Tax Administration

For years, the Internal Revenue Service (IRS) has been developing and revising a system of measures to gauge its performance in achieving its mission, including reducing taxpayer burdens through better customer service. Passage of the Government Performance and Results Act in 1993 has led IRS to refocus its performance measures on the results of its programs and operations. This is a difficult undertaking because it forces the agency, which has been preoccupied with staffing, activity levels, and tasks completed, to focus on the real difference its programs make on taxpayers. This report (1) describes IRS' system of performance measures and (2) identifies any challenges IRS faces in developing and implementing performance measures to gauge its efforts to reduce taxpayer burdens through improved customer service.

GAO noted that: (1) IRS is striving to develop and implement a results-oriented performance measurement system that will meet the requirements of GPRA; (2) however, IRS faces some difficult challenges in measuring the results of its efforts to reduce taxpayer burden through improved customer service; (3) IRS has a three-tiered system of performance measures; (4) at the highest level, IRS has a mission effectiveness indicator, which is intended to measure the agency's overall performance in collecting the proper amount of tax revenue at the least cost or burden to the government and the taxpayer; (5) the second level of indicators is intended to gauge IRS' progress in meeting its strategic objectives to improve customer service, increase taxpayer compliance, and increase its productivity; (6) to gauge its progress in improving customer service, IRS uses five initial indicators: (a) taxpayer burden cost for IRS to collect $100; (b) initial contact resolution rate for taxpayer inquiries; (c) toll-free telephone level of access; (d) tax law accuracy rate for taxpayer inquiries; and (e) customer satisfaction rates (being developed at the time of GAO's review); (7) the third level of indicators is intended to measure the accomplishments of specific IRS programs or operations, such as IRS' toll-free telephone operations; (8) IRS' 1997 Annual Performance Plan had 30 program-level customer service measures, which measure such things as the number of taxpayer calls answered and the average number of calls answered per full-time employee; (9) although IRS is striving to improve its overall performance measurement system, it faces some difficult challenges as it develops and implements performance measures to gauge its efforts to reduce taxpayer burden through improved customer service; (10) the key challenges GAO identified are: (a) developing a reliable measure of taxpayer burden; (b) developing measures that can be used to compare the effectiveness of the various customer service programs; and (c) refining or developing new measures that gauge the quality of the services provided; (11) it is important that IRS obtain stakeholder involvement to balance its efforts between assisting taxpayers and enforcing compliance with the tax laws; (12) IRS recognizes the limitations of its taxpayer burden measure and is looking for alternatives; and (13) at the same time, IRS will be faced with making decisions on how to minimize the costs of collecting data and measuring results over time.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: