Tax Administration: Workforce Planning Needs Further Development for IRS's Taxpayer Education and Communication Unit
Published: 2003-05-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Strategic workforce planning helps ensure that agencies have the right people with the right skills in the right positions to carry out the agency mission both in the present and future. The Internal Revenue Service's (IRS) Taxpayer Education and Communication (TEC) unit within its Small Business and Self- Employed Division assists some 45 million small business and self-employed taxpayers. Given the number of taxpayers it is to assist and changes in its priorities and strategies, GAO was asked to determine whether TEC has a workforce plan that conforms to critical elements for what should be in a plan and how it should be developed and implemented.
section_title: What GAO Found
paragraphs: Although it has existed for more than 2-and-a-half years, TEC does not have a strategic workforce plan that includes certain critical elements. For example, it has not identified gaps between the number, skills, and locations of its current workforce and the workforce it will need in the future, and the strategies to fill gaps. Such a workforce plan for TEC could be developed by IRS, the Small Business and Self-Employed Division, and/or TEC. Small Business and Self-Employed Division officials said that TEC does not have a strategic workforce plan because they focused on creating the division and units such as TEC to begin addressing taxpayer needs, and because they first wanted to gain some experience with TEC as a new unit. IRS and the Small Business and Self-Employed Division are creating a process for developing a workforce plan for TEC that in broad terms would incorporate the critical elements common to workforce planning. However, it is not yet clear whether the workforce plan for TEC will be developed and implemented consistent with these critical elements. For example, IRS and the Small Business and Self-Employed Division have not analyzed the skills that the TEC workforce will need to meet its program goals or outlined the process and data to be used to do these analyses.

section_title: Letter
paragraphs: In all federal agencies, employees are their most important asset in  accomplishing their missions and achieving their goals. The Government  Performance and Results Act of 1993 (GPRA) calls for agencies and their  operating divisions to address human capital in the context of  performance management and requires annual performance plans to  describe how agencies will use resources to accomplish their strategic  direction and program goals. As part of human capital management,  strategic workforce planning helps ensure that organizations have the  right number of staff with the right skills and competencies in the right  locations to fulfill their goals both now and in the future given the  strategies they have adopted to carry out their missions.
Certain critical elements are common in workforce plans and planning  processes across leading private and public organizations: (1) involving  top management and employees in developing and implementing a  workforce plan, (2) analyzing gaps between the workforce that exists  currently and that will be needed in the future, (3) devising strategies (e.g.,  hiring or training) to fill workforce gaps, and (4) evaluating the strategies  to ensure that they yield the workforce needed and to make revisions as  necessary.
In an August 2002 report, the Treasury Inspector General for Tax  Administration (TIGTA) voiced specific concerns that the Internal  Revenue Service’s (IRS) workforce planning documents do not focus on  long-term planning. IRS has assumed overall responsibility for developing  an IRS-wide workforce plan, which its divisions and units are to support  and can supplement with more detailed plans.
Within IRS, the Taxpayer Education and Communication (TEC) unit in the  Small Business and Self-Employed Division (SB/SE) were both created in  October 2000 during IRS’s reorganization. TEC is to serve about 45 million  small businesses and self-employed taxpayers primarily through efforts to  better educate them about their tax obligations. Although the other two  units in SB/SE combined many organizations and functions that had  existed prior to IRS’s reorganization, TEC was a new unit with new or  expanded responsibilities. TEC was to have over 1,200 staff by fiscal year  2002 in 15 major field locations and an annual budget of over $60 million.  Since its inception, TEC has (1) not reached its staffing level (it had 718  staff as of March 2003), (2) reduced the number of major field locations to  7, and (3) added priorities and strategies for providing education and  outreach to SB/SE taxpayers.
