IRS Employee Evaluations: Opportunities to Better Balance Customer
Service and Compliance Objectives (Letter Report, 10/14/1999,
GAO/GGD-00-1).

Pursuant to a congressional request, GAO reviewed the extent to which
the Internal Revenue Service (IRS) employee evaluation system can
support the new mission statement during the period IRS will need to
revamp its performance management system, focusing on: (1) determining
the relative emphasis on revenue production, efficiency, and customer
service in enforcement employees' annual written evaluations; (2)
identifying features of the evaluation process that might be used to
greater advantage to reinforce the importance of customer service; and
(3) describing IRS initiatives to promote customer service, including
those to encourage enforcement employees to be taxpayer oriented.

GAO noted that: (1) IRS could take advantage of opportunities within the
evaluation process to reinforce the importance of customer service among
its frontline enforcement employees; (2) there are a number of reasons
for doing so; (3) most importantly, the evaluation process is not
aligned with IRS' new mission statement because it emphasizes revenue
production more than customer service; (4) also, it is uncertain when a
new performance management system that IRS is planning will become fully
operational; (5) enforcement employees' two most recent written
evaluations for the period ending June 1998 emphasized their revenue
production and efficiency skills more than their customer service
skills; (6) available evidence indicates that four features of the
evaluation process could be used to greater advantage to reinforce the
importance of customer service among enforcement employees; (7) if the
features were to be used more, however, IRS would need to consider the
potential implications for the way in which supervisors allocate their
time between these and other administrative tasks; (8) the narrative
portion an employee's written evaluation provides flexibility for
supervisors to focus on employees' customer service skills; (9) midyear
progress reviews, which are required, provide supervisors with
opportunities to give interim feedback on aspects of case handling in
relation to customer service (and other) goals; (10) mandatory reviews
of sampling of completed cases present another opportunity for
supervisors to comment on customer service skills because these are ex
post facto examinations of documents prepared by employees to support
their case decisions; (11) field visits present an excellent opportunity
to reinforce customer service; (12) IRS has implemented a number of
initiatives to promote customer service; (13) it has: (a) revised its
strategic goals; (b) aligned them with its mission statement; and (c)
introduced organizational performance measures that are to balance
customer satisfaction, employee satisfaction, and business results; (14)
in the meantime, IRS has taken several interim actions to encourage
enforcement employees to be taxpayer oriented; and (15) it has
incorporated into the employee evaluation process a new retention
standard relating to the fair and equitable treatment of taxpayers that
employees must meet at a passing level to retain their jobs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-1
     TITLE:  IRS Employee Evaluations: Opportunities to Better Balance
	     Customer Service and Compliance Objectives
      DATE:  10/14/1999
   SUBJECT:  Personnel management
	     Reengineering (management)
	     Customer service
	     Tax administration
	     Personnel evaluation
	     Performance measures

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United States General Accounting Office
GAO

Report to the Chairman, Committee on Ways and

Means, and the Chairman,  Subcommittee on

Oversight, House of Representatives

October 1999

GAO/GGD-00-1

IRS EMPLOYEE EVALUATIONS
Opportunities to Better Balance Customer Service

and Compliance Objectives

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Contents
Page 201GAO/GGD-00-1 Balancing Customer Service and Compliance
Objectives
Letter                                                                      1
                                                                             
Appendix I                                                                 24
Objectives, Scope, and
Methodology
                           Objectives                                      24
                           Scope and Methodology                           24
                                                                             
Appendix II                                                                26
Samples of Employee
Evaluation Forms
                                                                             
Appendix III                                                               30
GAO Sampling Methodology
                           Sample Design                                   30
                           Sample Disposition                              30
                           Calculation of Survey Estimates                 31
                           Sampling Error                                  31
                                                                             
Appendix IV                                                                32
Criteria for
Categorizing Narrative
Statements and the
Results of Our Analysis
                                                                             
Appendix V                                                                 38
Examples of Supervisors'
Comments From Employee
Evaluations
                           Comments That Reflect Revenue                   38
                           Production and Efficiency
                           Comments That Reflect Customer Service          39
                                                                             
Appendix VI                                                                41
Data on Field Visits,
Case Reviews, and
Midyear Progress Reviews
Appendix VII                                                               42
Results of Survey to
Determine How IRS
Supervisors Allocate
Their Time
                                                                             
Appendix VIII                                                              44
Comments From the
Internal Revenue Service
                                                                             
Appendix IX                                                                49
GAO Contacts and Staff
Acknowledgments
                                                                             
