Internal Revenue Service

Pursuant to a congressional request, GAO provided information on the Internal Revenue Service's (IRS) most recent field office restructuring effort, particularly as it relates to Michigan, focusing on: (1) how IRS' field restructuring plans affect Michigan; (2) the impacts in Michigan as IRS transitions to its new structure, and whether they are likely to continue after the consolidation is complete; and (3) what savings, if any, IRS will achieve from its field office restructuring.

GAO noted that: (1) IRS' current restructuring plans for Michigan would result in fewer positions being eliminated in 1997 than originally anticipated, with additional positions scheduled for elimination in 1999; (2) IRS' October 1996 listing of positions to be eliminated included 90 positions in Michigan, all of which were in Detroit; (3) the expected result is a loss of 1 position in 1997; (4) however, Detroit's Automated Collection System (ACS) site is scheduled to close in 1999, which, given staffing levels as of January 1997, may result in the elimination of 112 positions; (5) IRS and National Treasury Employees Union officials in Detroit felt that closing Detroit's taxpayer service site had not adversely affected Michigan taxpayers, because telephone calls were being rerouted to other sites as IRS implements its phased consolidation of telephone-based services; (6) similarly, Michigan taxpayers are unlikely to notice any change when IRS closes its ACS site in Detroit because of a networking capability that enables ACS staff anywhere in the country to handle a taxpayer's call; (7) in its March 1997 report to Congress on the restructuring, IRS said that it expects to save $138 million in personnel costs as a result of eliminating 1,059 field office jobs; (8) for the most part, IRS' methodology for computing the savings is consistent with the methodology that GAO has used in computing personnel savings associated with buyouts versus reductions in force; (9) although IRS is projecting savings in personnel costs, it does not intend to reduce its overall staffing by the net number of field positions it plans to eliminate; (10) instead, IRS plans to redirect the $138 million to fund additional front-line customer service and compliance positions; (11) GAO recognizes that IRS could achieve some efficiencies in field office restructuring; (12) however, it is unclear whether the consolidation might also involve some operational costs, such as increases in cycle time and reductions in work quality that may offset some of those benefits; (13) because IRS' staffing levels are likely to fluctuate from their current levels, without a baseline ratio of front-line compliance and customer service staff to support staff before field office restructuring, it will be difficult to attribute changes in outputs to IRS' field office restructuring; and (14) without information on the operational costs of restructuring and a baseline ratio of front-line staff to support staff, it will be difficult to fully assess the net costs and benefits of IRS' field office restructuring.