Department of the Treasury: Status of Achieving Key Outcomes and
Addressing Major Management Challenges (15-JUN-01, GAO-01-712).
This report reviews the Department of the Treasury's fiscal year
2000 performance report and fiscal year 2002 performance report
plan required by the Government Performance and Results Act.
Specifically, GAO discusses Treasury's progress in addressing
several key outcomes that are important to Treasury's mission. In
general, GAO could not adequately determine the progress made by
Treasury on the five outcomes by reviewing its fiscal year 2000
performance report because the report lacked at least some
measures needed to directly assess each of the outcomes. However,
other information that GAO reviewed and the results of of GAO's
past work suggest that Treasury may be at risk of not achieving
these outcomes. In assessing Treasury's strategies, GAO
identified shortcomings in its plans for each of the outcomes it
reviewed. Chief among the limitations common to both the
Treasury's fiscal year 1999 and 2000 performance reports was that
the performance goals and measures of Treasury's agencies were
not always directly reflected in the broader departmental goals,
limiting the reports' usefulness in determining whether these
agencies are making progress in meeting their strategic goals in
general and the outcomes GAO reviewed in particular. Treasury
improved the fiscal year 2000 report by elevating its objective
of Improve Customer Satisfaction to a strategic goal and adding a
strategic goal of Improve Employee Satisfaction. Treasury's
performance report discussed the progress made in resolving many
of its major management challenges, but it did not specifically
discuss the agency's progress in resolving challenges related to
strategic human capital management.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-712
ACCNO: A01125
TITLE: Department of the Treasury: Status of Achieving Key
Outcomes and Addressing Major Management Challenges
DATE: 06/15/2001
SUBJECT: Performance measures
Personnel management
Reporting requirements
Strategic planning
Earned Income Tax Credit
Government Performance and Results Act
GPRA
Treasury Offset Program
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GAO-01-712
Report to the Ranking Minority Member, Committee on Governmental Affairs, U.
S. Senate
United States General Accounting Office
GAO
June 2001 DEPARTMENT OF THE TREASURY
Status of Achieving Key Outcomes and Addressing Major Management Challenges
GAO- 01- 712
Page i GAO- 01- 712 Treasury's Status of Achieving Key Outcomes Letter 1
Appendix I Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges 27
Appendix II Comments from the Department of the Treasury 40
Appendix III Staff Acknowledgments 45
Tables
Table 1: Major Management Challenges 27
Figures
Figure 1: Treasury Performance on IRS- wide Key Indicators 8 Figure 2: IRS
Unpaid Taxes and Collection Trends 12
Abbreviations
ACE Automated Commercial Environment ATF Alcohol, Tobacco, and Firearms BSM
Business Systems Modernization Customs U. S. Customs Service EEO Equal
Employment Opportunity EITC Earned Income Tax Credit FFMIA Federal Financial
Management Improvement Act FMS Financial Management Service FR Financial
Report FRB Federal Reserve Bank GPRA Government Performance and Results Act
of 1993 IRS Internal Revenue Service Contents
Page ii GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
IVRS Integrated Violence Reduction Strategy OCC Office of the Comptroller of
the Currency OIG Office of Inspector General OMB Office of Management and
Budget SEACATS Seized Asset and Case Tracking System TIGTA Treasury
Inspector General for Tax Administration
Page 1 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
June 15, 2001 The Honorable Fred Thompson Ranking Minority Member Committee
on Governmental Affairs United States Senate
Dear Senator Thompson: As you requested, we reviewed the Department of the
Treasury?s fiscal year 2000 performance report and fiscal year 2002
performance plan required by the Government Performance and Results Act of
1993 (GPRA) to assess the agency?s progress in achieving selected key
outcomes that you identified as important mission areas for the agency. 1
These are the same outcomes we addressed in our June 2000 review of the
agency?s fiscal year 1999 performance report and fiscal year 2001
performance plan to provide a baseline by which to measure the agency?s
performance from year- to- year. 2 These selected key outcomes are
tax laws are administered effectively and fairly, less waste, fraud, and
error relating to the Earned Income Tax Credit, improved delinquent tax
and non- tax debt collection, reduced availability and/ or use of illegal
drugs, and criminals are denied access to firearms and firearms- related
crime is
reduced. As agreed, using the selected key outcomes for the Department of
the Treasury as a framework, we (1) assessed the progress Treasury has made
in achieving these outcomes and the strategies the agency has in place to
achieve them; and (2) compared the Treasury?s fiscal year 2000 performance
report and fiscal year 2002 performance plan with the
1 This report is one of a series of reports on the 24 Chief Financial
Officers (CFO) Act agencies? fiscal year 2000 performance reports and fiscal
year 2002 performance plans. 2 See Observations on the Department of the
Treasury?s Fiscal Year 1999 Performance Report and Fiscal Year 2001
Performance Plan (GAO/ GGD/ AIMD- 00- 231R, June 30, 2000).
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
agency?s prior year performance report and plan for these outcomes. 3
Additionally, we agreed to analyze how Treasury addressed its major
management challenges, including the governmentwide high- risk areas of
human capital and information security, that we, Treasury?s Inspector
General and the Department?s Treasury Inspector General for Tax
Administration identified. Appendix I provides detailed information on how
Treasury addressed these challenges. (App. II contains Treasury?s comments
on a draft of our report).
In general, we could not adequately determine the progress made by the
Department of the Treasury on the five outcomes by reviewing its fiscal year
2000 performance report because the report lacked at least some measures
needed to directly assess each of the outcomes. However, other information
that we reviewed and the results of our past work suggest that Treasury may
be at risk of not achieving these outcomes. In assessing Treasury?s
strategies, we identified shortcomings in its plans for each of the outcomes
we reviewed.
Planned outcome: Tax laws are administered effectively and fairly. Based on
the information in Treasury?s 2000 performance report, we could not assess
its progress in effectively and fairly administering the tax laws because
the report lacked information on strategic measures directly related to this
outcome. However, our work and the Internal Revenue Service?s (IRS)
performance on other measures below the strategic level indicated that IRS
improved its performance on one key indicator- percent of telephone calls
answered- while losing ground on others, including three measures of
quality. In its fiscal year 2002 plan for IRS, Treasury lacked specific
strategies to demonstrate how it would achieve its strategic goals and
objectives and, thereby, be ensured of achieving this outcome.
Planned outcome: Less waste, fraud, and error relating to the Earned Income
Tax Credit. We are unable to assess progress toward achieving less waste,
fraud, and error relating to the Earned Income Tax Credit (EITC) because
Treasury did not report on measures for any aspect of IRS?
3 Treasury issued one consolidated report on the fiscal year 2000
performance of its agencies. For its fiscal year 2002 performance plan,
Treasury issued separate plans for each of its agencies. The outcomes that
we reviewed involve the programs of four Treasury agencies- Internal Revenue
Service, Financial Management Service, U. S. Customs Service, and the Bureau
of Alcohol, Tobacco, and Firearms. Results in Brief
Page 3 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
administration of the program. While Treasury plans to continue its current
strategy of educating taxpayers and tax preparers in determining eligibility
for the credit, it did not indicate that it would institute measures to
evaluate its success in achieving this outcome.
Planned outcome: Improved delinquent tax and non- tax debt collection.
Limitations in the performance measures reported by Treasury make it
difficult to gauge the progress of IRS in collecting tax debt and the
Financial Management Service (FMS) in collecting non- tax debt. However,
other available information showed continuing declines in most of IRS?
collections actions to collect delinquent tax debt and roughly stable
collections by FMS of non- tax debts. Treasury?s fiscal year 2002 plans for
the two agencies provided little information on how their strategies for
improvement will increase debt collections. Treasury?s plan for increasing
collections of tax debts focused on reducing the diversion to noncompliance
duties of experienced collection staff. For collecting nontax debts,
Treasury?s plan dealt with improving only one of its two collection
programs.
Planned outcome: Reduced availability and/ or use of illegal drugs.
Treasury?s performance report presented an incomplete assessment of progress
toward reducing illegal drug availability and use, in part because given the
clandestine and diffused nature of illegal drug traffic, measures of the
flow of illegal drugs are illusive. Treasury acknowledges that some of its
measures used to track performance may not provide the best performance
information and indicated that it is working toward improving performance
measures. We agree that measuring law enforcement performance is difficult
and recognize that obtaining definitive results is problematic even with
rigorous measurement efforts. However, our prior work found that program
evaluations might provide some indications of the comparative effectiveness
of different interdiction programs. While Treasury?s fiscal year 2002
performance plan for Customs provided specific strategies and programs
designed to help Customs reduce the availability and use of illegal drugs,
some of the measures for these efforts do not completely support the
performance outcome being measured.
Planned outcome: Criminals are denied access to firearms and firearmsrelated
crime is reduced. We are unable to determine Treasury?s progress because the
measures reported did not directly support the assessment of this outcome.
As with illegal drug flow, the clandestine nature of the underlying
activities makes performance measurement in this area problematic. As noted
above, we recognize that measuring law
Page 4 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
enforcement performance is difficult and even with rigorous measurement
efforts, definitive results are illusive. Similarly, our prior work suggests
that program evaluations might be another way to identify program benefits
and success. While Treasury?s fiscal year 2002 plan for the Bureau of
Alcohol, Tobacco, and Firearms (ATF) provided specific strategies and
programs designed to help it reduce access to firearms by criminals and
related crimes, the plan did not indicate that new measures would be
developed to evaluate its success.
We identified systemic limitations common to both the fiscal year 1999
Treasury performance report and the fiscal year 2000 report and two
improvements Treasury made to the fiscal year 2000 report. Chief among the
limitations was that the performance goals and measures of Treasury?s
agencies were not always directly reflected in the broader departmental
goals, limiting the reports? usefulness in determining whether these
agencies are making progress in meeting their strategic goals in general and
the outcomes we reviewed in particular. In addition, the reports provided
minimal assurance that the performance information and data reported were
credible. Decision- makers need more detailed explanations about such things
as data validity and completeness to make informed judgments. This is
particularly important in light of questions about the reliability and
accuracy of some of IRS? performance data raised by our previous work.
