program, many of which address the findings and recommendations in a final report 

emanating from an internal review of the agency’s BSA/AML supervision. The OCC: 

 Enhanced BSA/AML expertise by creating and filling a new position, Director 

for Bank Secrecy Act and Anti-Money Laundering Compliance, to consolidate 

anti-money laundering activities within the agency; increased the number of 

BSA policy staff in its Washington headquarters; established BSA/AML as a 

focal point for the OCC’s Examiner Specialized Skills Program; and augmented 

staff dedicated to BSA/AML compliance by expanding the contractor pool to 

include BSA skills,

 Conducted 1,530 BSA/AML/USA PATRIOT Act examinations,

 Published enforcement policy to provide additional guidance on situations in 

which formal actions should be taken,

 Worked with the other Federal banking agencies and Treasury’s Financial 

Crimes Enforcement Network (FinCEN) to develop and issue guidance on 

providing banking services to money services businesses,
OCC - 5

 Issued, jointly with other Federal financial banking agencies and FinCEN, a 

new and comprehensive Federal Financial Institutions Examination Council 

(FFIEC) BSA/AML Examination Manual and conducted interagency training 

and outreach sessions for examiners and bankers on the new Manual,

 Conducted a teleconference for almost 5,000 national bank participants to 

educate and answer questions about BSA,

 Created a money laundering risk assessment system to help examiners identify 

potentially high-risk bank activities that may warrant increased scrutiny,

 Enhanced internal tracking systems to ensure timely follow-up on BSA/AML 

compliance deficiencies cited in examination reports, and

 Worked with FinCEN and other agencies to improve information sharing and 

data analysis.

Consumer Protection

The OCC fulfills its consumer protection role through the supervision of national banks 

and their operating subsidiaries. The OCC issued guidance on consumer protection 

issues, including credit card marketing practices (e.g., “teaser rates” and interest rate 

increases and changes in terms on open accounts) and secured credit cards (e.g., security 

deposit charges and the significant diminution of available credit due to the structure of 

the credit account). The OCC worked closely with banks issuing credit cards to ensure 

compliance with the minimum payment, negative amortization and other provisions of 

the Credit Card Account Management and Loss Allowance guidance. The OCC 

developed and issued jointly with the Federal Deposit Insurance Corporation, the Federal 

Reserve and National Credit Union Administration, guidelines and best practices on 

overdraft protection programs to address safety and soundness and consumer protection 

risks associated with this increasingly prevalent credit feature of consumer deposit 

accounts. The OCC is incorporating expanded Home Mortgage Disclosure Act data into 

its existing Fair Lending supervision program. Additionally, interagency guidance was 

published to provide guidance on the development and implementation of a response 

program to address unauthorized access to, or use of, customer information that could 

result in substantial harm or inconvenience to a customer, including when to notify 

customers. 

The OCC adopted regulations that establish enforceable standards to prevent abusive or 

predatory lending practices in connection with residential mortgage lending by national 

banks and their operating subsidiaries. These new guidelines set out criteria to ensure 

that a bank's mortgage practices are consistent with safety and soundness standards and 

appropriate treatment of consumers.
OCC - 6

As part of its objective to ensure fair treatment and fair access to financial services for all 

Americans, the OCC 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. 

In FY 2005, the OCC’s Customer Assistance Group (CAG) closed over 72,000 consumer 

complaints that resulted in the payment of more than $6.3 million in disputed fees and 

other charges to customers of national banks. Additionally, the CAG monitors trends in 

consumer complaint activity by both product type and banking company and provides 

reports to the supervision offices on pertinent consumer issues to be considered in 

compliance examinations. 

The OCC also provides information on a variety of consumer and community 

development topics through the publication of Community Development Insights

publications, Community Developments newsletter, resource directories and other on-line 

information. The Comptroller also serves on the Financial Literacy and Education 

Commission that was created to develop a national strategy for financial education. As 

part of the work with the Commission, the OCC has provided input on the National 

Financial Literacy Strategy developed by the Treasury Department pursuant to the 

mandate of the Fair and Accurate Credit Transactions Act.

Supervision Staffing 

The OCC has established a nationwide recruitment and training program for entry-level 

bank examiners. Since the program’s inception in FY 2003, more than 250 examiners 

have been hired. In FY 2005, 96 entry-levels examiners completed their training team 

assignments and were placed into permanent field positions. Another 100 entry-level 

examiners began their training assignments. Specific initiatives and strategies to locate 

experienced examiners to address critical Large Bank Supervision needs were 

implemented in FY 2005. 

1C – Future Outlook 

The OCC will continue to closely monitor financial sectors and markets in FY 2006. The 

proliferation of non-traditional home mortgage products, rapid growth of home equity 

lines of credit and the acceleration of home prices require close attention. A sudden and 

sustained rise in interest rates, or drop in housing prices, could present potential 

vulnerabilities to real estate-related portfolios, as well as other consumer-lending 

portfolios. 

The OCC will continue its focus on compliance with BSA/AML regulations, as well as 

issues related to privacy, predatory lending and fairness in home mortgage lending 

practices. 
OCC - 7

Corporate governance, accounting and financial and consumer disclosures will continue 

to be important issues for the banking industry and large banks in particular, accentuating 

the need for strong corporate governance, accounting transparency, strong internal 

controls and audit and compliance programs. 

Risk measurement is becoming increasingly quantitative in nature and Basel II is 

expected to accelerate this trend. The OCC will work to ensure banks that rely on models 

to measure risk and determine minimum regulatory capital develop and implement 

appropriate control mechanisms and validation practices to govern the proper use of such 

models. 

Credit quality, allowance of loan and lease losses (ALLL) adequacy, off-balance-sheet 

activities and liquidity and interest rate risk management will continue to require close 

supervisory attention. 

Industry consolidation and earnings pressures will continue to create incentives for banks 

to reduce overhead, outsource technology- or people-intensive operations to third party 

vendors and search for new or expanded products and services. Assessing the adequacy 

and effectiveness of banks’ transaction, strategic and reputational risk management 

processes (including processes for approving and monitoring new products and 

outsourcing activities) will continue to be a critical component of OCC’s supervisory 

strategies. 

In the aftermath of Hurricane Katrina, all of the national banks in the affected areas 

resumed services as quickly as possible and were operational within a few days, although 

some branches and facilities remain closed. National banks continue to cooperate with 

each other, their State bank counterparts and with Federal, State and local officials to 

accommodate the needs of communities impacted by the disaster. The OCC will remain 

in constant contact with these institutions to provide assistance and support as recovery 

and rebuilding efforts continue. Through the bank supervision process, the OCC will 

monitor the future long-term economic impact to its institutions in the affected area and 

work with its Federal Financial Institutions Examination Council (FFIEC) counterparts to 

take appropriate supervisory actions.

