	Background

The mission of IRS’s HCO includes providing “human capital strategies  and tools for recruiting, hiring, developing, retaining, and transitioning a  highly-skilled and high-performing workforce to support IRS mission  accomplishments,” and developing and implementing “technology- enabled systems and processes to improve human capital planning and  management and empower employees to achieve their potential.” HCO is headed by the Human Capital Officer who reports to the Deputy  Commissioner for Operations Support and is to “provide executive  leadership and direction in all matters relating to the Service’s employees,  overseeing the design, development, and delivery of comprehensive,  agency-wide human capital management and development programs that  contribute to the Service’s vision and mission.”
Worklife Benefits and Performance (WBP) and Employment, Talent and  Security (ETS) are two subdivisions within HCO responsible for  supporting many of IRS’s strategic human capital management activities. IRS is in the Early Stages of Defining and Addressing its Workforce Needs

		IRS Strategic Workforce Planning Is Fragmented and Activities to Address Skills Needs Are Not Routinely Performed

IRS has scaled back strategic workforce planning activities in recent  years. IRS officials told us that resource constraints and fewer  staff with strategic workforce planning skills due to attrition since 2011  required HCO to largely abandon strategic workforce planning activities. A number of indicators led IRS to determine that continuing to make  short-term, largely nonstrategic human capital decisions was  unsustainable, according to IRS officials. However, IRS’s implementation of its workforce planning initiative has  been delayed. Lack of workforce planning skills. IRS is Not Fully Addressing Skills Gaps in Its Workforce

		Strict Hiring Limits Contributed to Annual Declines in IRS Full-Time Equivalents Since 2011

IRS full-time equivalents (FTE) have declined each year since 2011, and  declines have been uneven across different mission areas (see figure 5). Our analysis of the  President’s Budget data produced by OMB found the reductions have  been most significant within IRS Enforcement, where staffing declined by  27 percent (fiscal years 2011 through 2017). IRS attributed staffing declines primarily to a policy decision to strictly limit  hiring. Declining Staffing Contributed to IRS Decisions to Scale Back Enforcement Activities

Available staff was a key factor in decisions to scale back a number of  program activities, most predominantly in enforcement, according to IRS  officials. Our analysis of IRS data shows the number  of individual returns audited has declined each year between fiscal years  2011 through 2017, a 40 percent decline (see figure 6). IRS agreed with the  recommendations and took some action to close them. IRS Has Skills Gaps in Key Occupations

As previously discussed, IRS is in the initial stages of implementing a  strategic workforce planning model, which could provide IRS with  information needed to understand what critical skills and competencies  are needed to meet its mission. HCO officials told us they are generally monitoring the status of these  activities, but cited competing priorities as a reason they have not  determined how each activity will be evaluated in achieving increased  hiring capacity and associated outcomes. IRS Has Identified Hiring Risks Related to Tax Cuts and Jobs Act Implementation

IRS established a risk register as part of efforts to identify, prioritize, and  mitigate risks to IRS’s implementation of the Tax Cuts and Jobs Act,  including a number of risks related to its ability to hire. IRS has recently provided its  HCO with authority to lead and coordinate agency-wide strategic  workforce planning efforts. However, IRS has not targeted its limited  resources to addressing issues among the mission critical occupations  most at risk of skills gaps. Additionally, the results of an interagency working  group effort intended to address skill gaps among IRS revenue agents  and other occupations with skills gaps across the government may hold  important lessons for addressing skills gaps among mission critical  occupations at IRS. In addition, issuing clear guidance on  hiring request requirements would better position IRS to avoid hiring  delays for mission-critical occupations. In this report, we assess (1)  how IRS defines its workforce needs and develops strategies for shaping  its workforce; (2) the extent to which IRS identified the critical skills and  competencies it will require to meet its goals, and describe its strategy to  address skills gaps in its workforce; and (3) the extent to which IRS’s  Human Capital Office has the capacity to hire employees in hard to fill  positions. Based on these criteria, we selected revenue officers and tax examiners  as occupational case illustrations representing tax enforcement activities. For objective 3, to assess the extent IRS’s Human Capital Office has the  capacity to hire employees in hard to fill positions, we reviewed  documentation related to IRS hiring requirements, including the Internal  Revenue Manual and policy explaining the Exception Hiring Process.
Why GAO Did This Study

