Tax Administration: IRS and TIGTA Should Evaluate Their Processing of Employee Misconduct under Section 1203
Published: 2003-02-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Section 1203 of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 outlines conditions for firing IRS employees for any of 10 acts of misconduct covering taxpayer and employee rights and tax return filing requirements. Both IRS and the Treasury Inspector General for Tax Administration (TIGTA) have responsibilities related to section 1203. Because of concerns that section 1203 may have a chilling effect on IRS enforcement staff's productivity, GAO (1) determined the number of section 1203 allegations, (2) surveyed IRS employee perceptions about section 1203, and (3) identified problems IRS and TIGTA face in processing section 1203 cases and the extent to which they have addressed them.
section_title: What GAO Found
paragraphs: IRS data show that of the 3,970 section 1203 allegations IRS received from July 1998 through September 2002, IRS or TIGTA completed investigations on 3,512 allegations and substantiated 419 as violations, resulting in 71 employees being fired for section 1203 misconduct. Employee misconduct related to the two section 1203 provisions on whether employees filed their tax returns on time and accurately stated their tax liability (as opposed to the eight taxpayer and employee rights provisions) accounted for almost all of the violations and firings. Most of the IRS frontline enforcement employees who responded to GAO's survey said that they understood, but feared, section 1203. They also reported that, because of section 1203, their work takes longer and the likelihood of their taking an enforcement action, such as recommending a seizure, has decreased. However, employees also were more likely to say that other factors, such as IRS's reorganization, have had a greater impact on their ability to do their job than to say that section 1203 had a greater impact. IRS and TIGTA have taken steps intended to correct known problems in their processing of section 1203 employee misconduct cases--such as lengthy investigations and conflicts of interest during investigations--that may have negatively affected frontline employees' morale and productivity. However, the extent to which these steps have succeeded is unknown because IRS and TIGTA do not have a coordinated approach for evaluating how effectively they process section 1203 cases. Such an approach would include results-oriented goals, balanced performance measures to mark progress towards these goals, and means to collect performance data.

section_title: Letter
paragraphs: On July 22, 1998, the Congress enacted the Internal Revenue Service  Restructuring and Reform Act (Restructuring Act) to balance the Internal  Revenue Service’s (IRS) responsibility to collect taxes with its  responsibility to protect the rights of taxpayers and serve the public. One  provision of the Restructuring Act, section 1203, defines 10 specific acts or  omissions for which an IRS employee may be fired during the performance  of official duties. Such acts or omissions include harassing a taxpayer,  taxpayer representative, or other IRS employee, or IRS employees not  complying with their tax obligations; they are investigated on the basis of  allegations made by taxpayers (or taxpayer representatives) or IRS  employees. Both IRS and the Treasury Inspector General for Tax  Administration (TIGTA) have responsibilities for receiving and  investigating such allegations under section 1203 while IRS has the  responsibility for adjudicating violations of section 1203.
The IRS Commissioner and others have asserted that section 1203 has had  a negative impact on IRS employees’ morale and effectiveness. In  particular, they have indicated that section 1203 has had a “chilling effect”  on IRS frontline enforcement employees who are afraid to take certain  appropriate enforcement actions, contributing to recent declines in IRS’s  enforcement activities. In addition, IRS officials acknowledge that aspects  of the process for receiving, investigating, and adjudicating section 1203  allegations (which we refer to as the “section 1203 process”), such as long  case processing times, may have contributed to employees’ fears.
In light of the assertions about possible chilling effects, you asked us to  assess the implementation of section 1203. Specifically, as agreed with  your offices, our objectives were to (1) determine the number, type, and  disposition of section 1203 allegations; (2) determine IRS frontline  enforcement employees’ perceptions of how section 1203 has affected  their interactions with taxpayers; and (3) identify what problems, if any,  IRS and TIGTA have encountered in processing section 1203 cases and the  extent to which they have addressed them. We did not attempt to measure  the effectiveness of section 1203, or whether its perceived impacts were  beneficial or harmful. (See our scope and methodology section for details  on our approach.)
To determine the number, type, and disposition of section 1203  allegations, we analyzed IRS data for July 1998 (when section 1203 took  effect) through September 2002. To determine IRS frontline enforcement  employees’ perceptions of section 1203, we surveyed a random sample of  audit and collection employees—revenue agents, revenue officers, tax  auditors, and tax compliance officers. To identify any problems in the  section 1203 process and the extent to which they have been addressed,  we reviewed the policies and procedures for processing section 1203 cases  and interviewed responsible officials from IRS and TIGTA.
subsections: section_title: Background
paragraphs: As part of the Restructuring Act, the Congress enacted section 1203, which  provides for the firing of IRS employees who have been proven to commit  any of 10 acts or omissions in the performance of their official duties,  unless a mitigated penalty is appropriate. These 10 acts or omissions,  which are shown below, can be divided into 2 that relate to IRS  employees’ tax compliance in filing tax returns and reporting tax liability,  and 8 that relate to employee and taxpayer rights. Specifically, these acts  or omissions are  (1) willful failure to obtain the required approval signatures on documents  authorizing a seizure of a taxpayer’s home, personal belongings, or  business assets;  (2) providing a false statement under oath with respect to a material  matter involving a taxpayer or taxpayer representative;  (3) violating the rights protected under the Constitution or the civil rights  established under six specifically identified laws with respect to a  taxpayer, taxpayer representative, or other employee of the IRS;  (4) falsifying or destroying documents to conceal mistakes made by any  employee with respect to a matter involving a taxpayer or taxpayer  representative;  (5) assault or battery of a taxpayer, taxpayer representative, or employee  of the IRS, but only if there is a criminal conviction, or a final judgment by  a court in a civil case, with respect to the assault or battery;  (6) violating the Internal Revenue Code, Department of Treasury  regulations, or policies of the IRS (including the Internal Revenue Manual)  for the purpose of retaliating against, or harassing, a taxpayer, taxpayer  representative, or other employee of the IRS;  (7) willful misuse of the provisions of section 6103 of the Internal  Revenue Code for the purpose of concealing information from a  congressional inquiry;  (8) willful failure to file any return of tax required under the Internal  Revenue Code on or before the date prescribed therefore (including any  extensions), unless such failure is due to reasonable cause and not to  willful neglect;  (9) willful understatement of federal tax liability, unless such  understatement is due to reasonable cause and not to willful neglect; and  (10) threatening to audit a taxpayer for the purpose of extracting personal  gain or benefit.