Section 2 – Not Applicable for Non-appropriated Bureaus
OCC - 8

Section 3 – Budget and Performance Plan

3.1 – Activity Summary Table

Dollars in Thousands

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Description Actual Estimated Estimated to FY 2007

Revenue:

Assessments 557,823 608,900 639,400 5.0%

Interest 16,959 17,400 22,000 26.4%

Other Income 2,961 3,000 3,000 0.0%

Total Revenue $577,743 $629,300 $664,400 5.6%

Obligations Incurred:

Supervision 408,091 488,450 510,169 4.4%

Regulate 64,011 72,579 75,887 4.6%

Charter 15,011 18,372 19,190 4.5%

Total Obligations Incurred $487,113 $579,401 $605,246 4.5%

Contribution to Reserves

Asset Replacement Reserve Contribution 23,104 35,400 14,267 -59.7%

Contingency Reserve Contribution 67,526 14,499 44,887 209.6%

Total Reserve Contribution $90,630 $49,899 $59,154 18.5%

3A – Budget Activity Description

Supervise ($488,450,000) 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 risk and 

market trends in the national banking system or groups of national banks, the financial 

services industry and the economic and regulatory environment. 

An important issue for the OCC is to ensure sufficient staffing for the effective 

supervision of the increasing asset size and complexity of national banks. The OCC will 

continue its recruiting efforts to identify and hire entry-level examiners to fill vacancies 

as staff moves from the community bank line of business to the more complex mid-size 

bank and large bank lines of business. A particular challenge for the OCC will be to 

recruit experienced examiners to fill key positions in the Large Bank Supervision 

program for the largest and most complex national banks located where historically it has 

been difficult to attract and retain staff. 
OCC - 9

The OCC will continue to evaluate Basel II implementation by mandatory and opt-in 

banks. The OCC faces the challenge of attracting and retaining the same advanced 

modeling skills that the banks seek for their implementation of Basel II requirements. 

The OCC must effectively integrate its modeling skills and Basel expertise into the large 

bank supervisory process. 

In FY 2006, the OCC will complete its 2005 – 2006 BSA/AML action plan. The OCC 

will fully implement the new Money Laundering Risk system that will assist examiners 

in measuring risk levels within individual banks. Information on high-risk products, 

services, customers and geographies will be made available to examiners. The OCC will 

ensure timely and effective follow-up on BSA/AML compliance deficiencies. The OCC 

will increase and expand BSA/AML training for examiners and supplement resources 

needed for BSA/AML compliance through the realignment of examiners and use of 

contractors. 

Regulate ($72,579,000) 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. 

The OCC will continue its evaluation of the quantitative impact analysis (QIS4) and 

assess the effect on the planned January 2008 implementation date for Basel II. After this 

evaluation is complete, the OCC and other agencies will publish the notice of proposed 

rulemaking that was delayed from FY 2005. The OCC will continue cross-functional and 

interagency efforts for implementation of Basel II, including supervisory guidance for 

advanced Internal Ratings Based approach for commercial and retail credit and for 

operational risk under the Advanced Measurement Approach. The OCC will provide 

Basel II training and make Basel information sources available on-line to large bank 

examiners. 

Charter ($18,372,000) 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.
OCC - 10

e-Corp, a web-based application that has been operational for two years, allows national 

banks to file corporate applications and notices electronically at no cost to them. 

Electronic filing accounted for 38 percent of all filings and exceeded the OCC’s target of 

35 percent for FY 2005. In FY 2006, the OCC will continue efforts to promote the use of 

e-Corp by the industry. 

Bureau-wide Initiatives

In addition to major program initiatives, the FY 2006 budget includes funding for 

significant training initiatives related to BSA/AML and Basel II, the comprehensive 

training teams for the large number of entry-level examiners brought onboard in late 

FY 2005 and those planned for FY 2006 and leadership training in support of OCC’s 

succession planning. The FY 2006 budget also reflects staffing needs in several support 

areas, including: improving its intranet/extranet websites, filling key technical positions 

that support effective management of information technology projects and programs and 

implementing new requirements set forth in Office of Management and Budget (OMB) 

Circular A-123 and the Homeland Security Presidential Directive 12. 

The OCC will accomplish its FY 2006 program initiatives at an estimated 2,886 FTE 

level, an increase of 200 FTEs or 7.4 percent over the 2,686 FTE utilization in FY 2005. 

The FY 2006 budget is 95 FTEs or a 3.4 percent increase over the FY 2005 planned level 

of 2,791 FTEs. The underutilization of FTEs in FY 2005 resulted from two primary 

factors: the cyclical process of filling examiner positions and the external response to 

recruitment efforts did not yield hiring results sufficient to offset attrition for nonexaminer positions. A large part of the increased needs have been for the Large Bank 

Supervision program. The examiners needed for large banks come from Midsize/Community Bank Supervision and, to a lesser extent, experienced industry hires. 

The burden of replacing examiners who have transferred into Large Bank Supervision 

primarily falls on the Community Bank Supervision recruitment program that was 

established in 2003. This influx of staff from the examiner recruitment program occurs 

in January and June. The 151 new entry-level examiners that were hired in January and 

June of 2005 will generate the full FTE effects in FY 2006. The additional 155 entrylevel examiners that will be hired during the same time frames in FY 2006 also increase 

the FTEs needed for FY 2006, but the full FTE effects will not occur until FY 2007. 

Although OCC underutilized planned FTEs for FY 2005, funds were reallocated to 

supplement supervisory needs by expanding the use of contractors in FY 2005. Funds 

also were reallocated to fund several information technology initiatives and to establish 

technology portfolio management funds that are available to fund projects as needs arise 

rather than delaying them until the annual budget process. OCC management believes 

establishment of these funds serves to improve the overall identification, analysis and 

approval of new technology projects and initiatives. 
OCC - 11

3.2 – Budget and Performance Plan

Dollars in Thousands

Treasury Strategic Goals: Preserve the integrity of financial systems (F3)/Promote prosperous U.S. and World economies (E1)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Obligated Obligated Obligated Obligated Estimated Estimated

Treasury Strategic Objective F3C:

Budget Activity

Supervise 381,557 407,434 371,252 408,091 488,450 510,169

Treasury Strategic Objective E1B:

Budget Activities

Regulate 24,660 25,501 61,763 64,011 72,579 75,887

Charter 11,185 11,327 16,448 15,011 18,372 19,190

Subtotal $35,845 $36,828 $78,211 $79,022 $90,951 $95,077

Total Operating Level $417,402 $444,262 $449,463 $487,113 $579,401 $605,246

Human Resources

Supervise 2,540 2,513 2,212 2,250 2,467 2,467

Regulate 173 173 368 353 332 332

Charter 79 75 98 83 87 87

Total FTEs (direct and reimbursable) 2,792 2,761 2,678 2,686 2,886 2,886

Resource Level
OCC - 12

Strategic Objective: Increase the Reliability of the U.S. Financial System - F3C

Budget Activity: Supervise

Performance Goal: Achieve effective and efficient supervision, regulation, and chartering of national banks 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Total OCC costs relative to every $100,000 in bank assets regulated ($) (E)

Target Baseline 9.45

Actual

Target Met? N/A N/A N/A N/A

Budget Activity: Supervise

Performance Goal: Achieve effective rehabilitation of problem national banks

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Rehabilitated problem national banks as a percentage of the problem national banks one year ago (CAMELS

3, 4 or 5) (%) (Oe)

Target Baseline 40 40 40 40 40

Actual 47 32 40 44

Target Met? Y N Y Y

Budget Activity: Supervise

Performance Goal: Maintain a national banking system that effectively complies with consumer laws and

regulations

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of national banks with consumer compliance rating of 1 or 2 (%) (Oe)

Target 94 94 94 94 94

Actual 96 96 94

Target Met? N/A Y Y Y

Budget Activity: Supervise

Performance Goal: Maintain a safe and sound national banking system through effective supervision

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of national banks with composite CAMELS rating 1 or 2 (%) (Oe)

Target Baseline 90 90 90 90 90

Actual 95 94 94 94

Target Met? Y Y Y Y

Budget Activity: Supervise

Performance Goal: Maintain a well capitalized national banking system

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of national banks that are well capitalized (%) (Oe)

Target Baseline 95 95 95 95 95

Actual 99 99 99 99

Target Met? Y Y Y Y

Strategic Objective: Provide a Flexible Legal and Regulatory Framework - E1B

Budget Activity: Charter

Performance Goal: Complete licensing applications and notices in a timely manner.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percentage of licensing applications and notices completed within established timeframes. (%) (Oe)

Target 95 95 95 95 95 95

Actual 96 97 96 96

Target Met? Y Y Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure
OCC - 13

3B – Description of Performance

Total OCC Costs Relative to Every $100,000 in Bank Assets Regulated

Beginning in FY 2006, the OCC will implement a performance measure that reflects the 

efficiency of its operations while meeting the increasing supervisory demands of a 

growing and more complex national banking system. 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. 

