Tax Debt Collection: IRS Needs to Define Field Program Objectives and Assess Risks in Case Selection
Released: 2016-09-13T00:00:00

Letter

Background

As stated in IRS’s fiscal year 2016 collection program letter, the collection program’s mission is to collect delinquent taxes and secure delinquent tax returns through the fair and equitable application of the tax laws, including the use of enforcement tools when appropriate and providing education to taxpayers to facilitate future compliance.

As we have previously reported, IRS’s collection program largely uses automated processes to categorize unpaid tax or unfiled tax return cases and send them to a collection phase to be potentially selected for collection activities. The automated Inventory Delivery System (IDS) categorizes and routes cases based on many factors, such as type of tax and amount owed. As shown in figure 1, IDS analyzes cases to identify and filter out cases that should not be pursued further (shelved) and determine whether cases should be sent to either the telephone phase (the Automated Collection System, or ACS) or the in-person phase (Field Collection) for potential selection.

Through IDS routing, the Field Collection program generally makes the first effort to enforce filing and payment requirements for higher-priority cases that are not resolved by sending notices. The Field Collection program is also used to enforce compliance for lower-priority cases left unresolved by ACS’s efforts.

The Field Collection program is organized to make direct contact with individuals and business officials to enforce tax filing and payment requirements. The program divides the United States into seven areas. Each area is run by an area director who reports to the Director of Field Collection. Each area is typically divided into six to eight territories, each headed by a territory manager. Each territory, on average, contains six groups that are run by group managers. Group managers directly oversee an average of eight revenue officers.

Cases sent to the Field Collection program for potential selection are generally identified by the taxpayer’s ZIP code and aligned with Field Collection program groups around the nation, each of which works cases in a set of ZIP codes in its geographic proximity. Group managers select and assign collection cases to revenue officers for resolution. Revenue officers are generally assigned to work cases in designated ZIP codes handled by the group. Cases are removed from Field Collection’s inventory of cases for potential selection when they are assigned to a revenue officer for resolution, are shelved; or expire under statute of limitations laws.

Unless cases sent to the Field Collection program are assigned to a revenue officer for collection work, delinquent taxpayers may not receive contact from IRS to attempt to resolve the delinquency aside from annual reminder notices.

Since 2010, Field Collection staff have been reduced by 50 percent from a 2010 high of 7,268 full-time equivalents (FTE), as shown in figure 2.

Field Collection revenue officers have consistently closed fewer cases each year since a high in fiscal year 2011, as shown in figure 3. In fiscal year 2015, more than 40 percent of closed cases were closed by shelving rather than a revenue officer working the case. The figure also shows that the year-end Field Collection inventory and queue has generally remained stable in recent years.

Automated Processes First Prioritize Collection Cases, then Group Managers Manually Select Cases Balancing Various Factors

Automated Systems Assign Priority Levels Based on Collection Case Characteristics

Automated systems classify collection cases into a hierarchy of five priority levels, as shown in figure 4.

The priority levels are divided into two files—the group hold file and the group queue. Collection cases in the group hold file are generally considered the highest priority and are the first cases group managers evaluate for assignment. These cases are considered mandatory because group managers typically are required to evaluate whether to assign these cases within 45 days to the first available and qualified revenue officer or document why the cases were not assigned by the deadline or were removed from the hold file. Unlike collection cases in other priority levels, group hold file cases require immediate evaluation for assignment or an explanation if they are not assigned. Group managers must even assign some mandatory cases in less than 45 days. For example, collection cases involving missed or lower-than-expected employment tax payments—known as federal tax deposit alerts within IRS—should be assigned within 7 days. Other mandatory collection cases include those involving IRS employees, transfers from other areas within Field Collection, and current cases where additional delinquent taxes have been assessed.