Treasury improved the fiscal year 2000 report by elevating its objective of
Improve Customer Satisfaction to a strategic goal and adding a strategic
goal of Improve Employee Satisfaction. We believe that these changes
strengthened its presentation of program performance data in general and
also increased consistency with agency strategic goals. We identified three
systemic limitations in the fiscal year 2002 performance plans of the
Treasury agencies that we reviewed. The performance goals and measures of
the Treasury agencies still provide limited resultsoriented information
related to broader departmental goals. Also, the performance plans provide
incomplete assessments of the data that will be used to measure future
performance. In addition, except for improvements in Treasury?s plan related
to the outcome for illegal drugs, improvements were not made in plans
related to the other four key outcomes.
Treasury?s performance report discussed the progress made in resolving many
of its major management challenges, but it did not specifically discuss the
agency?s progress in resolving challenges related to strategic human capital
management.
Treasury generally agreed with the facts presented in this report. Treasury
noted, however, that it faces conflicting pressures to keep its GPRA
Page 5 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
products streamlined and yet to include more detailed information; it
characterized our position as one desiring considerably more detailed
information. We believe that it is only after Treasury establishes the
information needed for a GPRA orientation that presentation issues should be
addressed. Treasury also provided additional perspective on a number of
issues that we discuss in the report and technical clarifications that we
incorporated as appropriate. Treasury's comments are in app. II.
GPRA is intended to shift the focus of government decision making,
management, and accountability from activities and processes to the results
and outcomes achieved by federal programs. New and valuable information on
the plans, goals, and strategies of federal agencies has been provided since
federal agencies began implementing GPRA. Under GPRA, annual performance
plans are to clearly inform the Congress and the public of (1) the annual
performance goals for agencies? major programs and activities, (2) the
measures that will be used to gauge performance, (3) the strategies and
resources required to achieve the performance goals, and (4) the procedures
that will be used to verify and validate performance information. These
annual plans, issued soon after transmittal of the president?s budget,
provide a direct linkage between an agency?s longer- term goals and mission
and day- to- day activities. 4 Annual performance reports are to
subsequently report on the degree to which performance goals were met. The
issuance of the agencies? performance reports, due by March 31, represents a
new and potentially more substantive phase in the implementation of GPRA-
the opportunity to assess federal agencies? actual performance for the prior
fiscal year and to consider what steps are needed to improve performance,
and reduce costs in the future. 5
Treasury is responsible for a broad scope of activities that touch the lives
of all Americans, including collecting taxes, managing the government?s
finances, securing U. S. borders, controlling firearms- related crime, and
managing seized assets.
4 The fiscal year 2002 performance plan is the fourth of these annual plans
under GPRA. 5 The fiscal year 2000 performance report is the second of these
annual reports under GPRA . . Background
Page 6 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
This section discusses our analysis of Treasury?s performance in achieving
its selected key outcomes and the strategies the agency has in place,
particularly human capital 6 and information technology, for accomplishing
these outcomes. In discussing these outcomes, we have also provided
information drawn from our prior work on the extent to which the agency
provided assurance that the performance information it is reporting is
credible.
On the basis of information in Treasury?s 2000 performance report, we could
not assess its progress in effectively and fairly administering the tax laws
because the report lacked information on strategic measures directly related
to this outcome. However, the results of our work and other reported
information below the strategic level on the performance of Treasury?s
agency responsible for relevant programs- the Internal Revenue Service
(IRS)- indicated that IRS improved its performance on one key indicator
while losing ground on others.
As was the case last year, neither Treasury nor IRS had any measures that
were specifically linked to the outcome of effective and fair administration
of tax laws. IRS is modernizing all aspects of the agency?s operations, such
as its organizational structure, business processes, technology, and
performance management. As part of its modernization, IRS developed three
agencywide strategic goals, which we used to assess this outcome. The goals
are
top quality service to each taxpayer in every interaction,
top quality service to all taxpayers through fair and uniform application
of the law, and
productivity through a quality work environment. 6 Key elements of modern
human capital management include strategic human capital planning and
organizational alignment; leadership continuity and succession planning;
acquiring and developing staffs whose size, skills, and deployment meet
agency needs; and creating results- oriented organizational cultures.
Assessment of the
Department of the Treasury?s Progress and Strategies in Accomplishing
Selected Key Outcomes Tax Law Administration
Page 7 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
In fiscal year 2000, Treasury reported that the IRS made progress in
conceptualizing and identifying the measures it needs for its goals. 7
Currently the IRS has only an employee satisfaction measure, which relates
to the third goal.
While IRS- wide strategic measures to assess this outcome are not available,
our work on measures dealing with collecting revenues, providing taxpayer
service, and enforcing tax laws indicated mixed results. On the plus side,
during fiscal year 2000, IRS issued refunds without significant problems and
taxpayers had an easier time getting through to telephone assistors. On the
down side, the quality of service for taxpayers who visited taxpayer
assistance centers and trends in enforcement functions continue to be
troubling. 8 For example, Treasury?s fiscal year 2000 performance report
listed five IRS- wide measures that Treasury designated as key performance
indicators related to the outcome. The agency did not meet its target for
four of the five indicators including all three measures of quality.
Treasury?s explanations for not meeting its targets included reasons such as
the decline ?? was caused by a failure to meet any one, several, or all of
the standards measured in this category, thus resulting in a lower overall
composite score.? 9 Figure 1 shows IRS? performance over time on the five
key indicators.
7 IRS is developing measures of: taxpayer burden and customer satisfaction
for its goal of service to each taxpayer; voluntary filing, reporting, and
payment compliance for its goal of service to all taxpayers; and a
productivity/ workload index for its productivity goal.
8 See IRS Modernization: Continued Improvement in Management Capability
Needed to Support Long- Term Transformation (GAO- 01- 700T, May 8, 2001). 9
Department of the Treasury, Program Performance Report Fiscal Year 2000, p.
83.
Page 8 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Figure 1: Treasury Performance on IRS- wide Key Indicators
Source: Department of the Treasury, Program Performance Report Fiscal Year
2000.
In its fiscal year 2002 plan for IRS, Treasury lacked specific strategies to
demonstrate how it would achieve its strategic goals and objectives and,
thereby, be ensured of effectively and fairly administering the tax laws.
Instead, IRS? plan included individual strategies for meeting each of the 73
measures in the plan. Of those measures, 18 are outcome- oriented and
focused on quality, timeliness, customer satisfaction, or employee
satisfaction. 10 While 5 of these measures will establish baseline data, the
10 None of the outcome- oriented measures for quality, timeliness, or
customer satisfaction focused on pre- filing services, one of the agency?s
major activities.
0 10
20 30
40 50
60 70
80 90
100 FY1997 FY1998 FY1999 FY2000
Percentage Performance
Average overall quality, field collection cases reviewed Accuracy of tax law
answers on toll- free telephone calls Percent of toll- free telephone calls
answered Average overall quality, office examination cases reviewed Average
overall quality, field examination cases reviewed
Page 9 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
strategies to implement the remaining 13 measures are, in general,
continuations of those used in the previous year. For example, the strategy
for improving field collection quality 11 in fiscal year 2001 included using
data analysis to target areas for improvement, planning training around
identified needs, and delivering a redesigned, web- based manual. For fiscal
year 2002, the strategy to improve quality in that area included continued
data analysis and training and added a strategy to develop a system for
embedding responsibilities for quality at the organizational level closest
to customers. Treasury did not explain why it was likely to be more
successful in fiscal year 2002 by continuing similar strategies for the five
measures where the targets were not met. In February 2001, we again
recommended that IRS more clearly link its measures to its goals and
objectives. 12 In response, the Commissioner of Internal Revenue stated that
IRS would make such refinements as it gains more experience with
modernization.
We are unable to assess progress toward achieving less waste, fraud, and
error relating to the Earned Income Tax Credit (EITC) because Treasury did
not report on measures for any aspect of IRS? administration of the program,
and IRS also lacked performance measures for the program. 13 We first
identified this program as a high- risk area in 1995 and, more recently,
noted in our December 2000 report that the overall impact of the compliance
initiative remained unclear despite its success in identifying hundreds of
millions of dollars in erroneous EITC claims in fiscal year 2000. 14 Yet, no
performance measures specific to EITC activities are
11 ?Field collection? is made up of revenue officers who have personal
contact with taxpayers for the purpose of collecting delinquent taxes. The
quality of field collection work is measured by using the average of all
collection cases sampled and reviewed during a given period for a collection
organizational unit, using IRS? Collection Quality Measurement System.
12 See IRS Modernization: IRS Should Enhance Its Performance Management
System (GAO- 01- 234, Feb. 23, 2001). Other reports with recommendations
related to measures include Internal Revenue Service: IRS Initiatives to
Resolve Disputes Over Tax Liabilities (GGD- 97- 71, May 9, 1997) and IRS
Management: IRS Faces Challenges as it Restructures the Office of the
Taxpayer Advocate (GGD- 99- 124, July 15, 1999).
13 The EITC is a refundable tax credit available to low- income, working
taxpayers. The Congress created EITC to offset the impact of Social Security
taxes and to encourage lowincome workers to seek employment rather than
welfare.
14 See Tax Administration: Assessment of IRS? 2000 Tax Filing Season ( GAO-
01- 158, Dec. 22, 2000). Earned Income Tax Credit
Program
Page 10 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
planned at the agency level. Although IRS already collects some data for an
internal quarterly tracking report, Treasury does not plan to use that data
to assess and report program performance.
Treasury plans to continue emphasizing increased customer service for and
compliance activities affecting both taxpayers and preparers in its current
strategy for reducing problems in the EITC program. However, Treasury?s
performance plan for IRS does not include measures for those areas or others
related to this outcome. The 5- year strategy for EITC, instituted in 1998,
includes expanding customer service and taxpayer education, reviewing
preparers? compliance, and improving return selection methods for audits,
among others. However, the strategy does not address training needs,
performance management initiatives, or measurement of the strategy?s
effectiveness. Without performance measures and an evaluation strategy,
Treasury will not be able to assess progress.
Limitations in the performance measures reported by Treasury make it
difficult to gauge the progress of IRS in collecting tax debt and the
Financial Management Service (FMS) in collecting non- tax debt. However,
other available information showed continuing declines in most of IRS?
collection actions to collect delinquent tax debt and roughly stable
collections by FMS of non- tax debts. Also, Treasury?s plans for the two
agencies provided little information on how their strategies for improvement
will increase debt collections.