Tables                     Table 1: Estimated Frequency of                  6
                           Customer Service Comments and Revenue
                           Production and Efficiency Comments in
                           Employee Evaluations
                           Table 2: Estimated Frequency of                  7
                           Comments in Evaluations That
                           Indicated the Employee Helped
                           Taxpayers Understand and Meet Their
                           Tax Responsibilities
                           Table 3: Estimated Frequency of                  8
                           Comments in Evaluations That
                           Indicated the Employee Applied the
                           Tax Law With Integrity and Fairness
                           Table 4: Estimated Frequency of                  8
                           Comments in Evaluations That
                           Described the Employee's
                           Interpersonal Skills
                           Table 5: Estimated Frequency of                 10
                           Missing or Duplicate Narratives in at
                           Least One of Two Evaluations
                           Table III.1: Disposition of Sample              30
                           Cases
                           Table IV.1: Grouping of Critical Job            33
                           Elements for Each Employee
                           Classification Into Five Skill Groups
                           Table IV.2: Estimated Frequency of              34
                           Comments on Customer Service, Revenue
                           Production, and Efficiency in
                           Evaluations of Employee Technical
                           Skills
                           Table IV.3: Estimated Frequency of              34
                           Comments Related to Revenue
                           Production and Efficiency and
                           Customer Service
                           Table IV.4: Estimated Frequency of              35
                           Employees With Narratives Who Had at
                           Least One Customer Service Comment in
                           the Customer Service Critical Job
                           Element
                           Table IV.5: Estimated Frequency of              35
                           Employees With at Least One Comment
                           on One or Both Evaluations That Would
                           Support One or Both of the Elements
                           in IRS' New Mission Statement
                           Table IV.6: Estimated Frequency of              35
                           Employees With Evaluations Having
                           Comments That Indicated the Employee
                           Helps Taxpayers Understand and Meet
                           Their Tax Responsibilities
                           Table IV.7: Estimated Frequency of              36
                           Employees With Evaluations Having
                           Comments That Indicated That Employee
                           Applies Tax Law With Integrity and
                           Fairness
                           Table IV.8: Estimated Frequency of              36
                           Employees With Evaluations Having
                           Comments That Described the
                           Interpersonal Skills of Employee
                           Table IV.9: Estimated Frequency of              36
                           Employees With Other Evaluation
                           Comments on Employee Interaction With
                           Taxpayer
                           Table IV.10: Estimated Frequency of             37
                           Employees Whose Files Indicated They
                           Did Not Receive Some Features of the
                           Current Evaluation Process
                           Table IV.11: Estimated Frequency of             37
                           Employees With Some Discussion of
                           Customer Service on Their Progress
                           Reviews, Field Visits, or Case
                           Reviews
                           Table IV.12: Estimated Frequency of             37
                           Employees With Missing or Duplicate
                           Narratives in at Least One of Their
                           Evaluations
                           Table VI.1: Estimated Frequency of              41
                           Evaluation Files Supported by Field
                           Visits, Case Reviews, and Midyear
                           Progress Reviews and the Number of
                           Field Visits, Case Reviews, and
                           Midyear Progress Reviews Discussing
                           Customer Service
                           Table VII.1: Information Received From          42
                           Supervisors on Their Time Allocation
                           During a Typical Month
                           Table VII.2: Information Received From          43
                           District Offices on Supervisors' Time
                           Allocation During a Typical Month
                                                                             
Figures                    Figure II.1: Employee Evaluation, Part          27
                           2, Revenue Officer
                           Figure II.2:  Employee Evaluation,              28
                           Part 2, Revenue Agent
                           Figure II.3:  Employee Evaluation,              29
                           Part 2, Tax Auditor
                                                                             

Abbreviations

IRS       Internal Revenue Service
NTEU      National Treasury Employees Union

B-281902

Page 18GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
     B-281902

     October 14, 1999

The Honorable Bill Archer
Chairman, Committee on Ways and Means
House of Representatives
 
The Honorable Amo Houghton
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
 
The enactment of the Internal Revenue Service
Restructuring and Reform Act of 19981 signaled
strong congressional concern that the Internal
Revenue Service (IRS) had been overemphasizing
revenue production at the expense of fairness and
consideration of taxpayers. The concern centered
on frontline enforcement employees who have face-
to-face dealings with taxpayers during the
potentially confrontational process of assessing
and collecting taxes.2 In response, the
Commissioner of Internal Revenue is seeking to
transform the agency's culture to one that more
fully embraces customer service as a core
organizational value. The Commissioner began this
transformation by replacing IRS' old mission
statement, which emphasized collecting the proper
tax at the least cost, with a new one, which
emphasizes providing world-class customer service
by helping taxpayers understand and meet their tax
responsibilities and applying the tax law with
integrity and fairness. IRS has begun a number of
long-range initiatives to make the new mission
statement a reality, including developing new
organizational performance measures and revamping
the overall performance management system.

In light of this, you asked us to review the
extent to which the current employee evaluation
system can support the new mission statement
during the period IRS will need to revamp its
performance management system. Specifically, the
objectives for this report are to (1) determine
the relative emphasis on revenue production,
efficiency, and customer service in enforcement
employees' annual written evaluations;3 (2)
identify features of the evaluation process that
might be used to greater advantage to reinforce
the importance of customer service; and (3)
describe IRS initiatives to promote customer
service, including those to encourage enforcement
employees to be taxpayer oriented. To address
these issues, we analyzed a representative sample
of the two most recent enforcement employee
evaluations prepared under IRS' old mission
statement for the period ending June 1998. Thus,
our results are most appropriately used as
baseline data for determining the degree to which
supervisors might need to change the way they
prepare employee evaluations under the current
process to better reflect IRS' new mission.

Results in Brief
IRS could take advantage of opportunities within
the current evaluation process to reinforce the
importance of customer service among its frontline
enforcement employees. There are a number of
reasons for doing so. Most importantly, the
current evaluation process is not aligned with
IRS' new mission statement because it emphasizes
revenue production more than customer service.
Also, it is uncertain when a new performance
management system that IRS is planning will become
fully operational. Accordingly, during the period
IRS needs to put its new system in place, we are
recommending that the Commissioner of Internal
Revenue make better use of the current evaluation
process to develop and encourage good customer
service among the agency's enforcement employees.

Enforcement employees' two most recent written
evaluations for the period ending June 1998
emphasized their revenue production and efficiency
skills more than their customer service skills.
Based on a representative sample, we estimated
that two-thirds of the comments contained in
evaluations related to revenue production and
efficiency issues and one-third related to
customer service. Looking only at the technical
skill portion of the evaluations, comments on
revenue production and efficiency outnumbered
customer service by about four to one. When
supervisors made comments on employees' customer
service skills, their comments did not emphasize
the importance of taking into account the
taxpayers' point of view or how well they
understood the tax issues being raised by the
enforcement employee.

