Tax Administration
IRS and TIGTA Should Evaluate Their Processing of Employee Misconduct under Section 1203 Gao ID: GAO-03-394 February 14, 2003Section 1203 of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 outlines conditions for firing IRS employees for any of 10 acts of misconduct covering taxpayer and employee rights and tax return filing requirements. Both IRS and the Treasury Inspector General for Tax Administration (TIGTA) have responsibilities related to section 1203. Because of concerns that section 1203 may have a chilling effect on IRS enforcement staff's productivity, GAO (1) determined the number of section 1203 allegations, (2) surveyed IRS employee perceptions about section 1203, and (3) identified problems IRS and TIGTA face in processing section 1203 cases and the extent to which they have addressed them.
IRS data show that of the 3,970 section 1203 allegations IRS received from July 1998 through September 2002, IRS or TIGTA completed investigations on 3,512 allegations and substantiated 419 as violations, resulting in 71 employees being fired for section 1203 misconduct. Employee misconduct related to the two section 1203 provisions on whether employees filed their tax returns on time and accurately stated their tax liability (as opposed to the eight taxpayer and employee rights provisions) accounted for almost all of the violations and firings. Most of the IRS frontline enforcement employees who responded to GAO's survey said that they understood, but feared, section 1203. They also reported that, because of section 1203, their work takes longer and the likelihood of their taking an enforcement action, such as recommending a seizure, has decreased. However, employees also were more likely to say that other factors, such as IRS's reorganization, have had a greater impact on their ability to do their job than to say that section 1203 had a greater impact. IRS and TIGTA have taken steps intended to correct known problems in their processing of section 1203 employee misconduct cases--such as lengthy investigations and conflicts of interest during investigations--that may have negatively affected frontline employees' morale and productivity. However, the extent to which these steps have succeeded is unknown because IRS and TIGTA do not have a coordinated approach for evaluating how effectively they process section 1203 cases. Such an approach would include results-oriented goals, balanced performance measures to mark progress towards these goals, and means to collect performance data.
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Director: Team: Phone:GAO-03-394, Tax Administration: IRS and TIGTA Should Evaluate Their Processing of Employee Misconduct under Section 1203
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Report to the Chairman and Ranking Minority Member, Committee on
Finance, U.S. Senate:
United States General Accounting Office:
GAO:
February 2003:
Tax Administration:
IRS and TIGTA Should Evaluate Their Processing of Employee Misconduct
under Section 1203:
GAO-03-394:
GAO Highlights:
Highlights of GAO-03-394, a report to the Chairman and Ranking Minority
Member,
Committee on Finance, U. S. Senate:
February 2003:
Tax Administration:
IRS and TIGTA Should Evaluate Their Processing of Employee Misconduct
under Section 1203:
Why GAO Did This Study:
Section 1203 of the Internal Revenue Service (IRS) Restructuring and
Reform Act
of 1998 outlines conditions for firing IRS employees for any of 10 acts
of
misconduct covering taxpayer and employee rights and tax return filing
requirements.
Both IRS and the Treasury Inspector General for Tax Administration
(TIGTA) have
responsibilities related to section 1203. Because of concerns that
section 1203
may have a chilling effect on IRS enforcement staff‘s productivity, GAO
(1)
determined the number of section 1203 allegations, (2) surveyed IRS
employee
perceptions about section 1203, and (3) identified problems IRS and
TIGTA face
in processing section 1203 cases and the extent to which they have
addressed them.
What GAO Found:
IRS data show that of the 3,970 section 1203 allegations IRS received
from July
1998 through September 2002, IRS or TIGTA completed investigations on
3,512
allegations and substantiated 419 as violations, resulting in 71
employees
being fired for section 1203 misconduct. Employee misconduct related to
the
two section 1203 provisions on whether employees filed their tax
returns on
time and accurately stated their tax liability (as opposed to the eight
taxpayer
and employee rights provisions) accounted for almost all of the
violations and
firings.
Most of the IRS frontline enforcement employees who responded to GAO‘s
survey
said that they understood, but feared, section 1203. They also reported
that,
because of section 1203, their work takes longer and the likelihood of
their
taking an enforcement action, such as recommending a seizure, has
decreased.
However, employees also were more likely to say that other factors,
such as
IRS‘s reorganization, have had a greater impact on their ability to do
their
job than to say that section 1203 had a greater impact.
IRS and TIGTA have taken steps intended to correct known problems in
their
processing of section 1203 employee misconduct cases”such as lengthy
investigations and conflicts of interest during investigations”that may
have
negatively affected frontline employees‘ morale and productivity.
However,
the extent to which these steps have succeeded is unknown because IRS
and
TIGTA do not have a coordinated approach for evaluating how effectively
they
process section 1203 cases. Such an approach would include results-
oriented
goals, balanced performance measures to mark progress towards these
goals,
and means to collect performance data.
Figure: Extent to Which IRS Employees Said They Feared Section 1203:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few
’did not know or had no basis to judge“ responses.
[End of figure]
What GAO Recommends:
GAO recommends that IRS and TIGTA coordinate on an approach for
evaluating the
section 1203 process to include results-oriented goals for processing
section
1203 cases, performance measures that assess progress towards these
goals, and
means to collect and analyze related performance data.
In commenting on a draft of this report, IRS agreed with GAO‘s
recommendation
that a coordinated evaluation of the section 1203 process is desirable
and TIGTA
neither agreed nor disagreed. However, both raised a similar concern
about the
independence of each agency.
www.gao.gov/cgi-bin/getrpt?GAO-03-394.
To view the full report, including the scope and methodology, click on
the
link above. For more information, contact Jim White at (202) 512-9110
or
whitej@gao.gov
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
Few Section 1203 Allegations Were Substantiated and Resulted in an
Employee‘s Firing, Except for Those Involving Compliance with Federal
Tax Laws:
Most Employees Believed That They Understood but Feared Section 1203,
and That It Was One of Several Factors Affecting Their Work:
IRS and TIGTA Have Taken Steps Intended to Improve the Section 1203
Process, but Extent of Progress is Unknown:
Conclusions:
Recommendations:
Agency Comments and our Evaluation:
Appendix I: Survey and Case File Review Methodologies:
Survey Methodology:
Case File Review Methodology:
Appendix II: Data on Section 1203 Allegations:
Appendix III: GAO Survey of IRS Frontline Enforcement
Employees:
Appendix IV: Summary of Content Analysis of Open-Ended
Comments from GAO Survey of IRS Frontline Enforcement Employees:
Appendix V: Stages of Section 1203 Case Processing:
Reporting and Investigative Determination:
Fact-Finding:
Adjudication:
Appendix VI: Comments from the Internal Revenue Service:
Appendix VII: Comments from the Treasury Inspector General
for Tax Administration:
Appendix VIII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: Summary of Section 1203 Allegations Received, Investigated,
and Substantiated and of Employee Firings, July 1998 through September
2002:
Table 2: Summary of Problems Identified, Actions Recommended, and
Actions Taken to Improve the Section 1203 Process:
Table 3: Number of Cases Opened before, on, or after March 1, 2002:
Table 4: Summary of Substantiated Section 1203 Allegations by
Disposition, July 1998 through September 2002:
Table 5: Summary of Employee Firings by Type of Misconduct and Employee
GS-Level, July 1998 through September 2002:
Table 6: Summary of Investigative Results, July 1998 through September
2002:
Figures:
Figure 1: Employees Said They Had a Clear Understanding of the Types of
Misconduct under Section 1203:
Figure 2: Extent to Which Employees Said They Were Fearful of Section
1203:
Figure 3: How Collection Employees Said Section 1203 Affected the
Likelihood of Their Recommending a Seizure, Lien, or Levy:
Figure 4: How Employees Reported Section 1203 Affected the Likelihood
of Taking Other Actions Associated with Audit and Collection:
Figure 5: IRS Employee Views on the Impacts of Various Factors on Their
Ability to Do Their Jobs Compared to Section 1203:
Figure 6: Extent to Which IRS Employees Said Section 1203 Promotes
Employee Accountability and Respect for Taxpayer Rights:
Figure 7: Summary of Content Analysis of Open-Ended Written Responses:
Figure 8: Case Flow Process for Section 1203 Cases:
Abbreviations:
ALERTS: Automated Labor and Employee Relations Tracking System:
BEPR: Board of Employee Professional Responsibility:
CCPAG: Commissioner‘s Complaint Processing and Analysis Group:
EEO: Equal Employment Opportunity:
ETC: Employee Tax Compliance:
IRS: Internal Revenue Service:
SB/SE: Small Business and Self-Employed Operating Division:
TIGTA: Treasury Inspector General for Tax Administration:
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Letter:
February 14, 2003:
The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate:
On July 22, 1998, the Congress enacted the Internal Revenue Service
Restructuring and Reform Act[Footnote 1] (Restructuring Act) to balance
the Internal Revenue Service‘s (IRS) responsibility to collect taxes
with its responsibility to protect the rights of taxpayers and serve
the public. One provision of the Restructuring Act, section 1203,
defines 10 specific acts or omissions for which an IRS employee may be
fired during the performance of official duties. Such acts or omissions
include harassing a taxpayer, taxpayer representative, or other IRS
employee, or IRS employees not complying with their tax obligations;
they are investigated on the basis of allegations made by taxpayers (or
taxpayer representatives) or IRS employees. Both IRS and the Treasury
Inspector General for Tax Administration (TIGTA) have responsibilities
for receiving and investigating such allegations under section 1203
while IRS has the responsibility for adjudicating violations of section
1203.
The IRS Commissioner and others have asserted that section 1203 has had
a negative impact on IRS employees‘ morale and effectiveness. In
particular, they have indicated that section 1203 has had a ’chilling
effect“ on IRS frontline enforcement employees who are afraid to take
certain appropriate enforcement actions, contributing to recent
declines in IRS‘s enforcement activities. In addition, IRS officials
acknowledge that aspects of the process for receiving, investigating,
and adjudicating section 1203 allegations (which we refer to as the
’section 1203 process“), such as long case processing times, may have
contributed to employees‘ fears.
In light of the assertions about possible chilling effects, you asked
us to assess the implementation of section 1203. Specifically, as
agreed with your offices, our objectives were to (1) determine the
number, type, and disposition of section 1203 allegations; (2)
determine IRS frontline enforcement employees‘ perceptions of how
section 1203 has affected their interactions with taxpayers; and (3)
identify what problems, if any, IRS and TIGTA have encountered in
processing section 1203 cases and the extent to which they have
addressed them. We did not attempt to measure the effectiveness of
section 1203, or whether its perceived impacts were beneficial or
harmful. (See our scope and methodology section for details on our
approach.):
To determine the number, type, and disposition of section 1203
allegations, we analyzed IRS data for July 1998 (when section 1203 took
effect) through September 2002. To determine IRS frontline enforcement
employees‘ perceptions of section 1203, we surveyed a random sample of
audit and collection employees--revenue agents, revenue officers, tax
auditors, and tax compliance officers. To identify any problems in the
section 1203 process and the extent to which they have been addressed,
we reviewed the policies and procedures for processing section 1203
cases and interviewed responsible officials from IRS and TIGTA.
Results in Brief:
IRS data show that of the 3,970 section 1203 allegations received from
July 1998 through September 2002, IRS or TIGTA had finished
investigating 3,512 allegations and substantiated 419 as
violations.[Footnote 2] Of these 419 violations, 71 resulted in
firings[Footnote 3] and the rest resulted in a mitigated penalty, the
employee leaving IRS, or another disposition (see app. II). Employee
misconduct related to the two tax compliance provisions of section
1203--late filing of federal tax returns and understatement of federal
tax liability by IRS employees--accounted for about 93 percent of the
419 violations and 87 percent of the 71 firings.