The group queue contains the other four priority levels’ collection cases— accelerated high, high, medium, and low. The automated system assigns these priorities based on a number of criteria including the balance due amount, return type, tax year of the case, and last return amount. Accelerated high priority collection cases—second priority in selection consideration—are cases that IRS has determined are among the most important to pursue and group managers are generally expected to assign them from the queue first. Characteristics of cases in this category might include those with balances due greater than a selected high-dollar amount or individual delinquent taxpayers with income greater than a selected high amount. Non-accelerated high priority cases are third priority in selection consideration. Characteristics of these cases may include businesses with recent unpaid employment tax liabilities and those with balances due that fall into a range of selected high-dollar amounts. Characteristics of collection cases designated medium and low priority may include balances due within, or less than, a range of relatively moderate dollar amounts (in comparison to high priority cases) and certain case age parameters that IRS views as lower priority. Characteristics of low-priority cases include remaining cases that do not meet the criteria of higher-priority levels.

Group Managers Balance a Number of Considerations When Selecting Field Collection Cases

IRS’s automated systems send new cases weekly to group managers’ hold files and queues. Group managers we met with explained that they sequentially review the hold file and queue cases at each priority level to take into account several case selection considerations. These considerations can include revenue officers’ availability, including their geographic proximity to the taxpayer’s location, since Field Collection activities often involve face-to-face interaction. Group managers also consider the characteristics of the cases available for assignment, such as whether a business is still active or operating thus increasing the potential for collectability (see figure 5).

The automated systems determine the anticipated difficulty and appropriate category of revenue officer that can be assigned to a case based on the queue priority level and other characteristics of the case, such as complexity. These categories are based on the revenue officer’s pay scale, which is aligned with the federal General Schedule (GS) pay system. Revenue officers in the Field Collection program generally are GS-9, 11, 12, or 13. This approach generally ensures that higher paid revenue officers with more experience are assigned the more challenging or complex cases.

In most instances, group hold file and accelerated high-priority cases all must be assigned as soon as a revenue officer with the appropriate characteristics is available. However, IRS guidance provides group managers discretion to pass over these cases and select lower-priority cases when there are justifiable reasons or business needs. For example, a group manager can bypass an accelerated high-priority case when, in the group manager’s judgment, assignment of that case at the time would be too burdensome based on the size and complexity of the revenue officer’s current caseload or when a revenue officer’s current caseload has reached inventory levels prescribed in the Internal Revenue Manual.

On March 10, 2016, when we received a snapshot of all assigned and unassigned cases in IRS’s inventory management system, the majority of cases group managers had selected and assigned to revenue officers were accelerated high- and high-priority cases (see table 1). Likewise the majority of unassigned cases were medium- and low-priority cases. Although IRS officials did not have historical data readily available to analyze and confirm, they agreed that this mix of cases that we observed on March 10, 2016, is likely typical as the case selection process is geared toward selecting higher priority cases.

Weaknesses in Field Collection Case Selection Processes and Procedures Impact Their Ability to Support the Collection Program’s Mission

The primary weakness we identified in our analysis of Field Collection case selection processes is a lack of clearly defined and measurable objectives that support the collection program’s mission. According to federal internal control standards, objectives defined in clear and measurable terms are a foundation for improving accountability and providing necessary assurance that a program’s mission will be achieved. The lack of clearly defined and communicated objectives also negatively impacts other aspects of Field Collection case selection processes that we believe are most relevant to assuring mission achievement. Specifically, the lack of clearly defined objectives directly impacts IRS’s ability to effectively measure Field Collection performance, assess risks to the achievement of objectives, and assess the continued effectiveness of automated processes. Finally, we identified the lack of adequate procedures to guide group managers’ use of judgment in selecting cases. These deficiencies increase the risk that Field Collection case selections may not contribute to the program’s mission as well as they otherwise could.

Field Collection Has Not Clearly Defined and Communicated Program and Case Selection Objectives, including Fairness

Having program objectives clearly defined in measurable terms is a foundation that allows managers to take steps to assure a program achieves its mission, according to federal internal control standards. This includes selecting appropriate methods to communicate internally the necessary quality information to achieve program objectives.