Because TEC serves many taxpayers and has had the above changes, you  asked us to determine whether TEC has a workforce plan that conforms to  the critical elements for what should be in a plan and how the plan should  be developed and implemented. To do so, we interviewed IRS officials and  reviewed IRS workforce planning documents, reviewed guidance by  central management agencies such as the Office of Personnel Management  (OPM) and the Office of Management and Budget (OMB) on the critical  elements of workforce planning, and reviewed our reports on human  capital management. We did not evaluate the adequacy of TEC’s program  goals (or operational priorities).
subsections: section_title: Background
paragraphs: SB/SE was formed to address various issues affecting small business and  self-employed taxpayers, such as filing tax returns and paying taxes.  SB/SE’s strategic goals include increasing compliance and also reducing  burden among SB/SE taxpayers. As part of SB/SE, TEC is to use various  strategies, including providing education, outreach, assistance, and other  services, to support SB/SE taxpayers in understanding and complying with  tax laws. IRS created TEC in response to concerns that IRS should better  balance such services with its enforcement efforts.
In serving taxpayers, TEC is to partner with government agencies, small  business groups, tax practitioner groups, and other stakeholders that  could advance its education and outreach efforts. To meet an overall goal  of increasing voluntary compliance, TEC’s four program goals or priorities  are to combat abusive tax schemes, reduce taxpayer burden, promote  electronic filing, and negotiate agreements with SB/SE taxpayers on  specific ways to voluntarily comply with tax laws.
Recent events underscore the importance of human capital management  and strategic workforce planning. For example, we designated strategic  human capital management as a governmentwide, high-risk area in  January 2001, and it was also placed at the top of the President’s  Management Agenda in August 2001. In addition, OMB and OPM have  made efforts to improve human capital management and strategic  workforce planning.
subsections: section_title: Critical Elements in Workforce Planning
paragraphs: The goal of strategic workforce planning is to ensure that the right people  with the right skills are in the right place at the right time. Agency  approaches to workforce planning can vary with their particular needs and  missions. Nevertheless, looking across existing successful public and  private organizations, certain critical elements recur as part of a  workforce plan and workforce planning process. Although fluid, this  process starts with setting a strategic direction that includes program  goals and strategies to achieve those goals and flows through the critical  elements to evaluating the workforce plan. Figure 1 uses a simple model to  show these critical elements and their relationships to the agency’s overall  strategic direction and goals.
Before developing a workforce plan, an agency first needs to set a  strategic direction and program goals. Setting a strategic direction and  program goals is part of the general performance management principles  that Congress expects agencies to follow under GPRA. A workforce plan  should be developed and implemented to help fulfill the strategic direction  and program goals. The critical elements of what this plan should include  and how it should be developed follow.
Involvement of management and employees: Involving various staff  (from the top to the bottom) cuts across the other critical  elements. Involving staff in all phases of workforce planning can  help improve the quality of the plan because staff are directly  involved with the daily operations. Further, vetting proposed  workforce strategies to management and those most affected by  those decisions can build support for the plan and facilitate  obtaining the resources needed to implement the plan and meet  program goals. Establishing a communication strategy that  involves various staff can create shared expectations and a clear  reporting process about the workforce plan.
Workforce gap analysis: Analyzing whether gaps exist between the  current and future workforce needed to meet program goals is  critical to ensure proper staffing. The workforce plan should assess  these gaps, to the extent practical, in a fact-based manner. The  absence of fact-based analyses can undermine an agency’s efforts  to identify and respond to current and emerging challenges. Thus,  the characteristics of the future workforce should be based on the  specific skills and numbers of staff that will be needed to handle  the expected workload. The analysis of the current workforce  should identify how many staff members have those skills and how  many are likely to remain with the agency over time given  expected losses due to retirement and other attrition. The  workforce gap analyses can help justify budget and staffing  requests by connecting the program goals and strategies with the  budget and staff resources needed to accomplish them.
Workforce strategies to fill the gaps: Developing strategies to  address any identified workforce gaps creates the road map to  move from the current to the future workforce needed to achieve  the program goals. Strategies can involve how the workforce is  acquired, developed and trained, deployed, compensated,  motivated, and retained. Agencies need to know their flexibilities  and authorities when developing the strategies, and to  communicate the strategies to all affected parties.