The Restructuring Act provided the Commissioner with sole discretion,  which he cannot delegate, to determine whether to take a personnel action  other than firing an employee (i.e., mitigation) for a section 1203 violation.  Such determination may not be appealed in any administrative or judicial  proceeding.
The process for receiving, investigating, and adjudicating section 1203  allegations involves TIGTA and IRS. Under the section 1203 process,  revised in March 2002, TIGTA has primary responsibility for receiving and  investigating the allegations, except for those that IRS receives and  investigates. For example, IRS’s Employee Tax Compliance (ETC) unit,  using a computer match, has primary responsibility for identifying and  investigating employee tax compliance issues. Also, IRS’s Office of Equal  Employment Opportunity (EEO) is to analyze EEO settlement agreements,  findings of discrimination, and taxpayer complaints of discrimination to  identify whether a potential section 1203 civil rights violation exists. IRS  is responsible for adjudicating all section 1203 allegations that are  substantiated as violations.
Generally, each allegation of a potential section 1203 violation must be  initially evaluated to determine whether it merits a full investigation. Then,  if an investigation of an allegation uncovers sufficient facts to substantiate  it (i.e., support a section 1203 violation), the employee is to be issued a  letter notifying him or her of the proposed firing from IRS. The employee  has a right to respond to the letter. Afterwards, if the deciding official  determines that the evidence sustains the alleged violation, a board  established by the IRS Commissioner must review the case to determine  whether a penalty less than firing is appropriate. If the board does not find  mitigation to be appropriate, the case is not submitted to the IRS  Commissioner and the employee is fired. If the board recommends  mitigation, the Commissioner must consider it. If the Commissioner  mitigates the penalty, other disciplinary actions, such as counseling,  admonishment, reprimand, or suspension may be applied. Details on the  process are provided in appendix V.
According to IRS senior management, the misconduct addressed in  section 1203 has always been regarded as serious and subjected to  disciplinary action. Prior to the enactment of section 1203, the general  rules for imposing discipline required a deciding official to consider a wide  range of factors in arriving at the appropriate disciplinary action.  Enactment of section 1203 eliminated the variation in penalty for  substantiated misconduct, requiring the employee to be fired unless the  Commissioner mitigates that penalty.
The IRS Commissioner has expressed concerns over the appropriateness  of the mandatory firing penalty, especially when an IRS employee had  already paid his or her tax liability or when the allegation involves just IRS  employees. To address the concerns, IRS, through the Department of the  Treasury, is seeking legislation to amend section 1203 by eliminating this  penalty for (1) the late filing of tax returns for which a refund is due and  (2) action by IRS employees that violate another employee’s rights. In  addition, IRS requested that the Commissioner be able to use a range of  penalties aside from firing employees, for the types of misconduct under  section 1203. Further, because of the associated seriousness and  sensitivity over privacy issues, IRS also asked that the unauthorized  inspection of returns or return information be added to the list of  violations under section 1203.
section_title: Scope and Methodology
paragraphs: To determine the number, type, and disposition of section 1203  allegations, we analyzed data from IRS’s Automated Labor and Employee  Relations Tracking System (ALERTS) database as of September 30, 2002.  The data included all section 1203 cases that had originated in IRS, as well  as some cases that originated in TIGTA and were either investigated or  referred to IRS for investigation or adjudication. On the basis of IRS  information on its quality control checks of the data, the use of the data,  and our review of the database, we determined that the data were  sufficiently reliable to determine the number, type, and disposition of  section 1203 allegations.
To determine IRS employees’ perceptions of how section 1203 has affected  their interactions with taxpayers, we surveyed a stratified random sample  of IRS frontline enforcement employees nationwide. Those audit or  collection employees included revenue agents, revenue officers, tax  compliance officers, and tax auditors from IRS’s Small Business and Self- Employed Division (SB/SE). We asked questions about their  understanding and perceptions of section 1203 and its impacts on their  jobs. We sent the survey to 455 eligible frontline enforcement employees,  of which 350 responded via regular mail, fax, or the Internet between July  and September 2002, for a response rate of 77 percent. We also did a  content analysis of written comments volunteered by 208 respondents to  arrive at a limited number of content categories. A copy of the survey  instrument and a summary of the content categories are included in  appendixes III and IV.
To identify what problems, if any, IRS and TIGTA have encountered in  processing section 1203 cases and the extent to which they have  addressed them, we reviewed IRS’s and TIGTA’s policies and procedures  for receiving, investigating, and adjudicating section 1203 allegations. We  also interviewed IRS and TIGTA officials who are responsible for the  section 1203 process. In addition, we reviewed a study done by IRS,  TIGTA, and a private consulting firm to streamline the section 1203  process, and discussed the study with their officials. To understand the  process and gauge the length of time that section 1203 cases take to  process, we reviewed 92 of the 100 most recently closed cases as of  August 30, 2002, according to IRS’s ALERTS database; in 5 cases, the files  could not be located for employees who retired or otherwise left IRS and   3 cases were duplicates. We recorded dates and decisions for various  stages of the process.
We did not attempt to measure the effectiveness of section 1203 and  whether its impacts on IRS employees were positive or negative. Appendix  I contains more detailed information on our survey design and  administration and case file review approaches. We conducted our review  in Washington, D.C., from November 2001 to December 2002 in  accordance with generally accepted government auditing standards.
section_title: Few Section 1203 Allegations Were Substantiated and Resulted in an Employee’s Firing, Except for Those Involving Compliance with Federal Tax Laws
paragraphs: IRS data show that, with the exception of employees’ tax compliance  provisions, few of the 3,970 section 1203 allegations received between July  1998 and September 2002 were substantiated as violations of section 1203  and resulted in an employee’s firing. Table 1 shows what happened to the  3,970 allegations in terms of completed investigations, substantiated  allegations, and firings.