On the basis of our survey results, the majority of frontline
enforcement employees said that they have a clear understanding of the
types of misconduct under section 1203 but that they had fears
associated with section 1203, such as being fired.[Footnote 4] They
also cited section 1203 as one of several factors affecting their work.
Specifically, over three-quarters of the frontline enforcement
employees said that the time to do their jobs had increased, and nearly
two-thirds of those who collect tax debts said that the likelihood of
recommending a seizure of a taxpayer‘s assets had decreased. Further,
many frontline enforcement employees believe that other factors such as
IRS‘s reorganization and tax law changes have had a greater impact on
their ability to do their jobs than section 1203.
IRS and TIGTA have taken steps intended to correct known problems--such
as lengthy investigations and conflicts of interest during
investigations--that may have reduced the effectiveness of the section
1203 process as well as the morale and productivity of enforcement
employees. However, the extent to which these steps have succeeded is
unknown because IRS and TIGTA have not coordinated on an approach for
evaluating the section 1203 process on the basis of consistent types of
results-oriented goals, measures, and performance data. For example,
IRS has not developed results-oriented timeliness goals or measures or
tracked the length of time to handle its parts of the section 1203
process. Until IRS and TIGTA develop a coordinated approach to ensure
consistent and valid evaluation, IRS and TIGTA cannot determine the
effectiveness of the entire section 1203 process or any changes to it.
We are recommending that IRS and TIGTA coordinate on an approach for
evaluating the section 1203 process based on results-oriented goals,
measures, and related performance data. In commenting on a draft of
this report, IRS generally agreed with our recommendation and TIGTA
neither agreed nor disagreed. However, both IRS and Treasury raised a
similar concern about the independence of each agency. (See agency
comments and our evaluation and apps. VI and VII.):
Background:
As part of the Restructuring Act, the Congress enacted section 1203,
which provides for the firing of IRS employees who have been proven to
commit any of 10 acts or omissions in the performance of their official
duties, unless a mitigated penalty is appropriate. These 10 acts or
omissions, which are shown below, can be divided into 2 that relate to
IRS employees‘ tax compliance in filing tax returns and reporting tax
liability, and 8 that relate to employee and taxpayer rights.
Specifically, these acts or omissions are:
(1) willful failure to obtain the required approval signatures on
documents authorizing a seizure of a taxpayer‘s home, personal
belongings, or business assets;
(2) providing a false statement under oath with respect to a material
matter involving a taxpayer or taxpayer representative;
(3) violating the rights protected under the Constitution or the civil
rights established under six specifically identified laws with respect
to a taxpayer, taxpayer representative, or other employee of the
IRS;[Footnote 5]
(4) falsifying or destroying documents to conceal mistakes made by any
employee with respect to a matter involving a taxpayer or taxpayer
representative;
(5) assault or battery of a taxpayer, taxpayer representative, or
employee of the IRS, but only if there is a criminal conviction, or a
final judgment by a court in a civil case, with respect to the assault
or battery;
(6) violating the Internal Revenue Code, Department of Treasury
regulations, or policies of the IRS (including the Internal Revenue
Manual) for the purpose of retaliating against, or harassing, a
taxpayer, taxpayer representative, or other employee of the IRS;
(7) willful misuse of the provisions of section 6103[Footnote 6] of the
Internal Revenue Code for the purpose of concealing information from a
congressional inquiry;
(8) willful failure to file any return of tax required under the
Internal Revenue Code on or before the date prescribed therefore
(including any extensions), unless such failure is due to reasonable
cause and not to willful neglect;
(9) willful understatement of federal tax liability, unless such
understatement is due to reasonable cause and not to willful neglect;
and:
(10) threatening to audit a taxpayer for the purpose of extracting
personal gain or benefit.
The Restructuring Act provided the Commissioner with sole discretion,
which he cannot delegate, to determine whether to take a personnel
action other than firing an employee (i.e., mitigation) for a section
1203 violation. Such determination may not be appealed in any
administrative or judicial proceeding.
The process for receiving, investigating, and adjudicating section 1203
allegations involves TIGTA and IRS. Under the section 1203 process,
revised in March 2002, TIGTA has primary responsibility for receiving
and investigating the allegations, except for those that IRS receives
and investigates. For example, IRS‘s Employee Tax Compliance (ETC)
unit, using a computer match, has primary responsibility for
identifying and investigating employee tax compliance issues.[Footnote
7] Also, IRS‘s Office of Equal Employment Opportunity (EEO) is to
analyze EEO settlement agreements, findings of discrimination, and
taxpayer complaints of discrimination to identify whether a potential
section 1203 civil rights violation exists.[Footnote 8] IRS is
responsible for adjudicating all section 1203 allegations that are
substantiated as violations.
Generally, each allegation of a potential section 1203 violation must
be initially evaluated to determine whether it merits a full
investigation. Then, if an investigation of an allegation uncovers
sufficient facts to substantiate it (i.e., support a section 1203
violation), the employee is to be issued a letter notifying him or her
of the proposed firing from IRS. The employee has a right to respond to
the letter. Afterwards, if the deciding official determines that the
evidence sustains the alleged violation, a board established by the IRS
Commissioner must review the case to determine whether a penalty less
than firing is appropriate. If the board does not find mitigation to be
appropriate, the case is not submitted to the IRS Commissioner and the
employee is fired. If the board recommends mitigation, the Commissioner
must consider it. If the Commissioner mitigates the penalty, other
disciplinary actions, such as counseling, admonishment, reprimand, or
suspension may be applied. Details on the process are provided in
appendix V.
According to IRS senior management, the misconduct addressed in section
1203 has always been regarded as serious and subjected to disciplinary
action. Prior to the enactment of section 1203, the general rules for
imposing discipline required a deciding official to consider a wide
range of factors in arriving at the appropriate disciplinary
action.[Footnote 9] Enactment of section 1203 eliminated the variation
in penalty for substantiated misconduct, requiring the employee to be
fired unless the Commissioner mitigates that penalty.
The IRS Commissioner has expressed concerns over the appropriateness of
the mandatory firing penalty, especially when an IRS employee had
already paid his or her tax liability or when the allegation involves
just IRS employees. To address the concerns, IRS, through the
Department of the Treasury, is seeking legislation to amend section
1203 by eliminating this penalty for (1) the late filing of tax returns
for which a refund is due and (2) action by IRS employees that violate
another employee‘s rights. In addition, IRS requested that the
Commissioner be able to use a range of penalties aside from firing
employees, for the types of misconduct under section 1203. Further,
because of the associated seriousness and sensitivity over privacy
issues, IRS also asked that the unauthorized inspection of returns or
return information be added to the list of violations under section
1203.
Scope and Methodology:
To determine the number, type, and disposition of section 1203
allegations, we analyzed data from IRS‘s Automated Labor and Employee
Relations Tracking System (ALERTS) database as of September 30, 2002.
The data included all section 1203 cases that had originated in IRS, as
well as some cases that originated in TIGTA and were either
investigated or referred to IRS for investigation or
adjudication.[Footnote 10] On the basis of IRS information on its
quality control checks of the data, the use of the data, and our review
of the database, we determined that the data were sufficiently reliable
to determine the number, type, and disposition of section 1203
allegations.
To determine IRS employees‘ perceptions of how section 1203 has
affected their interactions with taxpayers, we surveyed a stratified
random sample of IRS frontline enforcement employees nationwide. Those
audit or collection employees included revenue agents, revenue
officers, tax compliance officers, and tax auditors from IRS‘s Small
Business and Self-Employed Division (SB/SE).[Footnote 11] We asked
questions about their understanding and perceptions of section 1203 and
its impacts on their jobs. We sent the survey to 455 eligible frontline
enforcement employees,[Footnote 12] of which 350 responded via regular
mail, fax, or the Internet between July and September 2002, for a
response rate of 77 percent. We also did a content analysis of written
comments volunteered by 208 respondents to arrive at a limited number
of content categories. A copy of the survey instrument and a summary of
the content categories are included in appendixes III and IV.
To identify what problems, if any, IRS and TIGTA have encountered in
processing section 1203 cases and the extent to which they have
addressed them, we reviewed IRS‘s and TIGTA‘s policies and procedures
for receiving, investigating, and adjudicating section 1203
allegations. We also interviewed IRS and TIGTA officials who are
responsible for the section 1203 process. In addition, we reviewed a
study done by IRS, TIGTA, and a private consulting firm to streamline
the section 1203 process, and discussed the study with their officials.
To understand the process and gauge the length of time that section
1203 cases take to process, we reviewed 92 of the 100 most recently
closed cases as of August 30, 2002, according to IRS‘s ALERTS database;
in 5 cases, the files could not be located for employees who retired or
otherwise left IRS and
3 cases were duplicates. We recorded dates and decisions for various
stages of the process.
We did not attempt to measure the effectiveness of section 1203 and
whether its impacts on IRS employees were positive or negative.
Appendix I contains more detailed information on our survey design and
administration and case file review approaches. We conducted our review
in Washington, D.C., from November 2001 to December 2002 in accordance
with generally accepted government auditing standards.
Few Section 1203 Allegations Were Substantiated and Resulted in an
Employee‘s Firing, Except for Those Involving Compliance with Federal
Tax Laws:
IRS data show that, with the exception of employees‘ tax compliance
provisions, few of the 3,970 section 1203 allegations received between
July 1998 and September 2002 were substantiated as violations of
section 1203 and resulted in an employee‘s firing. Table 1 shows what
happened to the 3,970 allegations in terms of completed investigations,
substantiated allegations, and firings.[Footnote 13]
Table 1: Summary of Section 1203 Allegations Received, Investigated,
and Substantiated and of Employee Firings, July 1998 through September
2002:
Type of section 1203 misconduct: Taxpayer and employee rights; Section
1203 allegations: Received: [Empty]; Section 1203 allegations:
Completed investigations: [Empty]; Section 1203 allegations:
Substantiated: [Empty]; Section 1203 allegations: IRS employee firings:
[Empty].
Type of section 1203 misconduct: Seizure without approval; Section 1203
allegations: Received: 16; Section 1203 allegations: Completed
investigations: 13; Section 1203 allegations: Substantiated: 0; Section
1203 allegations: IRS employee firings: 0.
Type of section 1203 misconduct: False statement under oath; Section
1203 allegations: Received: 22; Section 1203 allegations: Completed
investigations: 21; Section 1203 allegations: Substantiated: 1; Section
1203 allegations: IRS employee firings: 0.
Type of section 1203 misconduct: Civil rights/constitutional rights;
Section 1203 allegations: Received: 291; Section 1203 allegations:
Completed investigations: 262; Section 1203 allegations:
Substantiated: 1; Section 1203 allegations: IRS employee firings: 0.
Type of section 1203 misconduct: Falsifying or destroying documents;
Section 1203 allegations: Received: 81; Section 1203 allegations:
Completed investigations: 66; Section 1203 allegations: Substantiated:
10; Section 1203 allegations: IRS employee firings: 3.
Type of section 1203 misconduct: Assault or battery; Section 1203
allegations: Received: 10; Section 1203 allegations: Completed
investigations: 8; Section 1203 allegations: Substantiated: 1; Section
1203 allegations: IRS employee firings: 1.
Type of section 1203 misconduct: Retaliation or harassment; Section
1203 allegations: Received: 1,729; Section 1203 allegations: Completed
investigations: 1,680; Section 1203 allegations: Substantiated: 6;
Section 1203 allegations: IRS employee firings: 1.
Type of section 1203 misconduct: Misuse of section 6103 to conceal
information; Section 1203 allegations: Received: 5; Section 1203
allegations: Completed investigations: 3; Section 1203 allegations:
Substantiated: 0; Section 1203 allegations: IRS employee firings: 0.