Evaluation of and revisions to strategies: Evaluating the results of  the workforce strategies and making any needed revisions helps to  ensure that the strategies work as intended. A key step is  developing performance measures as indicators of success in  attaining human capital goals and program goals, both short- and  long-term.  Periodic measurement and evaluation provides data for  identifying shortfalls and opportunities to revise workforce plans  as necessary. For example, an evaluation may indicate whether  the workforce plan adequately considered barriers to achieving the  goals, such as insufficient resources to hire and train the full  complement of staff identified as necessary by the workforce gap  analysis.
Across the critical elements of a workforce plan, data collection and  analysis provide fundamental building blocks. Having reliable data is  particularly important to doing the workforce gap analysis. Early  development of the data provides a baseline by which agencies can  identify current workforce problems. Regular updating of the data enables  agencies to plan for improvements, manage changes in the programs and  workforce, and track the effects of changes on achieving program goals.
section_title: Status of Workforce Planning at IRS
paragraphs: IRS issued an Internal Revenue Manual (IRM) section for internal review  and comment in March 2003, and IRS expects to finalize it in June 2003.  The section outlines a strategic workforce planning system and model, and  discusses the roles and responsibilities of IRS and its divisions in this  system.
For example, IRS is to be responsible for developing the strategic  workforce plan across IRS and for analyzing current and future workforce  needs. The divisions are to be responsible for providing requested data to  IRS’s workforce planning office and for translating the IRS-wide plan into  their operations. Thus, a strategic workforce plan for a unit within a  division could be developed by IRS, the division, or the unit. If developed  by the division or unit, the workforce plan is to be consistent with IRS- wide strategic and workforce plans.
section_title: Objective, Scope, and Methodology
paragraphs: Our objective was to determine whether TEC has a workforce plan that  conforms to the critical elements for what should be in a plan and how it  should be developed and implemented. To meet this objective, we  reviewed human capital literature--including OPM’s Human Capital  Assessment and Accountability Framework--as well as workforce  planning models at OPM, OMB, and IRS, among others; reviewed TIGTA and GAO reports on human capital and workforce  planning; reviewed IRS and SB/SE documents on their strategic program plans,  the plan that guided TEC’s creation and initial staffing, and the annual  TEC staffing plan as well as IRS’s draft IRM section on strategic  planning and workforce analyses (section 6.251) as of March 2003; and interviewed SB/SE and TEC officials on their goals, strategies, and  staffing plans as well as IRS and SB/SE Workforce Council officials to  determine their purposes, activities, time lines, and challenges.
We conducted our work at IRS and SB/SE headquarters from February  2003 through April 2003 in accordance with generally accepted  government auditing standards. We did not attempt to analyze the  adequacy of any analyses done to develop a workforce plan for TEC or the  program goals and strategies.  The Commissioner of IRS provided  comments on a draft of this report, which are discussed in the “Agency  Comments and Our Evaluation” section and are reprinted in appendix I.
section_title: TEC Has Not Had a Strategic Workforce Plan and Questions Remain on How This Plan Will Be Developed and Implemented
paragraphs: Since its inception in October 2000, TEC has operated with short-term  staffing plans that do not meet the critical elements of what a strategic  workforce plan should include and how it should be developed. IRS and  SB/SE are taking steps to develop a strategic workforce plan that will  include TEC. However, questions remain about how the critical elements  will be developed and implemented for TEC.
subsections: section_title: TEC Does Not Have a Workforce Plan That Includes the Critical Elements
paragraphs: TEC does not have a strategic workforce plan that includes the critical  elements, such as analyses of the workforce gaps and strategies. Without  such a workforce plan, TEC has less assurance that it has the necessary  workforce to meet its current program goals and to manage changes in its  programs and goals. IRS and SB/SE officials said that TEC does not have a  strategic workforce plan because of the effort in creating the division and  its units such as TEC to meet SB/SE taxpayer needs. These officials said  this effort has been a significant undertaking, which delayed the  workforce planning. SB/SE officials also said that they needed to have  some experience with TEC as a new unit and some data on its new TEC  workforce before developing a strategic workforce plan for TEC.