On the basis of information in Treasury?s 2000 performance report, we could
not assess Treasury?s progress in improving its collection of delinquent
taxes because none of the performance measures were linked to this outcome.
However, based on other information about collection programs at the IRS-
the Treasury agency responsible for the relevant programs- we are troubled
by the performance with respect to this outcome. Treasury?s performance
report measures output for this effort in terms of volume of collection
cases closed and timeliness of certain types Delinquent Tax and Nontax
Debt Collection Delinquent Tax Collection
Page 11 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
of collection actions. 15 Treasury did not report performance measures that
would provide perspective on whether IRS is collecting the correct amount of
taxes under proper collection procedures. For example, the performance
report did not contain measures for amounts collected as a percentage of the
total value of the collection cases that were closed, or at the IRS- wide
level, a measure for enforcement revenue collected as a percent of unpaid
taxes. 16 Such measures, over time, would give a clearer indication than
case closure data as to whether Treasury is making any headway in improving
delinquent tax collections. As figure 2 illustrates, enforcement revenue
collected has not kept pace with the growth in the levels of unpaid taxes.
15 The four measures are (1) average percentage of field collection cases in
process 16 months or longer in the past 12 months, (2) percentage of offers
in compromise processed within 6 months, (3) delinquent taxpayer
investigations closed, and (4) delinquent taxpayer accounts closed. In
fiscal year 2000, IRS fell significantly short of meeting its prior year?s
performance levels and on three of its performance targets for these
outputs. According to Treasury, shortfalls were primarily due to shifting
collection staff to taxpayer service functions.
16 Gross unpaid taxes represent outstanding amounts due from taxpayers for
assessments of taxes, penalties, and interests. It increases with penalties
and interest accruing on delinquent account balances and new tax assessments
that have been identified and may be reduced when (1) payments are received
from the taxpayers; (2) IRS abates taxes, penalties, and interests; or (3)
an account reaches its statutory expiration dates due dates without
collection, at which time the account automatically drops off from the
population of unpaid taxes.
Page 12 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Figure 2: IRS Unpaid Taxes and Collection Trends
Source: Treasury?s fiscal year 1999 performance report and fiscal year 2002
performance plan;
Financial Audit: Examination of IRS? Fiscal Year 1997 Custodial Financial
Statements (GAO/ AIMD98- 77); Financial Audit: IRS Fiscal Year 1998
Financial Statements (GAO/ AIMD- 99- 75, Mar. 1999);
Financial Audit: IRS Fiscal Year 1999 Financial Statements (GAO/ AIMD- 00-
76, Feb. 2000); and
Financial Audit: IRS Fiscal Year 2000 Financial Statements (GAO- 01- 394,
Mar. 2001).
Furthermore, our recent work showed declines in important collection actions
including seizures, liens, and levies. 17 Although the Commissioner of
Internal Revenue predicted last year that the downward trends for these
actions would be reversed, by and large, they were not. In addition, the
reliability and accuracy of these output measures in Treasury?s performance
report is questionable. Our audit of IRS? fiscal year 2000 financial
statements found that IRS was unable to provide documentation
17 See GAO- 01- 700T.
0 50
100 150
200 250
300 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002
Dollars (in billions) Gross unpaid taxes Enforcement revenue collected
$ 34. 9 $ 34. 0 $ 33. 8 $ 32. 9 $ 35. 2 $ 37. 2
Page 13 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
that it had performed validation and verification procedures on its key
performance indicators. 18
Treasury?s strategy in its fiscal year 2002 IRS plan for increasing
collections of tax debts focused on reducing the diversion to noncompliance
duties of staff who are experienced in compliance efforts and enhancing the
efficiency of the delinquent tax account management. This included (1)
adopting a risk- based approach for identifying better yielding accounts for
collection and examination and (2) making more effective use of technology
and specialization for processing unpaid tax transactions through IRS
systems. However, although these strategies potentially could improve tax
debt collections, the performance plans did not contain performance measures
for assessing its progress. In addition, we previously reported that IRS
does not have adequate records on its unpaid assessments to properly manage
its accounts receivable inventory. 19 Without such information, IRS may not
be able to successfully implement these strategies and, therefore, not
achieve the desired outcome.
While Treasury reported that it had many significant accomplishments in
improving non- tax delinquent debt collection in fiscal year 2000, the
nontax debt collections in fiscal year 2000 were about the same as in fiscal
year 1999- about $2.6 billion, primarily from tax refund offsets. The
performance target for fiscal year 2000 was to collect $2. 08 billion. These
collections came from primary collection programs administered by FMS-
Treasury Offset Program and Cross- servicing. 20 Of the total collected,
about $41 million was collected through the cross- servicing program.
Treasury also measured non- tax debt collection progress in terms of the
amount of debt referred to FMS for collection. For example, as of September
30, 2000, agencies had referred 83 percent of delinquent debts over 180 days
old reported as eligible for the Treasury Offset and
18 Financial Audit: IRS? Fiscal Year 2000 Financial Statements (GAO- 01-
394, March 1, 2001). 19 See GAO- 01- 394 and Internal Revenue Service:
Recommendations to Improve Financial and Operational Management (GAO- 01-
42, Nov. 17, 2000). 20 The Treasury Offset Program offsets certain federal
payments, such as tax refunds, vendor payments, and federal retirement
payments, against federal non- tax debts, states? child support debts, and
certain states? tax debts. Cross- servicing is the process by which federal
agencies refer non- tax delinquent debts more than 180 days old to FMS for
collection. To collect the debts agencies refer, FMS employs a variety of
collection methods, including demand letters, follow- up telephone calls,
administrative wage garnishment, and private collection agencies. Non- tax
Debt Collection
Page 14 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Cross- servicing programs. Treasury?s fiscal year 2000 target was to refer
75 percent of the amount eligible for referral.
While the performance measure for total collections is a good indicator of
the overall progress being made in collecting non- tax debt, it does not
adequately capture important distinctions between the offset and
crossservicing programs. We suggested in our June 2000 report that combining
the performance achievements of the two programs can mask potential
performance issues with cross- servicing. 21 By breaking out- in the
performance report- the total collections amounts by the results of the
offset program and the cross- servicing program would give decisionmakers a
better indication of the effectiveness of the two programs relative to the
resources being applied to each program. Our prior report also suggested
that breaking out total non- tax collections by amounts collected as a
result of federal delinquent non- tax debt referrals and amounts collected
for debts associated with state child support would give decision- makers
more information on the types of debt that is being collected. As we
previously reported, collections for child support represent a significant
percentage of total collections and are forwarded to the states. 22
Reporting such collections separately from amounts related to the collection
of federal delinquent non- tax debts would provide a more accurate
indication of FMS? performance. In addition, the amount of delinquent non-
tax debt that is referred to Treasury for collection as compared with the
amount of delinquent non- tax debt that is eligible for referral is not
fully indicative of FMS? performance. Specifically, since the measure is an
indicator of the efforts of other agencies to participate in the program, it
might be unduly influenced by factors outside FMS? full control. Therefore,
it could be difficult to attribute changes in the measure to the
effectiveness of FMS? debt collection efforts.
Treasury?s fiscal year 2002 strategies in its FMS plan for increasing non-
tax debt collections revolved around efforts to improve the efficiency of
the cross- servicing program. For example, FMS plans to analyze the types of
cross- servicing debts collected, review cross- servicing costs and fee
structure, and develop a methodology to periodically evaluate the process of
distributing debts to private collection agencies. FMS is also preparing
audit guidance on procedures to monitor agency debt referrals. Regarding the
offset program, FMS plans to expand the program by including federal
21 See GAO/ GGD/ AIMD- 00- 231R. 22 See GAO/ GGD/ AIMD- 00- 231R.
Page 15 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
salary and other payment types. However, while FMS has strategies to
increase non- tax debt collections, it did not discuss a timeframe for
incorporating these payments into the program. FMS? target for total nontax
debt collections is $2.3 billion for fiscal year 2001 and $2.4 billion for
fiscal year 2002. Both of these targets are less than the $2.6 billion FMS
collected in fiscal years 1999 and 2000. As such, it does not appear that
FMS expects its planned actions for these programs to result in increased
collections.
It was difficult to fully gauge Treasury?s progress in reducing the
availability and/ or use of illegal drugs because some of its performance
measures did not directly measure Treasury's progress toward achieving this
outcome. 23 Treasury acknowledges that some of its measures used to track
performance may not provide the best performance information and indicated
that it is working toward improving performance measures. Given the measures
that Treasury did use, it made some progress in reducing the availability
and/ or use of illegal drugs. For example, the U. S. Customs Service
(Customs)- the Treasury agency primarily responsible for programs related to
this outcome- exceeded its targets for three of its nine measures of illegal
drugs seized. 24 For the targets that were not met, Treasury attributed this
shortfall to external factors such as ?an expanding cocaine market in Europe
where prices and profit margins are higher than in the United States.? 25
However, Treasury?s report did not identify actions to evaluate the effects
of external factors on Treasury?s seizure targets and programs although it
acknowledged that it would work with various
23 Treasury?s goals related to this outcome are to (1) dramatically reduce
the amount of illegal drugs entering the United States; (2) ensure
compliance and allow the expeditious movement of low- risk travelers by
increasing travelers? awareness and by targeting, identifying, and examining
high- risk travelers; (3) provide effective oversight of law enforcement
bureaus.
24 The 9 measures are (1) number of seizures- cocaine; (2) number of
seizures- marijuana; (3) number of seizures- heroin; (4) average pound per
seizure- cocaine; (5) average pounds per seizure- marijuana; (6) average
pounds per seizure- heroin; (7) total number of pounds seized (in
thousands)- cocaine; (8) total number of pounds seized (in thousands)-
marijuana; (9) total number of pound seized (in thousands)- heroin. In
addition, Treasury uses 9 measures of passenger transit activities and
public awareness. Customs is responsible for all of these except public
awareness, which is the responsibility of the Office of Foreign Asset
Control (OFAC). Because OFAC has a limited role relative to this outcome, we
excluded it from our analysis.
25 Department of the Treasury, Program Performance Report Fiscal Year 2000,
p. 160. Availability and/ or Use of
Illegal Drugs
Page 16 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
federal, state, local, and international law enforcement agencies on this
crosscutting outcome.