Type of section 1203 misconduct: Threat to audit for personal gain;
Section 1203 allegations: Received: 88; Section 1203 allegations:
Completed investigations: 77; Section 1203 allegations: Substantiated:
12; Section 1203 allegations: IRS employee firings: 4.
Type of section 1203 misconduct: Subtotal; Section 1203 allegations:
Received: 2,242; Section 1203 allegations: Completed investigations:
2,130; Section 1203 allegations: Substantiated: 31; Section 1203
allegations: IRS employee firings: 9.
Type of section 1203 misconduct: Compliance with federal tax laws;
Section 1203 allegations: Received: [Empty]; Section 1203 allegations:
Completed investigations: [Empty]; Section 1203 allegations:
Substantiated: [Empty]; Section 1203 allegations: IRS employee firings:
[Empty].
Type of section 1203 misconduct: Failure to timely file federal tax
return; Section 1203 allegations: Received: 1,042; Section 1203
allegations: Completed investigations: 914; Section 1203 allegations:
Substantiated: 345; Section 1203 allegations: IRS employee firings: 55.
Type of section 1203 misconduct: Understatement of federal tax
liability; Section 1203 allegations: Received: 686; Section 1203
allegations: Completed investigations: 468; Section 1203 allegations:
Substantiated: 43; Section 1203 allegations: IRS employee firings: 7.
Type of section 1203 misconduct: Subtotal; Section 1203 allegations:
Received: 1,728; Section 1203 allegations: Completed investigations:
1,382; Section 1203 allegations: Substantiated: 388; Section 1203
allegations: IRS employee firings: 62.
Type of section 1203 misconduct: Total; Section 1203 allegations:
Received: 3,970[A]; Section 1203 allegations: Completed
investigations: 3,512[B]; Section 1203 allegations: Substantiated:
419; Section 1203 allegations: IRS employee firings: 71.
Source: GAO analysis of IRS data.
[A] In addition, IRS forwarded 1,196 taxpayer allegations of section
1203 misconduct to its Frivolous Return Program. Further, IRS‘s
Discrimination Complaint Review Unit received 1,003 EEO settlements
and/or findings of discrimination involving civil rights or
constitutional issues.
[B] At the time of our review, another 351 allegations were in the
process of being investigated, while 107 allegations were not
investigated due to such reasons as the employee resigning or retiring.
[End of table]
Table 1 shows that IRS or TIGTA had finished investigating 3,512
allegations and substantiated 419 as violations, for which IRS fired 71
employees. Of the other 348 violations, IRS‘s Commissioner mitigated
the penalty for 166; the employees resigned or retired for 117; the
employees were fired on other grounds or during their probationary
period for 33; and IRS had not finalized the decision for another 32.
Appendix II shows the dispositions of all 419 violations by type of
section 1203 misconduct and the grade level of the 71 fired employees.
Table 1 also shows that most of the violations and related firings
involved the two tax compliance provisions of section 1203. The failure
to file tax returns on time and the understatement of federal tax
liability accounted for 388 of the 419 violations (93 percent) and 62
of the 71 firings (87 percent). The rest of the violations and related
firings involved the remaining 8 provisions, which deal with employee
and taxpayer rights. IRS officials said that the bulk of the violations
and firings involved the two tax compliance provisions of section 1203
because IRS has a systemic computerized process to identify and
evaluate potential employee tax compliance issues. Further, according
to officials, these issues generally are more factually based and
involve clearer indicators of misconduct.
To understand why 3,093 investigated allegations were not
substantiated, we analyzed IRS data and talked with IRS officials. As
shown in appendix II, 800 of these investigated allegations were not
substantiated as section 1203 violations but were substantiated as
misconduct violations unrelated to section 1203. Of those remaining,
1,549 involved allegations of retaliation and harassment of a taxpayer,
taxpayer representative, or IRS employee. Although IRS had not done a
systematic analysis, IRS officials offered possible reasons why these
investigated allegations could not be substantiated as section 1203
violations. These officials said that many were not credible. For
example, the officials cited cases in which a taxpayer representative
routinely lodged allegations whenever enforcement employees contacted
clients. Another cited example was when taxpayers‘ allegations had more
to do with their protests about having to meet their tax obligations.
Most Employees Believed That They Understood but Feared Section 1203,
and That It Was One of Several Factors Affecting Their Work:
Our survey indicated that most frontline enforcement employees
understood but feared section 1203, and that, because of section 1203,
their work takes longer and the likelihood of their recommending a
seizure decreased. Otherwise, employees‘ reported views were not as
strong on the impacts of section 1203 on other audit or collection
activities. At the same time, many employees said that, other factors,
such as IRS‘s reorganization, have had a greater impact on their
ability to do their jobs than section 1203.
Most Frontline Enforcement Employees Said They Understand the Types of
Section 1203 Misconduct:
The overwhelming majority of frontline enforcement employees reported
that they understood the types of misconduct covered by section 1203.
Figure 1 shows that for 9 of the 10 provisions, at least three-quarters
of the employees said they had a very or generally clear understanding
of misconduct under section 1203. For the provision on the misuse of
section 6103 to conceal information from a congressional inquiry--about
68 percent of the employees said they had a very or generally clear
understanding of misconduct covered by section 1203.
Figure 1: Employees Said They Had a Clear Understanding of the Types of
Misconduct under Section 1203:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few ’did not know“ responses.
[End of figure]
In addition, an estimated 48 percent of the employees said that IRS had
provided, to a very great or great extent, clear examples of what
constitutes harassment or retaliation under section 1203. Only about
7 percent said that IRS provided such examples to little or no
extent.[Footnote 14]
Most Frontline Enforcement Employees Reported Fears Associated with
Section 1203:
The majority of employees reported fears associated with section 1203.
As shown in figure 2, at least two-thirds reported that they were
somewhat or very fearful of having a taxpayer file an allegation and
being investigated. Almost as many said they were somewhat or very
fearful of being fired.[Footnote 15]
Figure 2: Extent to Which Employees Said They Were Fearful of Section
1203:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few ’did not know or had no basis to judge“ responses.
[End of figure]
Written comments, while not representative of all respondents, provide
some insights on employees‘ fears. For example, several employees
described fears of being falsely accused by a taxpayer while others
noted a fear of being investigated for making an honest mistake. A
number of employees expressed more general fears of section 1203. For
example, one employee wrote, ’I acknowledge that my fears may be
irrational, and I would hope that the system would work as it is
designed. I could envision a complaint (unfounded, I would hope) being
filed, and the resulting anxiety would be overwhelming.“:
Further, the survey revealed that most frontline enforcement employees
had little or no confidence in the disciplinary process for section
1203. For example, an estimated 50 percent of the employees said they
are not at all confident and 18 percent reported that they had little
confidence that they will not be disciplined for making an honest
mistake.[Footnote 16]
IRS officials said that they believe the fear and distrust of section
1203 is pervasive among all types of frontline enforcement employees.
However, they indicated that those most affected and concerned are
revenue officers who have face-to-face contacts with delinquent
taxpayers.[Footnote 17]
Many Frontline Enforcement Employees Reported That Section 1203
Contributes to Work Taking Longer and a Decline in Seizure Activity:
Many frontline enforcement employees perceived that section 1203
contributed to work taking longer and to a decline in seizure activity.
Otherwise, employees reported views that were not as strong on the
impacts of section 1203 on other frontline enforcement activities, such
as those associated with audits or collections.
Such perceptions are important because IRS management believes that
declines in enforcement activities since 1998 resulted, in part, from
employees‘ reluctance to use enforcement tools due to section 1203
fears.[Footnote 18] Our survey results on employees‘ perceptions of
changes in job behavior are broadly correlated with actual declines in
enforcement activities, such as seizures. However, this broad
correlation should be interpreted with caution because employee
perceptions do not necessarily demonstrate causation and section 1203
is unlikely to be the only reason for the decline in enforcement
activity. Further, any changes in enforcement activity could be
positive or negative, depending on whether the activity was merited.
One job behavior that employees reported being affected by section 1203
was the time spent to do their work. An estimated 80 percent of
frontline enforcement employees said that work took longer as a result
of section 1203.[Footnote 19] Some written comments helped to
illustrate why employees believed their work takes longer. For example,
one employee wrote, ’[I am] more cautious [and allow] more time to
avoid harassment allegations.“ Another said, ’the greatest impact [of
section 1203] has been on the amount of time necessary to work a case-
-ensuring that taxpayer rights are made clear and protected through
every step.“:
In addition, many employees responsible for collections, such as
issuing seizures, liens, and levies,[Footnote 20] said that section
1203 has affected how they do their jobs. As figure 3 shows, an
estimated 67 percent of the collection employees said that the
likelihood of their recommending a seizure of taxpayer assets to
satisfy a tax debt had decreased (including somewhat or greatly);
reported views were not as strong on the likelihood of recommending a
levy or lien decreasing.[Footnote 21]
Figure 3: How Collection Employees Said Section 1203 Affected the
Likelihood of Their Recommending a Seizure, Lien, or Levy:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few ’did not know“ responses.
[End of figure]
The written comments helped to illustrate why collection employees said
they were less likely to take collection actions. Several employees
indicated that they second-guess their decisions as a result of section
1203. One employee wrote, ’[Section 1203] has forced me to doubt my own
judgment on enforcement matters, especially . . . where some issues are
vague and the collection officer has to use his or her judgment.“
Another employee noted, ’[Section] 1203 has made me hesitant to take
any action and has slowed work progress since each and every action has
the potential to create a section 1203 violation. There is so much
information that we are responsible to know and any act, willful or
not, can result in a disciplinary action.“:
Employees reported views that were not as strong on the impacts of
section 1203 on other frontline enforcement activities. For example,
figure 4 shows that except for one action--contacting a third party--
roughly half or more than half of the employees reported that section
1203 had no impact on the likelihood of their taking actions that can
be associated with audits such as requesting, reviewing, or questioning
documents submitted by taxpayers.[Footnote 22]
Figure 4: How Employees Reported Section 1203 Affected the Likelihood
of Taking Other Actions Associated with Audit and Collection:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few ’did not know“ responses.
[End of figure]
Many Employees Said That IRS‘s Reorganization and Tax Law Changes Have
Had a Greater Impact on Their Ability to do Their Jobs Than Section
1203:
Many IRS frontline enforcement employees also reported that IRS‘s
reorganization and tax law changes have had a greater impact on their
ability to do their jobs than section 1203.[Footnote 23] As shown in
figure 5, a higher percentage of employees reported that IRS‘s
reorganization and tax law changes have had a greater impact rather
than a lesser impact on their ability to do their jobs compared to
section 1203.[Footnote 24]
Figure 5: IRS Employee Views on the Impacts of Various Factors on Their
Ability to Do Their Jobs Compared to Section 1203:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few ’did not know or had no basis to judge“ responses.
[End of figure]
Some written comments indicated employee‘s perceptions on how the other
factors had an effect on their ability to do their jobs. For example,
one employee wrote, ’The restructuring has created areas where there is
no accountability. Frontline employees have nowhere to go when not
receiving services, as the person providing the service is in a
different division . . . .“ Another wrote, ’The ongoing complex tax law
changes in conjunction with the threat of losing your job (under
section 1203) if you don‘t correctly implement all of the changes is
what greatly impacts our ability to do the job.“:
IRS officials indicated that the impacts of section 1203 on employees
cannot be isolated from those of such factors as IRS‘s reorganization
and tax law changes because they are interrelated. For example, the
officials said that section 1203 itself is part of the reorganization
and is a tax law change that some view as complex.