Available evidence indicates that four features of
the current evaluation process could be used to
greater advantage to reinforce the importance of
customer service among enforcement employees. If
the features were to be used more, however, IRS
would need to consider the potential implications
for the way in which supervisors allocate their
time between these and other administrative tasks.

ï¿½    The narrative portion of an employee's
written evaluation provides flexibility for
supervisors to focus on employees' customer
service skills. Narrative is not required in all
situations, and we estimate that nearly half of
the employees received one or more evaluations
that did not have any narrative comments.
ï¿½    Midyear progress reviews, which are required,
provide supervisors with opportunities to give
interim feedback on aspects of case
handling-including any deficiencies-in relation to
customer service (and other) goals. We estimate
that 65 percent of employees' files did not
contain evidence that  such a review was done.
ï¿½    Mandatory reviews of a sampling of completed
cases present another opportunity for supervisors
to comment on customer service skills because
these are ex post facto examinations of documents
prepared by employees to support their case
decisions. We estimate that the evaluations of
about 30 percent of employees did not contain
evidence that they were supported by such reviews.
ï¿½    Field visits-in which the supervisor is to
attend employees' face-to-face meetings with
taxpayers-present an excellent opportunity to
reinforce customer service. Through field visits,
supervisors can directly observe employee-taxpayer
interactions. As such, they are natural vehicles
for providing coaching and feedback. However,
field visits are optional after the employee's
first year. Based on our analysis, field visits
were not documented for more than 60 percent of
employees during the 2-year period.

IRS has implemented a number of initiatives to
promote customer service. It has revised its
strategic goals; aligned them with its mission
statement; and introduced organizational
performance measures that are to balance customer
satisfaction, employee satisfaction, and business
results. In the coming years, IRS also plans to
revamp its entire performance management system,
including its employee evaluation process.
However, it is uncertain when such a system would
be fully operational. The challenges that IRS
faces in making a successful transition are
formidable, and the agency's track record for
implementing reform is poor.

In the meantime, IRS has taken several interim
actions to encourage enforcement employees to be
taxpayer oriented. It has incorporated into the
employee evaluation process a new retention
standard relating to the fair and equitable
treatment of taxpayers that employees must meet at
a passing level to retain their jobs. Also, the
Collection Division, where many enforcement
employees now work, has revised the revenue
officers' position description and critical job
elements. While IRS has issued comprehensive
guidance on how to implement the new retention
standard, it has not issued similar guidance on
how to implement the revised critical job elements
for revenue officers, and we are recommending that
it do so.

Background
The employee evaluation process is an important
tool for influencing employee behavior. At IRS, as
in other federal agencies, employee evaluations
are the official documents used to support many
personnel actions, including within-grade pay
increases, performance awards, promotions,
reductions-in-force, and adverse performance-based
actions. As stated in IRS documents, the process
is intended to accurately reflect employees'
performance, facilitate their development, and
improve and enhance their work.

For enforcement (and most other IRS) employees,
the evaluation process is to include an annual
formal written evaluation and a midyear progress
review. The annual written evaluation involves a
quantitative assessment of performance, which may
be supported by narrative commentary. Supervisors
who complete the evaluations are to address how
well employees perform a number of critical job
elements, which are job skills that must be
performed at or above a set standard for an
employee's performance to be judged acceptable.
The critical elements include technical skills-the
specialized skills needed to process cases, such
as workload management and case analysis-as well
as customer relations, which involves
interpersonal skills in dealing with taxpayers.

The number of critical job elements on which an
enforcement employee is evaluated generally has
ranged from five to seven, depending on his or her
job classification (e.g., tax auditor, revenue
officer, or revenue agent). Each element is rated
on a 5-point scale, with 1 being unacceptable and
5 being outstanding. A score of 3 is to be given
for performance deemed fully successful. The
evaluation forms for the types of enforcement
employees we reviewed have similar formats and
critical job elements, as the examples shown in
appendix II illustrate. Progress reviews are also
required, preferably at midyear, and are to be
communicated by supervisors to each of their
employees.

IRS policy imposes several additional
requirements. Notably, the supervisor who is
responsible for assigning an employee's work is
also responsible for preparing and signing his or
her evaluation. The evaluation must be reviewed,
approved, and signed by a higher level manager.
And to help ensure the accuracy and fairness of
the rating, the supervisor who prepares the
evaluation is to observe the performance of the
employee during the rating period.4

In evaluating employee performance, supervisors
are to exercise caution when describing employees'
skills and contributions vis-a-vis revenue
production and efficiency, so as not to improperly
emphasize the accomplishment of statistical or
numerical goals. IRS policy prohibits rating
officials from using enforcement statistics, such
as the average amount of taxes assessed or
collected, in employee evaluations. However,
during hearings held by the Senate Committee on
Finance in September 1997, witnesses alleged that
IRS' focus on enforcement statistics at the
organizational level was encouraging enforcement
officers to take unnecessary and inappropriate
enforcement actions against taxpayers.5 IRS'
Internal Audit subsequently reviewed the use of
such statistics by examination and collection
supervisors and found an atmosphere largely driven
by statistical measures. In November 1998, we
reported that 75 percent of revenue agents, tax
auditors, and revenue officers believed that
enforcement results affected their evaluations.6

Scope and Methodology
To meet our reporting objectives, we reviewed the
two most recent evaluations for each employee as
of June 1998 in a statistically representative
sample of 19,096 examination and collection
frontline employees and the supplemental
documentation supporting those evaluations.
Because the confidence intervals for the different
estimates vary in size, we report all of them in
appendix IV. We also interviewed responsible IRS
headquarters officials and 30 supervisors in 3
district offices and sent division chiefs in all
33 IRS district offices a survey on how
supervisors allocated their time.

