To help ensure compliance, the law also required each district director to certify each quarter whether violations had occurred and the corrective action taken, if needed. IRS’ Certification Process Identified Few Violations but Had Systemic Weaknesses

Our review of quarterly certifications for fiscal years 1996 and 1997 found that directors reported 11 potential violations in 368 quarterly certifications (see app. Also, we identified several systemic weaknesses that affected the reliability of the certification process. First, our analysis of the potential violations that were reported indicated that there was confusion among IRS officials about what constituted a violation. We estimated that, overall, about 75 percent of front-line employees (i.e., revenue agents and tax auditors in the examination function and revenue officers in the collection function) and 81 percent of examination and collection group managers believe that one or more enforcement measures were considered to some extent by their managers when preparing their most recent performance evaluation. We estimated that about 70 percent of front-line employees, who believed that tax enforcement results affected their evaluations, based their perceptions on verbal communication with their managers during group meetings and performance feedback sessions. Appendix IV contains detailed information on the basis for front-line employee and group manager perceptions. Our analysis of employee evaluations found that an estimated 69 percent of the evaluations contained two types of narrative that employees could have interpreted as inappropriate references to tax enforcement results but which did not violate IRS guidance. The second type of narrative that could create misperceptions about the use of tax enforcement results was the use of the terms “overage” (the age of the cases in the employee’s workload inventory) and “cycle time” (the number of cases worked within the established guidelines for closing cases). IRS’ Proposed Revisions to the Certification Process Address Some Weaknesses

Because of Internal Audit reports, IRS has undertaken several steps to strengthen the certification process, including expanding the number of employees covered, instituting an independent review process of the certifications, revising guidance, and training managers. IRS has not informed managers about what specific sanctions can be imposed for misusing tax enforcement results or submitting misleading certifications. In addition to these possible sources of confusion, IRS’ independent review process is to focus on reviewing documents and records to identify written violations. Nonetheless, our survey of IRS employees indicated a widespread perception that managers consider tax enforcement results when preparing performance evaluations. IRS’ revised guidance has few examples of the appropriate and inappropriate use of tax enforcement results in written evaluations. Recommendations to the Commissioner of Internal Revenue

To better ensure managerial accountability for the proper use of tax enforcement results, we recommend that the Commissioner expand the guidance to include additional examples of the appropriate and inappropriate use of records of tax enforcement results in written evaluations, revise the quarterly certification form to specifically state that tax enforcement results were not used in any written employee evaluation prepared or reviewed, including appraisals, awards, or promotion justifications, and that the manager did not verbally communicate to employees that tax enforcement results affected their evaluations or were used to set individual production goals or quotas, revise the penalty guide to specifically list the disciplinary actions that can be taken for violations, and survey employees periodically to determine whether they perceive that tax enforcement results were used in written evaluations or verbally communicated by their supervisors and use the results to assess whether IRS needs to further clarify the guidance, provide additional training, or take any other appropriate action. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) managers' compliance with legislative and policy prohibitions against using enforcement statistics in employee evaluations and the requirement that managers certify each quarter whether violations had occurred, focusing on: (1) the extent to which IRS' certification process identified violations of law and policy; (2) IRS employees' perceptions of the use of tax enforcement results in their annual performance evaluations; (3) supervisors' use of tax enforcement results in written employee performance evaluations; and (4) IRS' efforts to revise the certification process.

What GAO Found

GAO noted that: (1) for fiscal years 1996 and 1997, district and service center directors submitted 368 quarterly certifications that reported 11 potential violations; (2) GAO identified several systemic weaknesses that affected the reliability of the certifications; (3) specifically, GAO found: (a) some confusion among IRS officials about what constituted a violation; (b) inadequate guidance about specific actions directors should take to identify violations; (c) a failure to integrate performance evaluations and the certification process; and (d) unclear guidance on sanctions that could be applied against managers for misusing tax enforcement results or submitting false certifications; (4) GAO's survey of a statistically representative sample of examination and collection employees showed a widespread perception that managers considered enforcement results when preparing annual performance evaluations; (5) GAO estimated that 75 percent of front-line employees and 81 percent of group managers perceived that tax enforcement results affected their most recent performance evaluation; (6) about 70 percent of front-line employees said they based their perception in part on information communicated to them verbally in staff meetings or performance feedback sessions with their managers; (7) and about 36 percent of front-line employees indicated tax enforcement results were used in their written performance evaluations; (8) 9 percent of employees received a written evaluation that contained a tax enforcement result and an estimated 69 percent contained narrative that employees could have interpreted as inappropriate references to tax enforcement results but which did not violate IRS guidance; (9) about 41 percent of the evaluations in GAO's sample mentioned process measures dealing with the age of the cases in the employee's workload inventory and the number of cases worked within guidelines established for closing cases; (10) IRS has undertaken several steps to strengthen the certification process; (11) although these actions address some of the weaknesses of the current system, IRS' revised guidance has few examples of the appropriate and inappropriate use of tax enforcement results in written evaluations; (12) the revised guidance does not clearly inform managers about potential sanctions for inappropriate use of tax enforcement results; and (13) IRS' new independent review process is geared toward identifying written violations and not violations communicated verbally.