Table 1 shows that IRS or TIGTA had finished investigating 3,512  allegations and substantiated 419 as violations, for which IRS fired 71  employees. Of the other 348 violations, IRS’s Commissioner mitigated the  penalty for 166; the employees resigned or retired for 117; the employees  were fired on other grounds or during their probationary period for 33; and  IRS had not finalized the decision for another 32. Appendix II shows the  dispositions of all 419 violations by type of section 1203 misconduct and  the grade level of the 71 fired employees.
Table 1 also shows that most of the violations and related firings involved  the two tax compliance provisions of section 1203. The failure to file tax  returns on time and the understatement of federal tax liability accounted  for 388 of the 419 violations (93 percent) and 62 of the 71 firings (87  percent). The rest of the violations and related firings involved the  remaining 8 provisions, which deal with employee and taxpayer rights. IRS  officials said that the bulk of the violations and firings involved the two tax  compliance provisions of section 1203 because IRS has a systemic  computerized process to identify and evaluate potential employee tax  compliance issues. Further, according to officials, these issues generally  are more factually based and involve clearer indicators of misconduct.
To understand why 3,093 investigated allegations were not substantiated,  we analyzed IRS data and talked with IRS officials. As shown in appendix  II, 800 of these investigated allegations were not substantiated as section  1203 violations but were substantiated as misconduct violations unrelated  to section 1203. Of those remaining, 1,549 involved allegations of  retaliation and harassment of a taxpayer, taxpayer representative, or IRS  employee. Although IRS had not done a systematic analysis, IRS officials  offered possible reasons why these investigated allegations could not be  substantiated as section 1203 violations. These officials said that many  were not credible. For example, the officials cited cases in which a  taxpayer representative routinely lodged allegations whenever  enforcement employees contacted clients. Another cited example was  when taxpayers’ allegations had more to do with their protests about  having to meet their tax obligations.
section_title: Most Employees Believed That They Understood but Feared Section 1203, and That It Was One of Several Factors Affecting Their Work
paragraphs: Our survey indicated that most frontline enforcement employees  understood but feared section 1203, and that, because of section 1203,  their work takes longer and the likelihood of their recommending a seizure  decreased. Otherwise, employees’ reported views were not as strong on  the impacts of section 1203 on other audit or collection activities. At the  same time, many employees said that, other factors, such as IRS’s  reorganization, have had a greater impact on their ability to do their jobs  than section 1203.
subsections: section_title: Most Frontline Enforcement Employees Said They Understand the Types of Section 1203 Misconduct
paragraphs: The overwhelming majority of frontline enforcement employees reported  that they understood the types of misconduct covered by section 1203.  Figure 1 shows that for 9 of the 10 provisions, at least three-quarters of the  employees said they had a very or generally clear understanding of  misconduct under section 1203. For the provision on the misuse of section  6103 to conceal information from a congressional inquiry—about   68 percent of the employees said they had a very or generally clear  understanding of misconduct covered by section 1203.
In addition, an estimated 48 percent of the employees said that IRS had  provided, to a very great or great extent, clear examples of what  constitutes harassment or retaliation under section 1203. Only about   7 percent said that IRS provided such examples to little or no extent.
section_title: Most Frontline Enforcement Employees Reported Fears Associated with Section 1203
paragraphs: The majority of employees reported fears associated with section 1203. As  shown in figure 2, at least two-thirds reported that they were somewhat or  very fearful of having a taxpayer file an allegation and being investigated.  Almost as many said they were somewhat or very fearful of being fired.
Written comments, while not representative of all respondents, provide  some insights on employees’ fears. For example, several employees  described fears of being falsely accused by a taxpayer while others noted a  fear of being investigated for making an honest mistake. A number of  employees expressed more general fears of section 1203. For example, one  employee wrote, “I acknowledge that my fears may be irrational, and I  would hope that the system would work as it is designed. I could envision  a complaint (unfounded, I would hope) being filed, and the resulting  anxiety would be overwhelming.”
Further, the survey revealed that most frontline enforcement employees  had little or no confidence in the disciplinary process for section 1203. For  example, an estimated 50 percent of the employees said they are not at all  confident and 18 percent reported that they had little confidence that they  will not be disciplined for making an honest mistake.
IRS officials said that they believe the fear and distrust of section 1203 is  pervasive among all types of frontline enforcement employees. However,  they indicated that those most affected and concerned are revenue officers  who have face-to-face contacts with delinquent taxpayers.
section_title: Many Frontline Enforcement Employees Reported That Section 1203 Contributes to Work Taking Longer and a Decline in Seizure Activity
paragraphs: Many frontline enforcement employees perceived that section 1203  contributed to work taking longer and to a decline in seizure activity.  Otherwise, employees reported views that were not as strong on the  impacts of section 1203 on other frontline enforcement activities, such as  those associated with audits or collections.
Such perceptions are important because IRS management believes that  declines in enforcement activities since 1998 resulted, in part, from  employees’ reluctance to use enforcement tools due to section 1203 fears.  Our survey results on employees’ perceptions of changes in job behavior  are broadly correlated with actual declines in enforcement activities, such  as seizures. However, this broad correlation should be interpreted with  caution because employee perceptions do not necessarily demonstrate  causation and section 1203 is unlikely to be the only reason for the decline  in enforcement activity. Further, any changes in enforcement activity  could be positive or negative, depending on whether the activity was  merited.
One job behavior that employees reported being affected by section 1203  was the time spent to do their work. An estimated 80 percent of frontline  enforcement employees said that work took longer as a result of section  1203. Some written comments helped to illustrate why employees  believed their work takes longer. For example, one employee wrote, “[I  am] more cautious  more time to avoid harassment  allegations.” Another said, “the greatest impact  has been  on the amount of time necessary to work a case—ensuring that taxpayer  rights are made clear and protected through every step.”
In addition, many employees responsible for collections, such as issuing  seizures, liens, and levies, said that section 1203 has affected how they do  their jobs. As figure 3 shows, an estimated 67 percent of the collection  employees said that the likelihood of their recommending a seizure of  taxpayer assets to satisfy a tax debt had decreased (including somewhat  or greatly); reported views were not as strong on the likelihood of  recommending a levy or lien decreasing.