We requested comments on a draft of this report
from the Commissioner of Internal Revenue. In a
letter dated September 17, 1999, we received his
comments, which are discussed at the end of this
letter and reprinted in appendix VIII.

We did our work at IRS headquarters in Washington
D.C., and the Northern California, Kansas-
Missouri, and Georgia District Offices between
November 1998 and June 1999 in accordance with
generally accepted government auditing standards.
(See app. I for more details on our objectives,
scope, and methodology.)

Employee Written Evaluations Emphasized Revenue
Production and Efficiency More Than Customer
Service
Our analysis of evaluations written when IRS' old
mission statement was in effect showed that,
overall, written evaluations of enforcement
employees emphasized revenue production and
efficiency more than customer service. In
addition, customer service comments, when made,
often did not emphasize the importance of taking
into account the taxpayer's point of view or how
well the taxpayer understood the tax issues being
raised by the enforcement employee.

Revenue Production and Efficiency Emphasized
As shown in table 1, about two-thirds of
supervisors' comments related to revenue
production and efficiency, and one-third related
to customer service. Looking only at the comments
in the technical skill portion of the evaluations,
comments on revenue production and efficiency
outnumbered customer service by about four to one.7
Of the comments in the customer relations element,
we estimate that about three-fourths related to
customer service and one-fourth to revenue
production and efficiency.

Table 1: Estimated Frequency of Customer Service
Comments and Revenue Production and Efficiency
Comments in Employee Evaluations
Skill element                     Comments
                         Customer    Revenue  Total
                         service production
                                        and
                                 efficiency
Technical skill                                
  Manage time and          1,455     22,998  24,45
workload                                         3
  Analyze cases and        6,187     24,579  30,76
determine proper                                 6
  course of action
  Process or work case     8,923     19,574  28,49
                                                 7
  Document actions and     1,736      4,287  6,023
conclusions
 Subtotal                 18,301     71,438  89,73
                                                 9
Customer relations        20,465      7,150  27,61
                                                 5
Total                     38,766     78,588  117,3
                                                54
Note: Confidence intervals for these estimates are
included in appendix IV.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

In considering these results, it is important to
point out that, to some extent, the design of IRS'
employee evaluations for enforcement personnel
could lead supervisors to focus on revenue
production and efficiency. This is because
customer relations is only one of five or more
equally weighted critical job elements upon which
employees are evaluated.8 Because the other, more
technical elements logically tend to involve
considerations of revenue production and
efficiency, the evaluation likely would focus on
such issues.

Comments on Customer Service Did Not Emphasize the
Importance of the Taxpayers' Point of View and
Understanding
Our analysis also revealed that, overall, many of
the customer service comments did not emphasize
the importance of taking into account the
taxpayers' point of view or whether they
understood the tax issues being raised by the
enforcement employee. To illustrate, consider the
following results on comments regarding employees'
assistance in helping taxpayers to better
understand their tax issues. As shown in table 2,
an estimated 53 percent of the employees received
evaluations discussing their efforts to describe
the law and regulations related to the examination
and collection process to the taxpayer. An
estimated 4 percent received evaluations
discussing efforts to check on taxpayers'
understanding of these issues by asking taxpayers
questions or soliciting their responses. Both
approaches can improve taxpayer understanding.
However, the latter approach-and comments as to
its use or lack thereof-can also help reinforce
the importance of targeting explanations to the
needs of the taxpayer.

Table 2: Estimated Frequency of Comments in
Evaluations That Indicated the Employee Helped
Taxpayers Understand and Meet Their Tax
Responsibilities
Evaluation comment                     Employeesa
                                     Number Percen
                                                 t
Described examination or collection  10,074     53
process to taxpayer
Provided Publication 1 to taxpayer    2,391     13
without explanationb
Explained appeals rights to taxpayer  2,076     11
Looked for ways to improve            1,302      7
taxpayer's future compliance
Checked taxpayer's understanding by     818      4
asking questions or soliciting
responses
Asked questions to identify taxpayer    526      3
needs
Note: Confidence intervals for these estimates are
included in appendix IV.
aTotal number of employees is 19,096.
bPublication 1 describes a taxpayer's rights to
appeal and the examination and collection process.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Most of the comments regarding whether the
employee applied the tax law with integrity and
fairness also did not reflect the taxpayer's point
of view. As shown in table 3, an estimated 31
percent of the employees had comments in their
evaluations discussing whether the employee
balanced taxpayer's interests with the
government's interests by listening to and
considering the taxpayer's position. Comments that
were more reflective of the taxpayer's point of
view, such as whether the employee considered a
variety of actions to try to meet taxpayer needs,
such as proposing an installment agreement to meet
the tax liability, or took proactive action, such
as identifying tax credits or deductions the
taxpayer was entitled to, were each made for about
6 percent of the employees.

Table 3: Estimated Frequency of Comments in
Evaluations That Indicated the Employee Applied
the Tax Law With Integrity and Fairness
Evaluation comment                     Employeesa
                                     Number Percen
                                                 t
Balanced taxpayer's interest with     5,861     31
government's interest
Applied law objectively               2,749     14
Considered variety of actions to try  1,226      6
to meet taxpayer's needs
Took proactive action in favor of     1,209      6
taxpayer
Note: Confidence intervals for these estimates are
included in appendix IV.
aTotal number of employees is 19,096.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

As shown in table 4, an estimated 38 percent of
the employees received evaluations indicating that
they listened to taxpayers, and 32 percent
received evaluations indicating that they were
courteous with taxpayers.

