Tax Debt Collection: IRS Is Addressing Success Factors for	 
Contracting Out but Will Need to Study the Best Use of Resources 
(24-MAY-04, GAO-04-492).					 
                                                                 
Congress is considering legislation to authorize IRS to contract 
with private collection agencies (PCA) and to pay them out of the
tax revenue that they collect. Some have expressed concerns that 
this proposal might be unsuccessful, inefficient, or result in	 
taxpayers being mistreated or having their private tax		 
information compromised. This report discusses (1) the critical  
success factors for contracting with PCAs for tax debt		 
collection; (2) IRS's actions to address these factors in	 
developing the PCA program and actions left to be done; and (3)  
whether IRS, if it receives the authority to use PCAs, plans to  
do a study that will help policy makers judge whether PCAs are	 
the best use of funds to meet IRS's collection objectives.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-492 					        
    ACCNO:   A10184						        
  TITLE:     Tax Debt Collection: IRS Is Addressing Success Factors   
for Contracting Out but Will Need to Study the Best Use of	 
Resources							 
     DATE:   05/24/2004 
  SUBJECT:   Collection procedures				 
	     Cost effectiveness analysis			 
	     Debt collection					 
	     Delinquent taxes					 
	     Federal taxes					 
	     Government collections				 
	     Human resources utilization			 
	     Performance measures				 
	     Privatization					 
	     Program evaluation 				 
	     Proposed legislation				 
	     Strategic planning 				 
	     Tax administration systems 			 
	     Tax information confidentiality			 
	     Taxpayers						 
	     Workloads						 

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GAO-04-492

United States General Accounting Office

                     GAO Report to Congressional Committees

May 2004

TAX DEBT COLLECTION

IRS Is Addressing Critical Success Factors for Contracting Out but Will Need to
                        Study the Best Use of Resources

                                       a

GAO-04-492

Highlights of GAO-04-492, a report to congressional committees

Congress is considering legislation to authorize IRS to contract with
private collection agencies (PCA) and to pay them out of the tax revenue
that they collect. Some have expressed concerns that this proposal might
be unsuccessful, inefficient, or result in taxpayers being mistreated or
having their private tax information compromised.

This report discusses (1) the critical success factors for contracting
with PCAs for tax debt collection; (2) IRS's actions to address these
factors in developing the PCA program and actions left to be done; and (3)
whether IRS, if it receives the authority to use PCAs, plans to do a study
that will help policy makers judge whether PCAs are the best use of funds
to meet IRS's collection objectives.

If Congress authorizes the use of PCAs, as soon as practical after
experience is gained using PCAs, the IRS Commissioner should ensure that a
study is completed that compares the use of PCAs to a collection strategy
that officials determine to be the most effective and efficient overall
way of achieving collection goals.

In commenting on a report draft, IRS said it would plan a study to ensure
that IRS is making the most effective and cost efficient use of total
resources available.

www.gao.gov/cgi-bin/getrpt?GAO-04-492.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Michael Brostek at (202)
512-9110 or [email protected].

May 2004

TAX DEBT COLLECTION

IRS Is Addressing Critical Success Factors for Contracting Out but Will Need to
Study the Best Use of Resources

Based on our analysis of information from various parties, including
officials from selected state revenue departments and federal agencies
that use PCAs, five factors are critical to the success of a PCA
collection program. Together, these factors increase the chances for
success and, as illustrated below, help the program achieve desired
results.

Although incomplete, IRS has taken actions to address these factors. For
example, IRS has been developing (1) program performance measures and
goals, (2) plans for a computer system to transmit data to PCAs, (3) a
method to select cases for PCAs, and (4) contract provisions to govern
data security and PCAs' interactions with taxpayers. IRS officials
recognize that major development work remains and have plans to finish it.
Officials said they would suspend work if PCA authorizing legislation is
not passed during 2004. If legislation passes, officials estimated that it
would take 18 to 24 months to send the first cases to PCAs.

Aware of concerns about the efficiency of using PCAs, IRS intends to study
the relative performance of PCAs and IRS employees in collecting tax debts
after gaining some experience with them. However, the initial idea for a
study would provide limited information to judge whether or when the PCA
approach is the best use of resources. The tentative idea-comparing PCA
and IRS performance for the same type of simpler cases to be sent to
PCAs-does not recognize that IRS officials believe that using IRS
employees on such cases would not be the best use of staff. Federal
guidance emphasizes efficiently and effectively using resources to achieve
results and identifying the most realistic and cost-effective program
option. Experience gained in using PCAs and a new IRS case selection
process would help officials design such a study.

Critical Success Factors Help Achieve Desired Results

Contents

  Letter

Results in Brief
Background
Objectives, Scope, and Methodology
Five Factors Are Critical for a Successful PCA Collection

Program IRS Has Taken Steps to Address Aspects of the Critical Success
Factors but Has Much Work Remaining Potential Study Design Would Provide
Limited Information to Judge

Whether Contracting with PCAs Is the Best Use of Resources Conclusions
Recommendation Agency Comments and Our Evaluation

1 2 4 7

9

12

14 19 20 20

Appendixes

Appendix I: Appendix II:

Appendix III: Appendix IV: Trends in IRS Collections Programs, 1996-2003

Actions IRS Has Taken to Address Critical Success Factors

Comments from the Internal Revenue Service

GAO Contacts and Staff Acknowledgments

GAO Contacts Acknowledgments 23

25

28

30 30 30

Tables   Table 1: Critical Success Factors and Related Subfactors for   
                    Contracting with PCAs for Tax Debt Collection          11 
              Table 2: Examples of Key Actions IRS Has Taken to Address    
                      Critical Success Factors and Examples of Major Tasks 
                                      Remaining                            12 
Figures  Figure 1: Five Critical Success Factors Help Achieve Desired      
                                       Results                             10
                Figure 2: Annual Gap Between Collection Cases Assigned and 
                    Cases Closed as a Percentage of Cases Assigned, Fiscal 
                               Years 1996 through 2003                     23 
                Figure 3: Number of Revenue Officers Working on Delinquent 
                             Accounts, 1996 through 2003                   24 

Contents

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separately.