Measures of illegal drugs seized provided only a partial assessment of
Customs? success in reducing the availability and/ or use of illegal drugs.
Without an underlying measure of the amount of drugs moving into the country
in total, interpretations of measures of drugs seized is problematic. This
overall measure, given the clandestine and diffused nature of illegal drug
traffic, is illusive even with rigorous measurement efforts. In its
performance report, Treasury noted that the Office of National Drug Control
Policy is developing models that will better estimate the amount of cocaine,
heroin, and marijuana being smuggled into the U. S. In the meantime, Customs
plans to rely on its targeting efficiency measures to quantitatively assess
the effectiveness of the criteria to target potential violators- a measure
applied to both air passengers and vehicles. Until better measures of
Customs? performance are developed, Treasury may want to explore the
relative effectiveness of several Customs anti- smuggling programs. Customs
relies on intelligence, surveillance, investigations, random inspections of
incoming passengers and cargo, technology, and arrangements with exporters,
importers, and carriers to increase the likelihood that it will detect drugs
being smuggled into the U. S. For example, Customs could compare the
difference in drug detection at different border crossings where one site
had a new scanning technology and another site did not have the technology.
26
As we noted in our September 2000 report, agencies could use program
evaluation for several purposes such as exploring the benefits of programs,
measuring program performance, and explaining performance results. 27 While
program evaluations will also be hampered by the lack of underlying data
about the flow of drugs, they might provide some indications of the
comparative effectiveness of different interdiction programs. In addition,
we noted in a March 2000 report that Treasury could improve processes
related to its performance measures for target efficiency. 28 In response to
our recommendations, Customs stated it would
26 This example is provided solely to illustrate a program evaluation
approach and is not intended to be prescriptive. 27 See Program Evaluation:
Studies Helped Agencies Measure or Explain Program Performance (GAO/ GGD-
00- 204, Sept. 29, 2000).
28 See U. S. Customs Service: Better Targeting of Airline Passengers for
Personal Searches Could Produce Better Results (GAO/ GGD- 00- 38, Mar. 17,
2000).
Page 17 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
collect more complete and accurate data on persons subjected to personal
searches as well as closely monitor data on personal searches. While
Treasury?s report notes that one of its actions to increase the targeting
efficiency and effectiveness is to improve training, Treasury?s performance
report for these measures could have included a discussion on either
progress to date for collecting this data or results of its data evaluations
of passengers targeted for searches in relation to its efforts to seize
drugs.
Treasury?s fiscal year 2002 plan for Customs provided specific strategies
and programs for fiscal year 2002 designed to help Customs reduce the
availability and use of illegal drugs. For example, Customs plans to reduce
the availability and/ or use of illegal drugs by using air and sea
interdiction units designed to protect our borders from the continually
shifting narcotics and contraband smuggling threat. However, some measures
for the strategies and programs that are designed to achieve this outcome
provide an incomplete measure of performance. For example, the agency plans
to measure the number of landings made by suspect aircraft that occur
shortly before the aircraft crosses the border into the U. S., called short
landings. The agency could refine its measure by using information about
planes that are found after landing in the U. S. to have carried illegal
drugs. In addition, Customs did not identify actions that are to be taken to
mitigate the effects on its activities of external influences such as
changes in drug smuggling routes in response to law enforcement pressures.
The fiscal year 2002 performance plan does not discuss any human capital
initiatives as strategies to support this outcome nor does it include
information on technology initiatives for this outcome. The plan also
described coordination efforts underway with another agency and annotated
the performance goal to show where such crosscutting coordination occurred.
As with drug flow discussed above, the clandestine nature of the underlying
activities renders performance measurement in the area problematic. Thus, it
is unclear whether Treasury made progress in achieving this outcome because
none of the measures for this outcome directly targeted whether criminal
access to firearms was reduced. For example, two measures tracked aspects of
firearms- tracing activities related to crime guns 29 -the number of
firearms trace requests submitted
29 A ?crime gun? is a firearm recovered from crimes or from those prohibited
from owning them. Firearms and Related
Crime
Page 18 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
and the average trace response time. According to the Bureau of Alcohol,
Tobacco, and Firearms (ATF)- the Treasury agency responsible for programs
related to this outcome- the tracing process assists law enforcement
agencies in identifying possessors of recovered crime guns, and it enables
ATF to develop investigative leads to identify illegal suppliers of
firearms. However, neither of these measures provided an assessment of the
extent to which tracing activities by ATF helped deny criminals access to
firearms or reduced crime. In addition, the measures do not address one
issue stated in the performance goal- community exposure to firearms-
related crime. 30 Although Treasury reported statistical data that indicated
reductions in crimes committed with firearms, these data were not reported
as performance measures. As discussed in an earlier section of this report,
our September 2000 report noted that agencies could also use program
evaluation to identify program benefits, among other uses.
Treasury?s fiscal year 2002 plan for ATF provided specific strategies and
programs designed to help it reduce criminal access to firearms and related
crime. For example, for the Integrated Violence Reduction Strategy (IVRS),
the ATF strategy aims to remove violent firearms offenders from the
community, deny criminals access to firearms, and prevent violence and
firearms crimes through community outreach. However, this strategy is not
currently addressed by the ATF performance measures, as none of these
measures determine how successful the IVRS will be at denying criminals
access to firearms and reducing related crimes. For example, one ATF
performance measure tracks the number of firearm trace requests submitted
during the fiscal year, a measure that does not provide sufficient
information regarding IVRS? success at helping deny access to firearms. In
addition, the fiscal year 2002 performance plan strategies to achieve this
outcome do not discuss human capital or information technology initiatives.
30 The five measures are (1) crime- related costs avoided (in billions), (2)
number of future crimes avoided as a result of ATF programs, (3) number of
firearms trace requests submitted, (4) average trace response time (in work
days), and (5) number of persons trained/ developed by ATF personnel.
Page 19 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
For the selected key outcomes, this section describes major improvements or
remaining weaknesses in Treasury?s (1) fiscal year 2000 performance report
in comparison with its fiscal year 1999 report, and (2) fiscal year 2002
performance plan in comparison with its fiscal year 2001 plan. It also
discusses the degree to which the agency?s fiscal year 2000 report and
fiscal year 2002 plan addresses concerns and recommendations by the
Congress, GAO, the Inspectors General and others.
Treasury?s fiscal year 2000 performance report contained the same weaknesses
that we identified in its fiscal year 1999 report and one additional
limitation. However, Treasury made a few improvements.
The strategic goals and objectives of IRS, FMS, Customs, and ATF were not
always directly reflected in the broader departmental goals, limiting the
reports? usefulness in determining whether these agencies are making
progress in meeting their strategic goals in general and these outcomes in
particular.
When measures were dropped from use, Treasury usually did not explain the
reason for the changes.
When agencies did not meet their targets, Treasury provided only brief
explanations for the shortfalls. In general, for fiscal year 2000, a full
understanding of the reasons for the shortfalls in performance was either
not provided or was speculative. For example, in explaining why IRS did not
meet its target for overall quality of field examination cases, Treasury
stated the obvious- that it was unable to meet new quality standards. 31
The reports generally did not discuss crosscutting issues or the impact of
external factors on Treasury?s abilities to meet its targets. For example,
31 Treasury offered an additional explanation for the shortfall- that the
department addressed concerns regarding sampling methodology to ensure valid
samples of cases reviewed, thus giving a truer indication of performance
than in the past. Comparison of
Treasury?s Fiscal Year 2000 Performance Report and Fiscal Year 2002
Performance Plan With the Prior Year Report and Plan for Selected Key
Outcomes
Comparison of Performance Reports for Fiscal Years 1999 and 2000
Page 20 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Customs did not identify actions to mitigate the effects on its activities
of external influences, such as changes in drug smuggling routes in response
to law enforcement pressures.
The reports provided minimal assurance that the performance information
and data reported was credible by inserting an overall data accuracy
statement at the beginning of the report. Data accuracy is one of several
important elements to consider when examining the quality of agency
performance data. 32 However, decision- makers may need more detailed
explanations about such things as data validity, completeness, consistency,
timeliness, and/ or access. As we noted earlier in this report, our audit of
IRS? fiscal year 2000 financial statements raised questions about the
reliability and accuracy of some of IRS? performance indicator data.
Unlike the fiscal year 1999 report, the fiscal year 2000 report did not
fully discuss the findings of any program evaluations performed. Instead,
the report provides brief summaries of four evaluations as examples.
Treasury made two changes that strengthened its presentation of program
performance data in general and also increased consistency with agency
strategic goals. First, Treasury elevated its objective of Improve Customer
Satisfaction to a strategic goal. Second, it added a strategic goal of
Improve Employee Satisfaction.
Treasury?s fiscal year 2002 performance plans for its agencies contained the
same weaknesses that we identified in its fiscal year 2001 report. First,
the performance goals and measures of Treasury?s agencies will still not
provide much results- oriented information related to broader departmental
goals. Second, the performance plan sections on IRS and FMS provided minimal
information on each measure?s data source, accuracy, and limitations, among
other things. The sections on Customs and ATF presented more data- related
information than was presented in the IRS section. However, while Customs
and ATF discussed the source and accuracy of the data, they did not present
complete assessments. For example, the Treasury performance plan did not
discuss data collection and storage, data validation and verification, or
data limitations. Under the Reports Consolidation Act of 2000 (P. L. 106-
531) agencies are to assess the completeness and reliability of the
performance data included in their reports. The assessments are to describe
any material inadequacies in the completeness and reliability of the
performance data, and the actions the
32 See Managing for Results: Assessing the Quality of Program Performance
Data (GAO/ GGD- 00- 140R, May 25, 2000). Comparison of
Performance Plans for Fiscal Years 2001 and 2002
Page 21 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
agency can take and plans to take to resolve such inadequacies. Third, the
sections generally did not describe program evaluations currently underway
and how they would be used to assess agency performance.
Only the outcome on reducing the availability and use of illegal drugs was
affected by changes in Treasury?s performance plans for its agencies. These
measures attempt to better link performance with this outcome but they may
not provide complete information. For example, one of these measures tracks
the number of suspect aircraft that land short of the U. S. border, an
indicator that Customs? interdiction effort is successful. While the number
of short landings is an indicator of successful reduction in the
availability of illegal drugs, Customs should also consider measuring the
number of suspect aircraft that actually make it past the border to deliver
their illegal drug cargo.