Most Frontline Enforcement Employees Said Section 1203 Has Had Some
Impact in Promoting Employee Accountability and Respect for Taxpayer
Rights:
As figure 6 shows, we estimate that at least 60 percent of the
enforcement employees perceived section 1203 as promoting some degree
of employee accountability and respect for taxpayer rights. We also
estimate that about 30 percent of the employees perceived section 1203
as doing little or nothing to promote accountability or respect for
taxpayer rights.[Footnote 25]
Figure 6: Extent to Which IRS Employees Said Section 1203 Promotes
Employee Accountability and Respect for Taxpayer Rights:
[See PDF for image]
Note: Percentages may not add to 100 percent because of rounding and a
few ’did not know or had no basis to judge“ responses.
[End of figure]
Some written comments indicated ways that employees perceived section
1203 as promoting employee accountability and respect for taxpayer
rights. One employee wrote, ’These changes were needed and . . . it has
been a change for the better and hopefully has increased our trust and
faith in the general public, our clients, the taxpayers.“ Another
employee noted, ’Section 1203 make[s] IRS employees accountable and
promotes respect for taxpayers . . . .“:
In other written comments, however, some employees offered their
perceptions of how section 1203 did little or nothing to promote
employee accountability or to promote taxpayer rights. For example, one
employee wrote, ’Employees who safeguard taxpayers‘ rights are those
who would have anyway--section 1203 did not affect that.“ Another
noted, ’We have . . . always been aware of and made every effort to
respect the taxpayer‘s rights. [Section] 1203 does not enhance
taxpayer‘s rights or . . . efforts to ensure those rights are
honored.“:
IRS and TIGTA Have Taken Steps Intended to Improve the Section 1203
Process, but Extent of Progress is Unknown:
IRS and TIGTA have taken steps intended to correct known problems, such
as lengthy investigations and conflicts of interest during
investigations, that may have reduced the effectiveness of the section
1203 process as well as the morale and productivity of enforcement
employees. However, the extent to which these steps have succeeded is
unknown because IRS and TIGTA have not coordinated on an approach for
evaluating the section 1203 process on the basis of consistent types of
results-oriented goals, measures, and performance data. Until IRS and
TIGTA develop a coordinated approach to ensure consistent and valid
evaluation, they cannot determine the effectiveness of the entire
section 1203 process or any changes to it.
IRS and TIGTA Made Changes to Address Problems with the Section 1203
Process:
IRS and TIGTA made changes to address problems with the process for
receiving, investigating, and adjudicating section 1203 allegations.
IRS initially identified some of these problems through a limited
review to check employee concerns that section 1203 cases were not
being resolved in a timely manner. The review revealed that, on
average, IRS investigations took over 200 days and TIGTA investigations
took over
300 days.[Footnote 26] In October 2001, IRS and TIGTA initiated a more
comprehensive study to assess the causes of lengthy processing times
and identify other problems associated with the process for receiving,
investigating, and adjudicating section 1203 cases. A team of IRS,
TIGTA, and private consulting firm officials did the study, which
resulted in recommendations to reengineer the process to improve
performance. The team issued a final report in January 2002.[Footnote
27]
The team identified several problems with the section 1203 process,
such as cases changing hands frequently within and between IRS and
TIGTA and use of multiple and inconsistent procedures for processing
section 1203 allegations. The team developed recommendations to correct
the problems and improve the section 1203 process.[Footnote 28] On the
basis of the recommendations, IRS implemented some changes in March
2002.[Footnote 29]
Table 2 lists the problems identified by the team,[Footnote 30] its
recommended actions, and actions taken.
Table 2: Summary of Problems Identified, Actions Recommended, and
Actions Taken to Improve the Section 1203 Process:
Problems identified: Section 1203 cases changed hands frequently within
IRS and TIGTA, which added to long case processing times.; Actions
recommended: Establish a Board of Employee Professional Responsibility
(BEPR) to streamline the section 1203 process and to
(1) oversee the section 1203 process; (2) receive and review all
allegations for investigative merit; and (3) issue clearance letters to
inform employees on decisions about the allegations through the
Commissioner‘s Complaint Processing and Analysis Group (CCPAG).[A];
Actions taken: BEPR was established and (1) is not responsible for
overseeing the section 1203 process; (2) TIGTA is to receive most
allegations and determine their investigative merit, while BEPR is to
determine the investigative merit of allegations referred to it by
TIGTA; and (3) CCPAG is to issue clearance letters to IRS employees.
Problems identified: Multiple, inconsistent procedures for section 1203
cases, as reflected in a section 1203 handbook.; Actions recommended:
No specific recommendation was made.; Actions taken: Actions taken to
streamline the process were viewed as ways to address multiple,
inconsistent procedures.
Problems identified: IRS and TIGTA lacked a centralized database for
section 1203 case information.; Actions recommended: Develop a
centralized database of information on section 1203 that will interface
with TIGTA‘s system.; Actions taken: Rather than developing a central
database, a system to share section 1203 data between IRS and TIGTA is
being developed.
Problems identified: IRS managers investigated employees for section
1203 misconduct, creating conflicts of interest, and lacked skills to
do investigations.; Actions recommended: TIGTA should be responsible
for investigating section 1203 allegations.; Actions taken: TIGTA is
responsible for conducting most investigations.[B].
Source: GAO review of Booz-Allen study.
[A] To better respond to employee and taxpayer complaints, the IRS
Commissioner established CCPAG. In October 1999, CCPAG began
controlling section 1203 complaints referred from TIGTA.
[B] According to IRS officials, IRS managers still do some section 1203
investigations, such as tax compliance-related allegations.
[End of table]
Although many of the team‘s recommendations were implemented, some were
not implemented or were modified. IRS and TIGTA officials said that
modifications resulted because both agencies agreed, after the
recommendations were developed, that TIGTA would be more involved in
screening and investigating most allegations.
For example, IRS modified the recommendation to create a BEPR[Footnote
31] that would receive section 1203 allegations, determine their
investigative merit, and oversee the section 1203 process. IRS had
created BEPR to handle these duties because IRS and TIGTA had not
agreed on the extent of TIGTA‘s involvement. By the time that the new
process was implemented, IRS and TIGTA had agreed that TIGTA would
handle allegations for section 1203, with some exceptions.[Footnote 32]
As a result, BEPR‘s responsibility was limited to determining the merit
of only those allegations forwarded to it by TIGTA and did not include
oversight of the whole section 1203 process. IRS officials said that
having two independent agencies responsible for different parts of the
section 1203 process complicates having one agency responsible for
overseeing the other agency.
Rather than creating a centralized database, IRS and TIGTA officials
described plans to modify an existing database to allow certain section
1203 data to be downloaded and shared between IRS and TIGTA. To do
this, IRS has hired a contractor to develop such integrated data
sharing. IRS officials said they plan to begin testing and implementing
this new system sometime in 2003. Both IRS and TIGTA officials said
that creating a centralized database for section 1203 cases would not
be efficient or practical since both agencies use their respective
databases to track various types of employee misconduct cases--not just
those relating to section 1203. In addition, TIGTA officials said that
sharing one database could compromise the integrity of TIGTA‘s
investigations, given the sensitivity of certain case information.
IRS officials said that the study did not make specific recommendations
to address the multiple, inconsistent procedures. These officials said
that they believe that the attempts to streamline the process will help
to address these problems. For example, the new process clarifies that
TIGTA is to be responsible for receiving and investigating most section
1203 allegations. IRS reflected the new process in a revised section
1203 handbook that eliminated some criteria on making various decisions
(e.g., mitigation). IRS officials said that they did not retain these
criteria because all IRS employees did not need such details. They
indicated that they plan to begin developing customized guidelines
during early 2003 for targeted audiences, such as labor relation
specialists.
IRS and TIGTA Have Not Coordinated on an Approach for Evaluating
Whether the New Section 1203 Process Corrected the Problems and
Operated Effectively:
IRS and TIGTA have not coordinated on an approach for evaluating the
section 1203 process on the basis of consistent types of results-
oriented goals, measures, and performance data. Until IRS and TIGTA
develop a coordinated approach to ensure consistent and valid
evaluation, IRS and TIGTA cannot determine the effectiveness of the
entire section 1203 process or any changes to it, such as those made in
March 2002.
We have issued a number of reports[Footnote 33] on the value added to
agency operations by using results-oriented goals and balanced measures
to guide and evaluate performance, avoid focusing on one aspect of
performance at the expense of others, and ensure that any changes to a
program or process are having the desired results rather than
unintended consequences.[Footnote 34] These reports also have discussed
the value of planning evaluations of performance of a program or
process early so that arrangements can be made to ensure collection of
the needed data.
IRS and TIGTA have not developed agreed-upon goals or measures for
evaluating the effectiveness of the section 1203 process or means for
collecting related performance data. For example, IRS has not
established goals or measures for timely adjudication of section 1203
cases and does not collect information on the amount of time to
adjudicate cases. To obtain a current view on section 1203 case
processing time, we analyzed 92 of the 100 most recently closed cases
in IRS‘s database by the end of August 2002.[Footnote 35] Our analysis
showed that the median number of days involved in the process was 186
days and that 80 percent of the cases ranged between 78 days and 774
days.
IRS officials said that they do not have a formal system for evaluating
the section 1203 process--including goals and measures--because IRS
does not have such a system for any of its employee disciplinary
processes. TIGTA officials indicated that TIGTA has a strategic goal of
120 days to investigate and refer all administrative cases to IRS and a
365-day goal for all criminal cases. Although such goals can apply to
section 1203 investigations, TIGTA officials said that they have not
evaluated whether its section 1203 investigations have met these goals.
Without such performance indicators, IRS and TIGTA cannot determine
whether the new process corrected the known problems and improved the
section 1203 process as intended--that is, to reduce the number of
handoffs, shorten the processing time, and eliminate conflicts of
interest. Further, IRS and TIGTA cannot determine how effectively they
process section 1203 allegations or whether future changes to the
section 1203 process will be needed.
During December 2002, IRS officials told us they plan to develop goals
and measures for evaluating all IRS disciplinary processes, including
section 1203. Although they could not provide documentation on how this
evaluation system would work, they said they plan to implement the
evaluation system during fiscal year 2003. On the basis of informal
tracking, they said that they believe that the new section 1203 process
has expedited the determination of investigative merit and adjudication
of violations. They acknowledged the value of having objective data on
section 1203 and believed that this informal tracking system can be
used to help develop appropriate goals and measures for the formal
evaluation system.
Conclusions:
The Congress included section 1203 in the Restructuring Act, in part,
to minimize certain types of IRS employee misconduct in dealing with
taxpayers. On the basis of our survey results, most IRS enforcement
employees do perceive that section 1203 has affected their behavior,
such as taking longer to work audit or collection cases and having some
reluctance to take enforcement actions. The survey results by
themselves, however, do not provide a basis for conclusions about
whether section 1203 has worked or should be changed. On the one hand,
their perceptions about longer case times and a reluctance to take
action are consistent with the fear of section 1203 felt by many
enforcement employees. On the other hand, any increase in the amount of
time to work cases also could result from other impacts of section 1203
seen by employees, such as promoting increased employee accountability
and respect for taxpayer rights. Moreover, policymakers might be
willing to accept longer case times and some fear of taking enforcement
actions when merited if the tradeoff is greater respect for taxpayer
rights.
One influence on how enforcement employees perceive section 1203 is the
IRS and TIGTA process for handling section 1203 allegations. However,
our survey found widespread distrust of the process. Further, IRS and
TIGTA recognized that problems with the section 1203 process were
affecting employee morale and productivity. Consequently, they
implemented a new process in March of 2002. Evaluation of the new
process is important because of the potential impact on IRS employees
and ultimately taxpayers. While too few section 1203 cases have been
closed under the new process for an evaluation to date, IRS and TIGTA
have not developed an evaluation approach. Any evaluation of
effectiveness would have to be based on results-oriented goals and
related performance measures. Developing an approach now would help
ensure timely collection of the needed data.