A

United States General Accounting Office Washington, D.C. 20548

May 24, 2004

Congressional Committees

For the last several years, Congress, the Internal Revenue Service (IRS),
and others have been concerned that performance declines in IRS's programs
to collect known unpaid taxes due the government1 might be affecting
taxpayers' confidence in the fairness of our tax system and voluntary
compliance. In testimonies and reports, we have highlighted such declines
in the collection programs, including a growing gap between the number of
cases assigned for collection action and the number of cases closed each
year. Also, the amount of potentially collectable known tax debt has
grown. As of September 30, 2003, IRS had an inventory of unpaid taxes with
some collection potential-including interest and penalties-of $120
billion,2 up from $112 billion the previous year. According to IRS, the
backlog of outstanding tax debt continues to grow 3 to 4 percent each
year. Because of potential revenue losses and the threat to voluntary
compliance, we have designated collection of unpaid taxes as a high-risk
area for the federal government.3

To help address the growing tax debt inventory, the Department of the
Treasury has proposed that Congress pass legislation to authorize IRS to
use private collection agencies (PCA) to help collect tax debts for
simpler types of cases, paying them out of a revolving fund of tax
revenues that they collect. IRS officials said that this proposal arose,
in part, because of the belief that Congress was not likely to provide the
increased budget to hire enough IRS staff to work on the inventory of
collection cases. Although the proposal has received support, some have
expressed concerns that it might be unsuccessful, inefficient, or result
in taxpayers being mistreated or having private tax information
compromised. In addition, some in Congress and elsewhere in the tax
community have said that increasing IRS collection staff-instead of
contracting out tax

1 Known unpaid taxes due the government include delinquent taxes (as well
as penalties and interest) owed that IRS has attempted to collect but has
decided not to continue pursuing.

2 U.S. General Accounting Office, Financial Audit: IRS's Fiscal Years 2003
and 2002 Financial Statements, GAO-04-216 (Washington, D.C.: Nov. 13,
2003).

3 U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of the Treasury, GAO-03-109 (Washington, D.C.: January
2003). The collection of unpaid taxes high-risk area also encompasses the
amount of unpaid taxes that are due the government but that IRS has not
identified.

collection-could result in tax debts being collected at less cost. A 1996
IRS pilot test to contract with PCAs was discontinued, in part, because
the revenue collected was less than IRS's direct costs plus revenues lost
from using IRS employees to support PCAs rather than to collect taxes. Our
review of the pilot found that, among other limitations, IRS's computer
systems and inability to transfer data hampered efforts to send
appropriate cases to PCAs.4

Due to congressional interest in the legislation being considered to
authorize IRS contracts with PCAs to collect simpler tax debts, we
reviewed, as part of our basic legislative responsibility for reviewing
federal programs and activities, various issues related to IRS's
preparations to implement the proposal, if enacted, and to report on the
role of PCAs in IRS's overall collections strategy. Specifically, our
objectives were to (1) identify the critical success factors for
contracting with PCAs for tax debt collection; (2) determine whether IRS
has addressed the critical success factors in developing the proposed PCA
contracting program and, if not, what is left to be done; and (3)
determine whether, if IRS receives authority to use PCAs, it will do a
study that will enable policymakers to judge whether contracting with PCAs
is the best use of limited federal funds to achieve IRS's collection
objectives.

To identify the critical success factors, we interviewed officials from
selected state revenue departments and federal agencies that use PCAs and
PCA contractors for government debt collection. We reviewed related
documentation from these sources. In addition, we analyzed our reports on
contracting practices. For our other objectives, we gathered and analyzed
PCA program development documents and interviewed IRS officials
responsible for developing the PCA program. We conducted our work between
June 2003 and March 2004 in accordance with generally accepted government
auditing standards. Our scope and methodology are discussed in detail
beginning on page 7.

Results in Brief	Five broad factors are critical to the success of a
program for contracting with PCAs to collect tax debt. Although addressing
these factors does not guarantee success, together they can improve the
chances. First, the PCA program should have a results orientation,
including established PCA

4 U.S. General Accounting Office, Internal Revenue Service: Issues
Affecting IRS's Private Debt Collection Pilot, GAO/GGD-97-12R (Washington,
D.C: July 18, 1997).

program goals and performance measures, such as for the amounts of tax
debt collected. Second, agency resources needed to help achieve desired
program results should be obtained and deployed, such as computer systems
to exchange data and staff to work on cases that PCAs refer back to IRS.
Third, PCAs' workload should be carefully considered, such as selecting
the type and volume of cases on which PCAs work. Fourth, taxpayer issues
should be addressed, such as protecting taxpayer data shared with PCAs and
ensuring that PCAs treat taxpayers properly. Fifth, the agency should do
evaluations, including ongoing monitoring of PCAs, program results, and
costs compared to program goals.

IRS has taken a number of steps to address each of the critical success
factors. For example, IRS has (1) developed program performance goals and
measures, (2) been planning development of a computer system to send cases
and case data to PCAs, (3) been developing a method to select PCA cases
based on collection potential, and (4) drafted contract provisions to
govern the security of taxpayer data and PCA interactions with taxpayers.
As for the evaluation factor, IRS officials have been developing
approaches for monitoring and measuring contractor performance, and said
that they intend to start developing an evaluation of whether the PCA
program achieves its goals after they receive legislative authority. The
officials recognize that major work needs to be done to sufficiently
address each factor and have a project plan to finish work on the factors.
In January 2004, Congress approved the IRS fiscal year 2004 budget, which
would provide the funding to further develop the PCA program, but IRS
delayed spending the funds until passage of the legislation appears to be
more imminent. IRS officials said that if authorizing legislation did not
pass during 2004, IRS would suspend work on developing the program. IRS
officials estimated that it would take 18 to 24 months after the
authorizing legislation passes to finish the remaining work and send cases
to PCAs.

Aware of concerns about the efficiency and effectiveness of using PCAs,
IRS officials also said that they intend to study the relative performance
of PCAs and IRS employees in collecting delinquent taxes. However, the
tentative study approach being considered would provide policymakers
limited information to judge whether or when the PCA strategy is the best
use of resources. This tentative approach-comparing PCA and IRS
performance for the same type of simpler cases that would be sent to
PCAs-does not recognize that IRS officials believe that using employees on
simpler cases would not be the best use of these employees given the need
to work on other, higher priority cases. Various guidance on federal

programs emphasizes that managers are to ensure that resources are used
efficiently and effectively to achieve intended results, to consider
benefits and costs in deciding on program options, and to determine which
program option is the most realistic and cost effective.