The written comments helped to illustrate why collection employees said  they were less likely to take collection actions. Several employees  indicated that they second-guess their decisions as a result of section 1203.  One employee wrote, “ has forced me to doubt my own  judgment on enforcement matters, especially . . . where some issues are  vague and the collection officer has to use his or her judgment.” Another  employee noted, “ 1203 has made me hesitant to take any action  and has slowed work progress since each and every action has the  potential to create a section 1203 violation. There is so much information  that we are responsible to know and any act, willful or not, can result in a  disciplinary action.”
Employees reported views that were not as strong on the impacts of  section 1203 on other frontline enforcement activities. For example, figure  4 shows that except for one action—contacting a third party—roughly half  or more than half of the employees reported that section 1203 had no  impact on the likelihood of their taking actions that can be associated with  audits such as requesting, reviewing, or questioning documents submitted  by taxpayers.
section_title: Many Employees Said That IRS’s Reorganization and Tax Law Changes Have Had a Greater Impact on Their Ability to do Their Jobs Than Section 1203
paragraphs: Many IRS frontline enforcement employees also reported that IRS’s  reorganization and tax law changes have had a greater impact on their  ability to do their jobs than section 1203.  As shown in figure 5, a higher  percentage of employees reported that IRS’s reorganization and tax law  changes have had a greater impact rather than a lesser impact on their  ability to do their jobs compared to section 1203.
Some written comments indicated employee’s perceptions on how the  other factors had an effect on their ability to do their jobs. For example,  one employee wrote, “The restructuring has created areas where there is  no accountability. Frontline employees have nowhere to go when not  receiving services, as the person providing the service is in a different  division . . . .” Another wrote, “The ongoing complex tax law changes in  conjunction with the threat of losing your job (under section 1203) if you  don’t correctly implement all of the changes is what greatly impacts our  ability to do the job.”
IRS officials indicated that the impacts of section 1203 on employees  cannot be isolated from those of such factors as IRS’s reorganization and  tax law changes because they are interrelated. For example, the officials  said that section 1203 itself is part of the reorganization and is a tax law  change that some view as complex.
section_title: Most Frontline Enforcement Employees Said Section 1203 Has Had Some Impact in Promoting Employee Accountability and Respect for Taxpayer Rights
paragraphs: As figure 6 shows, we estimate that at least 60 percent of the enforcement  employees perceived section 1203 as promoting some degree of employee  accountability and respect for taxpayer rights. We also estimate that about  30 percent of the employees perceived section 1203 as doing little or  nothing to promote accountability or respect for taxpayer rights.
Some written comments indicated ways that employees perceived section  1203 as promoting employee accountability and respect for taxpayer  rights. One employee wrote, “These changes were needed and . . . it has  been a change for the better and hopefully has increased our trust and  faith in the general public, our clients, the taxpayers.” Another employee  noted, “Section 1203 make IRS employees accountable and promotes  respect for taxpayers . . . .”
In other written comments, however, some employees offered their  perceptions of how section 1203 did little or nothing to promote employee  accountability or to promote taxpayer rights. For example, one employee  wrote, “Employees who safeguard taxpayers’ rights are those who would  have anyway—section 1203 did not affect that.” Another noted, “We have    . . . always been aware of and made every effort to respect the taxpayer’s  rights.  1203 does not enhance taxpayer’s rights or . . . efforts to  ensure those rights are honored.”
section_title: IRS and TIGTA Have Taken Steps Intended to Improve the Section 1203 Process, but Extent of Progress is Unknown
paragraphs: IRS and TIGTA have taken steps intended to correct known problems,  such as lengthy investigations and conflicts of interest during  investigations, that may have reduced the effectiveness of the section 1203  process as well as the morale and productivity of enforcement employees.  However, the extent to which these steps have succeeded is unknown  because IRS and TIGTA have not coordinated on an approach for  evaluating the section 1203 process on the basis of consistent types of  results-oriented goals, measures, and performance data. Until IRS and  TIGTA develop a coordinated approach to ensure consistent and valid  evaluation, they cannot determine the effectiveness of the entire section  1203 process or any changes to it.
subsections: section_title: IRS and TIGTA Made Changes to Address Problems with the Section 1203 Process
paragraphs: IRS and TIGTA made changes to address problems with the process for  receiving, investigating, and adjudicating section 1203 allegations. IRS  initially identified some of these problems through a limited review to  check employee concerns that section 1203 cases were not being resolved  in a timely manner. The review revealed that, on average, IRS  investigations took over 200 days and TIGTA investigations took over   300 days. In October 2001, IRS and TIGTA initiated a more  comprehensive study to assess the causes of lengthy processing times and  identify other problems associated with the process for receiving,  investigating, and adjudicating section 1203 cases. A team of IRS, TIGTA,  and private consulting firm officials did the study, which resulted in  recommendations to reengineer the process to improve performance. The  team issued a final report in January 2002.
The team identified several problems with the section 1203 process, such  as cases changing hands frequently within and between IRS and TIGTA  and use of multiple and inconsistent procedures for processing section  1203 allegations. The team developed recommendations to correct the  problems and improve the section 1203 process. On the basis of the  recommendations, IRS implemented some changes in March 2002.
Table 2 lists the problems identified by the team, its recommended  actions, and actions taken.
Although many of the team’s recommendations were implemented, some  were not implemented or were modified. IRS and TIGTA officials said that  modifications resulted because both agencies agreed, after the  recommendations were developed, that TIGTA would be more involved in  screening and investigating most allegations.
For example, IRS modified the recommendation to create a BEPR that  would receive section 1203 allegations, determine their investigative merit,  and oversee the section 1203 process. IRS had created BEPR to handle  these duties because IRS and TIGTA had not agreed on the extent of  TIGTA’s involvement. By the time that the new process was implemented,  IRS and TIGTA had agreed that TIGTA would handle allegations for  section 1203, with some exceptions. As a result, BEPR’s responsibility  was limited to determining the merit of only those allegations forwarded  to it by TIGTA and did not include oversight of the whole section 1203  process. IRS officials said that having two independent agencies  responsible for different parts of the section 1203 process complicates  having one agency responsible for overseeing the other agency.