Since its inception, TEC has operated under two types of staffing plans  that did not use the critical elements of a workforce plan. One plan was  developed prior to TEC’s creation in October 2000 to guide the hiring and  allocation of 1,209 full-time positions for TEC. The other plan annually  allocates the number of TEC staff to its various locations, functions (e.g.,  partnership outreach or marketing service) and four priorities (e.g.,  combat abusive tax schemes and promote electronic filing). Although both  plans reflect analyses of the number of TEC staff by location, these plans  did not address what a TEC workforce plan should include under the  critical elements. For example, the plans did not identify any gaps in the  workforce needed, any strategies to fill the gaps, or any measures for  evaluation purposes.
section_title: IRS and SB/SE Are Developing a Workforce Plan for TEC, but Questions Remain
paragraphs: Recognizing the need for workforce planning, both IRS and SB/SE are  developing strategic workforce plans and a planning process for TEC and  other IRS entities that broadly reflect the critical elements. However,  questions remain because of the lack of details on how any workforce plan  for TEC will address the critical elements.
IRS and SB/SE each convened workforce planning councils, consisting of  executives and human capital managers, to oversee the development of a  strategic workforce plan that would include TEC. IRS started its council in  the fall 2001 at the direction of the IRS commissioner. SB/SE started its  council in February 2003 to create a more detailed workforce plan for TEC  and its other units than would be provided in the IRS-wide plan.
Our review of IRS and SB/SE documents showed that they both intend to  use the critical elements of strategic workforce planning. These  documents include models and discussion that reference the critical  elements. For example, these models refer to elements such as analyzing  the gap in the workforce and developing strategies to reduce the  workforce gap.
Although IRS and SB/SE are taking steps to develop a strategic workforce  plan for TEC, these steps have not yet produced enough details to specify  how the critical elements will be developed and implemented for TEC. IRS  and SB/SE officials said that they recognize the need to further define how  the strategic workforce plan will be developed and implemented over  time.
For example, the degree to which top management and employees will be  involved in developing and implementing the workforce plan for TEC is  not yet clear. The draft IRM section refers to their involvement but does  not provide details on the extent and nature of their involvement.
As for identifying any workforce gaps at TEC, it is not clear what analyses  will be done. As of April 2003, neither IRS nor SB/SE has analyzed the type  of TEC workforce needed in the future to meet program goals or the skills  of the current TEC workforce. Both types of analyses are needed to  determine the gap between the current TEC workforce and the workforce  needed in the future. Nor is it clear how and when these analyses will be  done. SB/SE officials said that given resource limitations, they have not  done the necessary workforce analyses for TEC or developed an  implementation schedule for when the analyses would be done.
As of April 2003, IRS or SB/SE analyses have dealt with other workforce  issues. While useful, the analyses do not address the TEC workforce gap in  terms of the skills needed now or in the future to meet program goals,  particularly newer ones such as promoting electronic filing or negotiating  voluntary compliance agreements. For example,  IRS has analyzed 12 mission-critical positions in terms of potential  losses (e.g., retirement) from the current number of positions. These  analyses have not focused on TEC because the analyses, as well as the  eventual IRS-wide workforce plan, are intended to be done at a high  level with minimal references to TEC.
SB/SE asked officials in TEC and its other units in February 2003 to  use a checklist to self-assess their current workforce and planning  capabilities against OPM criteria. SB/SE has not indicated how it will  verify and use the subjective check marks made by the officials to  determine workforce gaps in TEC, particularly in skills needed.
No analyses have been provided to justify plans for fiscal year 2004 to  hire 250 additional staff in TEC to combat abusive tax schemes and to  not hire any additional staff to address three other TEC goals. IRS and  SB/SE workforce officials had told us that the 250 staff estimate came  from the budget and finance staff in SB/SE. In a subsequent meeting  during May 2003, TEC and SB/SE officials said that IRS has decided  against any staff expansion in TEC due to other budget  considerations.
Finishing the analyses of TEC workforce gaps is important for the rest of  the workforce plan. The other two critical elements involving strategies  and evaluation cannot be finished until IRS and SB/SE know the specific  needs of the current and future TEC workforces.