If Congress authorizes IRS to use PCAs, we are recommending that the
Commissioner of IRS ensure that, after experience is gained using PCAs to
collect tax debt, a study be conducted that compares the use of PCAs to
another collection strategy, which might include hiring more IRS
employees, that officials determine to be the most efficient and effective
overall way of achieving collection goals.

In providing written comments on this report (see app. III), the
Commissioner of Internal Revenue agreed that IRS would need to analyze the
PCA program to determine its effectiveness and impact on the overall
collection of delinquent taxes. He said that IRS's plans for evaluating
the use of PCAs will include a study to ensure that IRS is making the most
effective and cost efficient use of total resources available.

Background	IRS has two major programs to collect tax debts: telephone
collection and field collection. If taxpayers become delinquent (that is,
do not pay their taxes after being notified of amounts owed), IRS staff
assigned to the telephone collection program may attempt collection over
the phone or in writing. According to IRS officials, IRS collection staff
who make phone calls have not been initiating many calls to ask taxpayers
to pay their tax debts but rather have been responding to phone calls from
taxpayers about mailed tax due notices. If more in-depth collection action
or analyses of the taxpayer's ability to pay tax debt is required,
telephone collection staff may refer the case to field collections, where
staff may visit delinquent taxpayers at their homes or businesses as well
as contact them by telephone and mail. Under certain circumstances, the
telephone or field staff are authorized to initiate enforced collection
action, such as recording liens on taxpayer property and sending notices
to levy taxpayer wages, bank accounts, and other financial assets held by
third parties. Field staff also can be authorized to seize other assets
owned by the taxpayer to satisfy the tax debt.

As we have previously reported, in recent years IRS has deferred
collection action on billions of dollars of delinquent tax debt and IRS
collection program performance indicators have declined. By the end of
fiscal year 2003, IRS's inventory of tax debt with some collection
potential was $120 billion (up from $112 billion in the previous year). As
we reported in May 2002, from fiscal years 1996 through 2001, IRS had
almost universal declines in collection performance, including declines in
coverage of workload, cases closed, direct staff time used, productivity,
and dollars of unpaid taxes collected.5 Although IRS's collection workload
declined, the collection cases closed declined more rapidly, increasing
the gap between the number of cases assigned for collection action and the
number of cases closed each year (see fig. 2 in app. I). As a result, in
March 1999, IRS started deferring collection action6 on billions of
dollars in delinquencies. By the end of fiscal year 2002, IRS had deferred
collection action on about $15 billion, and, as of May 2003, was deferring
action on about one of every three collection cases.

Furthermore, IRS's collection staffing has declined overall comparing 1996
to 2003 (see fig. 3 in app. I) despite IRS's efforts to increase
collection staffing in its budget requests since 2001. As we previously
reported,7 IRS officials have said that collection staffing declines and
delays in hiring have been caused by increased workload in other essential
operations (such as as processing returns, issuing refunds, and answering
taxpayer mail), other priorities (such as taxpayer service), and
unbudgeted cost increases (such as rent and pay increases).

According to statements by the previous and current IRS commissioners,
IRS's growing workload has outpaced its resources. The former IRS
Commissioner's report to the IRS Oversight Board during September 2002
made a case for additional staff to check tax compliance and collect taxes

5 U.S. General Accounting Office, Tax Administration: Impact of Compliance
and Collection Program Declines on Taxpayers, GAO-02-674 (Washington,
D.C.: May 22, 2002).

6 In 1999, IRS's collection case selection system began forwarding cases
for collection only if they met certain dollar threshold, age, and case
characteristics. Those not forwarded were "deferred."

7 See U.S. General Accounting Office, Compliance and Collection:
Challenges for IRS in Reversing Trends and Implementing New Initiatives,
GAO-03-732T (Washington, D.C.: May 7, 2003); and Internal Revenue Service:
Assessment of Fiscal Year 2005 Budget Request and 2004 Filing Season
Performance, GAO-04-560T (Washington, D.C.: Mar. 30, 2004).

owed. The Commissioner recognized that IRS needed to improve the
productive use of its current resources, but also cited a need for an
annual 2 percent staffing increase over 5 years to help reverse the
trends. According to the Commissioner, IRS would require 5,450 new
full-time collection staff. IRS officials said that the PCA program
proposal was undertaken because it is unlikely that IRS will receive
funding adequate to handle the growing collection workload.

Since current law requires IRS to collect tax debts, legislation has been
proposed8 to authorize IRS to use PCAs to collect simpler tax debts under
defined activities-including locating taxpayers, requesting full payment
of the tax debt or offering taxpayers an installment agreement if full
payment cannot be made, and obtaining financial information from
taxpayers. Given the limited authorities proposed for PCAs,9 IRS would
refer those cases that are simplest to collect and have no need for IRS
enforcement action, including cases in which (1) taxpayers filed a tax
return showing taxes due but that have not been paid and (2) taxpayers
made three or more voluntary payments to satisfy an additional tax
assessed by IRS but have stopped the payments.

In 1996, Congress directed IRS to test the use of PCAs, earmarking $13
million for that purpose. IRS canceled the pilot project in 1997, in part,
because it resulted in significantly lower amounts of collections and
contacted significantly fewer taxpayers than expected (about 14,000 of
153,000 taxpayers). IRS reported that through January 1997, this program
accounted for about $3.1 million in collections and about $4.1 million in
expenses ($3.1 million in design, start-up, administrative expenses, and
about $1 million in PCA payments). IRS also reported lost opportunity
costs of about $17 million because IRS collection staff shifted from
collecting taxes to helping with the pilot.

The current proposal to use PCAs has some significant differences from the
1996 pilot test of PCAs. First, PCAs in the current proposal will actually
try to resolve collection cases within certain guidelines. In the 1996
test, PCAs only contacted taxpayers to remind them of their outstanding
tax debt and suggest payment options. Second, PCAs under the current
proposal will be

8 See, e.g., S. 1637, 108th Cong. S: 487 (2003) and H.R. 3967, 108th Cong.
S: 521 (2004).

9 According to IRS officials, decisions such as the adjustment of the
amount of tax debts and the use of enforcement powers to collect the debts
are inherently governmental functions that are to be made by government
employees rather than PCA employees.

paid a percentage of dollars they help collect from a revolving fund of
all PCA collections. In the 1996 test, PCAs were paid a fixed fee for such
actions as successfully locating and contacting taxpayers, even if
payments were not received. Third, IRS will electronically transmit cases
and data about the taxpayer and taxes owed to PCAs. In 1996, IRS's
computers were not set up to electronically transmit the cases and data to
PCAs. For the current proposal, IRS intends to develop the capability to
make secure transmissions to PCAs and protect confidentiality.