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, 44 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 the 40 percent achieved in FY 2004 and the 32 

percent achieved in FY 2003. 

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.

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 2005, 94 percent of national banks earned a composite 
OCC - 14

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.

Well Capitalized National Banks

The Federal Deposit Insurance Act established a system of prompt corrective action 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. 

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. The volume of corporate 

applications and notices was approximately 2,100 in FY 2005, a 14 percent decrease 

from FY 2004. Time frames have been established for completing each type of 

application and notice. The OCC completed 96 percent of applications and notices 

within the time standard. 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.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

Competitive Sourcing

The OCC is green on this initiative based on conducting studies for 85 of the baseline 

inventory of 273 commercial FTEs (current inventory is 313 which includes those 

already studied). The new standards for success are stated in terms applicable at the 

Treasury level and the OCC will work with Treasury to determine how the new standards 

will be applied at the bureau level. 

E-Government

The OCC has current business cases for its major IT projects. Also, the OCC has 

completed certification and accreditation of all its IT systems. The OCC has developed a 

current and target Enterprise Architecture (EA) that is integrated and embedded in the 

Treasury EA. The OCC supports E-Government initiatives as follows: 
OCC - 15

1. The OCC’s ALICE (e-training) system is aligned with the Federal GoLearn 

initiative. ALICE is an operational level datamart that enables OCC 

management to more effectively report on and analyze OCC’s usage of the 

GoLearn environment. This initiative complements the functionality offered 

by GoLearn as it is an internal management and reporting tool. The ALICE 

system uses courseware through the Office of Personnel Management and the 

GoLearn initiative (SkillSoft/Smartforce and MindLeaders). Use of this 

courseware will help to identify skill gaps and ensure the workforce has the 

appropriate skills to meet the bureau’s mission.

2. The OCC is participating in the Federal Document Management System that 

will allow interested parties to electronically view and comment on proposed 

OCC rules.

3. The OCC has the lead role on the E-Government initiative to automate human 

resource-related forms that employees complete when first hired. This 

initiative will convert current government-wide and agency unique human 

resources forms to electronic web-based forms that could take up to 75 

percent less time to complete by eliminating duplicate data entry. 

4. As noted previously, banks submitted 38 percent of corporate filings through 

the OCC’s automated application system, e-Corp. 

Human Capital Management

The OCC continues to work with the Department on human capital initiatives to move 

from a yellow rating to green. Specifically, the OCC is supporting the Department’s 

focus on leadership development, succession planning, diversity hiring and 45-day hiring 

this year. See additional discussion under Human Capital Strategy Description. 

Budget and Performance Integration

To improve performance on this initiative, the OCC was successful in working with 

Treasury to develop an efficiency performance measure for implementation in FY 2006. 

As discussed earlier, this performance measure evaluates the efficiency of OCC’s

operations relative to the bank assets it regulates. 

Improved Financial Management

The OCC meets all of the standards for success on this initiative, which includes 

receiving an unqualified audit opinion with no material weaknesses noted in its internal 

controls. The OCC continues to evaluate its system of internal controls over financial 

data to ensure data integrity is maintained. The OCC plans to complete the 

documentation for the processes related to financial reporting to meet the requirements of 

OMB Circular A-123, Appendix A and has established a Senior Assessment Team to 
OCC - 16

ensure these requirements are implemented effectively and communicated throughout the 

agency. 

3.3 – PART Evaluation Table

Section 4 – Supporting Materials

4.1 – Human Resources 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

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. 

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.

Full Time Equivalents Budgeted vs. Actual FTE Table

0 0 0 0 0 0 0 0 0 0

2,886 2,886 2,812 2,789 2,791 2,886 2,886

2,678 2,686 2,761

0

500

1000

1500

2000

2500

3000

3500

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

FT

Es

Bud. Direct Actual Direct Bud. Reimb. Actual Reimb. 
OCC - 17

4A – Human Capital Strategy Description

The OCC fully supports the Department’s Human Capital Strategic Plan and the goals 

articulated in it. OCC developed bureau-specific human capital goals. The first is to 

align and employ OCC workforce resources consistent with current and projected agency 

priorities. Strategies to achieve this goal 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 mid-size/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 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. More than half of the entry-level examiners hired were female and 

more than 40 percent were minorities.

FY 2005 FY 2006 FY 2007

Base: Year-end Actual from Prior Year 2,678 2,686 2,886

Increases:

134 323 110

Subtotal, Increases 134 323 110

Decreases:

Normal Attrition/Anticipated Retirements -126 -123 -110

Subtotal, Decreases -126 -123 -110

Year-end Actual/Estimated FTEs 2,686 2,886 2,886

Net Change from prior year SOY to budget year EOY 200

CHANGES IN FULL-TIME EQUIVALENTS

Increased Hiring: Bank Supervision for large banks and increasing 

complexity of the national banking system; community bank 

supervision recruiting; and anticipated retirements OCC-wide
OCC - 18

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 in the process of designing a leadership development program based upon identified 

competencies. The OCC also will focus on aligning leadership performance expectations 

with organizational goals and preparing leaders to create and sustain a productive work 

environment and to assume responsibility for developing staff.

A third human capital goal is to maintain strategic compensation and 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 

support OCC objectives. The OCC operates under a merit-based performance system. 

Annual across-the-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.

4.2 – Summary of IT and Non-IT Resources Table

Dollars in Millions

FY 2005 

Obligations

FY 2006 

Estimated

FY 2007 

Estimated

Information Technology:

Supervise Activity:

Supervisory Information System 3.154 2.200 2.300

Charter Activity:

Licensing Information System 3.787 3.347 0.050

Bureau-wide Activity

Management and Accountability Reporting Tools 2.881 1.628 1.590

Subtotal $9.822 $7.175 $3.940 

Non-Information Technology:

None

Subtotal $0.000 $0.000 $0.000 

Total Major Investments $9.822 $7.175 $3.940 

Major Investments
OCC - 19

4B – Information Technology and Non-Information Technology Strategy

Two major IT investments are planned for FY 2006: the Supervisory Information 

System (SIS) and the Licensing Information System (LIS). These investments will

improve overall program effectiveness, reduce costs and improve efficiency of OCC’s 

work processes. 