Rather than creating a centralized database, IRS and TIGTA officials  described plans to modify an existing database to allow certain section  1203 data to be downloaded and shared between IRS and TIGTA. To do  this, IRS has hired a contractor to develop such integrated data sharing.  IRS officials said they plan to begin testing and implementing this new  system sometime in 2003. Both IRS and TIGTA officials said that creating a  centralized database for section 1203 cases would not be efficient or  practical since both agencies use their respective databases to track  various types of employee misconduct cases—not just those relating to  section 1203. In addition, TIGTA officials said that sharing one database  could compromise the integrity of TIGTA’s investigations, given the  sensitivity of certain case information.
IRS officials said that the study did not make specific recommendations to  address the multiple, inconsistent procedures. These officials said that  they believe that the attempts to streamline the process will help to  address these problems. For example, the new process clarifies that  TIGTA is to be responsible for receiving and investigating most section  1203 allegations. IRS reflected the new process in a revised section 1203  handbook that eliminated some criteria on making various decisions (e.g.,  mitigation). IRS officials said that they did not retain these criteria because  all IRS employees did not need such details. They indicated that they plan  to begin developing customized guidelines during early 2003 for targeted  audiences, such as labor relation specialists.
section_title: IRS and TIGTA Have Not Coordinated on an Approach for Evaluating Whether the New Section 1203 Process Corrected the Problems and Operated Effectively
paragraphs: IRS and TIGTA have not coordinated on an approach for evaluating the  section 1203 process on the basis of consistent types of results-oriented  goals, measures, and performance data. Until IRS and TIGTA develop a  coordinated approach to ensure consistent and valid evaluation, IRS and  TIGTA cannot determine the effectiveness of the entire section 1203  process or any changes to it, such as those made in March 2002.
We have issued a number of reports on the value added to agency  operations by using results-oriented goals and balanced measures to guide  and evaluate performance, avoid focusing on one aspect of performance at  the expense of others, and ensure that any changes to a program or  process are having the desired results rather than unintended  consequences.  These reports also have discussed the value of planning  evaluations of performance of a program or process early so that  arrangements can be made to ensure collection of the needed data.
IRS and TIGTA have not developed agreed-upon goals or measures for  evaluating the effectiveness of the section 1203 process or means for  collecting related performance data. For example, IRS has not established  goals or measures for timely adjudication of section 1203 cases and does  not collect information on the amount of time to adjudicate cases. To  obtain a current view on section 1203 case processing time, we analyzed  92 of the 100 most recently closed cases in IRS’s database by the end of  August 2002. Our analysis showed that the median number of days  involved in the process was 186 days and that 80 percent of the cases  ranged between 78 days and 774 days.
IRS officials said that they do not have a formal system for evaluating the  section 1203 process—including goals and measures—because IRS does  not have such a system for any of its employee disciplinary processes.  TIGTA officials indicated that TIGTA has a strategic goal of 120 days to  investigate and refer all administrative cases to IRS and a 365-day goal for  all criminal cases. Although such goals can apply to section 1203  investigations, TIGTA officials said that they have not evaluated whether  its section 1203 investigations have met these goals.
Without such performance indicators, IRS and TIGTA cannot determine  whether the new process corrected the known problems and improved the  section 1203 process as intended—that is, to reduce the number of  handoffs, shorten the processing time, and eliminate conflicts of interest.  Further, IRS and TIGTA cannot determine how effectively they process  section 1203 allegations or whether future changes to the section 1203  process will be needed.
During December 2002, IRS officials told us they plan to develop goals and  measures for evaluating all IRS disciplinary processes, including section  1203. Although they could not provide documentation on how this  evaluation system would work, they said they plan to implement the  evaluation system during fiscal year 2003. On the basis of informal  tracking, they said that they believe that the new section 1203 process has  expedited the determination of investigative merit and adjudication of  violations. They acknowledged the value of having objective data on  section 1203 and believed that this informal tracking system can be used to  help develop appropriate goals and measures for the formal evaluation  system.
section_title: Conclusions
paragraphs: The Congress included section 1203 in the Restructuring Act, in part, to  minimize certain types of IRS employee misconduct in dealing with  taxpayers. On the basis of our survey results, most IRS enforcement  employees do perceive that section 1203 has affected their behavior, such  as taking longer to work audit or collection cases and having some  reluctance to take enforcement actions. The survey results by themselves,  however, do not provide a basis for conclusions about whether section  1203 has worked or should be changed. On the one hand, their perceptions  about longer case times and a reluctance to take action are consistent with  the fear of section 1203 felt by many enforcement employees. On the other  hand, any increase in the amount of time to work cases also could result  from other impacts of section 1203 seen by employees, such as promoting  increased employee accountability and respect for taxpayer rights.  Moreover, policymakers might be willing to accept longer case times and  some fear of taking enforcement actions when merited if the tradeoff is  greater respect for taxpayer rights.
One influence on how enforcement employees perceive section 1203 is the  IRS and TIGTA process for handling section 1203 allegations. However,  our survey found widespread distrust of the process. Further, IRS and  TIGTA recognized that problems with the section 1203 process were  affecting employee morale and productivity. Consequently, they  implemented a new process in March of 2002. Evaluation of the new  process is important because of the potential impact on IRS employees  and ultimately taxpayers. While too few section 1203 cases have been  closed under the new process for an evaluation to date, IRS and TIGTA  have not developed an evaluation approach. Any evaluation of  effectiveness would have to be based on results-oriented goals and related  performance measures. Developing an approach now would help ensure  timely collection of the needed data.
section_title: Recommendations
paragraphs: We recommend that the Acting Commissioner of Internal Revenue and the  Acting Treasury Inspector General for Tax Administration coordinate on  an approach for evaluating the section 1203 process. In developing this  approach, IRS and TIGTA also should develop (1) results-oriented goals  for processing section 1203 cases, (2) performance measures that are  balanced and can be used to assess progress towards those goals, and   (3) methods for collecting and analyzing performance data related to the  goals and measures.
section_title: Agency Comments and our Evaluation
paragraphs: On February 6, 2003, the Acting Commissioner of the Internal Revenue and  the Acting Treasury Inspector General for Tax Administration each  provided written comments on a draft of this report. (See appendix VI and  appendix VII, respectively.) In general, IRS agreed with our  recommendation that a coordinated evaluation of the section 1203 process  is desirable, and TIGTA neither agreed nor disagreed with our  recommendation. However, both agencies raised a similar concern about  the independence of each agency. Specifically, IRS said that TIGTA’s  independent role makes it inappropriate for IRS to oversee TIGTA’s  performance. TIGTA pointed to legislative challenges in implementing our  recommendation because Restructuring Act amendments to the Inspector  General Act of 1978 created TIGTA as an independent agency with  autonomy from IRS.