Recommendations:
We recommend that the Acting Commissioner of Internal Revenue and the
Acting Treasury Inspector General for Tax Administration coordinate on
an approach for evaluating the section 1203 process. In developing this
approach, IRS and TIGTA also should develop (1) results-oriented goals
for processing section 1203 cases, (2) performance measures that are
balanced and can be used to assess progress towards those goals, and
(3) methods for collecting and analyzing performance data related to
the goals and measures.
Agency Comments and our Evaluation:
On February 6, 2003, the Acting Commissioner of the Internal Revenue
and the Acting Treasury Inspector General for Tax Administration each
provided written comments on a draft of this report. (See appendix VI
and appendix VII, respectively.) In general, IRS agreed with our
recommendation that a coordinated evaluation of the section 1203
process is desirable, and TIGTA neither agreed nor disagreed with our
recommendation. However, both agencies raised a similar concern about
the independence of each agency. Specifically, IRS said that TIGTA‘s
independent role makes it inappropriate for IRS to oversee TIGTA‘s
performance. TIGTA pointed to legislative challenges in implementing
our recommendation because Restructuring Act amendments to the
Inspector General Act of 1978 created TIGTA as an independent agency
with autonomy from IRS.
We recognize that IRS and TIGTA are independent agencies. As noted in
our report, this independence is why IRS and TIGTA need to coordinate
on the evaluation. In this sense, coordination does not mean that
either agency evaluate, oversee, or direct the other agency. Rather,
coordination means that IRS and TIGTA officials communicate on how each
agency will develop goals, measures, and methods for collecting related
data to better ensure that the entire section 1203 process is
evaluated, using consistent and valid goals and measures.
We do not believe that such coordination would jeopardize the
independence of TIGTA from IRS, particularly when IRS and TIGTA already
have been working together on managing and improving the section 1203
process, as discussed in TIGTA‘s as well as IRS‘s comments. We view our
recommendation on developing a coordinated approach as part of that
continued communication. We made minor wording changes to our
recommendation in order to clarify the need for a coordinated
evaluation approach.
As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this report. At that time, we will send copies to the
Secretary of the Treasury; the Acting Treasury Inspector General for
Tax Administration; the Acting Commissioner of Internal Revenue; and
the Director of Office of Management and Budget. We will make copies
available to others on request. In addition, the report will be
available at no charge on GAO‘s Web site at http://www.gao.gov.
If you have any questions, please contact me or Tom Short on (202) 512-
9110. Key contributors to this report are acknowledged in appendix
VIII.
James R. White
Director, Strategic Issues:
Signed by James R. White:
[End of section]
Appendix I: Survey and Case File Review Methodologies:
This appendix discusses the methodology we used to survey the Internal
Revenue Service (IRS) employees on how section 1203 affected their
interactions with taxpayers. We also discuss our methodology for a
review of IRS case files to determine how long section 1203 cases were
taking to process.
Survey Methodology:
To determine IRS frontline enforcement employees‘ perceptions of how
section 1203 has affected their interactions with taxpayers, we
surveyed a random sample of IRS frontline enforcement employees in the
Small Business/Self Employed Operating Division (SB/SE) who had direct
contact with taxpayers and taxpayer representatives. We administered
the survey between July and September 2002 to a stratified sample of
IRS employees identified through IRS‘s personnel database.
Study Population:
The study population from which the sample was drawn consisted of
10,186 SB/SE frontline enforcement employees nationwide as of June
2002. To ensure that the study population only included frontline
enforcement employees who had regular contact with taxpayers and
taxpayer representatives, IRS managers familiar with the positions
reviewed a list of titles for all positions in the GS-512 job series
(revenue agents), GS-1169 job series (revenue officers), GS-526 job
series (tax compliance officers), an GS-501 and GS-598 job series (tax
auditors), and identified position titles in these 5 series where the
incumbent would have regular contact with taxpayers and taxpayer
representatives.
Sample Design:
The sample design for this survey is a single-stage stratified sample
of IRS frontline enforcement employees in SB/SE. We drew a sample of
500 employees composed of 4 strata--revenue agents, revenue officers,
tax compliance officers, and tax auditors.
After we administered the survey, we adjusted the original survey and
sample population size because 45 respondents indicated that they did
not have contact with taxpayers and taxpayer representatives. These
respondents were considered ’ineligible“ to participate in our survey
and were subsequently excluded. We adjusted the final sample size to
455. We received 350 completed responses to our survey--a response rate
of 77 percent. The remaining 105 cases were considered to be
nonrespondents.
Calculation of Sample Estimates:
All estimates produced in this report are for a study population
defined as IRS‘s SB/SE frontline enforcement employees who have contact
with taxpayers and taxpayer representatives. We designed our sample to
produce precise estimates of this population on a nationwide basis. As
a result, we did not perform any analyses by stratum. Further, we
created the estimates by weighting the survey responses to account for
the sampling rate in each stratum. The weights reflect both the initial
sampling rate and the response rate for each stratum.
Sampling Error:
We randomly selected the sample used for this study based on a
probability procedure. As a result, our sample is only one of a large
number of samples that we might have drawn from the total population of
SB/SE frontline enforcement employees. If different samples had been
taken from the same population, it is possible that the results would
have been different. To recognize the possibility that other samples
may have yielded other results, we express our confidence in the
precision of our particular sample‘s results as a 95-percent confidence
interval. For all the percentages presented in this report, unless
otherwise noted, we are
95-percent confident that the results we obtained are within plus or
minus 10 or fewer percentage points of what we would have obtained if
we had surveyed the entire study population. For example, our survey
estimates that 58 percent of the respondents indicated that section
1203 had no effect on their likelihood of requesting documents from a
taxpayer. The 95-percent confidence interval for this estimate would be
between 48 percent and 68 percent. We calculated the confidence
intervals
for our study results using methods that are appropriate for a
stratified
probability sample.
Nonsampling Error:
In addition to the reported sampling errors, the practical difficulties
of conducting any survey may introduce other types of errors, commonly
referred to as nonsampling errors. For example, questions may be
misinterpreted, the respondents‘ answers may differ from those who did
not respond, or errors could be made in keying the questionnaire
responses into a data file. We took several steps to reduce such
errors.
We pretested the survey questions with employees from SB/SE who were
part of the survey‘s target population. After the survey
administration, we examined the response rate for each of the 4 strata
to determine whether any of the strata were underrepresented. The
response rates for the revenue agent, revenue officer, tax compliance
officer, and tax auditor strata were 89 percent, 87 percent, 78
percent, and 44 percent, respectively. We did not assess the impact of
the nonrespondents on our results. To the extent that the
nonrespondents had different views than the respondents, then our
findings would be biased. The response rates for the revenue agent,
revenue officer, and tax compliance officer strata are fairly high and
give us a high degree of confidence that our findings for these groups
are likely to be representative of the fuller populations. The
44 percent response rate for the tax auditor strata raises the
possibility that the results for this group may have been different if
more employees had chosen to complete the survey.
To ensure the integrity of the survey data, we performed a quality
control check on the surveys that were keyed into an automated data
file. We found no keying errors.
Survey Development:
We identified areas to cover in the survey based on our congressional
request and initial interviews with IRS and National Treasury Employees
Union officials.
We pretested the survey to IRS revenue agents, revenue officers, and
tax compliance officers at three IRS field offices (at the time of the
pretests, tax auditors were unavailable). Two of the offices were
located in suburban Maryland and another was located in Washington,
D.C. In doing the pretest, we evaluated the appropriateness of the
survey questions and the various formats we planned to use in
administering the survey. Based on the pretests, we made necessary
changes to the survey prior to its nationwide implementation.
Survey Administration:
We administered the survey in three ways: mail, Internet, and as a
portable document format (pdf) attachment sent out via E-mail. The
respondents could submit their completed surveys through regular mail,
fax, or the Internet. In addition to the survey itself, each survey
package included two letters encouraging employees to participate in
the survey administration. One letter was signed by the IRS
Commissioner of the Small Business/Self Employed Division and the other
was signed by GAO‘s Managing Director of the Tax Administration and
Justice team. We conducted at least two follow up calls to each
nonrespondent in order to encourage a high response rate. A copy of the
survey instrument is in appendix III.
Content Analysis:
Some of the survey questions were open-ended, allowing respondents an
opportunity to provide thoughts and opinions in their own words. Of the
350 employees that responded to our survey, 208 provided written
responses to the open-ended questions. In order to categorize and
summarize these responses, we performed a systematic content analysis
of the open-ended responses. Two GAO analysts reviewed the responses
and independently proposed categories. They met and reconciled these;
each comment was then placed into one or more of the resulting
categories, and agreement regarding each placement was reached between
at least two analysts. All initial disagreements regarding placement
into categories were discussed and reconciled. The numbers of responses
in each content category were then summarized and tallied.
Case File Review Methodology:
To contribute to our understanding of IRS‘s processing of section 1203
cases and to determine the amount of time it takes to process the
cases, we reviewed 92 of the 100 most recently closed cases that were
recorded in IRS‘s ALERTS database as of August 30, 2002. We developed a
data collection instrument to record the type of allegation as well as
various dates associated with key stages in the processing of the case.
These key stages were identified as part of our review of the section
1203 process and confirmed through discussions with IRS officials
familiar with the processing of these cases.
Of the 100 cases that were identified in IRS‘s database as being the
most recently closed, we determined that 92 were available for review.
For the 8 cases that were not available, IRS identified 3 as being
duplicative,
and we were advised by IRS not to include them in our review. In
addition, according to IRS, 5 other cases were not available for review
because the employee left IRS before TIGTA finished the investigation.
(These cases were recorded as ’not adjudicated.“) We performed a
limited quality control check of the data recorded on 12 percent of the
92 cases by randomly selecting the cases.
In addition, for 19 of the 92 cases, missing data prevented us from
computing case processing times. As a result, processing times could
only be calculated for 73 of the 92 cases included in this review.
Table 3 provides a breakdown of the number of cases opened before, on,
or after March 1, 2002--the date that the new section 1203 process was
implemented. All cases were closed after March 1, 2002.
Table 3: Number of Cases Opened before, on, or after March 1, 2002:
N=92[A]: Cases opened before 3/1/2002; Cases closed after 3/1/2002: 59.
N=92[A]: Cases opened on or after 3/1/2002; Cases closed after 3/1/
2002: 14.
N=92[A]: Total; Cases closed after 3/1/2002: 73.
Source: GAO analysis of IRS closed cases.
[A] 19 of the 92 cases were missing an opened or closed date.
[End of table]
The case processing times were calculated based on the dates that the
case was opened by either TIGTA or IRS and closed by IRS. For the
closing date, we used the date that the employee was issued a letter
informing them of the outcome of his or her case. If there was no such
letter, we used other documentation contained in the file that
indicated the date that the case had been closed. In 5 of the cases,
the employee had resigned or retired and the case file did not include
a letter or other documentation to indicate the case had been closed.
For these cases, we used the employees‘ resignation or retirement date.
Our work was conducted in accordance with generally accepted government
auditing standards.
[End of section]
Appendix II: Data on Section 1203 Allegations:
Tables 4, 5, and 6 summarize information on section 1203 allegations
for the period July 1998 through 2002. Table 4 provides information on
substantiated section 1203 allegations by disposition and table 5
provides information on employee firings by type of misconduct and
employee GS level. Table 6 provides a breakdown of results for the
3,512 allegations that were investigated, including allegations that
were substantiated as a section 1203 violation, allegations that were
substantiated for nonsection 1203 misconduct, and allegations that were
not substantiated.
Table 4: Summary of Substantiated Section 1203 Allegations by
Disposition, July 1998 through September 2002:
Type of section 1203 misconduct: Taxpayer and employee rights; Firings:
[Empty]; Resigned/: retired: [Empty]; Probation separation[A]:
[Empty]; Fired: on other grounds[B]: [Empty]; Penalty mitigated:
[Empty]; In personnel process[C]: [Empty]; Total: [Empty].