GAO has identified two governmentwide high- risk areas: human capital and
information security. Regarding human capital, we found that Treasury?s
performance plan had one measure related to human capital which was to
measure the extent to which Treasury has implemented a new human resources
system. With respect to information security, we found that Treasury?s
performance plan had one related goal and measure that captured the percent
of all Treasury information technology systems that are certified and
accredited to operate. In addition, Treasury addressed this management
challenge at the individual agency level, as discussed in app. I.
In addition, GAO has identified five major management challenges facing the
Department of the Treasury. We found that Treasury?s performance report
discussed the agency?s progress in resolving its challenges. Of the agency?s
seven major management challenges, identified by GAO, its performance plan
had (1) goals and measures that were directly related to one of the
challenges, (2) had goals and measures that were indirectly applicable to
five of the challenges (3) had no goals and measures related to one of the
challenges, but discussed strategies to address it.
As agreed, our evaluation was generally based on the requirements of GPRA,
the Reports Consolidation Act of 2000, guidance to agencies from the Office
of Management and Budget (OMB) for developing performance plans and reports
(OMB Circular A- 11, Part 2), previous reports and evaluations by us and
others, our knowledge of Treasury?s operations and programs, GAO
identification of best practices concerning performance The Department of
the Treasury?s Efforts to Address its Major Management Challenges Identified
by GAO
Scope and Methodology
Page 22 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
planning and reporting, and our observations on Treasury?s other GPRArelated
efforts. We also discussed our review with agency officials in IRS, FMS,
Customs, ATF, and the Treasury?s Office of Inspector General. The agency
outcomes that were used as the basis for our review were identified by the
Ranking Minority Member of the Senate Governmental Affairs Committee as
important mission areas for the agency and do not reflect the outcomes for
all of Treasury?s programs or activities. We also used information from our
January 2001 report on major management challenges and program risks for
Treasury, 33 and similar reports by Treasury?s Inspector General 34 and the
Treasury Inspector General for Tax Administration 35 to identify challenges
related to the outcomes we reviewed. We did not independently verify the
information contained in the performance report and plan, although we did
draw from other GAO work in assessing the validity, reliability, and
timeliness of Treasury?s performance data. We conducted our review from
April 2001 through June 2001 in accordance with generally accepted
government auditing standards.
We discussed this report with Treasury officials on June 5, 2001, and
received written comments on it. The full text of Treasury's written
comments is in appendix II. Treasury noted that it appreciated our reviews
and insight on how it can make its GPRA products more useful. Treasury
divided its comments into two categories, general and specific. Regarding
the general comments, Treasury expressed agreement that it needs to use
program evaluation to determine the impact of its programs on outcomes. It
also expects to improve the link between agency measures and Treasury goals
and objectives by using information from a review of its measures that it
plans to conduct as part of the fiscal year 2003 budget. While we are not
recommending specific measures to Treasury at this time, we are available to
work with Treasury on performance measurement issues. In addition, Treasury
plans to take steps to ensure data
33 See Major Management Challenges and Program Risks: Department of the
Treasury (GAO- 01- 254, Jan. 2000). 34 See Office of the Inspector General
for Treasury, Management and Performance Challenges Facing the Department of
the Treasury. Dec. 2000 . 35 See Treasury Inspector General for Tax
Administration, Major Management Challenges Facing the Internal Revenue
Service, Fiscal Year 2001. Dec. 1, 2000. Agency Comments
and Our Response
Page 23 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
validity for each of its performance measures by reviewing its control
processes. We agree that such a step is useful. As part of that review,
Treasury may also want to identify and implement changes to ensure that its
performance measurement data are relevant, timely, and accurate. Treasury
also noted that it continues to face conflicting pressures to keep its GPRA
products streamlined and yet to include more detailed information; Treasury
characterized our position as one desiring considerably more detail in their
GPRA products. We agree that it is difficult to strike a balance in order to
provide information that is useful and easily understood yet is sufficiently
inclusive. However, we believe that it is only after Treasury establishes
the information basic to a GPRA orientation such as its (1) planned
outcomes, (2) actions to accomplish the outcomes, and (3) measures that are
meaningful and reliable indicators of progress that presentation issues
should be addressed. Producing documents that are responsive to GPRA
requirements is an additional consideration.
Treasury made a number of specific comments that provide additional
perspective on issues that we discuss in the report. We note below those
instances where Treasury disagreed with a point we made and where we
incorporated technical clarifications as appropriate.
Administration of Tax Law. Treasury agreed that it needs to further develop
measures for this outcome. We recognize that development of such measures is
difficult.
EITC. Treasury agreed that it lacks performance measures for the EITC
program and describes other measures that it uses in managing the program.
However, as we note in the report, without performance measures and an
evaluation strategy, Treasury will not be able to assess progress in
achieving less waste, fraud, and error in the program.
Delinquent Tax Collection. Treasury commented that IRS' reorganization, new
mission, and strategic goals caused IRS to find methods of measuring success
without considering dollars collected. Treasury went on to note that for
various reasons, IRS' traditional debt collection activities have declined
and that
Page 24 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
with additional staffing it has been authorized, IRS believes it will
realize significant improvement in critical debt collection areas by the end
of fiscal year 2002. While IRS' current performance measures provide some
perspective on its collections success, we believe, as explained in our
report, that some measures that consider whether IRS is collecting the
correct amount of taxes under proper collection procedures would provide a
more balanced performance perspective.
Non- tax Debt Collection. Treasury disagreed with our assessment that one of
its measures-- involving a comparison of delinquent non- tax debts referred
and eligible for referral-- for this outcome is not a good gauge of success.
While we agree that FMS has spent considerable resources working with other
agencies so that the agencies will refer their debt, it is also true that
the measure is unduly influenced by factors outside FMS' full control. We
modified the wording in our report to better reflect our concern about that
measure.
Customs Drug Interdiction Program. Treasury disagreed with our statement
that some of its performance measures were not linked directly to its goals.
In response, we revised our wording to better articulate our assessment of
the progress Treasury has made in achieving its outcomes.
Personal Search Data. Treasury provided additional perspective on its
efforts in response to our previous recommendation related to its
performance measures for target efficiency.
Short Landings. Treasury disagreed with our assessment that some of its drug
interdiction performance measures do not support the outcome of reduced drug
availability. It also took issue with our use of an example regarding the
performance measure on the number of suspect aircraft that land shortly
before crossing the border into the U. S. The intent of the example was to
illustrate the need for better outcome measures, a need that Treasury
acknowledged in its comments. We clarified our wording in the report.
Page 25 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Automated Commercial Environment (ACE). We deleted reference to the
development of the ACE initiative, as suggested by Treasury.
Data Accuracy, Incomplete Assessment. At Treasury's request, we revised the
report to include an example of components of an assessment of data issues.
FMS' Computer Security. Treasury provided information in its comments about
the performance measures it established for its Information Technology
Security Program in the SelfAssessment Framework. While that action is
commendable, it does not substitute for performance measures in Treasury's
performance report or plan. We clarified this point in our report.
FMS Non- compliance with the Federal Financial Management Improvement Act
(FFMIA). Treasury acknowledged that its financial management systems did not
comply with FFMIA and that it is addressing deficiencies through a
remediation plan and corrective actions. While those actions are
commendable, they do not substitute for performance measures in Treasury's
performance report or plan.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
the date of this letter. At that time, we will send copies to appropriate
congressional committees; the Honorable Paul H. O?Neill; and the Honorable
Mitchell E. Daniels, Jr., Director, Office of Management and Budget. Copies
will also be made available at www. gao. gov.
Page 26 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
If you or your staff have any questions, please call me at (202) 512- 9110.
Key contributors to this report were Ralph T. Block, Kerry Gail Dunn, and
Elwood D. White. Additional staff acknowledgments are listed in app. III.
Sincerely yours, Paul L. Jones, Director Tax Administration and Justice
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 27 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
The following table identifies the major management challenges confronting
the Department of the Treasury, which includes the government- wide high-
risk areas of human capital and information security. The first column of
the table lists the management challenges that we and/ or the Department of
the Treasury?s Office of Inspector General (OIG) or Treasury Inspector
General for Tax Administration (TIGTA) have identified. Treasury has two
offices of Inspector General- TIGTA, which covers the Internal Revenue
Service and the OIG, which covers all other Treasury bureaus. The second
column discusses what progress, as discussed in its fiscal year 2000
performance report, Treasury made in resolving its challenges. The third
column discusses the extent to which Treasury?s fiscal year 2002 performance
plan includes performance goals and measures to address the challenges that
we and the two Treasury IGs identified. We found that Treasury?s performance
report discussed the agency?s progress in resolving many of its challenges,
but it did not discuss the agency?s progress in resolving the following
challenge: Strategic Human Capital Management. Of the agency?s 16 major
management challenges, its performance plan had goals and measures that were
directly related to five of the challenges, goals and measures that were
indirectly applicable to five of the challenges and no goals and measures
related to six of the challenges, but discussed strategies to address them.
Table1: Major Management Challenges Major management challenge
Progress in resolving major management challenge as discussed in the fiscal
year 2000 performance report Applicable goals and measures in the
fiscal year 2002 performance plan GAO- designated governmentwide high risk
Strategic Human Capital Management.
GAO has identified shortcomings involving key elements of strategic human
capital management, including strategic human capital planning and
organizational alignment; leadership continuity and succession planning;
acquiring and developing staffs whose size, skills, and deployment meet
agency needs; and creating results- oriented organizational cultures.
According to its fiscal year 2000 performance report, Treasury has taken
actions to enhance its ability to recruit and is developing human capital
management strategies to foster performance management and talent
recruitment, development, and retention. These efforts include:
Rolling out a new human resources system to provide better support to
Treasury missions. Treasury?s phased- in roll out was delayed causing it to
fall short of its FY 2000 target.
Undertaking activities to target Treasury?s fiscal year 2002 performance
plan
has a goal to the roll out of the new human resources system that is being
designed to meet the bureaus business requirements. Another goal, which
Treasury added for fiscal year 2001 and hopes to fully meet in fiscal year
2002, is to increase the percent of major Treasury occupations for which
workforceplanning processes have been completed along with workforce
strategies developed as needed.