IRS guides Field Collection employees through a number of different channels, including: the Internal Revenue Manual (IRM), which is IRS’s official compendium of personnel guidance; annual program letters; and occasional memos and e-mails. However, none of the communications we reviewed clearly defined the collection program or case selection objectives. For example, the IRM does not state the objectives of the Field Collection program or what role case selection plays in supporting achievement of those objectives. Similarly, although annual collection program letters to staff stated the program mission and listed distinct activities and case types to focus on in the fiscal year grouped under IRS strategic goals, they did not present clearly defined program or case selection objectives sufficient for purposes of internal control. The objectives are unclear in part because the terms are so general that they do not enable management to assess risks, establish control procedures, or link to related performance measures. An August 2013 email from the Director of Field Collection stated that group managers should select cases so that the mix of assigned cases mirrors what is available in the inventory. This guidance suggests a program objective but neither the e-mail nor any other guidance identifies it as such.

The only IRS communication we obtained that identified program and case selection objectives was a document IRS provided to us in March 2016. According to IRS officials, the Collection program developed the document in response to prior recommendations we made in reviewing other aspects of collection case selection processes. However, as shown in table 2, our analysis of the document shows that it does not fully document and communicate program objectives, as recommended by federal internal control standards.

The lack of clear and consistently communicated objectives was also evident in our focus group discussions with Field Collection managers. We asked managers to describe the objectives in choosing which case to assign a given revenue officer. Participants provided a range of responses. For example, many participants identified an objective of assigning revenue officers a mix of cases that reflects the current inventory. IRS officials explained that the mix of cases refers to the ratios between cases where the taxpayer has a balance due versus those that have not filed a tax return. This case selection objective can also mean balancing the ratio of individual and business taxpayer cases so that the mix of assigned cases mirrors what is available for assignment. This principle reflects the guidance provided in the August 2013 email from the Director of Field Collection.

Focus Group participants also described productivity, or resource use, as an objective. For example, one participant said, “I look at cases that are going to be more productive rather than assigning old, inactive cases. The more productive cases are those cases that have come to Field Collection more recently or have more recent [collection assessments or unfiled returns]. The older cases are stale.” In contrast, several focus group participants said that the program’s automated prioritization system sometimes gives higher priority levels to cases that are older and may not be collectable, such as cases that have been assigned to ACS for a long time and have not been resolved. Some participants also stated that balancing the revenue officer’s workload was an objective. According to these participants, this involves looking at the number and complexity of the current assigned workload of a given revenue officer to ensure that the next case assigned does not overburden the officer.

In a March 2016 email to staff, the Director of Collection defined fairness in the program as having three components: (1) fairness to the taxpaying public by pursuing those who fail to voluntarily comply, (2) an equitable process to select cases expected to best promote voluntary compliance and other apparent Collection goals or objectives, and (3) respect and adherence to policies and procedures that safeguard relevant taxpayer rights in the collection process. This effort to define fairness came in response to recommendations we made in reviewing other aspects of IRS’s collection selection processes. While the effort demonstrates progress, our analysis of this email shows that it still does not meet applicable standards for clearly defining objectives and communicating them with methods appropriate for use in internal control, as detailed in table 3.

Because of the shortcomings identified in table 3, IRS risks that employees implementing control procedures may not understand how fairness applies to their work. For example, territory and group managers in our focus groups offered a variety of opinions and perspectives of how to assure fairness in case selection. Specifically, when we asked focus group participants what fairness means to them and how they apply fairness in case selection, managers’ responses included: avoiding conflicts of interest, such as cases where the group manager or revenue officer has a prior relationship with an individual or business; selecting cases with consideration of geography, such as to ensure there are no areas where taxpayers are in a “tax free zone;” and diversifying selections by type of business, selecting cases so that the Field Collection program provides broad coverage, cases selected are representative, and no one group of taxpayers is selected more than others.