Type of section 1203 misconduct: False statement under oath; Firings:
0; Resigned/: retired: 1; Probation separation[A]: 0; Fired: on other
grounds[B]: 0; Penalty mitigated: 0; In personnel process[C]: 0; Total:
1.
Type of section 1203 misconduct: Civil rights/constitutional rights;
Firings: 0; Resigned/: retired: 0; Probation separation[A]: 0; Fired:
on other grounds[B]: 1; Penalty mitigated: 0; In personnel process[C]:
0; Total: 1.
Type of section 1203 misconduct: Falsifying or destroying documents;
Firings: 3; Resigned/: retired: 5; Probation separation[A]: 1; Fired:
on other grounds[B]: 0; Penalty mitigated: 0; In personnel process[C]:
1; Total: 10.
Type of section 1203 misconduct: Assault or battery; Firings: 1;
Resigned/: retired: 0; Probation separation[A]: 0; Fired: on other
grounds[B]: 0; Penalty mitigated: 0; In personnel process[C]: 0; Total:
1.
Type of section 1203 misconduct: Retaliation or harassment; Firings: 1;
Resigned/: retired: 4; Probation separation[A]: 0; Fired: on other
grounds[B]: 1; Penalty mitigated: 0; In personnel process[C]: 0; Total:
6.
Type of section 1203 misconduct: Threat to audit for personal gain;
Firings: 4; Resigned/: retired: 4; Probation separation[A]: 2; Fired:
on other grounds[B]: 1; Penalty mitigated: 1; In personnel process[C]:
0; Total: 12.
Type of section 1203 misconduct: Subtotal; Firings: 9; Resigned/:
retired: 14; Probation separation[A]: 3; Fired: on other grounds[B]: 3;
Penalty mitigated: 1; In personnel process[C]: 1; Total: 31.
Type of section 1203 misconduct: Compliance with federal tax laws;
Firings: [Empty]; Resigned/: retired: [Empty]; Probation
separation[A]: [Empty]; Fired: on other grounds[B]: [Empty]; Penalty
mitigated: [Empty]; In personnel process[C]: [Empty]; Total: [Empty].
Type of section 1203 misconduct: Failure to timely file federal tax
return; Firings: 55; Resigned/: retired: 90; Probation separation[A]:
12; Fired: on other grounds[B]: 14; Penalty mitigated: 159; In
personnel process[C]: 15; Total: 345.
Type of section 1203 misconduct: Understatement of federal tax
liability; Firings: 7; Resigned/: retired: 13; Probation separation[A]:
1; Fired: on other grounds[B]: 0; Penalty mitigated: 6; In personnel
process[C]: 16; Total: 43.
Type of section 1203 misconduct: Subtotal; Firings: 62; Resigned/:
retired: 103; Probation separation[A]: 13; Fired: on other grounds[B]:
14; Penalty mitigated: 165; In personnel process[C]: 31; Total: 388.
Type of section 1203 misconduct: Total; Firings: 71; Resigned/:
retired: 117; Probation separation[A]: 16; Fired: on other grounds[B]:
17; Penalty mitigated: 166; In personnel process[C]: 32; Total: 419.
Source: GAO analysis of IRS data.
[A] Refers to the firing of an IRS employee during the first year of
employment during the employee‘s probationary period of employment.
[B] Refers to disciplinary firings for misconduct not related to
section 1203.
[C] Refers to instances when an IRS deciding official has determined
that a section 1203 allegation was substantiated and forwarded the case
to the Executive Review Board for consideration.
Note: Dispositions for 8 of the 10 types of section 1203 misconduct are
noted on this table. For the remaining 2 types of misconduct,
allegations made against the employee were not substantiated.
[End of table]
Table 5: Summary of Employee Firings by Type of Misconduct and Employee
GS-Level, July 1998 through September 2002:
Employee
GS level: 02; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 1; Understatement
of federal tax liability: 0; Total: 1.
Employee
GS level: 03; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 7; Understatement
of federal tax liability: 0; Total: 7.
Employee
GS level: 04; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 10; Understatement
of federal tax liability: 2; Total: 12.
Employee
GS level: 05; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 1; Failure to timely file federal tax return: 7; Understatement
of federal tax liability: 1; Total: 9.
Employee
GS level: 06; Falsifying or destroying documents: 0; Assault or
battery: 1; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 4; Understatement
of federal tax liability: 1; Total: 6.
Employee
GS level: 07; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 1; Failure to timely file federal tax return: 8; Understatement
of federal tax liability: 0; Total: 9.
Employee
GS level: 08; Falsifying or destroying documents: 1; Assault or
battery: 0; Retaliation or harassment: 1; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 8; Understatement
of federal tax liability: 2; Total: 12.
Employee
GS level: 09; Falsifying or destroying documents: 1; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 2; Understatement
of federal tax liability: 0; Total: 3.
Employee
GS level: 10; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 1; Understatement
of federal tax liability: 0; Total: 1.
Employee
GS level: 11; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 1; Failure to timely file federal tax return: 2; Understatement
of federal tax liability: 0; Total: 3.
Employee
GS level: 12; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 3; Understatement
of federal tax liability: 1; Total: 4.
Employee
GS level: 13; Falsifying or destroying documents: 0; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 1; Failure to timely file federal tax return: 2; Understatement
of federal tax liability: 0; Total: 3.
Employee
GS level: 14; Falsifying or destroying documents: 1; Assault or
battery: 0; Retaliation or harassment: 0; Threat to audit for personal
gain: 0; Failure to timely file federal tax return: 0; Understatement
of federal tax liability: 0; Total: 1.
Employee
GS level: Total; Falsifying or destroying documents: 3; Assault or
battery: 1; Retaliation or harassment: 1; Threat to audit for personal
gain: 4; Failure to timely file federal tax return: 55; Understatement
of federal tax liability: 7; Total: 71.
Source: GAO analysis of IRS data.
Note: Firings for 6 of the 10 types of section 1203 misconduct are
noted on this table. For the remaining 4 types of misconduct, an
employee was not fired.
[End of table]
Table 6: Summary of Investigative Results, July 1998 through September
2002:
Type of section 1203 misconduct: Taxpayer and employee rights;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: [Empty]; Investigative outcomes: Allegations:
substantiated for non section 1203 misconduct: [Empty]; Investigative
outcomes: Allegations not: substantiated: [Empty]; Investigative
outcomes: Total investigations: [Empty].
Type of section 1203 misconduct: Seizure without approval;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: 0; Investigative outcomes: Allegations: substantiated for
non section 1203 misconduct: 2; Investigative outcomes: Allegations
not: substantiated: 11; Investigative outcomes: Total investigations:
13.
Type of section 1203 misconduct: False statement under oath;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: 1; Investigative outcomes: Allegations: substantiated for
non section 1203 misconduct: 3; Investigative outcomes: Allegations
not: substantiated: 17; Investigative outcomes: Total investigations:
21.
Type of section 1203 misconduct: Civil rights/constitutional rights;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: 1; Investigative outcomes: Allegations: substantiated for
non section 1203 misconduct: 10; Investigative outcomes: Allegations
not: substantiated: 251; Investigative outcomes: Total investigations:
262.
Type of section 1203 misconduct: Falsifying or destroying documents;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: 10; Investigative outcomes: Allegations: substantiated for
non section 1203 misconduct: 22; Investigative outcomes: Allegations
not: substantiated: 34; Investigative outcomes: Total investigations:
66.
Type of section 1203 misconduct: Assault or battery; Investigative
outcomes: Allegations: substantiated for: section 1203: misconduct: 1;
Investigative outcomes: Allegations: substantiated for non section 1203
misconduct: 4; Investigative outcomes: Allegations not: substantiated:
3; Investigative outcomes: Total investigations: 8.
Type of section 1203 misconduct: Retaliation or harassment;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: 6; Investigative outcomes: Allegations: substantiated for
non section 1203 misconduct: 125; Investigative outcomes: Allegations
not: substantiated: 1,549; Investigative outcomes: Total
investigations: 1,680.
Type of section 1203 misconduct: Misuse of section 6103 to conceal
information; Investigative outcomes: Allegations: substantiated for:
section 1203: misconduct: 0; Investigative outcomes: Allegations:
substantiated for non section 1203 misconduct: 0; Investigative
outcomes: Allegations not: substantiated: 3; Investigative outcomes:
Total investigations: 3.
Type of section 1203 misconduct: Threat to audit for personal gain;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: 12; Investigative outcomes: Allegations: substantiated for
non section 1203 misconduct: 23; Investigative outcomes: Allegations
not: substantiated: 42; Investigative outcomes: Total investigations:
77.
Type of section 1203 misconduct: Subtotal; Investigative outcomes:
Allegations: substantiated for: section 1203: misconduct: 31;
Investigative outcomes: Allegations: substantiated for non section 1203
misconduct: 189; Investigative outcomes: Allegations not:
substantiated: 1,910; Investigative outcomes: Total investigations:
2,130.
Type of section 1203 misconduct: Compliance with federal tax laws;
Investigative outcomes: Allegations: substantiated for: section 1203:
misconduct: [Empty]; Investigative outcomes: Allegations:
substantiated for non section 1203 misconduct: [Empty]; Investigative
outcomes: Allegations not: substantiated: [Empty]; Investigative
outcomes: Total investigations: [Empty].
Type of section 1203 misconduct: Failure to timely file federal tax
return; Investigative outcomes: Allegations: substantiated for:
section 1203: misconduct: 345; Investigative outcomes: Allegations:
substantiated for non section 1203 misconduct: 330; Investigative
outcomes: Allegations not: substantiated: 239; Investigative outcomes:
Total investigations: 914.
Type of section 1203 misconduct: Understatement of federal tax
liability; Investigative outcomes: Allegations: substantiated for:
section 1203: misconduct: 43; Investigative outcomes: Allegations:
substantiated for non section 1203 misconduct: 281; Investigative
outcomes: Allegations not: substantiated: 144; Investigative outcomes:
Total investigations: 468.
Type of section 1203 misconduct: Subtotal; Investigative outcomes:
Allegations: substantiated for: section 1203: misconduct: 388;
Investigative outcomes: Allegations: substantiated for non section 1203
misconduct: 611; Investigative outcomes: Allegations not:
substantiated: 383; Investigative outcomes: Total investigations:
1,382.
Type of section 1203 misconduct: Total; Investigative outcomes:
Allegations: substantiated for: section 1203: misconduct: 419;
Investigative outcomes: Allegations: substantiated for non section 1203
misconduct: 800; Investigative outcomes: Allegations not:
substantiated: 2,293; Investigative outcomes: Total investigations:
3,512.
[End of table]
Source: GAO analysis of IRS data.
[End of section]
Appendix III: GAO Survey of IRS Frontline Enforcement Employees:
To determine IRS frontline enforcement employees‘ perceptions of how
section 1203 has affected their interactions with taxpayers, we
surveyed a sample of IRS revenue officers, revenue agents, tax
compliance officers, and tax auditors in the Small Business/Self
Employed Division. We received 350 completed responses to our survey--
a response rate of
77 percent. Note: Percentages may not add to 100 percent due to
rounding. In addition, for survey questions 5 and 9, respondents who
answered ’not applicable to my job“ were not included in our analysis
of the results.
