The employee evaluation process is an important tool for influencing employee behavior. At IRS, as in other federal agencies, employee evaluations are the official documents used to support many personnel actions, including within-grade pay increases, performance awards, promotions, reductions-in-force, and adverse performance-based actions. As stated in IRS documents, the process is intended to accurately reflect employees’ performance, facilitate their development, and improve and enhance their work. For enforcement (and most other IRS) employees, the evaluation process is to include an annual formal written evaluation and a midyear progress review. The annual written evaluation involves a quantitative assessment of performance, which may be supported by narrative commentary. Supervisors who complete the evaluations are to address how well employees perform a number of critical job elements, which are job skills that must be performed at or above a set standard for an employee’s performance to be judged acceptable. The critical elements include technical skills—the specialized skills needed to process cases, such as workload management and case analysis—as well as customer relations, which involves interpersonal skills in dealing with taxpayers. The number of critical job elements on which an enforcement employee is evaluated generally has ranged from five to seven, depending on his or her job classification (e.g., tax auditor, revenue officer, or revenue agent). Each element is rated on a 5-point scale, with 1 being unacceptable and 5 being outstanding. A score of 3 is to be given for performance deemed fully successful. The evaluation forms for the types of enforcement employees we reviewed have similar formats and critical job elements, as the examples shown in appendix II illustrate. Progress reviews are also required, preferably at midyear, and are to be communicated by supervisors to each of their employees. IRS policy imposes several additional requirements. Notably, the supervisor who is responsible for assigning an employee’s work is also responsible for preparing and signing his or her evaluation. The evaluation must be reviewed, approved, and signed by a higher level manager. And to help ensure the accuracy and fairness of the rating, the supervisor who prepares the evaluation is to observe the performance of the employee during the rating period. In evaluating employee performance, supervisors are to exercise caution when describing employees’ skills and contributions vis-a-vis revenue production and efficiency, so as not to improperly emphasize the accomplishment of statistical or numerical goals. IRS policy prohibits rating officials from using enforcement statistics, such as the average amount of taxes assessed or collected, in employee evaluations. However, during hearings held by the Senate Committee on Finance in September 1997, witnesses alleged that IRS’ focus on enforcement statistics at the organizational level was encouraging enforcement officers to take unnecessary and inappropriate enforcement actions against taxpayers.IRS’ Internal Audit subsequently reviewed the use of such statistics by examination and collection supervisors and found an atmosphere largely driven by statistical measures. In November 1998, we reported that 75 percent of revenue agents, tax auditors, and revenue officers believed that enforcement results affected their evaluations. To meet our reporting objectives, we reviewed the two most recent evaluations for each employee as of June 1998 in a statistically representative sample of 19,096 examination and collection frontline employees and the supplemental documentation supporting those evaluations. Because the confidence intervals for the different estimates vary in size, we report all of them in appendix IV. We also interviewed responsible IRS headquarters officials and 30 supervisors in 3 district offices and sent division chiefs in all 33 IRS district offices a survey on how supervisors allocated their time. We requested comments on a draft of this report from the Commissioner of Internal Revenue. In a letter dated September 17, 1999, we received his comments, which are discussed at the end of this letter and reprinted in appendix VIII. We did our work at IRS headquarters in Washington D.C., and the Northern California, Kansas-Missouri, and Georgia District Offices between November 1998 and June 1999 in accordance with generally accepted government auditing standards. (See app. I for more details on our objectives, scope, and methodology.) Our analysis of evaluations written when IRS’ old mission statement was in effect showed that, overall, written evaluations of enforcement employees emphasized revenue production and efficiency more than customer service. In addition, customer service comments, when made, often did not emphasize the importance of taking into account the taxpayer’s point of view or how well the taxpayer understood the tax issues being raised by the enforcement employee. As shown in table 1, about two-thirds of supervisors’ comments related to revenue production and efficiency, and one-third related to customer service. Looking only at the comments in the technical skill portion of the evaluations, comments on revenue production and efficiency outnumbered customer service by about four to one. Of the comments in the customer relations element, we estimate that about three-fourths related to customer service and one-fourth to revenue production and efficiency. In considering these results, it is important to point out that, to some extent, the design of IRS’ employee evaluations for enforcement personnel could lead supervisors to focus on revenue production and efficiency. This is because customer relations is only one of five or more equally weighted critical job elements upon