IRS has had several efforts under way to improve its performance measures. To identify any challenges IRS faces in developing and implementing performance measures to gauge its efforts to reduce taxpayer burden through improved customer service, we reviewed IRS’ strategic-level measures to improve customer service in its September 30, 1997, Strategic Plan for fiscal years 1997 through 2002; its fiscal year 1997 Strategic Plan; and selected program-level customer service measures in its Annual Performance Plan for fiscal year 1997. First-Tier Measure Is to Gauge Overall Performance

IRS’ mission-level effectiveness indicator (MEI) is intended to measure the agency’s performance in accomplishing its primary mission of collecting the proper amount of tax revenue at the least cost. With the MEI, IRS has a mission-level performance indicator that includes the taxpayer compliance rate, the cost or burden to taxpayers of complying with the tax laws, and the cost of operating IRS. IRS uses five indicators to gauge its progress in improving customer service: (1) taxpayer burden cost for IRS to collect $100, (2) initial contact resolution rate, (3) toll-free telephone level of access, (4) tax law accuracy rate for taxpayer inquiries, and (5) customer satisfaction rates (being developed at the time our review). IRS Faces Challenges Developing and Implementing Customer Service Measures

IRS is striving to develop and implement a results-oriented performance measurement system to meet the requirements of the Results Act. However, IRS faces some difficult challenges in measuring the results of its efforts to reduce taxpayer burden through improved customer service. The key challenges we identified are (1) developing a reliable measure of taxpayer burden, including the portion that IRS can influence; (2) developing measures that can be used to compare the effectiveness of the various customer service programs; and (3) refining or developing new measures that gauge the quality of the services provided. IRS recognizes the limitations of its burden measure and is looking for alternatives. IRS added three new strategic-level measures in its September 30, 1997, Strategic Plan: (1) toll-free telephone level of access, which is intended to compare the number of calls attempted to the number of calls answered; (2) tax law accuracy rate for taxpayer inquiries, which is intended to measure the accuracy of tax law information provided to taxpayers through the toll-free telephone assistance program; and (3) customer satisfaction rates. Obtaining stakeholder involvement is especially important for IRS as it seeks to balance its efforts and resources between assisting taxpayers and enforcing compliance with the nation’s tax laws. However, IRS faces some difficult challenges as it develops and implements its efforts to reduce taxpayer burden through improved customer service. 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.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) efforts to implement the Government Performance and Results Act (GPRA), focusing on: (1) IRS's system of performance measures; and (2) the challenges IRS faces in developing and implementing performance measures to gauge its efforts to reduce taxpayer burden through improved customer service.

What GAO Found

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.