[See PDF for image]
[End of figure]
[End of section]
Appendix IV: Summary of Content Analysis of Open-Ended Comments from
GAO
Survey of IRS Frontline Enforcement Employees:
Some of the survey questions were open-ended, allowing respondents to
provide thoughts and opinions in their own words. In order to
categorize and summarize these responses, we performed a systematic
content analysis of the open-ended responses. Two GAO analysts reviewed
the responses and independently proposed categories. They met and
reconciled these; each comment was then placed into one or more of the
resulting categories, and agreement regarding each placement was
reached between at least two analysts. All initial disagreements
regarding placement into categories were discussed and reconciled. As
shown in figure 7, the number of responses in each content category was
then summarized and tallied.
Figure 7: Summary of Content Analysis of Open-Ended Written Responses:
[See PDF for image]
[End of figure]
[End of section]
Appendix V: Stages of Section 1203 Case Processing:
The following description of section 1203 case processing applies to
all allegations, except those related to compliance with federal tax
laws and employee and taxpayer civil rights, which are processed
separately.[Footnote 36] Complaints involving allegations of section
1203 misconduct are subject to a 3-stage process, including: (1)
reporting and investigative determination, (2) fact-finding, and (3)
adjudication. Figure 8 provides an illustration of the various stages
of the processing of a section 1203 case.
Reporting and Investigative Determination:
Any taxpayer, taxpayer representative, or IRS employee can file a
complaint with IRS or TIGTA alleging employee misconduct under section
1203. IRS managers have been instructed to forward all allegations to
TIGTA, which has primary responsibility for receiving and investigating
complaints involving allegations of section 1203 misconduct. Once it
receives the complaint, TIGTA is to enter information on the allegation
into its information tracking system for managing and reporting
purposes.
After entering the information into its information system, TIGTA is to
make an initial determination about whether the allegation should be
investigated as a potential act of employee misconduct. If TIGTA finds
sufficient information indicating a section 1203 violation may have
occurred, TIGTA is to investigate the allegation. Similarly, TIGTA may
find sufficient grounds to conduct an investigation for misconduct
unrelated to section 1203. In either case, the results of the TIGTA
investigation are provided to IRS as a formal Report of Investigation.
TIGTA may also determine that the complaint does not contain specific
enough information, or that it does not have the necessary expertise,
to be able to make a determination on the complaint‘s investigative
merit. In these instances, TIGTA is to refer the complaint to the
Commissioner‘s Complaint Processing and Analysis Group (CCPAG) to
determine whether there is a basis for an investigation. A case
development team within CCPAG is to receive the allegation and enter
information on the allegation into its information tracking system. The
role of the case development team is to gather the relevant facts
related to the allegation to determine whether the essential elements
of a section 1203 violation may be present.
Upon its evaluation of the allegation, CCPAG may conclude that the
complaint is frivolous (e.g., a taxpayer alleges misconduct because the
employee did not agree with the taxpayer that the tax laws are
unconstitutional). In these instances, CCPAG is to forward the
allegation to IRS‘s Frivolous Return Program at the Ogden Service
Center.[Footnote 37]
After gathering the relevant information--for allegations not
considered frivolous--CCPAG is to forward the allegation to the Board
of Employee Professional Responsibility (BEPR) for its review. BEPR
includes the Director, CCPAG, and representatives from the Small
Business and Self Employed Division. IRS‘s Strategic Human Resources
and Agency-Wide Shared Services employee relations specialists and
Office of Chief Counsel General Legal Services may serve as advisors to
BEPR. TIGTA also serves in an advisory role on BEPR. IRS‘s Senior
Counselor to the IRS Commissioner participates in BEPR‘s review of
allegations involving IRS executives, GS-15‘s and senior manager pay
band employees.
BEPR‘s review may result in several outcomes. Specifically, BEPR may
concur with the case development team‘s finding that the allegation has
no merit. In this situation, no investigation is conducted and the
Director CCPAG is to issue a letter to the employee and his/her manager
advising that there will be no investigation. If BEPR concurs with the
case development team‘s findings that no misconduct occurred, the
Director of CCPAG is to issue a clearance letter to the employee and
his/her manager. The case is then closed. If BEPR concurs with the case
development team‘s findings that other misconduct may have occurred,
BEPR is to recommend a referral to TIGTA or IRS management for
investgation, and regular disciplinary procedures are to
apply.[Footnote 38] If BEPR agrees with the case development team‘s
findings that section 1203 misconduct may have occurred, BEPR is to
recommend a referral to TIGTA for investigation.
Fact-Finding:
Once TIGTA or BEPR determines an allegation to have investigative merit
as a possible section 1203 violation, TIGTA is to perform the
investigation. Specifically, TIGTA may review records, interview
witnesses, and consult technical experts as necessary to develop
information relevant to the alleged violation. In some cases, the
possible section 1203 misconduct may also be a potential violation of
criminal law. In these cases, TIGTA is to refer its findings to a local
U.S. Attorney Office for consideration of criminal prosecution. After
the investigation is completed, and a referral is made to a U.S.
Attorney, if appropriate, TIGTA is to provide a Report of Investigation
to CCPAG.
Adjudication:
All TIGTA Reports of Investigation on allegations of section 1203
violations are first to be reviewed by CCPAG to determine whether the
evidence can support the allegation for a section 1203 violation. If
CCPAG determines that the evidence does not support a section 1203
violation or other misconduct unrelated to section 1203, the Director
of CCPAG is to issue a clearance letter to the employee and his/her
manager. If CCPAG determines that the evidence presented supports a
section 1203 violation, it is to forward the Report of Investigation to
the ’proposing official“--a management official generally two levels of
supervision above the subject of the allegation--for further action.
Acting with the advice of an employee relations specialist, the
proposing official is to determine whether misconduct has been
substantiated by a preponderance of the evidence. If the proposing
official determines that no misconduct occurred, the official is to
issue a clearance letter to the employee. If this official determines
that the evidence supports misconduct unrelated to section 1203, IRS‘s
regular disciplinary procedures are to apply.[Footnote 39] If this
official determines that the specific elements of a section 1203
violation appear to be established by a preponderance of the evidence,
he or she is to issue a letter to the employee proposing removal from
the federal service. The employee has the right to respond to this
proposal letter and to review any information relied upon by the
proposing official. The case is to be submitted to the deciding
official, generally an executive at least three levels of supervision
above the employee.
The deciding official is to review the entire case file, including the
employee‘s response, to determine whether the charge has been proved.
If the deciding official determines that no misconduct occurred, the
official is to issue a clearance letter to the employee. If this
official determines that the evidence supports misconduct unrelated to
section 1203, IRS‘s regular disciplinary procedures are to apply. If
the deciding official determines that a section 1203 violation is
established by a preponderance of the evidence, the employee is to be
removed from the federal service, unless the Commissioner of Internal
Revenue decides that another penalty is to be imposed.
The Commissioner of Internal Revenue has established a Section 1203
Review Board (Board) to consider all cases in which a deciding official
finds that a section 1203 violation has occurred. Comprised of various
IRS executives from different IRS units, the board must review the
allegation to determine whether a penalty less than firing the employee
is appropriate.[Footnote 40] If the Board does not find mitigation to
be appropriate, the case is not submitted to the IRS Commissioner. The
case is then returned to the deciding official who is to impose the
statutory penalty of termination of employment. If the Board recommends
mitigation, the Commissioner reviews the recommendation. If the
Commissioner mitigates the penalty, other disciplinary actions, such as
written counseling, admonishment, reprimand, or suspension, may be
applied. The Commissioner‘s decision on the level of discipline to be
imposed is not subject to review outside IRS. After the Commissioner‘s
decision, the employee may appeal the finding that a violation
occurred.
Figure 8: Case Flow Process for Section 1203 Cases:
[See PDF for image]
Note: BEPR-Board of Employee Professional Responsibility; CCPAG-
Commissioner‘s Complaint Processing and Analysis Group; DO-deciding
official; IRS-Internal Revenue Service; PO-proposing official; ROI-
Receipt of Investigation; TIGTA-Treasury Inspector General for Tax
Administration:
[End of figure]
[End of section]
Appendix VI: Comments from the Internal Revenue Service:
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON, D.C.
20224:
COMMISSIONER:
February 6, 2003:
Mr. James R. White Director, Tax Issues United States General
Accounting Office Washington, D.C. 20548:
Dear Mr. White:
I reviewed your report titled ’IRS and TIGTA Should Evaluate Their
Processing of Employee Misconduct under Section 1203,“ GAO-03-394. In
recognition of the profound affect that Section 1203 has had on some of
our employees, we are continually evaluating every aspect of the
program and, in particular, striving to improve the way in which we
process 1203 cases. Indeed, this evaluation has led to a number of
administrative improvements and has also yielded insights that led to
the 1203 legislative proposal in the President‘s budget.
I believe the most effective response to the issues you highlighted in
your report would be enactment of the legislative proposal. The changes
proposed clarify several aspects of Section 1203, and authorize the
Commissioner of Internal Revenue to establish guidelines for imposing
penalties other than termination of employment. These guidelines would
also address some of the recurring fact patterns in cases that the
Commissioner must now personally review, but that clearly do not
warrant firing the employee. Other proposed changes to Section 1203
narrow its application by eliminating offenses related to employee
rights and late filed tax returns when a refund is owed. Enacting this
legislation would help restore our employees‘ confidence that they will
be treated fairly, while ensuring that we appropriately deal with the
very small number of egregious acts of misconduct.
As your report makes clear, employees continue to express significant
concern that their jobs are in jeopardy whenever a taxpayer complains.
We have addressed this issue through Commissioner speeches, videos and
all employee messages, as well as by publicizing statistics and case
results. Despite assurances that employee rights will be fully
protected and that no employee will be fired for an innocent mistake,
your survey results show that fear of Section 1203 allegations remains
a significant issue for our front-line employees. I do not believe
additional training and publicity will allay that fear. The correct
response to the employee concerns is to enact the legislative proposal.
Our response to your recommendation is enclosed. If you have questions,
please call Stephen Whitlock at (202) 622-6383.
Sincerely,
Bob Wenzel:
Acting Commissioner:
Signed by Bob Wenzel:
Enclosure:
RECOMMENDATION: The Commissioner of Internal Revenue and Treasury
Inspector General for Tax Administration jointly establish and
implement a plan for a coordinated evaluation of the Section 1203
process. In establishing this system, IRS and TIGTA also should develop
(1) results oriented goals for processing 1203 cases, (2) performance
measures that are balanced and can be used to assess progress towards
those goals, and (3) methods for collecting and analyzing performance
data related to the goals and measures.
RESPONSE: The IRS and the Treasury Inspector General for Tax
Administration (TIGTA) share responsibility for implementing Section
1203. We and TIGTA have taken steps to improve the process for
investigating and evaluating allegations against employees, including a
significant process reengineering that we implemented in March 2002. We
agree that coordinated evaluation is desirable, but TIGTA‘s
independence makes it inappropriate for us to oversee its performance.
We will establish a baseline for timely action on allegations, now that
the process we established in March 2002 has been stabilized, with
specific goals based on that baseline data. We will continue to monitor
employee attitudes through surveys and focus groups, so that we can
identify steps to further address employee concerns about Section
1203.We will use the results of the GAO survey as the baseline for
assessing improvements in employee attitudes.
[End of section]
Appendix VII: Comments from the Treasury Inspector General for Tax
Administration:
DEPARTMENT OF THE TREASURY WASHINGTON, D.C. 20005:
INSPECTOR GENERAL for TAX ADMINISTRATION:
February 6, 2003:
Mr. James R. White Director, Tax Issues U.S. General Accounting Office
Washington, DC 20548:
Dear Mr. White,
We have reviewed the report concerning the Internal Revenue Service
(IRS) and the Treasury Inspector General for Tax Administration‘s
(TIGTA) processing of alleged §1203 violations. This report is entitled
Tax Administration: IRS and TIGTA Should Evaluate Their Processing of
Employee Misconduct under Section 1203, (GAO-03-394). We appreciate the
opportunity to comment on the audit and associated report.