The performance plan has three measures related to the goal of improving the
efficiency of EEO process in resolving complaints. For example Treasury
measures the percent of EEO complaints resolved at the informal
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 28 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
employee recruitment; including contracting with advertising agencies to
develop recruitment and advertising campaigns, marketing employment
opportunities on the Internet, and tailoring recruitment initiatives to
target quality employees to fill immediate and long- term needs.
Instituting an Executive Leadership Program to fine tune leadership
competencies that executives need for managing their operations and
employees to optimum performance.
Examining different approaches to mitigate compensation and benefit
disparities that exist between government and those of the private sector.
Gearing Equal Employment Opportunity (EEO) efforts towards attracting,
retaining and developing a diverse workforce. Additionally, Treasury acted
to increase the efficiency of the discrimination complaint process to
provide increased opportunities to resolve workplace disputes.
Establishing a goal of improving employee satisfaction and conducting
employee satisfaction surveys at IRS and TIGTA. Several other bureaus have
initiated efforts to collect employee satisfaction data.
We reported that Treasury?s strategic human capital management lacks
measures. For example, IRS needs to implement a balanced approach to its
performance management system to better assess progress toward achieving
strategic goals and improving operations. The Customs Service needs to
foster reliable data to determine staffing needs.
stage. At the bureau level the performance plan cited measures of employee
satisfaction at IRS, TIGTA and the Federal Law Enforcement Training Center,
which set its baseline in fiscal year 2001. Additionally, Treasury is
expanding the number of bureaus measuring employee satisfaction.
IRS in 2001 began its first hiring initiative in several years. Compensation
and incentive policies will be developed to recruit for specialized
employees. In 2002 IRS will continue to implement programs to align
compensation with performance and provide opportunities to acquire skills.
IRS is hiring staff to expand compliance and customer service.
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 29 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan Information Security. Our January 2001
high- risk update noted that the agencies? and governmentwide efforts to
strengthen information security have gained momentum and expanded.
Nevertheless, recent audits continue to show federal computer systems are
riddled with weaknesses that make them highly vulnerable to computer- based
attacks and place a broad range of critical operations and assets at risk of
fraud, misuse, and disruption.
(Also identified by the Treasury IG for Tax Administration and Treasury
OIG.)
Treasury reported in its fiscal year 2000 performance report that it
strengthened electronic data processing controls, most notably at the IRS,
revised the Treasury Security Manual regarding information systems security
compliance, and began implementation of a two year plan to improve the
effectiveness of the Department?s security programs. However, Treasury
reported that there were no performance measures related to these activities
during fiscal year 2000.
Treasury also reported that its bureaus, including IRS, identified
information technology assets relevant to critical infrastructure
protection, have a computer security incident response capability, receive
security alerts and advisories, and apply patches and other fixes as
appropriate.
Based on our evaluation of computer controls over IRS information systems as
part of our audits of IRS? fiscal year 2000 financial statements and IRS?
electronic filing systems, we continue to report IRS computer security as a
material weakness and separately reported serious access control weaknesses
that could have allowed unauthorized individuals, both internal and external
to IRS, to view and modify taxpayer data on IRS? e- file systems.
Treasury?s performance report identifies steps - including new leadership,
additional contractor support, and increased resources -
Customs has taken to improve information security. Specifically, Customs
plans to have a commercial disaster recovery contract in place by the end of
fiscal year 2001. Additionally, the performance report states that Customs
has implemented new firewalls to secure Internet
Treasury?s fiscal year 2002 performance plan identifies a new performance
measure which provides that 65 percent of all Treasury information
technology systems will be certified and accredited to operate in fiscal
year 2002. In addition, Treasury addresses this management challenge at the
individual bureau levels.
IRS - Although IRS? fiscal year 2002 performance plan did not identify
specific goals or performance measures related to this major management
challenge, it identified numerous actions planned or underway that it
believes will continue to reduce its security risks. These actions include
reviewing the security operations of each service center, identifying and
implementing solutions to mitigate security weaknesses, and removing the
material weakness status for all 10 centers by October 2001. IRS also
reported that by September 2001, a security framework will be established to
improve and better measure its security capabilities. In addition, IRS
reported that security certifications of sensitive systems will be completed
by September 2002.
Customs - The performance plan does not include performance goals and
measures that specifically address information security. However, the plan
describes Customs? plans to acquire commercial disaster recovery services.
Additionally, the plan states that Customs has (1) provided new leadership
to its security organization, (2) increased the security organization?s
budget, (3) contracted for additional security support, and (4) addressed
various audit recommendations including installing additional firewall
protection and strengthening system password requirements.
FMS - The performance plan discusses FMS? actions planned or underway to
address its computer security issues. However, FMS has not established
specific performance measures in its plan for addressing computer security
control issues.
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 30 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
connections. Treasury reported in the fiscal year 2000 performance report
that during fiscal year 2000 FMS issued entitywide security policies and
procedures and is currently implementing them.
FMS could establish performance measures related to (1) establishing an
effective entitywide security management program, (2) implementing
corrective actions to resolve each of the individual weaknesses identified
in the report, and (3) working with the Federal Reserve Banks (FRB) to
implement corrective actions to resolve computer control vulnerabilities
related to FMS systems supported by the FRBs.
GAO- designated major management challenge Internal Revenue Service
Modernization:
Revamping Business Practices to Meet Taxpayers Needs. Within the new
operating divisions, IRS must take a fresh look at how to enforce the tax
laws and meet taxpayer needs in new and better ways. This will be a
challenge in overcoming cultural barriers and in coordinating the requisite
human capital, data, and information system support across IRS.
Implementing a Balanced Approach to IRS? Performance Management System to
Better Assess Progress. IRS is faced with the challenge of aligning its
individual performance evaluation systems with its balanced measurement
system to clearly link the work of individual managers and employees to the
mission and goals of the agency.
(Also identified by Treasury IG for Tax Administration.)
The fiscal year 2000 performance report briefly discussed several key
transition activities IRS completed related to revamping its business
practices. These included selecting division commissioners for its new
divisions and key top and mid level managers within each division. The
report noted that IRS continued improvement processes related to the
Modernization Management oversight structure, Taxpayer Advocate Service, and
IRS? Stakeholder Relationship Management.
The fiscal year 2000 performance report pointed out that IRS developed a new
strategic planning and budget process that links strategy, planning,
budgeting, and research to support senior management in establishing and
communicating IRS? strategic direction. The plan indicated that IRS
developed balanced measures at the strategic level; developed operational
level balanced measures for all operating and functional divisions; and
provided balanced measurement training to all mangers and staff.
Treasury?s fiscal year 2002 performance plan did not cite goals with related
measures for meeting this management challenge. The performance plan
recognized that IRS operations are facing various issues and challenges in
transitioning to the new organizational structure. The plan listed several
actions and changes to IRS? current business practices that is to allow it
to better meet taxpayer needs. These actions include redesigning the
Taxpayer Advocate Management Information System so that it interfaces with
other IRS systems and integrating several other automated systems into a
single platform.
The fiscal year 2002 performance plan indicated that balanced measures will
be developed at the strategic and operational management levels and
reporting mechanism will be implemented by September 2001. The measures may
include voluntary compliance, burden, overall productivity, and overall
customer satisfaction. The plan also indicates that data reporting for the
strategic measures will be fully implemented in September 2002.
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 31 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
Addressing Financial Management Weaknesses to Develop Reliable CostBased
Performance Information. IRS does not have reliable cost accounting data to
enable it to (1) develop cost- based performance information, (2) determine
cost/ benefits of its tax collection and enforcement programs, and (3) judge
whether it is appropriately allocating its resources among competing
management priorities.
(Also identified by Treasury OIG and Treasury IG for Tax Administration.)
Institutionalizing Effective Systems Modernization Management Controls.
Since 1995, IRS has made progress in dealing with management and technical
weaknesses in its information technology systems. However, weaknesses in
investment management, system life- cycle management, enterprise
architecture management, and software acquisition management remain
challenges
IRS Faces Challenges in Collecting Unpaid Taxes. Weaknesses in IRS?
information systems and inadequate financial and operational information
continue to hamper IRS? ability to collect billions of dollars in unpaid
taxes.
Treasury?s fiscal year 2000 performance report indicated that IRS acquired
an integrated financial management system (IFS) that will support cost
accounting. However, in its December 31, 2000, Federal Financial Management
Improvement Act (FFMIA) remediation plan, IRS indicated that it intends to
acquire and install IFS, but that this is not due until October 2004.
Pending implementation of IFS, IRS stated that it studied the desirability
of implementing an interim cost accounting system. However, IRS did not
indicate the outcome of this study or what, if any, subsequent action was
taken.
Treasury?s fiscal year 2000 performance report discusses this management
challenge and IRS? efforts to implement selected management controls and
capabilities. For example, it reports that IRS hired experienced technical
and managerial executives to run the modernization program. In addition, IRS
adopted and started to define its system life- cycle methodology that
incorporates software acquisition and investment management processes. The
report does not, however, include discussion of other important management
control improvement efforts underway at IRS such as the definition of
enterprise architecture. If properly implemented, these efforts taken as a
whole, would provide IRS the capacity to effectively manage the Business
Systems Modernization (BSM) program.
(This challenge is discussed under outcomes in the report.)
According to the fiscal year 2002 performance plan, IRS is developing IFS to
address its financial management weaknesses, including its lack of reliable
cost information. IFS is scheduled to be completed by April 2005. The plan
did not clarify if this is a revised completion date nor did it provide
reasons for the delay from the original completion date reported in the
fiscal year 2000 program performance report. There are no performance goals
or measures to gauge IRS? progress in implementing IFS nor the effectiveness
of any interim corrective actions.
Treasury?s fiscal year 2002 performance plan includes BSM as a major
activity being managed and overseen by the agency. However, the plan does
not include specific BSM performance goals and measures. Rather, the plan
states that BSM resources contribute to meeting goals and measures reported
by IRS business activities such as Filing and Account Services and
Compliance Services. However, the plan did not specify how BSM was
contributing to their performance goals and measures.
(This challenge is discussed under outcomes in the report.)
