Summaries of Tax-Related Products Issued Management of IRS GAO/GGD-92-79, 04/21/92 and GAO/GGD-92-80, 04/21/92 In two reports to Senators Harry Reid and Richard Bryan and IRS carried out Project Layoff in 1984 and 1985 to gather information about In addition, GAO determined that IRS was not fully prepared to execute an illegal bookmaking operation of the magnitude of Project Layoff. For example, (1) IRS lacked specific guidelines for accounting for business receipts and disbursements at the time of the operation, (2) IRS undercover agents did not develop or use an adequate recordkeeping system or controls to track wagers and cash, and (3) IRS managers did not adequately oversee the operation's business activities. In the second report, GAO reviewed 183 other undercover operations and found that although IRS had extensive controls to help minimize the risks associated with conducting undercover operations, these procedures were often not followed. For example, while IRS required that agents audit each undercover operation quarterly and at its conclusion, both quarterly and closing financial audits were frequently not completed in the operations in which federal funds had been expended. On the basis of the results of its studies, GAO concluded that IRS had not adequately overseen the more costly and sensitive operations for which the Assistant Commissioner (Criminal Investigation) is accountable. The IRS National Office had little assurance that these projects were being carried out so as to minimize the potential for operational breakdowns and misuse of funds. Summaries of Tax-Related Products Issued Recommendation(s) Action(s) Taken And/or The Commissioner of Internal Revenue should direct the Assistant ⚫ reaffirming the importance of monitoring and auditing undercover evaluating completed operations so that lessons learned can be applied to requiring that IRS' Controller be involved in planning financial involving the National Office in planning and overseeing how intelligence IRS generally agreed with GAO's recommendations and has taken steps or plans to take steps to improve the management of its undercover operations. For example, IRS ⚫ has expanded its National Office staff to include five full-time analysts who will more fully monitor regional undercover operations, ⚫ has revised its Internal Revenue Manual to require that the Criminal ⚫ has revised its Internal Revenue Manual to require additional ⚫ is currently setting up benchmarks in its Annual Business Plan to assist in Summaries of Tax-Related Products Issued IRS' Budget Request for Fiscal Year 1993 Related GAO Product(s) GAO/T-GGD-92-34, 04/30/92 The administration's fiscal year 1993 budget request for IRS was for 115,799 full-time equivalent staff years and about $7.24 billion-414 staff years fewer and $562 million more than authorized for 1992. GAO's testimony on this budget request made several points: • The budget included two initiatives that would provide more staff for IRS to examine more returns and collect more delinquent taxes. Although GAO supported such initiatives in the past, data in the budget and other IRS data raised questions about their long-term effect. Despite additional staffing authorized for Collection and Examination in fiscal year 1991 and the additional staffing being requested in the 1993 budget, IRS' projections for fiscal year 1993 showed minimal growth in Collection staffing and a decline in Examination staffing compared to fiscal year 1990. This was because IRS had been unable to sustain the funding needed to maintain increased staffing levels. • IRS' inability to sustain any growth in Collection and Examination staff came at a time when the trends in accounts receivable were bad and audit coverage was projected to again fall below 1 percent. • The fiscal year 1993 budget for another enforcement effort, the Information Returns Program, indicated a decline of 1,307 staff years since 1991. IRS projected that the number of underreporter cases worked under this program in 1992 would be about 38 percent less than the number worked in 1991. • The fiscal year 1993 budget included about $50 million in expected productivity savings from new or enhanced computer systems. Most of these savings, like those in the fiscal year 1992 budget, appeared to be based on unrealistic assumptions. As a result, programs were being cut to reflect "savings" that were not really there. GAO/GGD-90-26, 03/22/90; GAO/T-GGD-91-17, 03/20/91; GAO/GGD-92-45FS; and GAO/GGD-92-118, 07/31/92 Summaries of Tax-Related Products Issued GAO/T-GGD-92-35, 05/05/92 In testimony before the Senate Committee on Governmental Affairs, the Comptroller General said that public officials must be able to better ensure U.S. citizens that our government can effectively account for where their tax dollars go and how they are used. Better information on program status and a change in management attitude are needed along with stronger incentives for agencies to account for their results. The Comptroller General cited the Chief Financial Officers' Act passed in 1990 as a foundation and suggested the following additional steps that agencies could take to improve accountability for program results: clearly articulate their missions in the context of statutory objectives and, with regard to services, citizen expectations; develop implementation plans for the goals and objectives and specific measures of progress toward achieving them; and report annually on their progress to Congress, which needs to carry out effective program oversight to demonstrate that it will use the information provided to hold the agencies accountable. The Comptroller General said that progress in measuring performance was beginning to take place in some agencies, citing the Internal Revenue Service as an example. IRS had restructured its strategic business plan to focus on what it considered to be its most important objectives: reducing taxpayer burden, enhancing voluntary compliance, and improving quality and productivity. IRS found that developing strategies for achieving these objectives was a challenging effort. For example, one strategy to increase voluntary compliance is Compliance 2000. This is an effort to identify the root causes of taxpayer noncompliance and complement IRS's traditional enforcement focus. One of the root causes for noncompliance may be the complexity of tax laws and regulations. To address this root cause, IRS is considering rewriting regulations to make them easier to understand and developing measures to determine their success. But even if law and regulations are simplified, an equally difficult change of Compliance 2000 will be increasing IRS' emphasis on taxpayer assistance, which may require different work roles and behavior on the part of IRS employees. While these longer term actions are underway, IRS is developing the underpinnings by improving its ability to measure costs. IRS has identified and plans to report the overall costs of its various programs, such as |