Objectives, Scope, and Methodology

To identify the critical success factors for contracting with PCAs for tax
debt collection, we used multiple sources. We reviewed three of our
reports on leading practices in contracting10 and interviewed our staff
that review government contracting. We also interviewed parties with
experience in contracting for government debt collection, including both
tax and non-tax debt, to identify any factors common to both debt types.
Specifically, we interviewed officials from

o 	11 state revenue departments that, according to officials from the
Federation of Tax Administrators (FTA),11 represented a mix-in aspects
such as amount of resources and PCA roles-of experience in contracting
with PCAs for tax debt collection and provided examples of program
practices in such areas as case selection and use of performance data;12

o 	the Department of the Treasury's Financial Management Service and
Department of Education-two federal agencies with large-scale, nontax debt
collection contracting; and

10 U.S. General Accounting Office, Information Technology: Leading
Commercial Practices for Outsourcing of Services, GAO-02-214 (Washington,
D.C.: Nov. 30, 2001); Contract Management: Guidance Needed for Using
Performance-Based Service Contracting, GAO02-1049 (Sep. 30, 2002); and
Contract Management: Commercial Use of Share-in-Savings Contracting,
GAO-03-327 (Jan. 31, 2003).

11 FTA is an organization whose membership includes the principal tax
collection agencies of the 50 states, the District of Columbia, and New
York City. According to its charter, FTA's mission is to improve the
quality of state tax administration by providing services to state tax
authorities and administrators.

12 According to IRS data, about 40 state revenue departments and the
District of Columbia have used PCAs for the collection of delinquent
taxes.

o 	the three PCA firms that IRS selected as subject matter experts to
assist in drafting the provisions of a contract for PCA collection
services.

To help corroborate the factors that others identified, we interviewed
officials from the IRS office that is developing the proposed PCA program,
the IRS Office of Taxpayer Advocate, and the National Treasury Employees
Union, which represents IRS employees.

To summarize and categorize the critical success factors identified, we
grouped together similar factors that were most frequently cited by the
officials with experience in government debt collection contracting. We
first grouped factors associated with the start of a program and with a
maturing program into two broad time-oriented factors, including topics we
identified as implicit in the interviews and documents cited above.
Between these two time-oriented factors, we categorized three other
factors according to the broad topics that were most frequently cited. To
validate our summarization and categorization, we asked for comments on
our draft list of critical success factors from those who we had consulted
to identify the factors as well as from officials at four additional PCA
firms that, according to interviewed officials from two state revenue
departments and the two federal agencies, had experience in government
debt collection. In commenting on the draft list of factors, some
officials stressed certain factors more than others or elaborated on
selected factors or subfactors, but generally did not suggest factors
beyond those encompassed in our draft list. We made changes based on their
comments where appropriate.

To determine whether IRS has addressed the critical success factors in
developing the PCA contracting program and, if not, what is left to be
done, we interviewed IRS program officials. We analyzed program documents,
including the draft PCA contract as outlined in IRS's Request for Quotes
(RFQ)13 and the Office of Management and Budget (OMB) Form E-30014
budgetary document that describes goals and plans for the program. We did
not attempt to analyze how well or to what extent IRS addressed the
factors, or whether IRS made the right decisions on issues such as the
program goals or measures.

13 An RFQ is a solicitation to identify contractors willing to meet the
statement of work to be done.

14 OMB Form E-300, Capital Asset Plan and Business Case, 2003.

To determine whether, if IRS receives authority to use PCAs, it will do a
study that will enable policymakers to judge whether contracting with PCAs
is the best use of federal funds to achieve IRS's collection objectives,
we interviewed IRS program officials. We reviewed any studies IRS had done
to compare the use of PCAs with other strategies and assessed IRS's
intended approach for any future studies. We also applied our knowledge of
how to study the cost-effectiveness of options to meet a desired result or
benefit.

We did our work from June 2003 through March 2004 in accordance with
generally accepted government auditing standards.

Five Factors Are Critical for a Successful PCA Collection Program

Our work identified and validated five broad factors that are critical to
the success of a proposed program for contracting with PCAs to collect tax
debt. A general description of each critical success factor follows:

o 	Results orientation involves establishing expectations, measures, and
desired results for the program.

o  Agency resources involve obtaining and deploying various resources.

o 	Workload involves ensuring that the appropriate cases and case
information are provided to PCAs.

o 	Taxpayer issues involve ensuring that taxpayer privacy and other rights
are protected.

o 	Evaluation involves monitoring performance and collecting data to
assess the performance of PCAs and the overall program.15

As figure 1 illustrates, the factors are considered "success" factors
because each one, if adequately addressed, can help ensure that the PCA
program achieves desired results, such as in collecting tax debts.
Although addressing all factors during program design and implementation
does not guarantee success, doing so could improve the chances.

15 The purpose of program performance evaluation is to help assess how
well the program is achieving its goals, rather than whether another
program option would be a better use of agency resources to achieve those
goals.

Figure 1: Five Critical Success Factors Help Achieve Desired Results

Source: GAO.

Table 1 further describes the critical success factors by showing their
related subfactors that we identified and validated.

Table 1: Critical Success Factors and Related Subfactors for Contracting
with PCAs for Tax Debt Collection

Critical
success factor Related subfactors

Results orientation

o  Determine expected program goals, costs, and overall results for
contracting with PCAs.

o  Establish contract provisions and operational expectations, measurable
PCA performance evaluation standards, and PCA rewards and disincentives
based on performance and ensure that the government agency and PCAs have a
common understanding of these elements.

o  Give PCAs as much freedom as practical on how to achieve performance
goals.

o  Use a contracting process that will help ensure that PCAs selected are
able to meet operational and performance expectations.

Agency resources

o  Provide sufficient staffs to do work associated with contracting with
PCAs, including administrative functions, contract oversight, and working
collection cases referred back by the PCAs.

o  Have management commitment to using PCAs.

o  Ensure that PCA employees receive appropriate training on such areas as
taxes and case handling procedures.

o  Ensure that computer systems will allow data to be exchanged
electronically between PCAs and the government agency and that payments
will be tracked and accounts updated.

o  Be aware of and control costs of functions related to contracting.