Table 4: Estimated Frequency of Comments in
Evaluations That Described the Employee's
Interpersonal Skills
Evaluation comment                     Employeesa
                                      Number Perce
                                                nt
Listened to the taxpayer               7,222    38
Was courteous or tactful with          6,039    32
taxpayer
Responded quickly to taxpayer          4,032    21
inquiries
Was well prepared or organized for     3,160    17
taxpayer contact
Treated taxpayer fairly                2,484    13
Treated taxpayer with respect          1,021     5
Note: Confidence intervals for these estimates are
included in appendix IV.
aTotal number of employees is 19,096.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Categorizing comments as we have done was
necessary for determining the frequency of these
comments. However, a simple count does not convey
the context in which the comments were made. While
comments about revenue production and efficiency
may be appropriate, our analysis found instances
where IRS missed an opportunity to balance these
comments with comments that could reinforce
customer service. For example, we estimated that
about 32 percent of the employees received
evaluations reinforcing the importance of the
employee being firm with the taxpayer or demanding
payment from the taxpayer. While such actions may
be warranted, some evaluations did not balance the
discussion with the actions the employee could
take to help taxpayers meet their payment
obligations, such as entering into an installment
agreement. To illustrate, one manager commented

"Over the last year the Service is emphasizing
payments be obtained at the conclusion of the
examination. It can truly be said that the agent
has kept to this philosophy. The agent always
seeks to obtain full payment of the deficiency,
penalties, and interest. This shows a strong
commitment to the Service programs."

     Further, the above comment was contained in
the narrative for the customer relations critical
job element and seems to equate good customer
relations with success in obtaining full payment
in every case.

About 24 percent of the employees received
evaluations that emphasized that the employee set
time limits or time frames for the taxpayer to
comply. While such actions may appropriately
encourage timely taxpayer response, our analysis
found instances where managers emphasized
timeliness at the expense of customer service. In
commenting on how an employee managed his time and
workload, one manager said

"You set clear, reasonable deadlines and follow-up
on them promptly, usually with an appropriate
collection tool rather than a phone call. Your
success in that regard is referenced above. During
the selection of cases for one entity review it
was noted that 84% of your inventory was less than
5 months old. On another it was noted that only 4
of your cases had been assigned for longer than
six months."

While this discussion of the employee's
performance may be appropriate, it was not
balanced with statements indicating the employee
considered the taxpayer's circumstances when
setting deadlines and taking follow-up actions.

Although the employee's actions from the
perspective of revenue production and efficiency
may warrant discussion, given IRS' new mission
statement, these comments logically would need to
be balanced with comments on the employee's action
from the perspective of customer service. Appendix
V contains examples on how supervisor comments can
reflect the old versus new mission statements.

Features of Current Evaluation Process Could Be
Used to Reinforce Customer Service
The current IRS evaluation process contains four
features that provide supervisors with
opportunities to reinforce the customer service
orientation reflected in IRS' new mission
statement. The narrative portion of employee
evaluations, midyear progress reviews, case
reviews, and field visits provide supervisors with
the flexibility to identify and provide feedback
on employees' customer service behaviors, as well
as on their technical skills.

Features of Current Evaluation Process Offer
Opportunities to Promote Good Customer Service
Skills
Available evidence indicates that IRS supervisors
could take greater advantage of four features to
emphasize customer service. They could use the
narrative part of the evaluation more fully. They
also could conduct more midyear progress reviews,
case reviews, and field visits and sit-ins.9

Employee Annual Evaluations
Employee annual evaluations are intended to
facilitate employees' development and improve and
enhance their work. The narrative portion of an
employee's written evaluation provides flexibility
to supervisors to focus on employees' customer
service skills. We estimated that over a 2-year
period, more than 40 percent of the employees
received evaluations with no narratives in one or
both evaluations. An additional estimated 12
percent of employees received an evaluation that
duplicated the narratives from the prior year,
sometimes repeated word-for-word. A further 13
percent had some narrative but at least one
evaluation with no narrative for at least one
critical job element. Table 5 shows the extent of
missing and duplicate narratives.

Table 5: Estimated Frequency of Missing or
Duplicate Narratives in at Least One of Two
Evaluations
Occurrence of the narratives in the    Employees
employee evaluations
                                     Number Percent
No narrative in both evaluations      1,948     10
No narrative in one evaluation        6,776     35
Duplicate narrative for all critical  2,304     12
job elements
No narrative for at least one         2,536     13
critical job element in at least
one evaluation
Original narrative for all critical   5,532     29
job elements for both years
Total                                19,096     99
Note: Percentage does not equal 100 due to
rounding. Confidence intervals for these estimates
are included in appendix IV.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

According to the examination and collection
division chiefs who completed our survey in IRS'
33 district offices, enforcement supervisors have
an average of 12 employees that they supervise. To
reduce the administrative burden associated with
completing the evaluations, IRS and NTEU agreed
that supervisors could omit narratives from
evaluations under two circumstances. Supervisors
can omit all narratives for employees who have
earned the same numerical rating in every critical
job element as the prior year. In these cases,
supervisors may revalidate the prior evaluation
without having to prepare a new evaluation. Also,
supervisors are allowed to omit narratives for
critical job elements when employees receive a
numerical rating of either 5 (outstanding) or 4
(exceeds fully successful) for those elements, and
the numerical rating is the same as or higher than
the prior year's rating. IRS' evaluation policies
do not address the use of duplicate narratives.

