As a result, IRS  will be relying on paper case files for some years. IRS Does Not Have an Effective Process to Ensure That Paper Case Files Can Be Located Timely

Case files should be readily available for examination. Missing case files can result in  lost revenue, create unnecessary taxpayer burden, make cases unavailable  for other units such as quality review groups or advisory groups, and  hinder congressional oversight. IRS had this information  in the case file, but could not locate it. IRS has acknowledged its historic difficulties in locating and retrieving  case files. IRS Incurs Cost and Some Taxpayers May Experience Unnecessary Taxpayer Burden to Re-create Case Files

When IRS staff request paper case files, several attempts may be made to  locate them. This process can result in unnecessary  taxpayer burden. Lacking Data, IRS Cannot Assess Case Management Performance and Develop Plans for Improvement

IRS has not developed the data needed to measure the performance of its  case file processes, such as whether all of the paper case files it requests  are located or received timely. Furthermore, these officials added that IRS does not track the reasons  case files cannot be located. In the three previously mentioned GAO audits, we asked IRS staff who  requested our case files why the case files could not be located. Managers can use performance information to  identify problems in existing programs, to try to identify the causes of  problems, and/or to develop corrective actions. When we asked program managers who had  overall responsibility for case file management across IRS’s compliance  programs, the program managers said they did not know. Without overall  responsibility for case file management being clearly defined, IRS may not  be able to develop performance information across all of its programs to  determine how well paper case files are managed to achieve performance  targets and whether its case file management processes are in accordance  with FRA and internal control standards. However, IRS does not have data to determine which of the improvements  are the most cost effective for IRS. Appendix I: Objectives, Scope, and Methodology

The objectives of this assignment were to review the Internal Revenue  Service’s (IRS) case file storage, tracking, and documentation process to  determine whether IRS has (1) an effective process to ensure that paper  case files can be located timely and (2) sufficient data to assess the  performance of its paper case file processes.
Why GAO Did This Study

Proper paper case file management is a significant issue for the Internal Revenue Service (IRS) because its staff investigate and close millions of case files every year. In addition, IRS employees depend heavily on case files when pursuing enforcement actions. GAO was asked to review IRS's case file storage, tracking, and documentation processes to determine whether IRS has (1) an effective process to ensure that paper case files can be located timely and (2) sufficient data to assess the performance of its paper case file processes. To review these processes, GAO interviewed staff who request case files and case file managers.

What GAO Found

IRS does not have an effective process to ensure that paper case files can be located within the requesters' time frames. Missing case files can result in lost revenue, create unnecessary taxpayer burden, and make case files unavailable for other units such as quality review groups or advisory groups. IRS has acknowledged its historic difficulties in locating and retrieving case files. When IRS cannot locate paper case files, it may attempt to re-create them by requesting information from taxpayers, which can result in unnecessary taxpayer burden. Difficulties in locating case files can also hinder congressional oversight. When GAO requested case files in two prior audits, IRS could not locate all of the case files requested. IRS does not have sufficient data to assess the performance of its paper case file management processes. Having such data would enable IRS to assess whether its case management processes are in accordance with FRA and internal control standards. IRS does not track whether all of the case files it requests are located or received timely, or the reasons why case files cannot be located. If IRS developed this type of data, officials could use this data to identify problems in existing programs, to try to identify the causes of problems, and/or to develop corrective actions. Records management officials have recently instituted some performance measures, but these measures do not specifically address paper case files. IRS program managers also have not developed performance measures or data to determine how well paper case files are managed to achieve performance targets. Program managers do not know who has overall responsibility for case file management so performance information cannot be developed across IRS's compliance programs. GAO identified some potential improvements that IRS can consider, but IRS will need to determine which improvements are the most cost effective.