In keeping with the FRA, IRS established a Records Management Program. The program provides for the application of management practices in the creation, maintenance, retrieval, preservation, and disposition of records. Although the mission of the Records Management Program is to document, protect, and efficiently manage all IRS records until final disposition, actual day-to-day management of case files is left to each IRS program. According to an IRS official, program managers establish policies and procedures for the management of paper and electronic case files and have overall responsibility for case file management in their program. In addition, each program develops its own policies and procedures, which are documented in IRS’s Internal Revenue Manual (IRM). Case files can be paper, automated, or a combination of both. For example, when IRS examines a tax return, the documents completed by the examiner can be automated (electronically maintained within their system) or paper (placed in physical case files). Case files may include income tax returns, audits, investigations, or claims. According to W&I and SB/SE officials, in fiscal year 2006 they closed over 13 million and 9 million cases, respectively. When cases are closed, IRS units perform managerial and quality reviews to ensure cases were handled correctly and the case files are complete and meet their quality standards. For example, in fiscal year 2006, the SB/SE field collection quality review group found that over 96 percent of the case files they reviewed were complete. Paper case files can be stored in the files area of Submission Processing Center (SPC) campuses or field offices which are spread throughout the country. These case files are then transferred to Federal Records Centers (FRC) by filing coordinators located at the SPC or by information resource coordinators in the field. Once the specified retention period has expired at the FRC, the case files are destroyed. The locations of Submission Processing Centers, Area Records Managers, and Federal Records Centers are illustrated in figure 1. According to an IRS official, the agency is in the process of automating some of its paper case files. IRS is developing scanning capability to convert documents from paper to electronic. However, this official stated that IRS is initially developing this scanning capability for its campuses and not its field offices. Furthermore, the agency does not have a plan or time frame for when all of its case files will be automated. As a result, IRS will be relying on paper case files for some years. Case files should be readily available for examination. However, IRS does not know whether it locates all of the paper case files it requests. In the absence of data on IRS’s success in retrieving paper case files, several sources of anecdotal information give some indication of the potential extent of problems in locating case files. Missing case files can result in lost revenue, create unnecessary taxpayer burden, make cases unavailable for other units such as quality review groups or advisory groups, and hinder congressional oversight. Paper case files are crucial for cases scheduled for Tax Court or District Court. Without complete case files, IRS can lose those cases. For example, advisory staff informed us of several instances where IRS lost revenue in District Court cases because a case file could not be located. In one case, IRS obtained approval to file a nominee lien against a taxpayer because the taxpayer had transferred an asset to another person. IRS pursued collection action, but the taxpayer challenged IRS in District Court asserting that IRS needed to prove that the taxpayer had use and control of the asset that was transferred. IRS was unable to locate the case file for the trial. As a result, IRS lost about $45,000. In another case, a taxpayer commingled individual assets with corporate assets. IRS levied the funds in the bank account of an individual who controlled the corporation to pay the tax debt owed by the corporation. IRS collected the money owed, but the taxpayer filed a claim that IRS needed to prove the money in the individual account belonged to the corporation. IRS had this information in the case file, but could not locate it. Therefore, IRS had to return the levied money, which amounted to about $40,000. IRS has acknowledged its historic difficulties in locating and retrieving case files. In September 2006, the Tax Court proposed a requirement that IRS file answers in all small tax cases ($50,000 or less). An answer includes admissions, qualifications, and denials by IRS of each material fact alleged in the Tax Court petition filed by the taxpayer. In preparation of the answer, IRS generally examines and relies on the information in the case file. When IRS responded to this tax court proposal, IRS stated that due to difficulties in locating and retrieving case files, the requirement to answer all small tax case petitions may lead to a number of motions to extend time in which to answer. Appeals informed us that they are having difficulty obtaining case files that are docketed for Tax Court, and they are working with the Business Units to try and determine the cause. For example, W&I recently made a commitment to send docketed case files to Appeals within 25 days. To assess W&I’s performance, W&I requested Appeals to provide them with a report so they could track their progress. Appeals developed a report which showed that out of about 900 docketed cases from W&I campuses, Appeals had been waiting over 25 days for 420, or 46 percent, of the case files. If Appeals cannot obtain a case file prior to the scheduled court date, IRS could lose the case and any revenue owed by the taxpayer. When IRS staff request paper case files, several attempts may be made to locate them. For example, if a request is input into the Integrated Data Retrieval System (IDRS) and the case file is not located, another request may be input into IDRS. IRS may also perform special searches when normal searches are unsuccessful. When the paper case files still cannot be located, IRS may attempt to re-create them. This creates an additional cost and burden to IRS, which must use its scarce resources to perform special searches and re-create case files. To re-create case files, IRS obtains what information it can from its own systems. If IRS needs additional information from the taxpayer, IRS may contact the taxpayer and request this information. This process can result in unnecessary taxpayer burden. Some paper case files should be sent from field offices to campus file areas within a specified number of days after the case is closed. However, campus staff said they have had difficulty receiving the case files in the time specified. If case files are not sent to storage areas promptly, these case files may not be available for other units, such as quality review groups or advisory groups in performing their tasks. In Collection Field Offices, some types of case files should be sent to the Centralized Case Processing (CCP) Unit as soon as they are closed so that quality review samples can be readily available for selection. CCP has 21 days to obtain the closed case files for review. In a report provided by quality review staff, for the first quarter of fiscal year 2007, CCP was able to obtain only 45 percent of the cases requested for review within the 21- day period. Since collection realizes that CCP will not be able to obtain all of the case files requested, the number of case files requested is double the number needed to allow for cases that cannot be located. According to Collection officials in one field office, there are several reasons case files are not sent to CCP in a timely manner. For example, for Revenue Officers, sending a case file to CCP is not a top priority, especially when their other priorities include active aged cases. Aged cases take priority because the older the case is, the less likely IRS is to recover the amounts owed. In addition, some Revenue Officers are reluctant to let their cases leave their office. We were also informed by these officials that the number of support staff who assist in sending the case files to CCP has been reduced, and in one instance case files were found in a secretary’s desk drawer. In two recent GAO audits, we asked IRS to pull random samples of paper case files, but IRS was unable to locate all of the case files requested. The portion of case files IRS could not locate ranged from about 10 to 14 percent. For example, in one audit, we requested examination case files from NRP, but IRS was unable to locate about 10 percent of the case files requested. NRP staff were notified that 61 of the case files we requested had been sent to them, but NRP officials said they never received these case files. In a second audit, we requested Collection Due Process (CDP) case files where the collection action had been appealed. IRS was unable to locate about 14 percent of these case files. According to IRS staff that assisted us with these requests, they had made several requests to obtain these case files, but IRS was still unable to locate them. TIGTA has also requested random samples of paper case files in some of its reviews where IRS was unable to provide all of the case files requested. In one TIGTA review, TIGTA was to determine whether IRS had an adequate system to ensure tax records could be located and received timely. According to TIGTA, these records included the following types of case files: individual and business examination cases, Earned Income Tax Credit adjustments, and Trust Fund Recovery Penalty (TFRP) cases. IRS was unable to provide about 19 percent of the case files requested by TIGTA. In the review, TIGTA recommended that IRS: Ensure the quality and timeliness of the IRS Records Management Program by developing a method to track specific requests for tax records that will assign accountability, respond to customer problems, and provide management information for the program. According to IRS, it is in the process of modifying IDRS by adding a tracking feature, which will allow IRS to better track requests and provide improved service to requesters. IRS anticipates these modifications will be completed by January 2008.