Our focus group discussions also showed that managers had inconsistent views on the meaning of fairness in case selection and that some may not fully understand how to apply fairness or believe the selection process precludes unfair selection. In half of the group manager focus groups, at least one participant said he did not know what the role of fairness is in case selection or did not consider fairness in assigning cases. Some also said that choosing any case for assignment would be fair because all of the cases represent noncompliance and the automated selection process fairly prioritizes cases for potential selection.

According to IRS officials, they have not clearly defined Field Collection program and case selection objectives and fairness because they believe their efforts to define them in the document and email described above were sufficient. However, without clearly defined and clearly understood objectives aligned to the Field Collection mission, program management lacks reasonable assurance that case selection processes support achievement of IRS’s mission, including applying tax law with integrity and fairness to all.

Lack of Clear Objectives Impacts IRS’s Ability to Assess Performance, Program Risks, and Automated Processes

The lack of clear and consistent objectives also impacts IRS’s ability to measure program performance, assess risks to the program mission, and determine whether the automated processes used are still appropriate.

Performance Measures

We found that the Field Collection program tracks some case assignment and closure data. Specifically, Field Collection management compares open case inventory to a portion of the case inventory awaiting assignment. IRS officials, including managers in all eight of our focus groups, noted that they use case mix data to monitor or adjust case selections on a monthly basis to achieve this balance. Our analysis of Field Collection case data suggests that, overall at the national level, the program’s mix of assigned cases is aligned—to some degree—with the available inventory by noncompliance type and taxpayer type, as shown in table 4.

However, because the Field Collection program has not yet established clearly defined objectives and does not have related performance measures it lacks a way to measure program performance effectively over time. Federal internal control standards state that measurable objectives allow management to assess program performance in achieving them. For example, if one of Field Collection’s objectives was to achieve fairness and it defined fairness to include ensuring broad coverage of the taxpayer population in collection status, then the Field Collection program would need to establish measures to assess its achievement of this objective. Similarly, if a case selection objective was to assign them so that cases assigned to revenue officers reflect the Field Collection group inventory, then IRS would need to clearly link this objective to related performance measures to which staff were held accountable. We identified a number of potential data elements in the case selection system that could be helpful to IRS in developing such performance measures, as shown in table 5.

We found that IRS currently has two approaches for assessing risks within the agency. These approaches are: Internal controls framework. The procedures in IRM 1.4.2 govern IRS’s processes for monitoring and improving internal controls, which include identifying and mitigating risks. Managers are expected to understand the risks associated with their operations and ensure that controls are in place and operating properly to mitigate those risks.

Enterprise Risk Management (ERM). ERM is broader in scope than internal controls, focusing on service-wide risks. ERM is intended to help the service in setting strategy to consider risk and how much risk the service is willing to accept. IRS implemented ERM in February 2014 to alert IRS management to IRS-wide risks and to serve as an early-warning system to identify emerging challenges and address them before they affect operations.

However, in order to use both of these approaches effectively to identify, analyze, and manage risk, IRS needs to have clearly defined, measurable objectives. Federal internal control standards state that effectively managing a program to achieve its mission involves comprehensively considering and assessing potential risks in the program’s internal and external operating environments and establishing risk tolerances (the acceptable level of variation in performance relative to the achievement of objectives). Such tolerances are often stated in terms of performance measures, which allow performance assessment toward achieving objectives. Lacking clearly defined and associated performance measures therefore hinders the Field Collection program’s ability to effectively assess, identify, and address risks to the achievement of its mission. Without clearly defined objectives, risks to achieving those objectives cannot be identified and analyzed, nor can risk tolerances be determined. According to IRS officials, the Field Collection program has not assessed risks posed by case selection processes because selection processes are well designed. However, unless Field Collection management identifies and understands the significance of the risks to achieving identified objectives, IRS lacks sufficient assurance that the program’s case selection processes support achievement of objectives and respond to the identified risks within acceptable tolerances.