SIS is a multi-year project for the Large Bank Supervision and Mid-size/Community 

Bank Supervision programs that provides examiners with more efficient, risk-based 

supervision tools and improves documentation of ongoing supervision of complex and 

diverse institutions. SIS will support material enhancements of large and mid-size/ 

community bank supervision by providing greater consistency of supervision work, 

improving horizontal reviews and benchmarking and providing better management level 

views of workflow and examination results. 

LIS will provide for comprehensive electronic data capture from the corporate licensing 

process, eliminating manual data entry and replacing an antiquated mainframe data 

retrieval system. LIS is integral to OCC’s overall information technology strategy for 

replacing the mainframe computer system. 

OCC will fund maintenance costs of its financial system, the Management and 

Accountability Report Tools ($MART). There are no planned capital expenditures for 

this system. 
OCC - 20

4.3 – Operating Levels Table

Dollars in Thousands

FY 2005 

Obligated

FY 2006 

Estimated

FY 2007 

Estimated

FTEs 2,686 2,886 2,886

Object Classification:

11.1 Full-Time Permanent Positions..................................... 249,456 292,758 308,981

11.1 Other than Full-Time Permanent Positions.............. 6,565 7,380 7,385

11.5 Other Personnel Compensation................................... 468 1,545 1,615

11.8 Special Personal Services Payments..................... 0 10 10

11.9 Personnel Compensation (Total)............................. 256,489 301,693 317,991

12.0 Personnel Benefits...................................................................... 88,551 94,324 98,314

13.0 Ben. Former Personnel............................................... 519 276 276

21.0 Travel.................................................................................. 31,265 37,700 39,222

22.0 Transportation of Things........................................... 1,726 1,720 1,830

23.1 Rental Payments to GSA................................................218 186 192

23.2 Rent Payments to Others............................................... 25,338 25,037 26,569

23.3 Commun., Util., & Misc...................................................... 7,534 12,035 12,318

24.0 Printing and Reprod.......................................................... 1,044 1,177 2,432

25.1 Advisory & Assistance Services.................................................... 54,527 71,997 72,993

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...................... 0 0 0

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

26.0 Supplies and Materials.................................................... 3,161 6,426 5,714

31.0 Equipment.......................................................................... 13,623 17,047 17,397

32.0 Lands and Structures...................................................3,042 9,667 9,882

33.0 Investments & Loans.................................................... 0 0 0

41.0 Grants, Subsidies........................................................... 0 0 0

42.0 Insur. Claims & Indemn................................................. 76 116 116

43.0 Interest and Dividends......................................................0 0 0

44.0 Refunds.............................................................................. 0 0 0

Total................................................................. $487,113 $579,401 $605,246

Budget Activities:

Supervise.....................................................................408,091 . 488,450 510,169

Regulate.....................................................................64,011 . 72,579 75,887

Charter.....................................................................15,011 . 18,372 19,190

Total................................................................... $487,113 $579,401 $605,246
Office of Thrift Supervision

Resources Summary 

Table 1.1

(Dollars in Thousands)

$ Change % Change

FY 2005 FY 2006 FY 2007 FY 2006 FY 2006

Resources Actual Estimated Estimated to FY 2007 to FY 2007

Supervision of the 

thrift industry 187,434 215,500 220,888 5,388 2.5%

Total Resources $187,434 $215,500 $220,888 $5,388 2.5%

FY 2006 Priorities 

 Examine, supervise and regulate approximately 900 savings associations with total

assets exceeding $1.4 trillion,

 Examine and regulate approximately 500 registered holding company enterprises 

with total assets exceeding $7.1 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,

 Continue efforts to minimize regulatory burden,

 Abate money laundering and terrorist financing by examining savings associations for 

compliance with the Bank Secrecy Act, the USA PATRIOT Act and other antimoney laundering laws, and

 Continue efforts to implement the international Basel II risk-based capital framework.

Mission:

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.
Office of Thrift Supervision - 2

Table of Contents

Section 1 – Purpose

1A – Description of Bureau Vision and Priorities........................................................ 3

1B – Previous Highlights and Accomplishments ......................................................... 6

1C – Future Outlook.................................................................................................... 9

Section 2 – Not Applicable for Non-appropriated Bureaus................................... 10

Section 3 – Budget and Performance Plan ............................................................. 11

3.1 – Activity Summary Table................................................................................... 11

3A – Budget Activity Description ............................................................................. 11

3.2 – Budget and Performance Plan........................................................................... 14

3B – Description of Performance............................................................................... 16

3C – PMA Evaluation Description ............................................................................ 18

3.3 – PART Evaluation Table.................................................................................... 20

Section 4 - Supporting Materials............................................................................ 21

4.1 – Human Resources Table ................................................................................... 21

4A – Human Capital Strategy Description................................................................. 22

4.2 – Summary of IT and Non-IT Resources Table.................................................... 22

4B – Information Technology and Non-Information Technology Strategy................. 22

4.3 – Operating Levels Table..................................................................................... 23
Office of Thrift Supervision - 3

Section 1 – Purpose

1A – Description of Bureau Vision and Priorities 

Mission 

The mission of the Office of Thrift Supervision is 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.

Established by Congress as a bureau of the Department of the Treasury on August 9, 

1989, 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 state-chartered savings associations insured by 

the FDIC and provides for the registration, examination and regulation of savings and 

loan holding companies (SLHCs) and other affiliates.

OTS is the only Federal banking agency that both charters depository institutions and 

supervises their holding companies. The focus of most savings and loan holding 

companies is the ownership of a thrift institution. However, OTS regulates over 70 

SLHCs that engage in businesses other than banking or lending related activities. 

These include insurance, securities and commercial firms such as American

International Group, John Deere, General Electric, General Motors, ING, Merrill 

Lynch and Nordstrom.

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 900 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.

Health of the Thrift Industry

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. 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 
Office of Thrift Supervision - 4

evaluated, including the risk posed by other entities within the corporate structure. 

When weaknesses are identified, supervisory action is taken.

As of September 2005, OTS regulated 866 savings associations with total assets of $1.4 

trillion. Savings associations operate in a safe and sound manner with 94 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 2005, OTS supervised 486 holding company enterprises with 

approximately $7.1 trillion in consolidated assets. Over half of all savings associations 

and 80 percent of total savings association assets are owned by OTS-regulated holding 

companies. 

OTS Strategic Goals 

 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 Strategic Priorities 

OTS’s FY 2006 budget totals $215.5 million. The budget directly supports OTS’s 

strategic and performance goals that provide for proactive supervision of the industry, 

reduced regulatory burden and improved credit availability. The FY 2006 budget enables 

OTS to continue tailoring 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. 

Following are key strategic priorities for OTS during FY 2006: 

Supervision: OTS assesses the financial condition and risk profile of savings associations 

and the consolidated enterprises within which they operate. OTS also identifies 

violations of law and regulation and potential financial and economic problems. OTS 

will continue to strive to maintain a thrift industry that is sufficiently capitalized, conduct 

examinations in an efficient and effective manner, encourage continuous communication 

with savings association management and minimize regulatory burden.

Financial Crimes: To combat fraud and money laundering and protect the integrity of 

financial systems, OTS examines savings associations for compliance with the 

requirements of the Bank Secrecy Act, the USA PATRIOT Act and other anti-money 

laundering laws. Through examinations, guidance and training, OTS will continue to 
Office of Thrift Supervision - 5

assess the financial condition and risk profile of the thrift industry and identify violations 

of law and regulation.