As IRS and SB/SE officials develop and implement a workforce plan for  TEC, major challenges are likely to arise. For example, these officials cited  the challenge of balancing daily operational demands with the capacity to  forecast workforce needs in terms of staff numbers, skills, and locations.  Another challenge is gathering reliable data on the attrition, retirement,  and skills of the current workforce to do analyses that are critical to  workforce planning. IRS and SB/SE officials also pointed to budget  fluctuations that could limit their strategies to close gaps in the workforce  needed by TEC over time. For example, the budget may be insufficient to  replace losses of TEC workforce skills due to retirement. Finally, they said  that if the workforce plan could adversely affect current TEC employees,  dealing with employee unions to address the concerns could be a  challenge. We have reported on these and other challenges that any  agency faces in doing successful workforce planning.
section_title: Conclusions
paragraphs: As discussed in our previous reports, and echoed by OPM and OMB  guidance, a strategic workforce plan enables an agency to identify gaps in  its current and future needs, select strategies to fill the gaps, and evaluate  the success of the plan to make revisions that may be needed to better  meet program goals. Such a workforce plan does not yet exist for TEC.  Without such a plan, TEC is less likely to have the right number of staff  with the right skills in the right places at the right time to address its  priorities. Further, it is difficult to justify budget and staffing requests if  the workforce needs are not known.
IRS and SB/SE have started taking steps to develop a strategic workforce  plan for TEC based on the critical elements under OPM and OMB  guidelines, and our guidelines for what a plan is to include and how it is to  be developed and implemented. However, IRS and SB/SE have not yet  identified many details on how the plan for TEC will incorporate the  elements. Without these details, we cannot be certain that the critical  elements will be used and contribute to the program goals.
section_title: Recommendation for Executive Action
paragraphs: Given the uncertainty on how the workforce plan for TEC will be  developed and implemented, we recommend that the Commissioner of  Internal Revenue ensure that the workforce plan for TEC be developed in  conformance with the critical elements for what a plan should include and  how a plan should be developed and implemented.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this report from IRS. The  Commissioner of Internal Revenue provided written comments in a letter  dated May 28, 2003. (See appendix I.)  These comments neither explicitly  agreed nor disagreed with our recommendation to ensure that a workforce  plan for TEC is developed in conformance with the critical elements of  what a plan should include and how it should be developed and  implemented.
The Commissioner did say that IRS strongly endorses the development of  a strategic workforce plan and that IRS has made progress on this effort,  listing eight steps that have been taken. The Commissioner also said that  the steps were a set of integrated strategies that reflect IRS’s commitment  to improve its workforce planning efforts and that they addressed the  issues raised in our report. To the extent that IRS had told us about how  these steps contributed to a workforce plan for TEC, our report discusses  them when we describe IRS’s efforts to create such a plan using the  critical elements.  Although we believe that these steps are useful, we  made our recommendation because we did not see enough details to be  assured that a workforce plan for TEC would be sufficiently developed  and implemented in accordance with the critical elements.
We are encouraged that IRS strongly endorses development of a strategic  workforce plan.  We look forward to seeing a workforce plan for TEC.
As we agreed with your staff, unless you publicly release the contents of  this report earlier, we will not distribute it until 30 days after its issue date.   At that time, we will send copies of this report to the Ranking Minority  Member of the Senate Committee on Small Business and  Entrepreneurship. We will also send copies to the Commissioner of  Internal Revenue and other interested parties. We will make copies  available to others on request. In addition, the report will be available at  no charge on the GAO Web site at http://www.gao.gov.
This report was prepared under the direction of Thomas Short, Assistant  Director. Other major contributors include Catherine Myrick and Grace  Coleman. If you have any questions or would like additional information,  please contact me at (202) 512-9110 or brostekm@gao.gov or Thomas  Short at (202) 512-9110 or www.shortt@gao.gov.
section_title: Appendix I: Comments from the Internal Revenue Service
paragraphs: This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.