Workload  o  Select the appropriate type and volume of cases for PCAs to
work on.

o  Ensure that contractors work on the range of cases that they are
assigned in terms of ease of collection and amounts due.

o  Provide PCAs appropriate, accurate information on taxpayers and
accounts.

Taxpayer issues  o  Ensure that taxpayers are treated properly by PCAs.

o  Ensure the security of taxpayer information provided to PCAs.

Evaluation  o  Perform ongoing monitoring of PCAs in various aspects of
operations and performance expectations.

o  Measure PCAs' performance in light of performance standards and
distribute rewards/disincentives.

o  Evaluate whether the program meets its goals and expectations and
adjust the program as needed.

Source: GAO analysis of selected GAO reports and interviews with officials
from selected state and federal agencies and PCA firms.

IRS Has Taken Steps to Address Aspects of the Critical Success Factors but
Has Much Work Remaining

IRS has taken steps to address the critical success factors and developed
a project plan to help finish addressing the factors if Congress
authorizes use of PCAs. Officials recognize that much work needs to be
done to sufficiently address each factor, which they estimate will take 18
to 24 months after any legislation passes. Table 2 shows examples of the
key actions taken to address the critical success factors and major tasks
remaining. Discussion after table 2 elaborates on some of these major
tasks.

Table 2: Examples of Key Actions IRS Has Taken to Address Critical Success
                 Factors and Examples of Major Tasks Remaining

Critical success
factor Examples of key actions taken Examples of major tasks remaining

Results  o  Developed performance measures and goals, spelling out  o 
Finalize the goals, measures, and compensation orientation desired results
for PCAs. system in the contract to be put out for bids.

o  Adopted a performance-based PCA compensation strategy, using incentives
and disincentives.

o  Provided PCAs freedom to determine how to collect tax debts, but
imposed certain restrictions (e.g., taxpayer rights, privacy).

o  Decided to use the list of approved federal contractors maintained by
the U.S. General Services Administration.

Agency resources  o  Identified an infrastructure to administer contracts,
provide  o  Complete the administration infrastructure. oversight, and
work on cases referred back to IRS.  o  Verify that initial staffing is
appropriate.

o  Identified initial staff needs.  o  Illustrate management commitment by
providing

o  Received IRS management commitment to support the resources.

PCA program if legislative authority is granted.  o  Develop a program to
track resources and costs associated with the PCA program.

Workload  o  Started to develop a risk-scoring model to identify the most 
o  Finish and test the case selection model. appropriate cases to be
referred to PCAs.  o  Use the model to annually determine the type and

o  Established incentives to encourage PCAs to work on the number of cases
to be referred to PCAs. full range of simpler cases assigned to them.  o 
Finish and test the computer interface system.

o  Started planning development of a computer interface  o  Train IRS
staff on working with PCAs on case system to ensure that PCAs receive
accurate data on selections/referrals and data transfers. taxpayer
accounts.

Taxpayer issues    o  Established draft        o  Develop training courses 
                   contract provisions on how         and train PCA employees 
                       o  PCAs must treat           on taxpayer issues.       
                   taxpayers and protect data, 
                   o  PCAs must follow federal o  Develop and finalize plans  
                            laws, and          to monitor calls to            
                   o  IRS will check PCA           taxpayers and survey their 
                   compliance in these areas.         satisfaction with PCAs. 

Evaluation o  Established draft contract           o  Develop programs for 
              provisions on monitoring and         monitoring PCA performance 
              evaluating PCA and program           and evaluating program     
              performance against                  performance against the    
              program goals, performance measures,           goals.           
              and the                              
                 performance-based compensation    o  Train IRS staff on how  
                            system.                to do the evaluations and  
                                                          monitoring.         
                                                     o  Use the results to    
                                                    manage the PCA program.   

Source: Interviews with IRS officials and reviews of IRS documents.

IRS officials are aware of these major tasks that must be completed to
address the critical success factors and implement the PCA program. In
discussing their intent to address them, IRS officials elaborated on some
of the major tasks.

o 	Under "results orientation," IRS is aware that it has to clarify a goal
on how much it expects to collect. IRS had estimated originally that the
PCA program would result in $9 billion in tax collections and produce $7.2
billion in net revenue over 10 years. The Department of the Treasury
estimated that $1.5 billion in net revenue would be produced over 10
years. IRS officials said the differences arise because each estimate was
done differently. IRS acknowledged that its original estimate may be too
high and is reworking it in light of the Treasury estimate.

o 	Under "workload," IRS officials said that they are aware of the
importance of selecting the right cases to send to PCAs for collection and
plan to use consumer credit history data on delinquent taxpayers to
identify those that would be more likely to pay if contacted. IRS
officials said that the new case collection system will extend beyond
selecting cases for PCAs, and that the experience and knowledge IRS will
gain would contribute to IRS's broader modernization program for using
data to improve how IRS does collection work. For example, IRS officials
said that, in the future, the case selection data might be used to help
determine which collection method-such as sending notices, using PCAs, or
making in-person contact-might be more effective in attempting collection
from a given taxpayer.

o 	Under "evaluation," IRS officials said that they were aware that they
had not developed plans or dates for evaluating the program to assess how
well the PCA program achieves its results. IRS officials said that
developing the evaluation was premature given the other work needed to
develop the program and lack of legislative authority. IRS officials said
they intend to start developing the evaluation plan after they receive
this authority and to finish it before sending cases to PCAs. Evaluation
plans developed before program implementation increase the likelihood that
the necessary data and resources for proper evaluation will be available
when needed.

o 	Many of the factors involve the development of an information system.
Testing of information systems being developed for the PCA program is an
important task left to do. Our interviews with IRS officials and our

reviews of IRS documents indicate that IRS plans on testing the
information systems to be used in the PCA program.

IRS officials informed us that they have slowed development of the program
due to funding constraints and uncertainty over whether and when
legislation will pass to authorize contracts with PCAs. Because IRS's
fiscal year 2004 budget was not passed until January 2004, IRS officials
said that, since September 2003, IRS slowed work on the PCA program. These
officials said that, because of various budgetary procedures, the
appropriated funds were not released to the PCA program until March 2004.
However, the officials explained that IRS, intending to be fiscally
prudent, is delaying spending of the funds until passage of the
legislation appears to be more imminent.