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 32 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
Noncompliance with Earned Income Tax Credit. Noncompliance with EITC
exposes the federal government to billions of dollars of risk. However, IRS
does not yet have sufficient data to demonstrate that it has effective
controls over EITC compliance.
(This challenge is discussed under outcomes in the report.) (This challenge
is discussed under outcomes
in the report.)
Need to Improve Customs Service?s Regulation of Commercial Trade while
Protecting Against Entry of Illegal Goods at U. S. borders. Although Customs
has made progress in implementing initiatives to improve security at U. S.
borders, the following challenges remain, (1) completing an assessment of
new trade compliance initiatives, (2) balancing travelers? rights with
customs? responsibility to interdict contraband, (3) using reliable data to
determine staffing needs, and (4) acquiring a new import processing system.
Treasury?s fiscal year 2000 performance report noted that to help protect
against the entry of illegal goods at U. S. borders, Customs began
implementing the National Drug Control Strategy. Some of Custom?s efforts to
implement this strategy include using scanning technology for vehicles,
containers or passengers at high risk ports, sharing smuggling intelligence
with other agencies, and participating in multi- agency interdiction
operations. Customs is also cooperating with the National Drug Control
Policy in developing consistent, accurate statistics on drug interdiction.
The performance report also noted that:
Customs is reviewing the agency?s trade compliance strategy in an effort
to evaluate its impact on compliance. The evaluation is currently underway
but not yet completed.
Customs has increased its targeted effectiveness of personal search
activity by increasing management oversight, emphasizing the collection and
use of data, and improving training and standard procedures.
Customs is working to ensure a stable- funding stream for the Automated
Commercial Environment (ACE). However, the report does not describe progress
toward acquiring ACE.
Treasury?s fiscal year 2002 performance plan focuses on Customs? efforts to
reduce entry of illegal drugs at U. S. Border as well as provides statistics
regarding the number of seizures for various types of illegal drugs and
information about the implementation of the Five- year Non- Intrusive
Inspection technology plan. Treasury?s plan for Customs does not discuss how
its performance goals and measures will help it address this management
challenge. In addition, any initiatives for improving the new trade
compliance initiative, targeted searches, and staffing model are not
discussed.
Also, the performance plan does not include performance goals and measures
that specifically address acquisition of ACE. However, the plan describes
ACE?s importance to providing Customs personnel with the information and
tools needed to better support trade activities and protect U. S. citizens.
(The challenge of reducing illegal drug use is further discussed under
outcomes in the report.)
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 33 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan Financial Management:
Challenges Affecting Certain Bureaus Operations. For fiscal year 2000,
Treasury reported that seven of its bureaus? financial management systems
were not in substantial compliance with the requirements of the Federal
Financial Management Improvement Act of 1996 (FFMIA). Also, Customs faces
weaknesses in its internal control over data in its automated systems and
problems developing and implementing new automated systems, and IRS
continues to experience ongoing deficiencies in its financial management and
operational systems and processes.
(Also identified by Treasury OIG.) In its fiscal year 2000 performance
report, Treasury stated that bureaus that were not in substantial compliance
with FFMIA have prepared remediation plans in accordance with the Act.
Treasury also issued guidance to the bureaus on defining the roles and
responsibilities in complying with FFMIA and has met with OMB to review
FFMIA issues, including obtaining waivers for the Customs Service and IRS
from the requirement to correct the noncompliance within 3 years of
determination.
Treasury stated that between fiscal year 1999 and fiscal year 2000, the
number of material weaknesses in the Department was reduced by as much as 46
percent. Treasury also stated that the bureaus continue to make progress in
improving their financial management systems. Treasury stated that ATF
implemented a Joint Financial Management Improvement Program core financial
system in October 1999 and Customs has selected an Enterprise Resource
Planning system to replace both its core financial system as well as its
legacy administrative systems.
We reported that FMS continues to face computer security issues that
contributed to its noncompliance. We have made recommendations to FMS on how
to address this issue.
(The recommendations are enumerated above in the Information Security
challenge.)
Treasury stated that Customs is in the process of creating a fully
integrated core financial system. However, according to Treasury, actual
implementation will be dependent on
Treasury?s fiscal year 2002 performance plan addresses this management
challenge at the individual bureau levels.
FMS - The performance plan discusses FMS? actions planned or underway to
address its noncompliance with the federal financial management systems
requirements of FFMIA. However, the actions planned or underway do not fully
address the computer security issues that contributed to its noncompliance.
FMS has not established specific measures for addressing FFMIA
noncompliance.
Customs - The performance plan discusses actions that are planned or
underway to address compliance with FFMIA including (1) Customs
modernization efforts to address issues communicated in its remediation
plan, (2) pursuing a solution to the longstanding issue surrounding the lack
of disaster recovery capability, and (3) a broad process improvement effort
to respond to prior audit recommendations. However, the plan does not
include measurable performance goals and measures to address these
challenges.
IRS - According to the performance plan, IRS is developing IFS to address
its financial management weaknesses, including its lack of reliable cost
information. (This system is discussed above under IRS modernization
challenges.)
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 34 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
the Automated Commercial Environment, which is to help aid the movement of
goods into the U. S. and facilitate the collection of revenues.
Treasury?s performance report identified steps IRS took during fiscal year
2000 to improve the reliability of its reported property and equipment
balances. However, progress in addressing related internal control and
operational deficiencies were not discussed.
Preparing Financial Statements for the Government Continues to be a
Challenge for FMS. As the preparer of the Financial Report of the U. S.
Government (FR), FMS continues to face challenges in working with federal
agencies, including the inability to (1) properly account for billions of
dollars of basic transactions, especially those between government entities;
(2) ensure that information in the Financial Report is consistent with
agencies? financial statements; and (3) effectively reconcile the results of
operations reported in the U. S. government?s financial statements with
budget results.
(Also identified by the Treasury OIG.) According to Treasury?s performance
report, the following initiatives took place during fiscal year 2000 to
address improvements needed in preparing reliable U. S. financial
statements:
The Government- wide Accounting Project is re- examining FMS? existing
processes for collecting budget execution data governmentwide and reporting
of the government?s budget surplus/ deficit. This long- term project, which
according to Treasury is expected to make fundamental changes and will
produce more timely, accurate, and reliable financial reports, while at the
same time, reduce the reporting and reconciliation burdens on agencies.
FMS continued to work with federal agencies to help them adopt uniform
accounting and reporting standards and systems.
To facilitate preparation of the Financial Report, FMS is working with the
Chief Financial Officers? Council and OMB to develop systems and additional
guidelines that will enable agencies to identify and reconcile
intragovernmental transactions.
Treasury?s fiscal year 2002 performance plan discussed several actions
underway to resolve weaknesses in the Financial Report. To facilitate the
preparation of the Financial Report, FMS stated that it is continuing to
work with the Chief Financial Officers? Council to help agencies identify
and reconcile any accounting differences on interagency transactions. FMS is
also working with OMB to develop additional processes, procedures, and
guidelines that will enable agencies to identify their trading partners and
eliminate differences for certain other classes of intragovernmental
transactions. FMS stated that it also continues to work with agencies to
help them adopt uniform accounting and reporting standards and systems.
However, FMS does not include specific performance goals or measures to
gauge its progress in implementing the stated actions underway.
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 35 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
As we suggested in our prior year report, FMS could better measure its
progress if it designed measures for areas central to the management
challenge. Also, FMS? planned performance would be clearer if measures were
designed that related to the issues on which it has taken the lead -
specifically, Intragovernmental transactions, consistency and propriety of
FR financial data, and fund balance with Treasury reconciliations.
Challenges Remain in Implementing the Debt Collection Improvement Act of
1996.
Challenges remain for FMS to fully implement its Treasury Offset Program to
include all payment types. Challenges also remain for full implementation of
Treasury?s cross- servicing program. For example action is needed to ensure
fair debt distribution and to promote competition among private collection
agencies.
(This challenge is discussed under outcomes in the report.) (This challenge
is discussed under outcomes
in the report.)
Debt Management Challenges in a Period of Budget Surpluses. The transition
from annual budget deficits to surpluses has consequences for both the
profile of federal debt held by the public and Treasury?s strategies for
achieving its debt management objectives.
The fiscal year 2000 performance report did not discuss progress in
resolving this new management challenge.
The fiscal year 2002 performance plan did not contain any goals with related
measures that address this management challenge.
Need to Improve ATF?s Performance Measures to Better Determine the Progress
in Denying Criminals? Access to Firearms. Despite significant technological
advances that have given ATF more investigative information to carry out its
mission, limitations in its performance measures make it difficult to
determine its progress.
(This challenge is discussed under outcomes in the report.) (This challenge
is discussed under outcomes
in the report.)
Need to Improve the Management of Treasury?s Asset Forfeiture Program.
Treasury?s Asset Forfeiture Program faces inadequate information systems and
financial management weaknesses, including problems with accountability over
seized assets.
According to the fiscal year 2000 performance report, Customs is finalizing
user requirements and exploring funding options to complete resolution of
all recommendations to improve its Seized Asset and Case Tracking System
(SEACATS). If funding is available, resolution will be
Treasury?s fiscal year 2002 performance plan did not include performance
goals or measures related to this major management challenge. The
performance plan only states that Customs is finalizing user requirements
and exploring funding options to complete resolution of all recommendations
made to improve SEACATS and that if funding is
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 36 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
complete by fiscal year 2002. The report does not mention any progress made
towards the consolidation of the Treasury and Justice Asset Forfeiture
Programs.
We reported that Treasury?s asset forfeiture program needs to address
weaknesses in the department?s accountability for and reporting of seized
and forfeited property.
available, resolution will be completed by fiscal year 2002.
TIGTA- designated major management challenges Processing Returns and
Implementing Tax Law Changes During the Tax Filing Season. The Treasury IG
for Tax Administration reported that implementation of computer programming
changes, reduction of tax form complexity and taxpayer burden, and other
related issues remain a challenge for the IRS.
Treasury?s fiscal year 2000 performance report discussed several actions IRS
took for the 2000 filing season to more effectively process returns such as
including return labels in tax packages to identify either remit or non-
remit returns, expanding and promoting the use of the internet for timely
taxpayer information to supplement available forms and publications, and
redesigning and simplifying publications and tax form and instructions for
the Earned Income Tax Credit. IRS actions to implement tax law changes
included ensuring that programming, training, and tax forms and publications
were completed for new legislative provisions and conducting reviews of new
legislation statutory termination dates to determine whether actions needed
to be taken on the provisions.