Credit Risk: As community-based lenders, the majority of savings associations’ loans 

are made to consumers. Direct loans to consumers, including single-family mortgages, 

made up 63 percent of savings association assets as of September 2005. Savings 

associations’ asset quality is dependent on stable real estate values, a favorable 

employment environment and consumers’ continued ability to service their debt. Credit 

review is a significant priority in OTS’s examination process. 

Interest Rate Risk: 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. The model allows OTS to assess interest rate risk exposure. 

OTS remains cautious of the potential impact of a rapid increase in market interest rates 

and OTS will remain vigilant in monitoring savings associations for adverse trends.

Fair Access: A strong and healthy thrift industry helps to support a strong domestic 

economy. OTS addresses unfair or deceptive practices of regulated savings associations 

and promotes fair access to financial services for all Americans and fair treatment of 

customers. OTS will continue to work with savings associations on ways they can assist 

underserved markets in their communities. Examinations help to prevent development or 

continuation of unsafe operating practices and to ensure compliance with consumer 

protection laws and regulations. 

Global Financial Services: OTS is actively working with both domestic and international 

supervisors to ensure that the thrift industry remains a healthy and robust component of 

the domestic and global financial services marketplace. The Basel Committee and U.S. 

bank and thrift regulators are attempting to improve upon our current system by making 

capital standards more risk sensitive. OTS is evaluating issues to ensure that the new 

framework results in safe and sound capital adequacy standards and risk management, 

while maintaining fair competition among all financial institutions.

OTS continues to engage in active dialog with foreign financial supervisors to discharge 

OTS’s duties as a consolidated thrift holding company supervisor by working in 

conjunction with foreign functional supervisors. Another objective of OTS cross-border 

discussions includes receiving additional equivalency determinations under the European 

Union (EU) directives for OTS supervised financial conglomerates, banking groups, 

investment firms and insurance groups with operations in the EU. OTS is also focused 

on enhancing cooperation in the international community through active participation on 

international committees and working groups, pursuit of information sharing agreements 

with those foreign supervisors involved in the supervision of foreign operations of OTS 

supervised savings associations and savings and loan holding companies and 

participation in foreign technical assistance programs that utilize OTS examiner skills 

and expertise.
Office of Thrift Supervision - 6

Regulatory Burden: 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 that may impose regulatory burdens on thrifts. It tailors examinations to the 

risk profile of the individual institutions, streamlines the examination procedures for 

small institutions and conducts comprehensive examinations that combine safety and 

soundness and compliance.

The Federal financial regulatory agencies began a multi-year effort in 2003 to obtain 

suggestions from the industry and public on more streamlined and less burdensome ways 

to regulate. The interagency Economic Growth and Regulatory Paperwork Reduction 

Act project team continues its outreach efforts to review regulations and legislation to 

identify unnecessary burden. 

Technology/Operational Risks: The growth of internet banking, foreign outsourcing and 

the continued rapid pace of technological and financial innovation is creating new 

challenges and concerns. Identity theft and the significant increases in electronically 

perpetrated consumer scams are impacting consumer confidence in electronic banking. 

OTS’s Information Technology examiners and specially trained safety and soundness 

examiners assess savings associations’ use of technology. Data and customer security 

and foreign outsourcing are receiving increased supervisory attention. OTS evaluates 

these risks on a consolidated basis in those cases where a savings association is part of a 

complex conglomerate that manages IT risk on an enterprise-wide basis.

1B – Previous Highlights and Accomplishments

The following activities highlight recent OTS accomplishments and strategic 

achievements: 

Countering Financial Crime

The Federal banking regulatory agencies, including OTS, are working in partnership 

with the credit union regulatory agency and the Financial Crimes Enforcement 

Network (FinCEN) to abate money laundering and terrorist financing. The approach 

the regulatory agencies have taken to achieve these goals is to ensure examination 

consistency and provide guidance to financial institutions for developing policies and 

programs to comply with anti-money laundering requirements. 

The regulatory agencies recently issued interagency guidance on a wide variety of 

specific topics, such as customer identification program requirements, the provision of 

services to foreign embassies and foreign political figures and information sharing 

requirements under section 314(a) of the USA PATRIOT Act. To address the specific 

issue of examination consistency, the agencies recently issued examination procedures 

that provide valuable guidance to both examiners and the banking industry. These 
Office of Thrift Supervision - 7

interagency examination procedures are being augmented by nationwide examiner 

training and banker outreach efforts.

OTS expects savings associations to take a risk-based approach in developing and 

administering their anti-money laundering compliance programs. OTS recognizes that, 

due to the diversity of the U.S. financial system, this is not an area that lends itself to a 

prescriptive, one-size-fits-all approach. OTS’s approach allows savings associations the 

flexibility to design programs that are appropriate for their particular business operations, 

provided the programs are consistent with regulatory requirements.

The Federal regulatory agencies and FinCEN executed an information sharing agreement 

to enhance implementation and communication regarding the Bank Secrecy Act (BSA). 

OTS augmented its data collection and internal tracking systems to ensure timely followup on BSA/anti-money laundering (AML) compliance deficiencies and to facilitate 

information sharing with FinCEN.

Global Financial Services

OTS serves on several international task forces and working groups responsible for 

developing and implementing the Basel II capital accord. Domestically, OTS is working 

with the other Federal banking agencies to ensure Basel II will serve as a modern, riskbased capital framework that enhances risk management and refines capital adequacy on 

a basis broadly consistent with capital standards governing foreign banking 

organizations. A key aspect of this work was the fourth quantitative impact study 

designed to provide the agencies with a better understanding of how implementation of 

the Basel II Framework might affect minimum required risk-based capital within the U.S. 

banking system. The study results will help the Federal banking agencies develop an 

interagency notice of proposed rulemaking and comprehensive guidance.

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. 

The European Union directive on financial conglomerates became effective January 

2005. One of the directive’s objectives is to ensure that financial conglomerates 

headquartered outside EU member countries and conducting financial operations in the 

EU are subject to an equivalent level of supervision by foreign supervisors. The directive 

also emphasizes 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 received “equivalency" status under the EU financial conglomerates directive for an 

American financing company and continues to work with the appropriate EU supervisors 

responsible for other OTS supervised conglomerates with EU operations. OTS recently 

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, Italy and France.
Office of Thrift Supervision - 8

Regulatory Burden Reduction

Under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), a 

1996 law, 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 multi-year 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. To date, agencies have issued five 

notices requesting comment on various categories of regulations. In addition, the 

agencies are conducting outreach meetings across the United States to solicit input from 

bankers as well as consumer and community groups.

The Federal banking agencies have also identified burdens that would require legislative 

changes to the underlying statutes before changes can be made to the regulations. These 

changes were presented to Congress in 2005 as a list of consensus items that also enjoy 

industry support as being meaningful reductions in burden.

Based on industry comments, OTS changed its application and reporting requirements in 

an interim final rule in November 2004. The changes were designed to reduce burden to 

the extent consistent with the safe and sound supervision of the banking and thrift 

industries. On August 31, 2005, OTS finalized this rule. The rule: 1) modifies 

application and notice requirements that apply to branch and agency offices operated by 

thrifts; 2) revises the publication and public comment procedures for various OTS 

applications and notices; and 3) revises procedures for formal and informal meetings held 

in connection with OTS applications.