Automated Processes

The Field Collection program’s automated prioritization and decision support systems are control procedures that are intended to help guide staff to reduce risks in making decisions. For example, the priority levels may help guide group managers to generally select the types of cases management considers higher priority, such as those that could yield more revenue or other positive compliance results, which potentially reduces the risk of using resources inefficiently. However, because Field Collection lacks program and case selection objectives, it is not clear what objectives the automated processes support or which specific risks they are intended to address. According to federal internal control standards, periodic reviews of controls assure procedures continue to work as intended. Monitoring internal control design and effectiveness, and revising control procedures as needed provides sufficient evidence that the controls continue to be effective in addressing risks (which can change over time) and support achievement of program objectives.

Although IRS occasionally makes and documents ad hoc changes to these automated processes to improve results, Field Collection lacks documented procedures to periodically review automated case selection policies, procedures, and related activities, such as the case characteristics and thresholds used to classify cases by priority level. IRS established the queue priority categories in 2000 and modified them in 2001, but did not have available documentation of periodic assessments to assure they continued to be effective in the intervening 15 years. According to IRS officials, Field Collection lacks documented procedures for periodic assessments because selection processes are well designed. However, without periodic reviews IRS lacks reasonable assurance that the case selection processes are still effective in working toward achieving the program’s mission, including fairness to all taxpayers.

The Field Collection Program Has Not Developed and Communicated Procedures to Guide the Use of Judgment in Case Selection Decisions

Management is responsible for establishing operating procedures and communicating them to staff to ensure they are followed so that objectives are achieved. Establishing and communicating guidance— such as documenting procedures—provides necessary assurance that the staff responsible for implementing procedures understand and apply them to effectively achieve program objectives. The Field Collection program has established and communicated operating procedures to guide automated aspects of case selection. However, Field Collection has provided insufficient guidance to group managers on the use of professional judgment when manually selecting cases.

As we noted earlier, we learned about the judgment group managers exercise in selecting cases by talking with Field Collection officials. For example, during the focus groups, managers described how professional judgment factors into the case selection process. Some group managers said they may choose to select a given case because of its geographic proximity to other cases assigned to the revenue officer. Similarly, several group managers discussed how they used professional judgment based on previous experience to assess a case’s potential productivity for resulting in collection. This is consistent with the findings of a September 2014 report from the Treasury Inspector General for Tax Administration (TIGTA).

Although group managers use professional judgment when selecting cases for assignment—resulting in the commitment of revenue officer resources and some cases being selected over others—IRS has limited guidance on how to exercise such judgment. IRS’s official guidance—the Internal Revenue Manual (IRM)—does not guide group managers on how to exercise judgment, such as by listing the factors that ought to be taken into account to help ensure that Field Collection program and case selection objectives are achieved. The only place the IRM acknowledges professional judgment is in a note that states, “There are many considerations when assigning work such as: risk level, case grade, current inventory, geographical issues, etc.” The only other program- wide guidance we identified was the August 2013 email from the Director of Field Collection stating that cases should be selected so that the mix of assigned cases mirrors what is available in the queue.

According to IRS officials, Field Collection has not developed and documented guidance for how group managers are to exercise professional judgment in case selection because they consider current procedures sufficient, such as relying on group mangers to understand local conditions, relying on their previous experience as revenue officers or gaining necessary experience on the job. However, the use of professional judgment without sufficient guidance presents risks and results in Field Collection management not having sufficient assurance that the case selection decisions group managers make support achievement of the program’s mission of applying the tax law with integrity and fairness to all.

Conclusions

The Field Collection program’s automated systems and the decisions made by group managers determine if some collection cases are pursued sooner, later, or at all. Case selections can affect federal spending, revenue collected, and taxpayer confidence in the tax system’s fairness, which can affect overall voluntary compliance. Therefore, it is important that the Field Collection program select and pursue collection cases that are most likely to produce results in support of IRS’s mission, including applying tax laws with integrity and fairness to all. Without clearly defined and measurable objectives the Field Collection program cannot know, or provide taxpayers assurance that, its case selection procedures are effectively supporting its mission. Further, without objectives and other controls IRS will not be able to monitor performance; identify, assess, and manage risks; or ensure that its automated process are still effective. Moreover, while the use of professional judgment is to be expected in the selection of cases for assignment, without guidance for managers, IRS will not have assurance that selections are being made consistently across its regional offices.