IRS officials stated that if legislation to authorize the program was not
passed during 2004, IRS eventually would suspend work on developing the
program. These officials said that they have been balancing and managing
their existing funds and the timing of their work given that the
authorizing legislation might not pass. If this legislation passes, IRS
officials said that they would need another 18 to 24 months afterwards to
complete the many tasks remaining, as shown in table 2. IRS officials said
that, if Congress passes authorizing legislation in summer 2004, the
estimated date for starting to send cases to PCAs is July 2006.

Potential Study Design Would Provide Limited Information to Judge Whether
Contracting with PCAs Is the Best Use of Resources

Although IRS officials intend to study the relative performance of PCAs
and IRS employees in collecting delinquent taxes, the study approach under
initial consideration would provide policymakers limited information to
judge whether and when the PCA strategy is the best use of resources. The
tentative idea for a design-comparing PCA and IRS performance for similar
types of simple cases that would be sent to PCAs-does not recognize that
IRS officials believe that using employees on these cases would not be
their best use given the need to work on other, higher priority cases.

The Cost-Effectiveness of the Proposed Use of PCAs Has Been Questioned

Among other issues concerning the proposed use of PCAs, policymakers and
others have questioned whether using PCAs to collect tax debts is more
efficient or effective than having IRS employees do so. During
consideration of IRS's proposal, some members of Congress questioned
whether IRS could collect the taxes that IRS plans to assign to PCAs at
less cost or whether IRS would be able to collect a higher portion of the
taxes that are due. During hearings, some witnesses raised similar
concerns.16

IRS officials have said that IRS employees might be more effective than
PCAs in collecting delinquent taxes because IRS employees have greater
powers to enforce collections. These powers (such as tax liens and wage
levies) may enable IRS employees to collect a higher portion of the taxes
from the same types of cases on which PCAs would work.

IRS officials said that the proposal to use PCAs to collect simpler tax
debts was not based on a judgment that PCAs would necessarily be more
efficient or effective in collecting delinquent tax debt. Rather the
proposal was based on a judgment that Congress was unlikely to approve a
substantial increase in IRS's budget to fund additional staff for the
collection function. Officials believed that the growing inventory of tax
debts was not a good signal to taxpayers about the importance of complying
with their tax obligations. Given constraints in hiring staff, IRS
officials said that using PCAs was the only practical means available to
begin working on significantly more collection cases that otherwise would
not be worked on due to IRS staffing constraints.

16 For example, see Subcommittee on Oversight, Committee on Ways and
Means, U.S. House of Representatives, Hearing on Use of Private Collection
Agencies to Improve IRS Debt Collection (Washington, D.C.: May 13, 2003),
http://waysandmeans.house.gov/hearings.asp?formmode=view&id=1043
(downloaded Apr. 6, 2004).

Although this policy judgment served as the rationale behind the PCA
proposal, in March 2004, IRS provided us with projections of revenues and
federal government costs for the proposed PCA program compared to
projections for an alternative approach under which IRS would hire
additional staff to work on the same volume for selected types of cases on
which the PCAs would work.17 According to the analysis, PCAs would
generate $4.6 in revenue for every dollar in cost and IRS employees would
generate $4.1.

We did not review the data and assumptions that underlie these revenue and
cost projections because the comparison that IRS constructed did not
address the relevant economic question for policymakers seeking to reduce
the backlog of uncollected taxes-which is, what is the least costly
approach for reaching a certain revenue collection goal. IRS's analysis
did not examine other feasible approaches that IRS might be able to use,
if given additional resources, to collect the same amount of revenue that
the PCAs would bring in, but at lower cost.

Study Approach Being Considered

Assuming IRS receives authority to use PCAs, IRS officials said they would
design a study to compare the performance of PCAs versus IRS employees.
However, the study approach under initial consideration would provide
policy makers limited information to help determine whether the use of
PCAs as currently proposed is the best use of federal resources to collect
tax debts. IRS's approach might show whether PCAs or IRS employees are
best at working on certain types of collection cases, but would not show
whether the use of PCAs as planned would be the best use of resources to
deal with the overall collection workload.

IRS officials said that although they believe they should conduct a study
that compares PCA results to results achieved by IRS employees, they have
not designed such a study.18 They expect to design the study after
authorization to use PCAs is enacted and before sending cases to PCAs.

17 The types of cases PCAs would work on include cases in which (1)
taxpayers filed a tax return showing taxes due but that have not been paid
and (2) taxpayers made three or more voluntary payments to satisfy an
additional tax assessed by IRS but have stopped making payments. The total
cost to the federal government included those paid from IRS's budget as
well as fees paid to PCAs.

18 Given other work and limited staff, officials were deferring work on
the study design until the use of PCAs was authorized.

Although the study approach will evolve, officials said that they are
considering selecting a sample of the same type of simpler cases that will
be sent to PCAs and having such cases also sent to a group of IRS
telephone collection employees. The results generated by these IRS
employees and by PCAs would be compared to see which option is more
effective; how effectiveness would be defined and measured would be
determined in designing the study. This potential design would help answer
the relatively narrow-but important-question of whether and when PCAs or
IRS employees are a better choice for working on the specific types of
cases to be sent to PCAs.

However, IRS officials told us that using IRS employees on these simpler
cases would be less productive than assigning them to work on a different
mix of collection cases. These officials said that the simpler cases IRS
plans to assign to PCAs are generally not those cases that IRS would
assign to any additional collection employees, if hired. IRS employees
would work on more complex cases that fit their skills and enforcement
powers and that have a higher priority due to such factors as the type and
amount of tax debt or length of the delinquency.

Generally, federal officials are responsible for ensuring that they are
carrying out their responsibilities as efficiently and effectively as
possible. Various federal and IRS guidance reinforces this responsibility.
For example, according to OMB Circular A-123 "the proper stewardship of
Federal resources is a fundamental responsibility of agency managers and
staff. Federal employees must ensure that government resources are used
efficiently and effectively to achieve intended program results." OMB
Circular A-94 states that agencies should have a plan for periodic,
resultsoriented studies of program effectiveness to, among other purposes,
help determine whether the anticipated benefits and costs have been
realized and program corrections are needed. IRS guidance states that in
selecting among course of action options, IRS managers should determine
which is the most realistic and most cost effective. Further, IRS has
adopted a critical job responsibility for its managers that specifies
their responsibility to achieve goals by leveraging available resources to
maximize efficiency and produce high-quality results.