We recognize that IRS and TIGTA are independent agencies.  As noted in  our report, this independence is why IRS and TIGTA need to coordinate on  the evaluation.  In this sense, coordination does not mean that either  agency evaluate, oversee, or direct the other agency.  Rather, coordination  means that IRS and TIGTA officials communicate on how each agency will  develop goals, measures, and methods for collecting related data to better  ensure that the entire section 1203 process is evaluated, using consistent  and valid goals and measures.
We do not believe that such coordination would jeopardize the  independence of TIGTA from IRS, particularly when IRS and TIGTA  already have been working together on managing and improving the  section 1203 process, as discussed in TIGTA’s as well as IRS’s comments.   We view our recommendation on developing a coordinated approach as  part of that continued communication. We made minor wording changes  to our recommendation in order to clarify the need for a coordinated  evaluation approach.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from the  date of this report. At that time, we will send copies to the Secretary of the  Treasury; the Acting Treasury Inspector General for Tax Administration;  the Acting Commissioner of Internal Revenue; and the Director of Office  of Management and Budget. We will make copies available to others on  request. In addition, the report will be available at no charge on GAO’s  Web site at http://www.gao.gov.
If you have any questions, please contact me or Tom Short on (202) 512- 9110. Key contributors to this report are acknowledged in appendix VIII.
section_title: Appendix I: Survey and Case File Review Methodologies
paragraphs: This appendix discusses the methodology we used to survey the Internal  Revenue Service (IRS) employees on how section 1203 affected their  interactions with taxpayers. We also discuss our methodology for a review  of IRS case files to determine how long section 1203 cases were taking to  process.
subsections: section_title: Survey Methodology
paragraphs: To determine IRS frontline enforcement employees’ perceptions of how  section 1203 has affected their interactions with taxpayers, we surveyed a  random sample of IRS frontline enforcement employees in the Small  Business/Self Employed Operating Division (SB/SE) who had direct  contact with taxpayers and taxpayer representatives. We administered the  survey between July and September 2002 to a stratified sample of IRS  employees identified through IRS’s personnel database.
subsections: section_title: Study Population
paragraphs: The study population from which the sample was drawn consisted of  10,186 SB/SE frontline enforcement employees nationwide as of June  2002. To ensure that the study population only included frontline  enforcement employees who had regular contact with taxpayers and  taxpayer representatives, IRS managers familiar with the positions  reviewed a list of titles for all positions in the GS-512 job series (revenue  agents), GS-1169 job series (revenue officers), GS-526 job series (tax  compliance officers), an GS-501 and GS-598 job series (tax auditors), and  identified position titles in these 5 series where the incumbent would have  regular contact with taxpayers and taxpayer representatives.
section_title: Sample Design
paragraphs: The sample design for this survey is a single-stage stratified sample of IRS  frontline enforcement employees in SB/SE. We drew a sample of 500  employees composed of 4 strata—revenue agents, revenue officers, tax  compliance officers, and tax auditors.
After we administered the survey, we adjusted the original survey and  sample population size because 45 respondents indicated that they did not  have contact with taxpayers and taxpayer representatives. These  respondents were considered “ineligible” to participate in our survey and  were subsequently excluded. We adjusted the final sample size to 455. We  received 350 completed responses to our survey—a response rate of   77 percent. The remaining 105 cases were considered to be  nonrespondents.
section_title: Calculation of Sample Estimates
paragraphs: All estimates produced in this report are for a study population defined as  IRS’s SB/SE frontline enforcement employees who have contact with  taxpayers and taxpayer representatives. We designed our sample to  produce precise estimates of this population on a nationwide basis. As a  result, we did not perform any analyses by stratum. Further, we created  the estimates by weighting the survey responses to account for the  sampling rate in each stratum. The weights reflect both the initial sampling  rate and the response rate for each stratum.
section_title: Sampling Error
paragraphs: We randomly selected the sample used for this study based on a  probability procedure. As a result, our sample is only one of a large  number of samples that we might have drawn from the total population of  SB/SE frontline enforcement employees. If different samples had been  taken from the same population, it is possible that the results would have  been different. To recognize the possibility that other samples may have  yielded other results, we express our confidence in the precision of our  particular sample’s results as a 95-percent confidence interval. For all the  percentages presented in this report, unless otherwise noted, we are   95-percent confident that the results we obtained are within plus or minus  10 or fewer percentage points of what we would have obtained if we had  surveyed the entire study population. For example, our survey estimates  that 58 percent of the respondents indicated that section 1203 had no  effect on their likelihood of requesting documents from a taxpayer. The  95-percent confidence interval for this estimate would be between   48 percent and 68 percent. We calculated the confidence intervals for our  study results using methods that are appropriate for a stratified probability  sample.
section_title: Nonsampling Error
paragraphs: In addition to the reported sampling errors, the practical difficulties of  conducting any survey may introduce other types of errors, commonly  referred to as nonsampling errors. For example, questions may be  misinterpreted, the respondents’ answers may differ from those who did  not respond, or errors could be made in keying the questionnaire  responses into a data file. We took several steps to reduce such errors.
We pretested the survey questions with employees from SB/SE who were  part of the survey’s target population. After the survey administration, we  examined the response rate for each of the 4 strata to determine whether  any of the strata were underrepresented. The response rates for the  revenue agent, revenue officer, tax compliance officer, and tax auditor  strata were 89 percent, 87 percent, 78 percent, and 44 percent,  respectively. We did not assess the impact of the nonrespondents on our  results. To the extent that the nonrespondents had different views than the  respondents, then our findings would be biased. The response rates for the  revenue agent, revenue officer, and tax compliance officer strata are fairly  high and give us a high degree of confidence that our findings for these  groups are likely to be representative of the fuller populations. The   44 percent response rate for the tax auditor strata raises the possibility  that the results for this group may have been different if more employees  had chosen to complete the survey.