IRS faces a number of challenges that pose risks to meeting its mission if not managed effectively. Key to addressing IRS's challenges is its workforce. Cultivating a well-equipped, diverse, flexible, and engaged workforce requires strategic human capital management.
GAO was asked to review IRS's enterprise-wide strategic workforce planning efforts. GAO assessed (1) how IRS defines its workforce needs and develops strategies for shaping its workforce; (2) the extent to which IRS identified the critical skills and competencies it will require to meet its goals, and its strategy to address skills gaps in its workforce; and (3) the extent to which IRS's Human Capital Office has the capacity to hire employees in hard to fill positions.
GAO analyzed trends in staffing across IRS and in selected mission critical occupations; compared IRS strategic workforce management processes, practices, and activities with federal regulations and leading practices; analyzed IRS documents and interviewed agency officials.

What GAO Found

The Internal Revenue Service (IRS) has scaled back strategic workforce planning activities in recent years. IRS officials told GAO that resource constraints and fewer staff with strategic workforce planning skills due to attrition required IRS to largely abandon strategic workforce planning activities.
However, a number of indicators, such as increasing rates of retirement eligible employees and declining employee satisfaction, led IRS to determine that continuing to make short-term, largely nonstrategic human capital decisions was unsustainable. One way IRS sought to address these issues was to develop a strategic workforce plan and associated workforce planning initiative. Initiative implementation, however, is behind schedule and on hold. IRS attributed the delay to a combination of: 1) personnel resources redirected to implement Public Law 115-97—commonly referred to as the Tax Cuts and Jobs Act, 2) lack of workforce planning skills within its Human Capital Office, and 3) delayed deployment at the Department of the Treasury (Treasury) related to a new workforce planning system. As a result, IRS lacks information about what mission critical skills it has on board, where skills gaps exist, and what skills will be needed in the future.
IRS staffing has declined each year since 2011, and declines have been uneven across different mission areas. GAO found the reductions have been most significant among those who performed enforcement activities, where staffing declined by around 27 percent (fiscal years 2011 through 2017). IRS attributed staffing declines primarily to a policy decision to strictly limit hiring. Agency officials told GAO that declining staffing was a key contributor in decisions to scale back activities in a number of program and operational areas, particularly in enforcement, where the number of individual returns audited from fiscal years 2011 through 2017 declined by nearly 40 percent.
IRS has skills gaps in mission critical occupations, and the agency's efforts to address these skills gaps do not target the occupations in greatest need, such as tax examiners and revenue officers. However, the results of an interagency working group effort that began in 2011, and was intended to address skill gaps among IRS revenue agents and other occupations with skills gaps across the government, may hold important lessons for addressing skills gaps in other mission critical occupations at IRS.
IRS's Human Capital Office has limited staffing capacity to hire employees in hard to fill positions, which holds risks for the agency's ability to implement the Tax Cuts and Jobs Act. IRS is undertaking a variety of activities to improve its hiring capacity, but has not determined how each activity will be evaluated and will contribute to increased hiring capacity or associated outcomes. In addition, changes in the agency's hiring processes have been confusing to managers and contributed to hiring delays. Clear guidance on hiring request requirements would better position IRS to avoid the risk of hiring delays for mission critical occupations.

What GAO Recommends

GAO is making six recommendations to IRS that include implementing its delayed workforce planning initiative, evaluate actions to improve the agency's hiring capacity, and address changes in its processes that have contributed to hiring delays. IRS agreed with GAO's recommendations. GAO also recommends Treasury clarify guidance to IRS on a forthcoming workforce planning system. Treasury agreed with the recommendation.