Treasury?s fiscal year 2002 performance plan does not include specific goals
with related measures for this major management challenge. However, the plan
discussed several actions IRS has taken or plans to take to enhance the 2001
filing season and future filing seasons. These actions included (1)
developing contingency plans for new process and new legislation, (2)
aligning the notice process within the appropriate managing organization,
(3) undertaking a feasibility study and cost/ benefit analysis of calling
taxpayers for missing tax return data, (4) checking dependent birth dates on
returns claiming the child care credit, and (5) undertaking transition
activities related to service center reorganization.
Providing Quality Customer Service Operations. The Treasury IG for Tax
Administration reported that despite heavy investment in technology,
telephone service has not improved significantly and that there was a
dramatic increase in tax return preparation assistance. As a result, the
challenge to provide quality customer service will continue.
The fiscal year 2000 performance report discussed several actions IRS took
to address customer service needs. These actions include reassigning the
Innocent Spouse program to the Wage and Investment Division, providing 7 day
a week/ 24 hour telephone service during the 2000 filing season, expanding
Spanish language services, providing voice enabling service for refund
callers, completing a skills assessment and developing training plans for
tollfree/ adjustments employees, and developing a new balance measure to
determine the contact quality (impact of error onto the customer).
The fiscal year 2002 performance plan showed an increase in the toll- free-
level of service (number of calls answered to number of calls attempted) for
fiscal year 2000 compared to fiscal year 1999. However, the toll- free tax
law and account quality scores decreased. The performance plan discussed
several of IRS? planned or on- going actions to enhance customer service.
These actions included enhancing the intelligent call routing system to
route calls to employees with specific expertise, offering evening and
weekend field assistance and multi- lingual translation services, increasing
the availability and accessibility of electronic products and services, and
offering products and services tailored to specific taxpayer
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 37 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
needs through outreach programs.
Taxpayer Protection and Rights. The Treasury IG for Tax Administration
reported that compliance with taxpayer rights requirements of the IRS
Restructuring and Reform Act of 1998 remains a challenge.
The fiscal year 2000 performance report noted that IRS established the new
Taxpayer Advocated Service; hired and provided training to TAS staff,
implemented balanced measures of organizational performance, and began
building collaborative relationships with other new IRS components. Among
the changes IRS reported implementing were systemic changes to prevent
refund offsets from occurring while innocent spouse claims are considered
and to prevent processing levy requests when due process rights have been
given, included a third- party notification stuffer in levy notices, and
issued due process notices on delinquent accounts when enforcement action
was imminent.
Treasury?s fiscal year 2002 performance plan does not include specific goals
with related measures for this major management challenge. However, the plan
noted that in fiscal year 2001, RRA 98 provisions will be reviewed and plans
will be developed to resolve all outstanding issues. Also, a new Taxpayer
Advocate program was established to identify sources of taxpayer problems
and work with IRS operating divisions to address the problems. The plan
noted that IRS will continue to act to reduce willful violations of taxpayer
rights by reinstating the quality standard dealing with disclosure of
taxpayer data and requiring frontline managers to evaluate staff compliance
with the standard. Among other actions IRS also modified and implemented
training programs to reinforce the reforms outlined in the 1998 Act.
Impact of the Global Economy on Tax Administration. The Treasury IG for Tax
Administration reported that internal control and systemic weaknesses in
IRS? administration of international programs remain a challenge.
The fiscal year 2000 performance report does not address specific actions
taken to improve international compliance. The report discusses meetings IRS
held with various international bodies, which were attended by senior tax
officials from various countries.
Treasury?s fiscal year 2002 performance plan does not include specific goals
with related measures for this major management challenge. However, the plan
discussed various actions that were planned or underway to deal with the
globalization challenge. Several of the actions dealt with conducting
meetings and building partnerships with tax officials from other countries
and federal agencies such as the Federal Trade commission and the Securities
and Exchange Commission. The plan also noted IRS would be developing an
index to identify variables that can be used to identify potential
noncompliance.
Customer Service and Tax Compliance Initiatives. The Treasury IG for Tax
Administration reported that to properly balance customer support with
compliance, IRS is faced with the challenge of adequately staffing the
customer service function while at the same time, properly managing
compliance resources and processes.
The fiscal year 2000 performance report does not address this challenge.
Treasury?s fiscal year 2002 performance plan did not have goals with related
measures that directly related to this management challenge. The plan
reported that enforcement revenue collected in fiscal year 2000 increased by
about $1 billion over fiscal year 1999. The plan noted that hiring efforts
directed at accomplishing pre- filing assistance goals were scheduled to
begin in fiscal year 2001 and that as these resources gradually replace the
post- filing resources used for filing season support, the number of direct
hours available for compliance activities should expand. The plan listed
several actions IRS plans to take to allow
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 38 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
compliance activities to expand.
OIG- designated management challenge Treasury?s Information Technology (IT)
Investment Management. Treasury?s OIG determined that improvements are
needed in capital planning, investment controls, project management, systems
development, and performance measurement of IT investments.
Treasury?s fiscal year 2000 performance plan established the
?percentage of new IT capital investments that are within costs, on
schedule, and meeting performance targets? as the department?s measure for
IT investment management. Treasury?s fiscal year 2000 target for this
measure was 100 percent. However, the fiscal year 2000 performance report
states that Treasury bureaus did not provide the cost, schedule, and
performance data necessary to determine their progress.
The fiscal year 2002 performance plan reiterates the following measure,
earlier specified in the fiscal year 2000 performance plan: ?percentage of
new IT capital investments that are within costs, on schedule, and meeting
performance targets.? The goal for this measure is 100 percent.
Money Laundering/ Bank Secrecy.
Treasury?s OIG reported that Treasury needs to continue to combat money
laundering worldwide through enhanced law enforcement, improved banking
supervision and international cooperation.
The fiscal year 2000 performance report noted that Treasury awarded a
contract in August 2000 to develop a methodology for estimating the
magnitude of money laundering. This project is expected to take 18 months to
complete.
The performance report discussed several actions Treasury took in fiscal
year 2000 to address this management challenge. Among these were the
publication of by the Financial Action Task Force of a list of 15
jurisdictions with serious deficiencies in their anti- money laundering
regimes and advisories to U. S. banks urging additional scrutiny of
transactions involving these countries. The report listed other actions,
such as working on rules for suspicious activity reporting for nondepository
financial institutions and issuing guidance to banks on certain high- risk
accounts.
In Treasury?s fiscal year 2002 performance plan the Financial Crimes
Enforcement Network listed four goals related to (1) providing investigative
case support, (2) identifying financial crime trends and patterns, (3)
administering the Bank Secrecy Act, and (4) fostering international
cooperation. Measures generally gauged customer satisfaction or degree of
participation.
Customs lists a goal of strengthening domestic and international efforts to
disrupt the flow of illegal money derived from global criminal activity.
Revenue Protection by ATF and Customs.
The Treasury OIG recommended stronger internal controls and system
improvements to increase revenue collected.
The fiscal year 2000 performance report noted that during 2000, ATF
implemented controls relating to reviewing evidence and conducting
verifications of shipments of tax- free exports of distilled spirits. ATF
implemented an inspection- targeting program to track field tax assessments
for firearms and ammunition. ATF is
The fiscal year 2002 performance plan did not have goals with related
measures for the management challenge. The ATF listed several actions
underway to address the management challenge, including studies on the tax
gap, developing ways to file taxes electronically, systems integration,
alcohol and tobacco inspection targeting program, and new examination
workplans and internal
Appendix I: Observations on the Department of the Treasury?s Efforts to
Address Its Major Management Challenges
Page 39 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Major management challenge Progress in resolving major
management challenge as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the
fiscal year 2002 performance plan
making computer enhancements that will track field assessments. System
enhancements are targeted for completion in October 2002.
Customs is undertaking an agencywide self- inspection program to increase
management oversight of internal controls.
control instruments. Customs did not discuss actions related to this
challenge in the performance plan.
Safety and Soundness of the Banking Industry. Treasury?s OIG reported that
in fulfilling its regulator role, the Office of the Comptroller of the
Currency (OCC) needs to monitor developments in the National Banking System,
analyze trends, and assess systemic risks to identify events that could
affect the soundness of the system.
The fiscal year 2000 performance report noted that during 2000, OCC produced
annual underwriting survey analysis that identified asset quality
deterioration, piloted the ?early
warning system? for bank failure potential, and made early warning reports
for liquidity, interest rate risk and credit available to examiners via the
web to facilitate more rapid response.
In Treasury?s fiscal year 2002 performance plan OCC had one measurable
performance goal that related to its strategic goal of ?a
safe and sound national banking system.? The planned performance goal for
2000 was to ?achieve effective compliance with Federal Deposit Insurance
Corporation Improvement Act examination schedule? by conducting 100 percent
of bank examinations as scheduled. The actual was 98 percent, which was an
improvement over 1999 when it was 92 percent.
Source: Department of the Treasury Fiscal Year 2000 Performance Report and
Fiscal Year 2002 Performance Plans.
Appendix II: Comments from the Department of the Treasury
Page 40 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Appendix II: Comments from the Department of the Treasury
Appendix II: Comments from the Department of the Treasury
Page 41 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Now on pages 6- 9.
Appendix II: Comments from the Department of the Treasury
Page 42 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Now on pages 13- 15. Now on pages 10- 13. Now on pages 9- 10.
Appendix II: Comments from the Department of the Treasury
Page 43 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Now on pages 15- 17.
Appendix II: Comments from the Department of the Treasury
Page 44 GAO- 01- 712 Treasury's Status of Achieving Key Outcomes
Now on page 17. Now on page 17. Now on pages 20- 21. Now on page 29- 30.
Now on page 31.
Appendix III: Staff Acknowledgments Page 45 GAO- 01- 712 Treasury's Status
of Achieving Key Outcomes
In addition to those named in the report, Mark T. Bird, Charles R. Fox,
Meafelia P. Gusukuma, Gary N. Mountjoy, Paula M. Rascona, Gregory C.
Wilshusen, and Ellen T. Wolfe made contributions to this report. Appendix
III: Staff Acknowledgments
(440046)
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