Recommendations for Executive Action

To ensure that Field Collection program case selection processes support IRS’s and the Collection program’s mission, including applying tax laws with integrity and fairness to all, we recommend that the Commissioner of Internal Revenue take the following five actions.

Develop, document, and communicate Field Collection program and case selection objectives, including the role of fairness, in clear and measurable terms sufficient for use in internal control.

Develop, document, and implement performance measures clearly linked to the Field Collection program and case selection objectives.

Incorporate program and case selection objectives into existing risk management systems or use other approaches to identify and analyze potential risks to achieving those objectives so that Field Collection can establish risk tolerances and appropriate control procedures to address risks.

Develop, document, and communicate control procedures guidance for group managers to exercise professional judgment in the Field Collection program case selection process to achieve fairness and other program and collection case selection objectives.

Develop, document, and implement procedures to periodically monitor and assess the design and operational effectiveness of both automated and manual control procedures for collection case selection to assure their continued effectiveness in achieving program objectives.

Agency Comments and Our Evaluation

We provided a draft of this report to the Commissioner of Internal Revenue for review and comment. The Deputy Commissioner for Service and Enforcement provided written comments on August 25, 2016, which are reprinted in appendix II. IRS agreed with our recommendations and described actions it plans to take to address each of them. IRS stated that it appreciates GAO’s support and guidance as it continues to seek opportunities to improve Field Collection case selection controls and case selection throughout IRS.

IRS states that our report does not identify any instances where the selection of a case was considered inappropriate or unfair. However, as described in our scope and methodology, we did not design our study to look for cases of inappropriate selection but rather to assess the internal controls that help safeguard the case selection processes. By evaluating the Field Collection program’s internal control framework for selection, we were able to determine whether IRS has processes in place that provide reasonable assurance of fair case selection.

IRS outlines planned actions to address each of our recommendations. However, it is not clear that these actions will be fully responsive to the first recommendation that IRS develop, document, and communicate Field Collection program and case selection objectives, including the role of fairness, in clear and measurable terms. IRS states that the Small Business/Self-Employed Division (SB/SE) will develop fiscal year 2017 program objectives that align with the mission of SB/SE and that the Collection program will develop and document specific Field Collection and case selection activities that will support SB/SE objectives. Our concern is that it is not clear how these efforts will address our recommendation to establish Field Collection (not division-level) program and case selection objectives. As described in this report, listing distinct activities or case types to focus on in a fiscal year does not meet the internal control standard of clearly defining and communicating program objectives in specific and measurable terms.

Since it is not clear that the actions IRS described will result in Field Collection program and case selection objectives sufficient for internal control purposes, IRS’s ability to address our related recommendations to establish performance measures, assess program risks, and monitor control procedure effectiveness may be limited. Clearly defining objectives is the foundation for effective implementation of internal control standards, including assurance that program operations effectively address risks to program objectives and support the achievement of objectives over time.

In response to our recommendation to develop, document, and communicate control procedures guidance for Field Collection group managers to exercise professional judgement in case selection, IRS stated they would review current procedures and guidance and make changes if necessary. Given that we found little documented guidance on the appropriate use of professional judgement, IRS lacks sufficient assurance that case selections support achievement of the program’s mission of applying the tax law with integrity and fairness to all.

IRS provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the Chairmen and Ranking Members of other Senate and House committees and subcommittees that have appropriation, authorization, and oversight responsibilities for IRS. We will also send copies of the report to the Secretary of the Treasury, Commissioner of Internal Revenue, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) describe the Field Collection program’s processes (automated and manual) for prioritizing and selecting cases and (2) assess how well Field Collection case selection processes support the collection program’s mission, including applying tax laws “with integrity and fairness to all.”

