In 1997 and 1998, the quality of service IRS provided to taxpayers was identified as a problem both in and outside IRS. The Vice President’s National Performance Review looked within and across federal agencies at how existing programs could operate more efficiently and effectively and what activities the government should be doing. After hearing from citizens, legislators, and others that IRS needed to improve in meeting the needs of taxpayers, NPR commissioned a Customer Service Task Force. The Task Force made more than 200 recommendations for customer service improvements. The Senate Finance Committee held hearings during which taxpayers, IRS employees, and others testified about instances of taxpayer abuse and mistreatment. At the same time, a new Commissioner received thousands of improvement suggestions from meetings held with employees across the nation. The Commissioner was also formulating long-term plans for restructuring IRS according to the functional groups of taxpayers it serves (e.g., wage earners, small businesses, and large corporations) in accordance with the IRS Restructuring and Reform Act of 1998. A major information systems modernization was under way, as were efforts to make IRS’ systems Year 2000 compliant. To meet our reporting objective, we reviewed our prior work and IRS documents and interviewed cognizant officials about the overall strategy for managing the customer service improvement efforts and about activities related to the implementation of the selected individual initiatives. We requested comments on a draft of this report from the Commissioner of Internal Revenue. We received written comments, which are discussed near the end of this letter and reprinted in appendix III. We did our work primarily at IRS headquarters in Washington, D.C., between April 1998 and January 1999, in accordance with generally accepted government auditing standards. (See app. I for more details on our scope and methodology.) IRS established a promising strategy for managing the implementation of the agency’s customer service initiatives. The development and use of management information on costs and benefits, milestones and completion dates, and performance measures would strengthen its management strategy. IRS’ basic management strategy was to establish a central office, TSI, in January 1998 to manage the overall implementation of customer service improvements that were being carried out by many different IRS and Treasury offices. The head of TSI was authorized to build a staff and create a strategy for the coordinated review and implementation of the more than 5,000 improvement initiatives IRS received. At the same time the Commissioner established TSI, he created an executive steering committee, with himself as chair, to oversee the implementation activities. The steering committee was to provide decisions on matters affecting the implementation of the recommended initiatives and was to ensure that initiatives being implemented were consistent with IRS’ overall business strategy. We have found that this kind of centralized coordination of crosscutting programs is an effective management strategy. It can be used to identify program overlap, duplication, or fragmentation. Coordination also helps to ensure that program efforts are mutually reinforcing. By April 1998, the 12-person TSI staff had created a database of the initiatives and begun using it to categorize the initiatives on its agenda. TSI grouped the recommendations into functional areas, identified sources of suggestions, and linked similar suggestions from different sources together. The database also had fields for information on the priority level, impact, and cost of implementing initiatives—data that could potentially be used to monitor implementation and facilitate effective management and oversight of work on initiatives. According to TSI officials, however, this information was not routinely completed and updated by offices implementing the initiatives. Early actions to develop the database notwithstanding, TSI had problems in carrying out its responsibilities during its first months of operation. Officials said that the problems arose in large part from the sheer volume of improvement initiatives on its agenda. The TSI staff was not able to evaluate and prioritize the more than 5,000 mandates, recommendations, and suggestions that came from sources including Congress, task force groups, and individual employees and taxpayers. TSI officials said that efforts to determine accountability for work, especially when two or more offices shared responsibility, and to track the progress being made on individual initiatives were also hampered by the large volume of initiatives. As of January 1999, IRS had taken several actions to address its problems. Top IRS management established criteria for prioritization in September 1998. To determine what initiatives to implement in the short term, officials said that IRS criteria were that legislative mandates were top priorities and that all initiatives selected were to show taxpayers, employees, and external stakeholders (e.g., NPR and Congress) that IRS was changing. In January 1999, IRS leadership approved a list of 157 initiatives as primary customer service improvement actions, drastically reducing the number to be managed by TSI in the short term. The initiatives selected were organized under 19 strategic categories (e.g., protect taxpayer rights, improve and increase the use of education and delinquency prevention techniques, and create an IRS culture that values employees and rewards top-quality service). An “owner”—an IRS executive—was assigned as the official accountable for each strategic category and the initiatives being implemented within it. Each strategic category contributed to one of IRS’ three strategic goals: (1) service to each taxpayer; (2) service