Such records are to be designed to furnish the information necessary to protect the legal and financial rights of the government and of persons directly affected by the agency’s activities.To do this, each agency is to establish and maintain an active, continuous records management program that provides effective controls over the creation, maintenance, and use of agency records that are sufficient to (1) document the persons, places, things, or matters dealt with by the agency; (2) facilitate action by agency officials and their successors in office; (3) make possible a proper scrutiny by Congress or other authorized agencies of the government; (4) protect the financial, legal, and other rights of the government and other affected persons; (5) document the formulation of agency policies and decisions; and (6) document important board, committee, or staff meetings. Under 44 U.S.C. Objectives, Scope, and Methodology

Our objectives were to (1) determine how IRS applies the restrictions of section 6103 in reviewing and inventorying its records and (2) evaluate how IRS carries out its records management responsibilities. Our work focused on certain IRS management records, which were those records addressing agency policies, decisions, and operations. We did not review IRS’ field office records management operations because NARA reviewed field operations as part of its comprehensive 1995 review of IRS’ records program and found that the agency had generally handled and maintained tax returns and return information correctly. These records had been scheduled by IRS and appraised by NARA. NARA noted that IRS had extensive recordkeeping requirements in its Internal Revenue Manual and was developing a vital records program, and that the agency’s tax-processing records were well-managed and handled in accordance with approved disposition schedules. NARA made 58 recommendations to address the problems it found in IRS’ records management practices. According to a NARA official, as of May 1997, IRS had successfully completed 47 of these recommendations. In addition, NARA noted that there were a number of backlogged headquarters records stored on-site or at FRCs that could not be scheduled for disposition because IRS, on the basis of the access restrictions of section 6103, did not allow NARA to appraise the records’ contents. IRS and NARA engaged in a blind review of the 6103-protected records, whereby an IRS disclosure officer described the records’ contents to the NARA records appraiser who decided on the basis of this description whether the records had historical value. The 6103-nonprotected records were made available to NARA for appraisal. We observed that 36 percent of the records were in the first category, 59 percent were in the second category, and 5 percent were in the third category. Not all IRS records were stored in poor conditions. In August 1997, we toured IRS’ headquarters storage facilities again and found that progress in inventorying and scheduling these documents had been made. IRS Has Made Improvements to Its Records Management Program

IRS acknowledged having some records management program problems. al., v. IRS and NARA) that was pending at the time of our review. NARA’s Comments

NARA’s comments centered on two major points. However, IRS does not believe that section 6103 would allow NARA access to tax returns or return information for appraisal purposes.
Why GAO Did This Study

Pursuant to a congressional request, GAO evaluated the Internal Revenue Service's (IRS) records management program, focusing on how IRS: (1) applies the restrictions of U.S. Code, title 26, section 6103, in reviewing and inventorying its records; and (2) carries out its records management responsibilities.

What GAO Found

GAO noted that: (1)the National Archives and Records Administration's (NARA) 1995 review of IRS' records program found that IRS had managed its overall records program according to NARA requirements, except for certain issues; (2) NARA found that certain management and policy documents, many of which IRS maintained were subject to the disclosure restrictions of section 6103, were not inventoried or scheduled for disposition as required, and that some documents were stored in unsatisfactory conditions; (3) NARA's review highlighted issues associated with its inability to appraise certain IRS records for historical value because of IRS' interpretation of section 6103 restrictions; (4) GAO's review confirmed that these problems existed, but identified progress being made by IRS, and confirmed that the controversy related to NARA's access remains unresolved; (5) certain IRS management that documented policymaking and high-profile programs and actions were not reviewed by NARA because IRS maintained that the documents potentially contained taxpayer-protected data; (6) NARA and IRS subsequently worked out a test method for appraising some of these management records; (7) IRS and NARA engaged in a "blind" review of the 6103-protected records, whereby an IRS official described the records' contents to the NARA records appraiser who decided on the basis of this description whether the records had historical value; (8) the nonprotected records were made available to NARA for appraisal; (9) GAO observed that 59 percent of the records were designated as historical and containing tax returns or return information, 36 percent were designated as historical and containing no tax return information, and 5 percent were designated as nonhistorical and could be destroyed after the applicable period; (10) at the time of NARA's and GAO's reviews, a substantial backlog of uninventoried records has accumulated at IRS; (11) in four of the six headquarters storage locations GAO observed in early 1996 , records were stored in no particular order and under poor conditions; (12) according to NARA, some of the records stored at IRS headquarters could have been less expensively stored at a federal records center; (13) early in 1996, IRS escalated its efforts to improve its records management program with NARA's assistance; (14) as of May 1997, IRS' last official reporting date, NARA said that IRS had completed action on 47 of NARA's 58 recommendations to improve records management and was making progress on the other recommendations; and (15) the two agencies agreed that less progress had been made on resolving NARA's access for appraisal purposes.