The overall objective of this audit was to assess the implementation of
the Internal Revenue Service Restructuring and Reform Act of 1998
(RRA98) § 1203. The audit objectives included the following:
(1) to determine the number, type and disposition of section 1203
allegations; (2) determine the frontline enforcement employees‘
perceptions of how section 1203 has affected their interactions with
taxpayers; and (3) identify what problems, if any, IRS and TIGTA have
encountered in processing section 1203 cases and the extent to which
they have addressed them.
Your audit notes that the IRS and TIGTA made changes to address
problems with the process for receiving, investigating, and
adjudicating § 1203 allegations. One of the changes instituted in March
2002, streamlined the § 1203 process by requiring that all §1203
allegations except those allegations related to employee tax
compliance, i.e.,
§§ 1203(b)(8) and 1203(b)(9), are reported directly to TIGTA. The IRS
and TIGTA also created the Board of Employee Professional
Responsibility to ensure that 1203 allegations are promptly
investigated and adjudicated.
The audit makes the following recommendation:
Recommendation: The Commissioner of Internal Revenue and the Treasury
Inspector General for Tax Administration jointly establish and
implement a plan for a coordinated evaluation system of the section
1203 process. In establishing this system, IRS and TIGTA also should
develop (1) results-oriented goals for processing section 1203 cases,
(2) performance measures that are balanced and can be used to assess
progress towards those goals, and (3) methods for collecting and
analyzing
performance data related to the goals and measures.
While TIGTA philosophically understands the desire to have a jointly
established and implemented plan for a coordinated evaluation system of
the 1203 process, there are legislative challenges in meeting this
objective. The RRA98 amendments to the Inspector General Act of 1978
(IG Act) created TIGTA as an independent IG with structural and actual
autonomy from the IRS. TIGTA has independently established goals,
performance measures, and methods for analyzing performance data for
all TIGTA investigations, including section 1203 cases. TIGTA
understands that the IRS is in the process of establishing a system to
ensure the timely adjudication of section 1203 cases. In addition, as
noted earlier, the IRS and TIGTA made changes to the §1203 process to
ensure that all § 1203 cases are investigated and adjudicated in a
timely manner. TIGTA will continue to effectively manage investigations
of § 1203 allegations and TIGTA will work with the IRS to ensure the
1203 process is operating efficiently and effectively.
Thank you for the opportunity to review and comment on your draft
report and recommendation regarding the handling and processing of
§1203 allegations. Also please allow me to express my appreciation to
you and your staff for their work done in this area.
If you need any further information regarding this matter, please do
not hesitate to call me or a member of your staff may call Tim Camus,
Special Agent in Charge, Operations Division, at (202) 927-7234.
Sincerely,
Pamela J. Gardiner Acting Inspector General:
Signed by Pamela J. Gardiner:
[End of section]
Appendix VIII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
James R. White (202) 512-9110
Thomas Short (202) 512-9110:
Staff Acknowledgments:
In addition to the persons named above, the following persons made key
contributions to this report: Kevin Dooley, Evan Gilman, Patty Hsieh,
Shirley Jones, Stuart Kaufman, Anne Laffoon, MacDonald Phillips,
Kristen Plungas, Brenda Rabinowitz, Anne Rhodes-Kline, Andrea Rogers,
Wendy Turenne, and Chris Wetzel.
As discussed in appendix I, we focused on the last 100 cases closed
rather than those started after March 2002 and closed by August 2002
because most of the investigations under the old process took well
beyond 6 months to close. We were unable to use 8 cases because of
files that were a duplicate or that could not be located. Further, 19
case files did not include enough information on time spent. Our
analysis of the remaining 73 cases showed that section 1203 case
processing times ranged from 22 days to 1155 days. Also,
59 of the cases opened before and 14 opened after March 1, 2002--the
date that the new section 1203 process took effect.
FOOTNOTES
[1] P.L. 105-206.
[2] According to IRS, an allegation is considered ’substantiated“ if
the investigation develops information sufficient to support the
allegation, thereby resulting in a violation.
[3] According to IRS, the firing and mitigated penalty data presented
throughout this report do not include the results of any third party
appeals.
[4] The sampling errors (confidence limits) for all survey percentages
do not exceed plus or minus 10 percentage points, unless otherwise
shown as footnotes to the report text.
[5] These laws are: (1) Title VI or VII of the Civil Rights Act of
1964; (2) Title IX of the Education Amendments of 1972; (3) the Age
Discrimination in Employment Act of 1967;
(4) the Age Discrimination Act of 1975; (5) Section 501 or 504 of the
Rehabilitation Act of 1973; or (6) Title I of the Americans with
Disabilities Act of 1990. IRS Reform Act section 1203(b)(3)(B).
[6] Section 6103 of the Internal Revenue Code governs the protection of
tax data, which are confidential, from unauthorized disclosure and use.
[7] The ETC unit is to refer employee tax issues that it cannot resolve
to IRS management for additional fact-finding. TIGTA may investigate
employee tax compliance allegations that are identified independent of
the ETC unit.
[8] The Discrimination Complaint Review Unit is to assess EEO
settlement agreements and discrimination findings to determine
potential section 1203 misconduct. The External Civil Rights Unit is to
investigate complaints from taxpayers or taxpayer representatives about
being excluded from, denied the benefits of, or subjected to
discrimination in an IRS program or activity. TIGTA may also
investigate civil rights allegations involving some types of sexual
harassment.
[9] Factors included the nature, notoriety, and seriousness of the
offense; the employee‘s work record; and the impact of the offense on
confidence in the employees‘ ability to perform their duties.
[10] According to IRS and TIGTA officials, only a small percentage of
TIGTA cases are not included in IRS‘s database.
[11] As one of four operating divisions, SB/SE was established in
October 2000 to serve the needs of self-employed individuals as well as
businesses with assets of up to $10 million or less.
[12] As discussed in appendix I, we dropped 45 survey respondents from
our initial sample of 500 because those employees reported that they
did not have regular contact with taxpayers.
[13] For context, IRS‘s frontline enforcement employees interacted with
tens of millions of individual taxpayers from 1998 to 2002, and some
portion (which is not known) of the 3,970 allegations were made by IRS
employees rather than taxpayers.
[14] See appendix III for more detailed survey results.
[15] See appendix III for more detailed survey results.
[16] Another estimated 27 percent of the employees said they are
somewhat or very confident that they would not be disciplined for
making an honest mistake.
[17] As noted in appendix I, because our sample was designed to produce
precise estimates for a nationwide sample of enforcement employees, we
did not do any analyses by type of employee.
[18] For example, between fiscal years 1998 and 2001, the number of
levies and seizures decreased 73 percent and 90 percent, respectively.
Over the same time, the rate at which IRS audited individual tax
returns declined from 0.99 percent to 0.58 percent.
[19] See appendix III for more detailed survey results.
[20] Under the Internal Revenue Code, ’levy“ is the seizure of taxpayer
assets, including bank accounts, wages, and other property possessed by
third parties, such as banks or employers. A ’lien“ is a legal claim
attached to property to secure payment of a debt.
[21] See appendix III for more detailed survey results.
[22] Collection employees also might take some of these actions when
trying to collect unpaid taxes.
[23] Since the Restructuring Act, IRS has been in the midst of a major
reorganization, and complex tax laws have been changing annually. For
information see, U.S. General Accounting Office, IRS Restructuring Act:
Implementation Under Way but Agency Modernization Important to Success,
GAO/T-GGD-00-53 (Washington, D.C.: Feb. 2, 2000) and Tax
Administration: IRS‘s Implementation of the Restructuring Act‘s
Taxpayer Protection and Rights Provision, GAO/GGD-00-85 (Washington,
D.C.: Apr. 28, 2000).
[24] See appendix III for more detailed survey results.
[25] See appendix III for more detailed survey results.
[26] IRS‘s limited review involved 35 cases.
[27] Booz-Allen & Hamilton, Inc., Section 1203 Complaint Process
Reengineering; December 21, 2001. Addendum to Final Report, Section
1203 Complaint Process Reengineering; January 22, 2002.
[28] The study did not examine the section 1203 process for allegations
involving the tax compliance provisions of section 1203.
[29] We did not assess the new process since it took effect during the
course of our work.
[30] We are reporting on problems that the team identified and for
which recommendations were made by the team or actions were taken by
IRS to address the problems. Other problems included IRS managers
lacking skill to perform adjudications and inadequate training for
managers and employees on section 1203.
[31] As we discuss in greater detail in appendix V, BEPR is comprised
of IRS SB/SE and other officials.
[32] Exceptions include some employee tax compliance and civil rights
allegations, since other units within IRS have primary responsibility
for investigating these types of allegations.
[33] See our work on IRS‘s performance goals and measures, such as U.S.
General Accounting Office, Tax Administration: IRS‘s Innocent Spouse
Program Performance Improved; Balanced Performance Measures Needed,
GAO-02-558 (Washington, D.C.: Apr. 24, 2002); Tax Administration: IRS
Should Evaluate the Changes to its Offers in Compromise Program,
GAO-02-311 (Washington, D.C.: Mar. 15, 2002); and Political
Organizations: Data Disclosure and IRS‘ Oversight of Organization
Should Be Improved, GAO-02-444, (Washington D.C. July 17, 2002).
[34] Three balanced measures--customer service, employee satisfaction,
and business results--are to be considered when establishing goals and
evaluating performance. For the section 1203 process, the measures
could balance service provided to those making allegations, the
satisfaction of IRS employees involved, and results such as the
timeliness and quality of the process.
[35] As discussed in appendix I, we focused on the last 100 cases
closed
rather than those started after March 2002, and closed by August 2002
because most of the investigations under the old process took well
beyond
6 months to close. We were unable to use 8 cases because of files that
were a duplicate or that could not be located. Further, 19 case files
did not include enough information on time spent. Our analysis of the
remaining 73 cases showed that section 1203 case processing times
ranged
from 22 days to 115 days. Also, 59 of the cases opened before and 14
opened after March 1, 2002--the date that the new section 1203 process
took effect.
[36] As discussed earlier in this report, IRS‘s Employee Tax Compliance
unit is responsible for identifying and investigating employees who
appear to have tax compliance problems. IRS‘s Office of Equal
Employment Opportunity is responsible for reviewing and analyzing EEO
settlement agreements, findings of discrimination, and taxpayer
complaints of discrimination to determine whether a potential section
1203 violation exists. However, under certain circumstances, TIGTA may
also investigate allegations related to compliance with federal tax
laws and employee and taxpayer civil rights.
[37] The Frivolous Return Program is responsible for identifying the
tax returns of individuals who assert unfounded legal or constitutional
arguments and refuse to pay their taxes or to file a proper tax return.
The program also identifies returns claiming frivolous refunds, such as
those involving slavery reparations.
[38] The regular disciplinary process is codified at 5 U.S.C. Chapter
43 on unacceptable performance and 5 U.S.C. Chapter 75 on adverse
actions.
[39] The discipline imposed may range from oral counseling to
termination of employment, depending on the nature and severity of the
misconduct, the employee‘s work record, and other factors.
[40] The Deputy Commissioner is designated as the Board Chairman, but
he is serving as the Acting Commissioner of Internal Revenue at this
time, and in this role must consider the recommendations of the Board.
Current members of the Board are the Assistant Deputy Commissioner, who
serves as Acting Chairman, the Deputy National Taxpayer Advocate, the
National Director for Equal Opportunity and Diversity, and the Deputy
Commissioner of the Large and Midsized Business Division. In addition,
the Director of CCPAG serves as Executive Director for the Board,
presenting case files for consideration and maintaining records of the
Board‘s activities. Agency-Wide Shared Services employee relations
specialists assemble case files for the Board, and a representative of
the Office of Chief Counsel attends and participates in all Board
meetings.
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