For the third consecutive year, OTS managed its operations to ensure that assessment rate 

increases did not exceed the inflation rate.

Comprehensive Examination Initiative 

In April 2002, OTS began combining its separate compliance and safety and soundness 

examinations into one comprehensive examination. The combination allows for greater 

efficiencies in the examination process, improved assessment of risk within the industry 

and a broader range of development opportunities for its examiners. OTS examination 

teams issue one report of examination that covers both compliance and safety and 

soundness. The 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 Privacy on a more frequent basis. The majority of OTS-regulated 

institutions indicate a favorable response to the comprehensive examination approach.

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. It examines lending portfolios from both compliance and safety and 

soundness perspectives at the same time. It also prepares one comprehensive 
Office of Thrift Supervision - 9

examination report that details all examination findings. OTS launched a new 

comprehensive examination handbook that combines its compliance and safety and 

soundness examination guidance. Over time, OTS expects this comprehensive approach 

will further reduce savings association cost and burden while promoting efficient, riskfocused examinations. 

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 in charge of at least two comprehensive examinations prior to accreditation. 

OTS also recognizes that there may be 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. 

1C – Future Outlook

OTS will continue to address the key strategic priorities outlined in Section 1 while 

monitoring the effects of external economic factors. Each priority and its associated 

activities support the OTS mission and its effort to ensure that the thrift industry thrives 

and remains healthy. 

The 2005 devastation of Hurricanes Katrina and Rita in the Gulf Coast states is 

representative of how quickly external factors reprioritize the regulatory support that 

OTS and the thrift industry must provide to preserve the integrity of financial systems 

and to serve their affected customers. On August 29, OTS issued a news release 

encouraging thrifts to assist customers in areas affected by Hurricane Katrina and stating 

that OTS would work with thrifts to identify ways to assist in the recovery efforts of their 

customers and communities. OTS issued a news release in conjunction with the Federal 

Reserve System, Conference of State Bank Supervisors, FDIC, NCUA and OCC

encouraging insured depository institutions to assist displaced customers. 

The needs and issues presented by Hurricane Katrina are unprecedented and will take a 

long time to resolve. In addition to participating in various interagency relief efforts, 

OTS communicates with all thrift institutions in the affected area to determine resources 

and assistance that may be needed for recovery. To assist savings associations and their 

customers affected by hurricanes, OTS provides a toll-free hotline number on its internet 

site for hurricane-related questions. OTS also provides access to the OTS press releases 

addressing hurricane-related issues plus information from government sponsored 

enterprises and trade groups, community service groups (such as the American Red Cross 

and Habitat for Humanity) and information from State agencies. 

OTS is helping its institutions restore branch facilities, including temporary facilities and 

is encouraging thrifts in the affected areas to work with their customers and communities 

by:
Office of Thrift Supervision - 10

 Considering temporarily waiving late payment charges and early withdrawal of 

savings penalties,

 Reassessing the current credit needs of their communities and offering prudent 

loans to help rebuild damaged property,

 Restructuring borrowers’ debt obligations, where appropriate, by altering or 

adjusting payment terms,

 Soliciting State and Federal guarantees and other means to help mitigate 

excessive credit risks, and

 Considering all available programs offered by the Federal Home Loan Banks.

In order to facilitate rebuilding efforts in the areas affected by the hurricanes, OTS is 

working with institutions to grant emergency exceptions to applicable appraisal standards 

and to provide for the allowance of reasonable loan documentation deficiencies 

necessitated by thrift office relocation or personnel shortages. OTS will continue to 

monitor the effects of the hurricanes on the regional and national economy throughout 

2006.

The rise in home values coupled with low interest rates and favorable tax treatment have 

made residential mortgage loans and home equity lines of credit extremely attractive to 

consumers. To date, delinquency and loss rates on home equity loans and lines have 

been at historical lows. A number of new mortgage products, underwriting risk factors 

and lending trends have attracted increased supervisory scrutiny. OTS will reinforce 

close attention to underwriting standards and safe and sound lending practices with 

savings associations using these new product lines. 

OTS will continue to combat fraud and money laundering and protect the integrity of the 

financial system by building upon the success of the common examination procedures, 

guidance and outreach that occurred in 2005. OTS will also strive to continue its efforts 

to reduce regulatory burden and to support the recommendations of the EGRPRA 

interagency team.

Section 2 – Not Applicable for Non-appropriated Bureaus
Office of Thrift Supervision - 11

Section 3 – Budget and Performance Plan

3.1 – Activity Summary Table 

Dollars in Thousands

% Change

FY 2005 FY 2006 FY 2007 FY 2006

Description Actual Estimated Estimated to FY 2007

Summary of Revenue and Expenses:

Revenue:

Supervision

Assessments 187,419 206,000 211,150 2.5%

Rental Income 5,114 4,739 4,857 2.5%

Interest 5,709 5,800 5,945 2.5%

Fees & Other 8,612 6,461 6,623 2.5%

Total Revenue $206,854 $223,000 $228,575 2.5%

Expenses:

Supervision

Compensation & Benefits 153,905 176,047 180,448 2.5%

Travel & Transportation 11,089 12,310 12,618 2.5%

Facilities 10,759 12,895 13,217 2.5%

Other Services & Supplies 11,681 14,248 14,604 2.5%

Total Expenses $187,434 $215,500 $220,888 2.5%

Net Results $19,420 $7,500 $7,687 2.5%

3A – Budget Activity Description

Supervision of the Thrift Industry ($215,500,000 ) 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 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 enabling early identification of emerging trends or 
Office of Thrift Supervision - 12

problems. When safety and soundness or compliance issues are identified, OTS acts 

promptly to ensure association management and directors institute corrective actions to 

address supervisory concerns. OTS ensures that its staff is well trained to identify and 

address current and emerging risks and that examiner guidance is appropriate and current. 

OTS continually assesses its examination procedures to ensure that there is an adequate 

review of the association’s controls and risk management processes.

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. As of September 2005, OTS regulates 866 savings associations with 

total assets of $1.4 trillion. Savings associations operate in a safe and sound manner with 

94 percent achieving an overall composite CAMELS rating of 1 or 2. The industry’s 

capital position remains strong with over 99 percent of savings associations meeting the 

well-capitalized standards. 

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 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. It examines lending portfolios from both compliance and safety and 

soundness perspectives at the same time. It also prepares one comprehensive 

examination report that details all examination findings. Over time, OTS expects this 

comprehensive approach will further reduce savings association cost and burden while 

promoting efficient, risk-focused examinations.

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 three years. OTS replaced holding 

company examination fees with semi-annual assessments in 2004. The new system 

provides savings and loan holding companies with consistency and predictability

regarding costs. It allows them to better plan for assessments by eliminating annual 

fluctuations that occurred under the previous system.
Office of Thrift Supervision - 13

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.
Office of Thrift Supervision - 14

3.2 – Budget and Performance Plan

Dollars in Thousands

OTS Budget Activity: Supervision

OTS Budget Activity: Supervision

A professional and motivated workforce that provides exceptional service to its customers and supports achievement 

of OTS business goals.

OTS Support of Treasury Goals

OTS Strategic Goals:

OTS Strategic Goal:

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.

