Tax Administration

GAO is monitoring the Internal Revenue Service's (IRS) tracking of three fiscal year 1991 compliance initiatives. The three initiatives were designed to (1) revise IRS' training program for revenue agents so that experienced staff would spend less time training new staff and, as a result, have more time for audit work; (2) increase examination staff so that IRS could audit more returns; and (3) increase collection staff so that IRS could collect more delinquent accounts. The results for these initiatives were mixed. IRS used contract instructors less extensively than expected. Nonetheless, IRS reported that its opportunity cost savings from its training initiative were $4 million more than originally estimated. These additional savings resulted from the conservative approach IRS used in estimating first-year opportunity cost savings from this initiative. The examination initiative exceeded its staffing goal by 46 staff years, but lost almost $9 million more than IRS expected. This additional loss arose because opportunity costs associated with training new revenue agents were higher than anticipated. IRS did not meet its target for the total dollars collected from delinquent accounts in fiscal year 1991. Yet, IRS has said that the collection initiative achieved its revenue target of $38.7 million. IRS arrived at this conclusion by reducing the baseline against which initiative results were measured.

GAO found that: (1) by comparing the cost of training new revenue agents under the old training program with the cost of training them under the new program, IRS determined that the training initiative actually reduced opportunity costs by $14.3 million in FY 1991, $4 million more than it had originally estimated; (2) IRS also estimated that the training initiative would reduce opportunity costs by $408.5 million through FY 1995; (3) IRS estimated that the examination initiative, which provided for adding almost 900 examination staff, would result in an $18.3-million loss in the first year, but would generate $854.2 million through FY 1995; (4) at the end of FY 1991, IRS had exceeded its staffing goal by 46 staff years, but had lost almost $9 million more than it had initially estimated, mainly because the opportunity costs associated with training new revenue agents were higher than anticipated; (5) the collection initiative called for hiring an additional 687 collection staff to close an additional 17,000 taxpayer delinquent accounts and collect an additional $38.7 million in FY 1991 and $1.1 billion through FY 1995; and (6) according to the IRS yearend compliance initiative tracking report, IRS collected $7.6 billion, $43 million less than originally projected, but achieved its revenue target of $38.7 million by reducing the baseline against which it measured initiative results.