Midyear Progress Reviews
Midyear progress reviews provide supervisors with
opportunities to provide interim feedback on all
aspects of case handling, including any
deficiencies, relating to agency customer service
(and other) goals. While supervisors are required
to conduct midyear progress reviews, we estimated
that about 65 percent of the employees' files did
not contain evidence that a midyear progress
review was done. Also, for the employees for whom
reviews were documented, an estimated 36 percent
did not have reviews discussing the customer
relations critical job element.

Case Reviews
Supervisors are required to review a sample of
each employee's cases at least once a year. We
estimated that the evaluations of about 30 percent
of the employees did not contain evidence that
they were supported by case reviews. These reviews
are important because they provide supervisors
with the opportunity to examine employees' case
documentation to determine whether employees' case
decisions were made in accordance with the
agency's policies and procedures, including those
that relate to customer service. Also, we found
that supervisors did not always take advantage of
case reviews to review customer service. We
estimate that 23 percent of employees for whom
case reviews were documented did not receive
reviews that addressed the customer relations
critical job element.

Field Visits
According to IRS training documents, many
experienced supervisors see significant benefits
to field visits, which allow supervisors to
observe the employee interacting with taxpayers
and the employee's application of the law,
regulations, and procedures. One field visit is
required during an employee's first year, but
after the first year, the frequency and need for
visits is left to the supervisor's judgment. We
found that supervisors had not documented field
visits for an estimated 66 percent of the
employees and that for those employees for whom
visits were documented, an estimated 18 percent
had reviews with no indication that the customer
relations critical job element was discussed.

Increased Use of Evaluation Process Features Could
Reduce Time Spent on Other Administrative Tasks
More fully using the evaluation process features
discussed above, especially field visits, could
reduce the time supervisors spend on their other
administrative tasks. The 30 supervisors from 3
district offices that we visited estimated that
they were spending an average of about 25 percent
of their time on the 4 employee evaluation
activities and about 29 percent of their time on
clerical duties and other administrative and
collateral duties.10 All but one of these
supervisors we talked to indicated that direct
observation of employees was the best method for
evaluating customer service skills. However, 25 of
the 30 supervisors said that they did not have
time to spend in the field with their employees
and also complete their other supervisory and
administrative responsibilities. The supervisors'
administrative burden and its effect on
supervisors' ability to manage their employees was
also raised in a 1991 nationwide IRS survey of
revenue officer supervisors and more recently by
the Professional Managers Association.11 In a
December 17, 1998, message to the Commissioner of
Internal Revenue, the association stated, "One of
the major concerns of frontline managers is the
excessive administrative burden placed on them."

Supervisors we interviewed suggested several
options that would give them more time to spend in
the field with their employees and on other
employee evaluation activities. These options
included reducing their administrative duties,
providing clerical staff to take over some of
their administrative duties, and reducing the
number of employees that report to them. We did
not evaluate the feasibility or impact of these
alternatives. If the features were to be used
more, IRS would need to consider the potential
implications for the way in which supervisors
allocate their time between these and other
administrative tasks.

IRS Initiatives to Promote Customer Service
IRS has implemented a number of initiatives to
promote customer service, setting the stage for
the reform of IRS' entire performance management
system over the coming years. Thus far, IRS has
revised its strategic goals; aligned them with its
new mission statement; and introduced
organizational performance measures that are to
balance customer satisfaction, employee
satisfaction, and business results. IRS has also
taken several interim actions to promote customer
service in evaluating enforcement employees.

IRS' new strategic goals are intended to promote
customer service by (1) providing service to each
taxpayer by such means as being prompt,
professional, and helpful to taxpayers when
additional taxes may be due; (2) providing service
to all taxpayers by such means as increasing the
fairness of compliance; and (3) increasing
productivity by providing a quality work
environment for employees.

To evaluate how well it is achieving these new
goals, IRS has also developed new organizational
performance measures that are intended to balance
customer satisfaction, employee satisfaction, and
business results.12 Customer satisfaction is to be
measured through written or telephone surveys to
obtain taxpayers' perceptions of how they were
treated by IRS employees during interactions.
Employee satisfaction is to be measured through
annual employee surveys of work environment
satisfaction. The quality aspects of business
results are to be measured through samples of
completed cases taken under its various
operational quality review programs, while the
quantity aspects are to be based on data collected
on such outcome-neutral items as the number of
cases handled. IRS is in the process of providing
training to supervisors and employees on the new
balanced measures, which emphasizes customer
service.

IRS also intends to revamp its entire performance
management system as required by the Internal
Revenue Service Restructuring and Reform Act of
1998. Performance management systems are broad
systems for managing employee behavior that
incorporate the evaluation process and other
managerial actions. Office of Personnel Management
regulations define performance management as the
integrated processes agencies use to (1)
communicate and clarify organizational goals, (2)
identify accountability for accomplishing
organizational goals, (3) identify and address
developmental needs, (4) assess and improve
performance, (5) measure performance for
recognizing and rewarding accomplishments, and (6)
prepare appraisals.

It is difficult to determine when IRS' new system
would become fully operational. As we have
reported, IRS faces formidable challenges to
achieve this and other reforms related to its
ongoing modernization efforts.13 As we noted, IRS
is attempting to implement all of the reforms in a
comprehensive, rather than sequential, fashion.
The integrated approach that IRS is using makes
sense and has the potential to significantly
improve the way IRS interacts with taxpayers.
However, it also presents a significant challenge.
At the same time IRS is attempting to reform its
performance management system, it also is striving
to revamp its business practices, restructure its
organization, and implement new technology.
Effectively implementing such a broad and complex
set of interdependent changes will strain IRS'
management capacity. Having to make the transition
while continuing to operate the existing tax
administration process will strain the agency
further. These factors and IRS' poor track record
for implementing reforms suggest that it could be
years before a new performance management system
is fully operational.