Treasury Strategic Objective E1B: Provide a flexible legal and regulatory framework

Treasury Strategic Goal: Promote prosperous U.S. and World economies (E1)

Treasury Strategic Objective F3C: Increase the reliability of the U.S. Financial System

Treasury Strategic Goal: Preserve the integrity of financial systems (F3)

A safe and sound thrift industry.

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Actual Actual Actual Actual Estim ated Estim ated

Budget Activity:

Supervision (90% ) 137,900 138,293 160,842 168,691 193,950 198,799

Total Operating Level for F3C $137,900 $138,293 $160,842 $168,691 $193,950 $198,799

Hum an Resources

 Supervision NA 821 797 797 869 869

Total FTE (direct and reimbursable) for F3C NA 821 797 797 869 869

Budget Activity:

Supervision (10% ) 17,800 15,366 17,871 18,743 21,550 22,089

Total Operating Level for E1B $17,800 $15,366 $17,871 $18,743 $21,550 $22,089

Hum an Resources

 Supervision NA 91 89 88 96 96

Total FTE (direct and reimbursable) for E1B NA 91 89 88 96 96

Total Operating Level for OTS $155,700 $153,659 $178,713 $187,434 $215,500 $220,888

Total FTE for OTS NA 912 886 885 965 965

OTS Budget by Treasury Strategic Goal

Resource Level 1/

Treasury Strategic O bjective E1B: Provide a flexible legal and regulatory fram ew ork

Treasury Strategic G oal: Prom ote prosperous U.S. and W orld econom ies (E1)

Treasury Strategic O bjective F3C: Increase the reliability of the U.S. Financial System

Treasury Strategic G oal: Preserve the integrity of financial system s (F3)
Office of Thrift Supervision - 15

Strategic Objective: Increase the Reliability of the U.S. Financial System - F3C

Budget Activity: Supervision

Performance Goal: Conduct examinations in an efficient and effective manner

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of safety and soundness exams started as scheduled (%) (Ot)

Target Baseline 90 90 90 90

Actual 92 94 93

Target Met? N/A Y Y Y

Total OTS costs relative to every $100,000 in savings association assets regulated ($) (E)

Target Baseline TBD

Actual

Target Met? N/A N/A N/A N/A

Budget Activity: Supervision

Performance Goal: Ensure that OTS-regulated thrift institutions operate in a safe and sound manner or that

OTS has taken appropriate supervisory or enforcement action 

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of thrifts with composite CAMELS ratings of 1 or 2 (%) (Oe)

Target Baseline 90 90 90 90

Actual 93 93 94

Target Met? N/A Y Y Y

Budget Activity: Supervision

Performance Goal: Maintain a thrift industry that effectively complies with compliance laws and regulations

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of thrifts with compliance examination ratings of 1 or 2 (%) (Oe)

Target Baseline 90 90 90 90

Actual 94 94 94

Target Met? N/A Y Y Y

Budget Activity: Supervision

Performance Goal: Maintain a thrift industry that is adequately capitalized

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Percent of thrifts that are well capitalized (%) (Oe)

Target Baseline 95 95 95 95

Actual 99.6 99.4 99.5

Target Met? N/A Y Y Y

Strategic Objective: Provide a Flexible Legal and Regulatory Framework - E1B

Budget Activity: Supervision

Performance Goal: Minimize financial regulatory burden on thrifts

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Difference between the inflation rate and the OTS assessment rate increase (%) (E) 

Target 0 0 0 0 0 0

Actual 0 0 0 0

Target Met? Y Y Y Y

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure 
Office of Thrift Supervision - 16

3B – Description of Performance

As highlighted in the charts, OTS met all five of its performance measures in 2005. 

Following is a brief description of each performance measure:

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 and may adjust 

the rating between examinations if the association’s overall condition has changed. New 

savings associations are typically not assigned a composite CAMELS rating until the first 

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 that are well capitalized.

Capital absorbs losses, promotes public confidence and provides protection to depositors 

and the FDIC insurance funds. 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; 

Performance Summary Table

0

5

0 1 2 3 4 5 6

Unmet

Met

Number of Performance Measures
Office of Thrift Supervision - 17

adequately capitalized; undercapitalized, significantly undercapitalized; and critically 

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.

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.

Percent of thrifts with compliance examination ratings of 1 or 2.

A uniform, interagency compliance rating system was first approved by the Federal 

Financial Institutions Examination Council (FFIEC) in 1980. The FFIEC rating system 

was designed to reflect, in a comprehensive and uniform fashion, the nature and extent of 

an 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.

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. The assessment rate increases for savings 

associations have not exceeded the inflation rate for the past three years.
Office of Thrift Supervision - 18

Total OTS Costs Relative to Every $100,000 in Savings Association Assets Regulated

Beginning in FY 2006, OTS will implement 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. Over 65 percent of all savings associations 

have total assets less than $250 million and are generally community-based organizations 

that provide retail financial services in their local markets. In addition, the measure does 

not include over $7 trillion in assets of holding company enterprises regulated by OTS.

For detailed information about each performance measure, including definition, 

verification and validation, please go to: 

http://www.treasury.gov/offices/management/budget/budget-documents/cj/performance

3C – PMA Evaluation Description

OTS evaluated the President’s Management Agenda (PMA) strategies and adopted 

practices that were financially practical and helped OTS to achieve its mission. Many 

strategies were already practiced at OTS. Following are highlights:

Human Capital

Over 75 percent of the OTS budget funds staff compensation and benefits. Human 

capital is OTS’s primary resource required 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.

As a result of PMA, OTS drafted a Human Capital Strategic Plan and ensured that OTS’s 

senior managers have a supplemental critical element in their Annual Performance 

Evaluation requiring the manager to have knowledge of OTS’s Strategic Plan and its 

relationship to the applicable components of the senior manager’s position and job 

responsibilities. OTS’s compensation strategies and performance systems differentiate 

performance levels.

OTS offers a compensation and benefits package that is comparable to other financial 

regulators and allows OTS to retain and attract highly skilled candidates to perform 

specialized functions. To meet the need to fill positions requiring specialized expertise, 

OTS developed the Fellows Program that offers 13-24 month temporary appointments.

OTS strives to ensure that its staff is well trained and able to meet the challenges of 

regulating the thrift industry. Efforts to accomplish this include: an examiner 

accreditation program, specialized examiner training courses, use of individual 

development plans and a management development program. 
Office of Thrift Supervision - 19

Electronic Government

OTS strives to provide timely and efficient technological assistance and solutions to its 

examiners and the industry to meet regulatory responsibilities and enhance 

communication channels. The OTS web site includes a free service that provides 

subscribers with an e-mail alert when new material is posted to the site. OTS installs 

virtual private network software on the examiners’ notebook computers to enable them to 

securely access OTS Systems and data over high-speed, broadband connections from 

OTS-regulated institutions or other locations. OTS provides a service to enable the 

exchange of encrypted messages and documents directly with institutions. The OTS 

Secure Messaging Center service meets the industry standards for secure electronic data 

exchange and facilitates the timely transmission of sensitive data and information. This 

program is successfully used to exchange sensitive data with the thrift industry. OTS 

systems enable collection and processing of examination workpapers in electronic 

format. 

OTS has certified and accredited all of its 19 information technology systems and 

continues to update policies and procedures based on guidance from Treasury, OMB and 

the National Institute of Standards and Technology (NIST).