To describe the case selection processes, we reviewed program documents and interviewed knowledgeable IRS officials, including officials in the Small Business and Self-Employed Division Collection and Field Collection offices. Our document review included guidance in the Internal Revenue Manual (IRM) and automated system manuals. Our analysis included both automated and manual processes that may involve IRS staff. We analyzed these processes to outline and graphically depict systems and processes IRS uses to prioritize and select cases.

To provide information on the assigned and unassigned case inventory, we analyzed data from IRS Field Collection’s main inventory management and case selection information system, ENTITY. The data included characteristics such as the dollars due on selectable and assigned cases, the age of the cases, and the priority levels of the cases as determined in the prioritization process. These data describe a one- time snapshot of IRS Field Collection case inventory characteristics on March 10, 2016. The data were only available as a snapshot because, according to IRS officials, ENTITY is the only source for data on the priority level of each case and the data on priority levels are updated frequently and are not stored.

To assess the reliability of the ENTITY March 10, 2016, snapshot data we present in the report tables, we interviewed knowledgeable IRS officials and manually tested the data for missing data, outliers, or obvious errors. We also reviewed relevant documentation on management reports and case routing data. In addition, we received another snapshot of the case inventories for May 25, 2016, and compared the data to the March 10 snapshot. We analyzed the data to determine if it changed significantly between the two points in time—which, for the purposes of our analysis, we determined would be a greater than 10 percent change—and found no significant changes. We found the data sufficiently reliable for the analysis that we conducted in this review.

To evaluate how well the case selection processes support program goals, we compared the selection process and procedures to selected standards in Standards for Internal Control in the Federal Government, to include the standard that managers define program objectives, assess risks to the objectives, and design controls to support the achievement of the objectives and address the risks. We selected the standards by assessing which are among the most relevant to ensuring the selection processes support mission achievement given our objectives and the program context. These standards include to define program objectives in clear and measurable terms, which is an internal control foundation for other selected standards to assess risks and establish risk tolerances; to design and implement control procedures to guide operations and address risks; and to establish performance measures and procedures for assessing control procedures to assess program performance in achieving objectives and ensure that controls effectively address risks and support achievement of objectives over time.

Our review of the design of controls included the IRM and other Field Collection program documents that we used to describe the case selection process in objective one.

We conducted eight focus groups with a non-generalizable, nation-wide random sample of IRS Field Collection managers—two focus groups with territory mangers and six with group managers—to collect evidence on the implementation of the case selection process. We received a list of all Field Collection group and territory managers from IRS. To ensure that managers selected had sufficient experience in their respective positions to actively contribute to the focus groups, we removed managers that were “acting” or had less than two years of experience in their position. We arranged the list of managers in a random order. Managers were assigned a focus group date and time in order of their random selection, controlling for their time zones, and were given the option to participate in the focus group or not. 43 of the 46 group managers that agreed to participate in the focus groups actually did; all 16 territory managers participated. All of the focus groups were conducted by phone in the week of March 28, 2016.

We asked all eight focus groups questions about internal controls in the Field Collection case selection process, including the program objectives of the case selection process and the case characteristics managers consider when making case selections and assignments. We documented the responses from the focus group participants and categorized the responses into themes. We analyzed the themes for their frequency and pervasiveness through the focus groups. We looked for patterns or trends across all eight focus groups and for differences between the group and territory manager focus groups.

We conducted this performance audit from August 2015 to September 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Comments from the Commissioner of Internal Revenue

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

James R. McTigue, Jr. (202) 512-9110 or mctiguej@gao.gov.

Staff Acknowledgments

In addition to the above named contact, Brian James (Assistant Director), David Dornisch, Steven Flint, Travis Hill, Ted Hu, Ronald W. Jones, Kay Kuhlman, Donna Miller, Justin Riordan, and Andrew J. Stephens made key contributions to this report.