To ensure the integrity of the survey data, we performed a quality control  check on the surveys that were keyed into an automated data file. We  found no keying errors.
section_title: Survey Development
paragraphs: We identified areas to cover in the survey based on our congressional  request and initial interviews with IRS and National Treasury Employees  Union officials.
We pretested the survey to IRS revenue agents, revenue officers, and tax  compliance officers at three IRS field offices (at the time of the pretests,  tax auditors were unavailable). Two of the offices were located in  suburban Maryland and another was located in Washington, D.C. In doing  the pretest, we evaluated the appropriateness of the survey questions and  the various formats we planned to use in administering the survey. Based  on the pretests, we made necessary changes to the survey prior to its  nationwide implementation.
section_title: Survey Administration
paragraphs: We administered the survey in three ways: mail, Internet, and as a portable  document format (pdf) attachment sent out via E-mail. The respondents  could submit their completed surveys through regular mail, fax, or the  Internet. In addition to the survey itself, each survey package included two  letters encouraging employees to participate in the survey administration.  One letter was signed by the IRS Commissioner of the Small Business/Self  Employed Division and the other was signed by GAO’s Managing Director  of the Tax Administration and Justice team. We conducted at least two  follow up calls to each nonrespondent in order to encourage a high  response rate. A copy of the survey instrument is in appendix III.
section_title: Content Analysis
paragraphs: Some of the survey questions were open-ended, allowing respondents an  opportunity to provide thoughts and opinions in their own words. Of the  350 employees that responded to our survey, 208 provided written  responses to the open-ended questions. In order to categorize and  summarize these responses, we performed a systematic content analysis  of the open-ended responses. Two GAO analysts reviewed the responses  and independently proposed categories. They met and reconciled these;  each comment was then placed into one or more of the resulting  categories, and agreement regarding each placement was reached between  at least two analysts. All initial disagreements regarding placement into  categories were discussed and reconciled. The numbers of responses in  each content category were then summarized and tallied.
section_title: Case File Review Methodology
paragraphs: To contribute to our understanding of IRS’s processing of section 1203  cases and to determine the amount of time it takes to process the cases,  we reviewed 92 of the 100 most recently closed cases that were recorded  in IRS’s ALERTS database as of August 30, 2002. We developed a data  collection instrument to record the type of allegation as well as various  dates associated with key stages in the processing of the case. These key  stages were identified as part of our review of the section 1203 process  and confirmed through discussions with IRS officials familiar with the  processing of these cases.
Of the 100 cases that were identified in IRS’s database as being the most  recently closed, we determined that 92 were available for review. For the   8 cases that were not available, IRS identified 3 as being duplicative, and  we were advised by IRS not to include them in our review. In addition,  according to IRS, 5 other cases were not available for review because the  employee left IRS before TIGTA finished the investigation. (These cases  were recorded as “not adjudicated.”) We performed a limited quality  control check of the data recorded on 12 percent of the 92 cases by  randomly selecting the cases.
In addition, for 19 of the 92 cases, missing data prevented us from  computing case processing times. As a result, processing times could only  be calculated for 73 of the 92 cases included in this review.
Table 3 provides a breakdown of the number of cases opened before, on,  or after March 1, 2002—the date that the new section 1203 process was  implemented. All cases were closed after March 1, 2002.
The case processing times were calculated based on the dates that the  case was opened by either TIGTA or IRS and closed by IRS. For the  closing date, we used the date that the employee was issued a letter  informing them of the outcome of his or her case. If there was no such  letter, we used other documentation contained in the file that indicated  the date that the case had been closed. In 5 of the cases, the employee had  resigned or retired and the case file did not include a letter or other  documentation to indicate the case had been closed. For these cases, we  used the employees’ resignation or retirement date.
Our work was conducted in accordance with generally accepted  government auditing standards.
section_title: Appendix II: Data on Section 1203 Allegations
paragraphs: Tables 4, 5, and 6 summarize information on section 1203 allegations for  the period July 1998 through 2002. Table 4 provides information on  substantiated section 1203 allegations by disposition and table 5 provides  information on employee firings by type of misconduct and employee GS  level. Table 6 provides a breakdown of results for the 3,512 allegations that  were investigated, including allegations that were substantiated as a  section 1203 violation, allegations that were substantiated for nonsection  1203 misconduct, and allegations that were not substantiated.
section_title: Appendix III: GAO Survey of IRS Frontline Enforcement Employees
section_title: Appendix IV: Summary of Content Analysis of Open-Ended Comments from GAO Survey of IRS Frontline Enforcement Employees
paragraphs: Some of the survey questions were open-ended, allowing respondents to  provide thoughts and opinions in their own words. In order to categorize  and summarize these responses, we performed a systematic content  analysis of the open-ended responses. Two GAO analysts reviewed the  responses and independently proposed categories. They met and  reconciled these; each comment was then placed into one or more of the  resulting categories, and agreement regarding each placement was  reached between at least two analysts. All initial disagreements regarding  placement into categories were discussed and reconciled. As shown in  figure 7, the number of responses in each content category was then  summarized and tallied.
section_title: Appendix V: Stages of Section 1203 Case Processing
paragraphs: The following description of section 1203 case processing applies to all  allegations, except those related to compliance with federal tax laws and  employee and taxpayer civil rights, which are processed separately.  Complaints involving allegations of section 1203 misconduct are subject to  a 3-stage process, including: (1) reporting and investigative determination,  (2) fact-finding, and (3) adjudication. Figure 8 provides an illustration of  the various stages of the processing of a section 1203 case.
subsections: section_title: Reporting and Investigative Determination
paragraphs: Any taxpayer, taxpayer representative, or IRS employee can file a  complaint with IRS or TIGTA alleging employee misconduct under section  1203. IRS managers have been instructed to forward all allegations to  TIGTA, which has primary responsibility for receiving and investigating  complaints involving allegations of section 1203 misconduct. Once it  receives the complaint, TIGTA is to enter information on the allegation  into its information tracking system for managing and reporting purposes.
After entering the information into its information system, TIGTA is to  make an initial determination about whether the allegation should be  investigated as a potential act of employee misconduct. If TIGTA finds  sufficient information indicating a section 1203 violation may have  occurred, TIGTA is to investigate the allegation. Similarly, TIGTA may find  sufficient grounds to conduct an investigation for misconduct unrelated to  section 1203. In either case, the results of the TIGTA investigation are  provided to IRS as a formal Report of Investigation.