Budget and Performance Integration

OTS managers meet quarterly to integrate financial performance and program 

information. OTS’s online Budget Variance Reporting System enables managers and 

employees responsible for financial performance to monitor expense, commitment and 

obligation data relative to approved budgets. Financial data is updated monthly and 

available through the OTS intranet. Quarterly performance measure results are posted on 

the OTS Strategic and Performance Planning intranet site. Senior managers discuss 

performance and financial results during the Regional Manager meetings that are held 10 

times annually. All major OTS responsibilities are discussed.

Improved Financial Performance

OTS is committed to financial management excellence. OTS financial management 

systems provide timely, useful and auditable information that promotes the incorporation 

of financial and performance measurement in the planning, budgeting and reporting 

processes. OTS has received consecutive unqualified opinions on its financial statements 

since being formed in 1989. During 2003, program managers received online access to 

financial and budgetary information allowing them to monitor performance. During 

2004, managers used this online financial and budgetary information for operational 

evaluation and decision-making. Quarterly performance results are provided to 

management. 

In FY 2003, OTS began receiving administrative accounting support through a crossservicing arrangement with the Administrative Resource Center (ARC), an entity of the 

Treasury Franchise Fund. For FY 2005, ARC successfully transitioned its financial 

management operations to Oracle Federal Financials for OTS. 
Office of Thrift Supervision - 20

3.3 – PART Evaluation Table

There were no resource implications as a result of OTS’s PART evaluation.

P ART Nam e: Thrift S upervision

S trategic G oal:

Rating: E ffective

O M B Rec om m endations

O TS A ctions Taken

OTS Actions P lanned or Underw ay

3. D urin g the 2004 strate gic planning process, system ic risks were exa min ed and addresse d in the P lan.

1. The program purpose is clear.

2. The program develop ed new go als that are outcome -oriented and program m easurem ents which are cle ar.

3. The program is efficiently and effectively ma naged.

1. O TS will continue to work with the O CC to e nsure that strategic goals are closely aligned . O TS w ill continu e to share its 

strategic and performan ce plans w ith the oth er ba nking regulatory age ncies and mee t to discuss strategic and perform ance 

plann ing.

2. O TS will continue to perfo rm a join t exam ination.

3. O TS will continue to exam ine and a ddress system ic risks.

P reserve the inte grity of financial system s (F3)

O M B M ajor Findings

1. O CC and O TS worked to gether thro ughout the strategic and p erform ance pla nning efforts to ensure that their strategic 

goals were closely aligned. The b anking regulato ry a gencies share their strategic and pe rform ance pla ns with e ach other 

and m eet quarterly to discuss strategic and perfo rm ance p lanning.

1. Federal ban king regulatory agen cies, including the O TS , the O CC, the N CUA , and the FD IC, work togeth er to align 

outco me goals and relate d m easures to allo w for grea ter comp ariso n of program p erform ance in the industry.

2. The O TS evalua te the efficiency and effectivene ss of a sin gle exam ination for both S afety and Soun dness and 

Com plia nce functions.

3. The O TS take steps to exa mine long-term system ic risks in the industry.

2. B ased on feedback received ove r the past two years, the vast m ajo rity o f the industry p refers the efficiency and 

effectiveness o f a joint examination. O TS elim inated much of the redundan cy of two separate exam s. O TS will fulfill its 

statu tory exam ination respon sibilities with less FTE s as a result o f this chan ge.
Office of Thrift Supervision - 21

Section 4 - Supporting Materials

4.1 – Human Resources Table 

Actual FTE vs. Budgeted FTE

959

913 920

965 965 965 965

912 886 885

0

150

300

450

600

750

900

1050

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007

Bud. Direct Act. Direct B ud. R eim b. Act Reim b.

FY 2005 FY 2006 FY 2007

886 885 965

Reason #1

Continued recruitment priority in the examiner 

ranks for sucession planning as well as to 

address increasing holding company needs

80

Subtotal, Increases 80 0

-1

Subtotal, Decreases -1 0 0

885 965 965

-1 80 0

Base: Year-end Actual from Prior Year

Actual/Projected FTE

Net Change from prior year SOY to budget year EOY estimate

INCREASES 

DECREASES 
Office of Thrift Supervision - 22

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 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.

OTS’s Human Capital Strategic Plan (HCSP) links with two of the strategic goals 

outlined in OTS’s Strategic Plan (2003 – 2008) and its annual Performance Budgets; 

namely, 1) a safe and sound thrift industry and 2) a professional and motivated workforce 

that provides exceptional service to its customers and supports achievement of OTS 

business goals. 

4.2 – Summary of IT and Non-IT Resources Table

OTS does not have major IT or Non-IT investments.

4B – Information Technology and Non-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 and 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.

OTS has no major IT investments planned for FY 2006.
Office of Thrift Supervision - 23

4.3 – Operating Levels Table

Dollars in Thousands 

FY 2005 

Actual

FY 2006 

Estimated

FY 2007 

Estimated

FTEs 885 965 965

Object Classification:

11.1 Full-Time Permanent Positions 94,562 105,779 108,423

11.1 Other than Full-Time Permanent Positions 945 1,425 1,461

11.5 Other Personnel Compensation 0 0 0

11.8 Special Personal Services Payments 0 0 0

11.9 Personnel Compensation (Total) 95,507 107,204 109,884

12.0 Personnel Benefits 58,277 68,544 70,258

13.0 Benefits to Former Personnel 120 300 308

21.0 Travel 10,865 12,055 12,356

22.0 Transportation of Things 224 254 260

23.1 Rental Payments to GSA 0 0 0

23.2 Rent Payments to Others 4,352 4,359 4,468

23.3 Commun., Util., & Misc. 2,880 3,571 3,660

24.0 Printing and Reprod. 193 307 315

25.1 Advisory & Assistance Services 928 1,469 1,506

25.2 Other Services 1,553 3,088 3,165

25.3 Purchase of Goods/Serv. from Govt. Accts. 3,224 3,822 3,918

25.4 Operation & Maintenance of Facilities 4,050 3,673 3,765

25.5 Research & Development Contracts 0 0 0

25.6 Medical Care 0 0 0

25.7 Operation & Maintenance of Equipment 279 297 304

25.8 Subsistence & Support of Persons 0 0 0

26.0 Supplies and Materials 1,279 1,592 1,632

31.0 Equipment 2,334 3,706 3,799

32.0 Lands and Structures 1,194 1,259 1,290

33.0 Investments & Loans 0 0 0

41.0 Grants, Subsidies 0 0 0

42.0 Insur. Claims & Indemn. 175 0 0

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 0 0

Total........................... $187,434 $215,500 $220,888

Budget Activities:

Supervision of the thrift industry

Total........................... $187,434 $215,500 $220,888
INTERNATIONAL PROGRAMS

The Department of the Treasury’s FY 2007 budget request for International Programs is 

included in the Foreign Operations Appropriation.
OFFICE OF HOUSING FINANCE SUPERVISION

The Administration will again propose broad reform of the supervisory system for 

government-sponsored enterprises (GSEs) in the mortgage market: Fannie Mae, Freddie 

Mac, and the Federal Home Loan Bank System. Part of this reform includes establishing 

a new safety and soundness regulator for Housing GSEs with power comparable to other 

world-class financial regulators, and with the stature and resources necessary to carry out 

its responsibilities. The budget places this new regulator in the Department of the 

Treasury. The Administration’s proposal promotes a strong, resilient financial system 

and increased opportunities for affordable home ownership.