A study that focuses on the least costly approach to collecting a desired
amount of tax debts would be more in line with federal guidance than the
study that officials anticipate performing. Such a study would more likely
answer the broader question of how IRS can be the most efficient and
effective in achieving its collection goals. One alternative design might
entail comparing the results of using PCAs to the results from using the
same amount of funds to be paid to PCAs in an unconstrained manner that
IRS determines to be the most effective overall way of achieving its
collection goals. Determining the most effective and efficient overall way
of achieving collection goals would undoubtedly require some judgment.
However, because IRS is developing a new case selection model for its own
use, after some experience is gained both with using PCAs and with new IRS
case selection processes, IRS should have better data to use in
determining the best way of achieving its collection goals. If using PCAs
as expected under the current proposal meets IRS's collection goals at
less cost than the best unconstrained alternative, policymakers could be
comfortable with continuing their use. If not, policy makers would have
information available to consider whether changes in the use of PCAs would
be appropriate.19

Regardless of the approach chosen, IRS would have to address several
challenges in designing a study to compare the use of PCAs and IRS
employees. For instance, contracting for PCA assistance may provide
flexibility over hiring additional IRS staff. To recruit, select, and
train the new staff, IRS could need many months or more and, if
experienced staff assists in training newly hired staff, the experienced
staff would not be able to handle normal workloads. Further, if the
collection workload were to decrease, IRS may be able to reduce contract
commitments more rapidly than it could reassign and, if needed, retrain
IRS staff. To some extent, the study would have to account for similar
types of direct and opportunity costs to hire, train, assign, and release
employees of the PCA contractor. Accounting for these and other factors
raises challenges to the design of a comparative study.

19As noted earlier in this report, IRS 's budget requests for more
collection staffing have not resulted in increased staffing because of
such factors as increased workloads in other areas and unfunded cost
increases. If IRS were to request more staffing to reduce the tax debt
inventory, and Congress wanted to be assured that funds would be used for
this purpose, Congress could dedicate the appropriation. Congress has done
this for selected other areas in which tax compliance has been a concern,
such as earmarking appropriated funds to address concerns with overclaims
for the earned income tax credit.

Because IRS would not assign cases to PCAs for collection until 2006, it
will have time to take these challenges into account and to better ensure
that its study would be useful to policy makers. Further, in designing the
study, IRS would have time to identify the data that would be needed for
the study and develop systems or processes for collecting the data.

Conclusions	IRS has an inventory of over $100 billion dollars of tax debts
that has some potential for being collected. In recent years, IRS has
deferred collection actions on billions of dollars of debt because it
lacked collection staff to do the work. The growth in the backlog of
unpaid taxes poses a risk to our voluntary tax system, particularly as IRS
has fallen further behind in pursuing existing as well as new tax debt
cases. We have placed the collection of unpaid taxes on our high-risk list
since 1990 due to the potential revenue losses and the threat to voluntary
compliance with our tax laws.

Accordingly, we believe that effective steps need to be taken to improve
the collection of these unpaid taxes. Because we did not analyze available
options in this review, we are not taking a position on whether the use of
PCAs is a preferable option. However, doing nothing more than has been
done recently is not preferable. The compliance signals sent to taxpayers
from the backlog of delinquent tax debts are not appropriate. When the
majority of taxpayers receiving phone calls from IRS are those who respond
to written IRS notices, taxpayers and practitioners may conclude that
failing to respond to IRS is an effective tactic for avoiding tax
responsibilities.

If Congress does authorize PCA use, IRS's planning and preparations to
address the critical success factors for PCA contracting provide greater
assurance that the PCA program is heading in the right direction to meet
its goals and achieve desired results. Nevertheless, much work and many
challenges remain in addressing the critical success factors and helping
to maximize the likelihood that a PCA program would be successful.

Although IRS did an analysis that suggests that using PCAs may be a
somewhat more efficient means to collect certain types of delinquent
debts, that analysis was not done in a manner that informs policymakers
whether the proposed use of PCAs is the least costly option to achieve
IRS's collection goals. Further, given the lack of experience in using
PCAs to collect tax debts, key assumptions are untested. Accordingly, if
Congress authorizes the use of PCAs, Congress and IRS would benefit from

a study that uses the experience gained with PCAs and by IRS itself in
using new case selection processes to better determine whether and how the
use of PCAs fits into an overall collection strategy that is designed to
most effectively and efficiently collect delinquent taxes. Although IRS
officials have preliminary plans to do a study that compares the use of
PCAs and IRS employees to work the same type of cases, this study design
would not help policymakers in Congress and the executive branch judge
whether using PCAs as currently proposed is the best use of scarce federal
resources.

Recommendation	If Congress authorizes the use of PCAs, as soon as
practical after experience is gained using PCAs, the IRS Commissioner
should ensure that a study is completed that compares the use of PCAs to a
collection strategy that officials determine to be the most effective and
efficient overall way of achieving collection goals.

Agency Comments and Our Evaluation

The Commissioner of Internal Revenue provided written comments on a draft
of this report in a letter dated May 14, 2004 (see app. III). In the
letter, the Commissioner said that our findings would help IRS focus its
PCA program development efforts on those areas most critical to success of
the program if Congress authorizes IRS's use of PCAs. He agreed that IRS
had taken actions to address the critical success factors we identified
and acknowledged that significant actions are yet to be done, referring to
several key PCA program project plan steps that have not been completed.

In response to our recommendation that, if Congress authorizes IRS's use
of PCAs, IRS do a study that compares the use of PCAs to a collection
strategy that officials determine to be the most effective and efficient
overall way of achieving collection goals, the Commissioner agreed that
IRS would need to analyze the PCA program to determine its effectiveness
and impact on the overall collection of delinquent taxes. He said that the
detailed design for evaluating the PCA program will include a study to
ensure that IRS is making the most effective and cost efficient use of
total resources available.

We are also sending copies to the Secretary of the Treasury, the
Commissioner of Internal Revenue, the Director, Office of Management and
Budget, and other interested parties. We will make copies available to

others on request. In addition, the report will be available at no charge
on the GAO Web site at http://www.gao.gov.

This report was prepared under the direction of Thomas D. Short, Assistant
Director. Appendix IV also lists major contributors to this report. If you
have any questions about this report, contact me at [email protected] or
Tom Short at [email protected], or either of us at (202) 512-9110.