IRS recognizes that revamping its performance
management system is a major effort. With respect
to enforcement employees in particular, IRS has
recognized that the evaluation process is an
important part of any performance management
system and may be a key to improving customer
service. In laying out its long-term strategy for
creating a customer-oriented work force, IRS has
identified the need for change in the evaluation
process for enforcement and other employees so
that supervisors communicate what constitutes good
customer service, ensure that employees adopt the
new desired behaviors, and assess and develop
employees' customer service skills. IRS has also
recognized that short-term improvements in
employees' customer service are needed and has
advised managers to think of ways they could begin
fostering the new orientation.

IRS has incorporated into the evaluation process a
new performance standard relating to the fair and
equitable treatment of taxpayers that employees
must meet at a passing level to retain their jobs.
The retention standard, which was required by the
IRS Restructuring and Reform Act, says that
employees must "Administer the tax laws fairly and
equitably, protect all taxpayers' rights, and
treat each taxpayer ethically with honesty,
integrity, and respect." When evaluating
employees, supervisors are to first determine
whether the employee met the retention standard
and, if the employee did, then proceed to evaluate
the employee on the critical job elements. IRS
officials expect that most employees will meet the
retention standard.

The new retention standard was put in place in
July 1999. IRS issued guidance on how managers
were to implement the retention standard. The
guidance included examples of behaviors that would
meet the standard and those that would not.
Supervisors were also instructed to develop other
examples of behavior tailored to their employees'
occupations. By July 31, 1999, supervisors were to
have held individual or group meetings with their
employees to discuss how employees would be
evaluated under the standard.

In addition, the Collection Division has taken two
steps to restructure its evaluation system for
revenue officers to better reflect the increased
value that IRS now places on customer service. The
division has (1) revised its standard position
description for revenue officers and (2) reduced
the number of critical job elements for revenue
officers from five to three. The three revised
critical job elements of customer relations and
assistance, case resolution, and case management
take the place of time and workload management,
case decisions, investigation and analysis,
accounts maintenance, and customer relations.

The revised elements became effective in July
1999. The guidance issued to IRS district
collection officials on implementing the revised
elements is not as comprehensive as the guidance
issued for the new retention standard. The
guidance instructs supervisors to meet with their
employees to discuss the revised position
description and critical job elements. It does
not, however, explain or provide examples of how
the revised elements are to be incorporated into
the evaluation process or to be used to evaluate
revenue officers.

In a related effort, the Examination Division was
exploring the extent to which critical job
elements for revenue agents should reflect IRS'
auditing standards. By linking the critical job
elements with the auditing standards, the
Examination Division hoped to reduce the number of
standards supervisors must refer to when
evaluating employee performance. At the time we
completed our fieldwork, the Examination Division
had not yet established a time frame for
completing the initiative, which began in April
1999.

Conclusions
To fulfill its new mission statement, IRS will
need to make a significant departure from the past
supervisory practice of emphasizing revenue
production and efficiency in employee evaluations
to one that balances these goals with good
customer service. IRS recognizes that making
changes to its employee evaluation process will be
important in bringing about cultural change and
establishing customer service as an agency
priority. IRS expects to change the process as
part of a larger reform of its entire performance
management system.

However, because of the magnitude of the changes
IRS is undertaking, it is uncertain when such a
system will become fully operational and a new
employee evaluation process put in place. In the
meantime, IRS could take better advantage of
opportunities within the current evaluation
process to reinforce the importance of customer
service among its frontline enforcement employees.

Recommendations
We recommend that the Commissioner of Internal
Revenue develop an interim approach for making
better use of enforcement employees' performance
evaluations to develop and encourage good customer
service. The approach could include providing
guidance on the conditions under which supervisors
should provide narrative for critical job elements
and conduct field visits in assessing individual
employees. As part of developing the approach, the
Commissioner should determine whether to better
enforce the existing agency policies requiring
that supervisors conduct midyear progress reviews
of all enforcement employees and review a sample
of their caseloads annually.

We also recommend that the Commissioner ensure
that Collection Division supervisors are given
more comprehensive guidance on how the revised
elements are to be incorporated into the
evaluation process and used to evaluate revenue
officers.

Agency Comments and Our Evaluation
     The Commissioner of Internal Revenue provided
written comments on a draft of this report in a
September 17, 1999, letter, which is reprinted in
appendix VIII. We also met with senior Collection
and Examination officials on August 26, 1999, to
obtain oral comments from them on the draft
report. We have incorporated technical comments
from that meeting and the Commissioner's letter
where appropriate. Our evaluation of IRS' comments
focuses on those of the Commissioner, since his
comments and those provided by IRS officials were
generally consistent.

     The Commissioner's letter emphasized that IRS
is providing training to supervisors and employees
on the balanced measurement system that would
reinforce IRS' increased emphasis on good customer
service. Although IRS' training on performance
measures was not part of our review, we said in
our testimony on modernization that-given the
critical role that frontline employees will have
in improving taxpayer service-such training will
be important to effectively align IRS' culture
with its new mission statement.14

     More specific to our report, the Commissioner
noted that the report provides timely information
on IRS' current evaluation system. He also agreed
with our recommendation to develop an interim
approach for making better use of enforcement
employees' performance evaluations to develop and
encourage good customer service. He said IRS is
developing a Manager's Guide to Performance
Management that would provide detailed information
on the entire appraisal process, including
monitoring and evaluating employee performance. He
said that the guide, which is expected to be
issued in October 1999, would specifically address
the conditions under which managers should provide
a narrative for critical job elements and conduct
field visits. He also stated that mandatory mid-
year progress reviews are to be conducted.