to all taxpayers; or (3) productivity through a quality work environment. This prioritization process was a necessary first step to setting realistic goals for progress based on IRS’ capacity to take on additional responsibilities. It reduced the number of improvement actions to a manageable level and established accountability for carrying out the work. It also made it feasible to expect that TSI could track the progress being made in implementing the priority initiatives. TSI also made improvements to its database that gave offices implementing the individual initiatives on-line access to information. This change was designed, in part, to make it easier and more efficient to track progress being made on individual initiatives. IRS’ management strategy could be improved. As our review was being completed, TSI had requested that the owners of each primary initiative enter an “action plan” into the database with information on start and completion dates and milestones. As of March 1999, TSI was working with managers of individual initiatives to finalize the action plans. TSI officials said that they expected to use the action plans to monitor progress being made and to keep current on the status of the initiatives. However, IRS had not assessed the need for information on expected costs and benefits and how results of the initiatives were to be measured. TSI officials said that consideration of how to systematically collect standard information on costs and benefits of the initiatives and plans for measuring their results was in an early discussion stage. TSI had concentrated its efforts on prioritization and then developing information on initiatives’ key milestones and completion dates. It had not developed plans to seek information on costs, benefits, or results for individual initiatives. As of January 1999, managers for a few of the 25 initiatives we reviewed had documented management information on costs and benefits, milestones and completion dates, and anticipated results. For 19 of the 25 initiatives we reviewed (see app. II), we asked for documentation of this management information. These 19 initiatives were in process and had progressed past the planning and design phases. We found that 11 of the 19 initiatives had written plans with milestone dates for reaching key points and an estimated final completion date. Cost- benefit analyses were done for eight initiatives, and written documentation of performance measures to gauge expected results were done in seven instances. Managers on individual initiatives provided a number of reasons why some types of management information were not developed. For example: The manager for an initiative to administer preemployment screening assessments to applicants for customer service positions said that IRS leadership wanted the screening assessments to be used for hiring for the 1999 filing season. She noted that there was not enough time to prepare formal project management documents before that hiring began in September 1998. The manager of an initiative to provide tax information to small start-up businesses jointly with the Small Business Administration said that it was not possible to track individual taxpayers who received the information to directly measure how receiving it improved their compliance with tax laws. The manager of an initiative to provide customer service training to all IRS employees said that since the commitment to this training was made by the Acting Commissioner to the Senate Finance Committee, a cost-benefit analysis was not necessary to decide whether the project should be completed. Our work evaluating the implementation of the Government Performance and Results Act has documented the difficulties that agencies face in developing management information, particularly measures of results. Extenuating circumstances, such as short time frames and difficulties identifying benefits and costs, may even preclude the development of management information in some instances. Moreover, factors such as scope and complexity can drive the level of detail necessary. For example, one would not expect to see as much detail in a plan to study why people hang up when they use an automated telephone menu as in a plan to begin using complex new call router technology. However, our work has also shown that public sector agencies can and do overcome obstacles to successfully implement strategic management principles and become more results-oriented. Such efforts have resulted in improved performance. For example, the National Oceanic and Atmospheric Administration began to measure the extent to which it could increase the advance notice it gave the public before severe weather events, instead of counting the number of forecasts it made. The emphasis is significant because having more time to prepare should lessen the loss of life and property. The Coast Guard’s Office of Marine Safety, Security, and Environmental Protection improved its mission effectiveness with fewer people and at lower cost. It did so by giving field commanders greater authority and by investing in activities and processes that went most directly to the goal of reducing risks on the water. Measuring performance allows agencies to track the progress they are making toward their goals and gives managers crucial information on which to base their organizational and management decisions. No picture of what government is accomplishing with the taxpayers’ money can be complete without management information on benefits and costs. It provides agencies with tools to determine whether they have used public resources economically, efficiently, and effectively to achieve the purposes for which they were appropriated. Viewing program performance in light of costs can be important on at least two levels. First, it can help Congress make informed decisions.