which employees are evaluated. Because the other, more technical elements logically tend to involve considerations of revenue production and efficiency, the evaluation likely would focus on such issues. Our analysis also revealed that, overall, many of the customer service comments did not emphasize the importance of taking into account the taxpayers’ point of view or whether they understood the tax issues being raised by the enforcement employee. To illustrate, consider the following results on comments regarding employees’ assistance in helping taxpayers to better understand their tax issues. As shown in table 2, an estimated 53 percent of the employees received evaluations discussing their efforts to describe the law and regulations related to the examination and collection process to the taxpayer. An estimated 4 percent received evaluations discussing efforts to check on taxpayers’ understanding of these issues by asking taxpayers questions or soliciting their responses. Both approaches can improve taxpayer understanding. However, the latter approach—and comments as to its use or lack thereof—can also help reinforce the importance of targeting explanations to the needs of the taxpayer. Most of the comments regarding whether the employee applied the tax law with integrity and fairness also did not reflect the taxpayer’s point of view. As shown in table 3, an estimated 31 percent of the employees had comments in their evaluations discussing whether the employee balanced taxpayer’s interests with the government’s interests by listening to and considering the taxpayer’s position. Comments that were more reflective of the taxpayer’s point of view, such as whether the employee considered a variety of actions to try to meet taxpayer needs, such as proposing an installment agreement to meet the tax liability, or took proactive action, such as identifying tax credits or deductions the taxpayer was entitled to, were each made for about 6 percent of the employees. As shown in table 4, an estimated 38 percent of the employees received evaluations indicating that they listened to taxpayers, and 32 percent received evaluations indicating that they were courteous with taxpayers. “Over the last year the Service is emphasizing payments be obtained at the conclusion of the examination. It can truly be said that the agent has kept to this philosophy. The agent always seeks to obtain full payment of the deficiency, penalties, and interest. This shows a strong commitment to the Service programs.” Further, the above comment was contained in the narrative for the customer relations critical job element and seems to equate good customer relations with success in obtaining full payment in every case. “You set clear, reasonable deadlines and follow-up on them promptly, usually with an appropriate collection tool rather than a phone call. Your success in that regard is referenced above. During the selection of cases for one entity review it was noted that 84% of your inventory was less than 5 months old. On another it was noted that only 4 of your cases had been assigned for longer than six months.” While this discussion of the employee’s performance may be appropriate, it was not balanced with statements indicating the employee considered the taxpayer’s circumstances when setting deadlines and taking follow-up actions. Although the employee’s actions from the perspective of revenue production and efficiency may warrant discussion, given IRS’ new mission statement, these comments logically would need to be balanced with comments on the employee’s action from the perspective of customer service. Appendix V contains examples on how supervisor comments can reflect the old versus new mission statements. The current IRS evaluation process contains four features that provide supervisors with opportunities to reinforce the customer service orientation reflected in IRS’ new mission statement. The narrative portion of employee evaluations, midyear progress reviews, case reviews, and field visits provide supervisors with the flexibility to identify and provide feedback on employees’ customer service behaviors, as well as on their technical skills. Available evidence indicates that IRS supervisors could take greater advantage of four features to emphasize customer service. They could use the narrative part of the evaluation more fully. They also could conduct more midyear progress reviews, case reviews, and field visits and sit-ins. Employee annual evaluations are intended to facilitate employees’ development and improve and enhance their work. The narrative portion of an employee’s written evaluation provides flexibility to supervisors to focus on employees’ customer service skills. We estimated that over a 2- year period, more than 40 percent of the employees received evaluations with no narratives in one or both evaluations. An additional estimated 12 percent of employees received an evaluation that duplicated the narratives from the prior year, sometimes repeated word-for-word. A further 13 percent had some narrative but at least one evaluation with no narrative for at least one critical job element. Table 5 shows the extent of missing and duplicate narratives. According to the examination and collection division chiefs who completed our survey in IRS’ 33 district offices, enforcement supervisors have an average of 12 employees that they supervise. To reduce the administrative burden associated with completing the evaluations, IRS and NTEU agreed that supervisors could omit narratives from evaluations under two circumstances. Supervisors can omit all narratives for employees who have earned the same numerical rating in every critical job element as the prior year. In these cases, supervisors may revalidate the prior evaluation without having to prepare a new evaluation.