Michael Brostek Director, Tax Issues

List of Committees

The Honorable Charles E. Grassley Chairman The Honorable Max Baucus
Ranking Minority Member Committee on Finance United States Senate

The Honorable William M. Thomas Chairman The Honorable Charles B. Rangel
Ranking Minority Member Committee on Ways and Means House of
Representatives

The Honorable Tom Davis Chairman The Honorable Henry A. Waxman Ranking
Minority Member Committee on Government Reform House of Representatives

Appendix I

Trends in IRS Collections Programs, 19962003

Figure 2 below shows the annual gap between the number of cases assigned
to field and telephone collections and the number of delinquent accounts
worked to closure (excluding accounts for which collection workload was
deferred) expressed as a percentage of the number of cases assigned.

Figure 2: Annual Gap Between Collection Cases Assigned and Cases Closed as
a Percentage of Cases Assigned, Fiscal Years 1996 through 2003 40

35

30

25

20

15

10

5

0

-5 1996 1997 1998 1999 2000 2001 2002 2003

Source: GAO analysis of IRS data.

Appendix I Trends in IRS Collections Programs, 1996-2003

Figure 3: Number of Revenue Officers Working on Delinquent Accounts, 1996
through 2003

6,000 Number of staff

5,500

5,000

4,500

4,000

3,500

3,000 1996 1997 1998 1999 2000 2001 2002 2003 Fiscal year

Source: Data from the Treasury Inspector General for Tax Administration
and IRS.

Appendix II

Actions IRS Has Taken to Address Critical Success Factors

The following appendix provides some detail on various IRS actions to
address the critical success factors.

Critical Success Factor-Results Orientation:

IRS envisions that the PCA program will meet the following goals:

o  Increase the collection of tax debts by $9.2 billion.

o  Increase the closure of tax debt cases by 17 million taxpayers.

o  Reduce the tax debt backlog; and

o  Increase taxpayer satisfaction by 12.5 percent.

To motivate PCAs to achieve these results, IRS is devising a balanced set
of measures--the "balanced scorecard"--and a related performance-based
compensation system. The performance scores on these measures also are to
be used in determining financial bonuses and future case allocations to
PCAs. Specifically, PCAs with above-average performance scores are to be
eligible for monetary bonuses if they meet minimum thresholds for five of
six performance measures. Also, the performance score is to be translated
into a value for each PCA that is to be used to determine a proportionate
allocation of cases for the next quarter. IRS's intent is that the
balanced scorecard will ensure that collection efforts are balanced
appropriately in providing quality service; ensuring adherence to taxpayer
rights; and complying with IRS policies, procedures, and regulations. The
performance measures are to include the following.

o 	Collection effectiveness: Dollars collected as a percentage of dollars
assigned to be collected over the contract period.

o 	Case resolution: Resolving cases assigned through the payment of the
tax debts immediately or through installment payments over 3 years,
identification of bankrupt or deceased taxpayers, or identification of
hardships that affect the taxpayers' ability to pay.

o 	Taxpayer satisfaction: Satisfaction will be measured through random
surveys of taxpayers on the accuracy and quality of actions taken by PCA
employees and their adherence to various standards, and through taxpayer
complaints.

Appendix II
Actions IRS Has Taken to Address Critical
Success Factors

o 	PCA employee satisfaction: Satisfaction will be measured through
surveys of employees and their retention rates.

o 	Work quality: Quality will be measured through audits of PCA cases and
telephone monitoring of interactions with taxpayers.

o 	Validated taxpayer complaints: Financial penalties will be assessed and
points will be subtracted from PCA performance scores if taxpayer
complaints are validated.

Critical Success Factor-Agency Resources:

IRS has set up an infrastructure to

o  administer the PCA program,

o  oversee PCA contractors, and

o  work on cases referred back to IRS from PCAs.

IRS has identified initial staffing needs for the PCA program. IRS has
estimated that 100 full-time equivalency positions (FTE) will be needed to
initially staff the three elements of the program. IRS estimates that it
will need 30 FTEs to administer the program and do oversight, and 70 FTEs
to work on the cases referred back to IRS from PCAs for the first round of
PCAs selected to work on cases. As IRS learns about its staffing needs and
sends cases to more PCAs over time, IRS plans to adjust its staffing
accordingly.

Critical Success Factor-Workload:

IRS has informed PCAs that the number of cases that they receive over a
set time period is to be based on their performance scores against
balanced measures. IRS plans to oversee the assigned workload to ensure
that PCAs work on the full range of simpler cases. To motivate PCAs to
work on the full range of cases, IRS plans to measure, among other things,
the extent to which PCAs resolve cases sent to them, including those that
PCAs refer back to IRS without resolving the tax debt. IRS also is working
on systems to help it identify the best cases to send to PCAs and to help
it transmit and manage those cases.

Appendix II
Actions IRS Has Taken to Address Critical
Success Factors

Critical Success Factor-Taxpayer Issues:

IRS has drafted provisions to ensure that PCAs know that they have to
treat taxpayers properly and make them aware of the consequences of not
treating taxpayers properly. Proper treatment of taxpayers is one of the
performance measures used to determine a performance score for use in
granting monetary bonuses and case allocations for PCAs. The following
provides examples of the draft provisions on proper taxpayer treatment.

o 	PCAs shall comply with all applicable federal and state laws. The
principal federal statues and regulations currently governing collection
activities are to be followed. Further, IRS plans to monitor PCA
collection activities and treatment of taxpayers; any behavior that is not
in conformance with cited federal and state laws and regulations will be
considered a breach of contract.

o 	IRS has informed PCAs that it will be conducting customer satisfaction
surveys and that customer satisfaction is one of the key components of the
balanced scorecard to be used to determine financial bonuses and future
case allocation.

o 	IRS plans to require that PCAs inform taxpayers orally and in writing
on how to report improper treatment by PCA employees to IRS.

Critical Success Factor-Program Evaluation

IRS has established preliminary plans for monitoring and measuring PCA
performance through such means as conducting site visits and compensating
PCAs according to their performance reflected in the balanced measures
scorecard. However, IRS has deferred doing much work on evaluating program
performance overall given the other work that had to be done and the
resources that were available.

                                  Appendix III

                   Comments from the Internal Revenue Service

Appendix III Comments from the Internal Revenue Service

Appendix IV

                     GAO Contacts and Staff Acknowledgments

GAO Contacts	Michael Brostek, (202) 512-9110
Thomas D. Short, (202) 512-9074

Acknowledgments	In addition to those named above, Evan Gilman, Ronald
Jones, John Lesser, Cheryl Peterson, and Jim Wozny made key contributions
to this report.

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