TIGTA may also determine that the complaint does not contain specific  enough information, or that it does not have the necessary expertise, to be  able to make a determination on the complaint’s investigative merit. In  these instances, TIGTA is to refer the complaint to the Commissioner’s  Complaint Processing and Analysis Group (CCPAG) to determine whether  there is a basis for an investigation. A case development team within  CCPAG is to receive the allegation and enter information on the allegation  into its information tracking system. The role of the case development  team is to gather the relevant facts related to the allegation to determine  whether the essential elements of a section 1203 violation may be present.
Upon its evaluation of the allegation, CCPAG may conclude that the  complaint is frivolous (e.g., a taxpayer alleges misconduct because the  employee did not agree with the taxpayer that the tax laws are  unconstitutional). In these instances, CCPAG is to forward the allegation  to IRS’s Frivolous Return Program at the Ogden Service Center.
After gathering the relevant information—for allegations not considered  frivolous—CCPAG is to forward the allegation to the Board of Employee  Professional Responsibility (BEPR) for its review. BEPR includes the  Director, CCPAG, and representatives from the Small Business and Self  Employed Division. IRS’s Strategic Human Resources and Agency-Wide  Shared Services employee relations specialists and Office of Chief Counsel  General Legal Services may serve as advisors to BEPR. TIGTA also serves  in an advisory role on BEPR. IRS’s Senior Counselor to the IRS  Commissioner participates in BEPR’s review of allegations involving IRS  executives, GS-15’s and senior manager pay band employees.
BEPR’s review may result in several outcomes. Specifically, BEPR may  concur with the case development team’s finding that the allegation has no  merit. In this situation, no investigation is conducted and the Director  CCPAG is to issue a letter to the employee and his/her manager advising  that there will be no investigation. If BEPR concurs with the case  development team’s findings that no misconduct occurred, the Director of  CCPAG is to issue a clearance letter to the employee and his/her manager.  The case is then closed. If BEPR concurs with the case development  team’s findings that other misconduct may have occurred, BEPR is to  recommend a referral to TIGTA or IRS management for investgation, and  regular disciplinary procedures are to apply. If BEPR agrees with the case  development team’s findings that section 1203 misconduct may have  occurred, BEPR is to recommend a referral to TIGTA for investigation.
section_title: Fact-Finding
paragraphs: Once TIGTA or BEPR determines an allegation to have investigative merit  as a possible section 1203 violation, TIGTA is to perform the investigation.  Specifically, TIGTA may review records, interview witnesses, and consult  technical experts as necessary to develop information relevant to the  alleged violation. In some cases, the possible section 1203 misconduct may  also be a potential violation of criminal law. In these cases, TIGTA is to  refer its findings to a local U.S. Attorney Office for consideration of  criminal prosecution. After the investigation is completed, and a referral is  made to a U.S. Attorney, if appropriate, TIGTA is to provide a Report of  Investigation to CCPAG.
section_title: Adjudication
paragraphs: All TIGTA Reports of Investigation on allegations of section 1203  violations are first to be reviewed by CCPAG to determine whether the  evidence can support the allegation for a section 1203 violation. If CCPAG  determines that the evidence does not support a section 1203 violation or  other misconduct unrelated to section 1203, the Director of CCPAG is to  issue a clearance letter to the employee and his/her manager. If CCPAG  determines that the evidence presented supports a section 1203 violation,  it is to forward the Report of Investigation to the “proposing official”—a  management official generally two levels of supervision above the subject  of the allegation—for further action.
Acting with the advice of an employee relations specialist, the proposing  official is to determine whether misconduct has been substantiated by a  preponderance of the evidence. If the proposing official determines that  no misconduct occurred, the official is to issue a clearance letter to the  employee. If this official determines that the evidence supports  misconduct unrelated to section 1203, IRS’s regular disciplinary  procedures are to apply. If this official determines that the specific  elements of a section 1203 violation appear to be established by a  preponderance of the evidence, he or she is to issue a letter to the  employee proposing removal from the federal service. The employee has  the right to respond to this proposal letter and to review any information  relied upon by the proposing official. The case is to be submitted to the  deciding official, generally an executive at least three levels of supervision  above the employee.
The deciding official is to review the entire case file, including the  employee’s response, to determine whether the charge has been proved. If  the deciding official determines that no misconduct occurred, the official  is to issue a clearance letter to the employee. If this official determines  that the evidence supports misconduct unrelated to section 1203, IRS’s  regular disciplinary procedures are to apply. If the deciding official  determines that a section 1203 violation is established by a preponderance  of the evidence, the employee is to be removed from the federal service,  unless the Commissioner of Internal Revenue decides that another penalty  is to be imposed.
The Commissioner of Internal Revenue has established a Section 1203  Review Board (Board) to consider all cases in which a deciding official  finds that a section 1203 violation has occurred. Comprised of various IRS  executives from different IRS units, the board must review the allegation  to determine whether a penalty less than firing the employee is  appropriate. If the Board does not find mitigation to be appropriate, the  case is not submitted to the IRS Commissioner. The case is then returned  to the deciding official who is to impose the statutory penalty of  termination of employment. If the Board recommends mitigation, the  Commissioner reviews the recommendation. If the Commissioner  mitigates the penalty, other disciplinary actions, such as written  counseling, admonishment, reprimand, or suspension, may be applied. The  Commissioner’s decision on the level of discipline to be imposed is not  subject to review outside IRS. After the Commissioner’s decision, the  employee may appeal the finding that a violation occurred.
section_title: Appendix VI: Comments from the Internal Revenue Service
section_title: Appendix VII: Comments from the Treasury Inspector General for Tax Administration
section_title: Appendix VIII: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the persons named above, the following persons made key  contributions to this report: Kevin Dooley, Evan Gilman, Patty Hsieh,  Shirley Jones, Stuart Kaufman, Anne Laffoon, MacDonald Phillips, Kristen  Plungas, Brenda Rabinowitz, Anne Rhodes-Kline, Andrea Rogers, Wendy  Turenne, and Chris Wetzel.