     The Commissioner did not specifically say if
he would enforce existing agency policies
requiring supervisors to review a sample of
employees' caseloads.  However, he stated that
current IRS procedures require periodic reviews of
employees' caseloads, which we interpret to mean
the current requirement for annually reviewing a
sample of employees' caseloads will be enforced.
As our report points out, case reviews are
important for determining whether employees' case
decisions were made in accordance with agency
policies and procedures.

     The Commissioner stated that IRS plans to
discuss with NTEU representatives our
recommendation that more comprehensive guidance on
the revised critical job elements be provided to
Collection supervisors. He stated that the revised
critical job elements represent a reordering of
previous job elements under the current appraisal
system and that IRS worked closely with NTEU to
define the features of this appraisal system.
Therefore, IRS plans to collaboratively work with
NTEU to develop any additional guidance regarding
incorporating the revised elements for revenue
officers into the evaluation process.  We believe
that this is an appropriate approach to take. Our
recommendation is based on the premise that
customer service starts with the frontline
employees, who need to know what IRS expects, and
that supervisors are a key link in explaining
those expectations.  NTEU representatives should
be knowledgeable of the sort of guidance
supervisors need to evaluate revenue officers and
can help IRS develop guidance about IRS'
expectations regarding acceptable performance
under the revised critical job elements, including
good customer service.

     We are sending copies of this report to
Representative Charles B. Rangel, Ranking Minority
Member, Committee on Ways and Means;
Representative William J. Coyne, Ranking Minority
Member, Subcommittee on Oversight, Committee on
Ways and Means; various other congressional
committees; the Honorable Lawrence H. Summers,
Secretary of the Treasury; the Honorable Charles
O. Rossotti, Commissioner of Internal Revenue; and
other interested parties. We will also make copies
available to others on request.

If you have any questions, please contact me at
(202) 512-9110 or Ralph T. Block at (415) 904-
2000. Other major contributors are acknowledged in
appendix IX.

Margaret T. Wrightson
Associate Director, Tax Policy
  and Administration
 
_______________________________
1Public Law 105-206, July 22, 1998.
2Enforcement employees exercise judgment regarding
taxpayers' tax liability or ability to pay. Our
report focuses on revenue agents and tax auditors,
who deal directly with the taxpayer when auditing
tax returns, and revenue officers, who deal
directly with the taxpayer when collecting unpaid
taxes.
3We used the language of IRS' old and new mission
statements to form categories for comments
pertaining to revenue production, efficiency, and
customer service as described in appendix I. For
example, comments on customer service were
categorized as comments regarding (1) helping
taxpayers understand and meet their tax
responsibilities and (2) applying the tax laws
with integrity and fairness. We also included a
category for interpersonal skills because IRS has
emphasized that quality interactions with
taxpayers are an important component of customer
service.
4The procedures used in the evaluation process and
the resulting personnel actions are negotiated by
IRS and the National Treasury Employees Union
(NTEU) and are covered by the union agreement.
5The Internal Revenue Restructuring Act of 1998
prohibits IRS from using tax enforcement results
to evaluate its employees or to impose or suggest
production quotas or goals. This provision
replaced a similar prohibition included in the
Technical and Miscellaneous Revenue Act of 1988,
which applied only to employees involved in
collections activities and their immediate
supervisors.
6IRS Personnel Administration: Use of Enforcement
Statistics in Employee Evaluations (GAO/GGD-99-11,
Nov. 30, 1998).
7As described in detail in appendix IV, the
critical elements of different types of
enforcement employee evaluations use somewhat
different language to describe similar critical
elements. Thus, to determine the frequency of
comments on revenue production, efficiency, and
customer service, we grouped the various elements
into five skill groups-four relate to the
employee's technical skills and one, customer
relations, relates to customer service.
8Revenue agents are evaluated on seven critical
job elements, tax auditors are evaluated on six
critical job elements, and revenue officers are
evaluated on five critical job elements. Each
position has a customer relations critical job
element.
9Sit-ins are conducted by supervisors of tax
auditors at their IRS office. Since both field
visits and sit-ins represent supervisors observing
interactions between their employees and
taxpayers, we are calling both activities field
visits in this report.
10Division chiefs who completed our survey in the
33 district offices estimated that their
supervisors were spending an average of about 28
percent of their time on the 4 employee evaluation
activities and 18 percent of their time on
clerical duties and other administrative and
collateral duties. Appendix VII summarizes how the
30 supervisors we interviewed allocated their time
during an average month and presents the results
of our survey of division chiefs.
11The Professional Managers Association represents
supervisors and managers of federal agencies,
including IRS.
12See also Small Business: Taxpayers Face Many
Layers of Requirements (GAO/T-GGD-99-76, Apr. 12,
1999) and IRS Management: Business and Systems
Modernization Pose Challenges (GAO/T-GGD/AIMD-99-
138, Apr. 15, 1999).
13IRS Management: Formidable Challenges Confront
IRS as It Attempts to Modernize (GAO/T-GGD/AIMD-99-
255, July 22, 1999).
14See GAO/T-GGD/AIMD-99-255, July 22, 1999.

Appendix I
Objectives, Scope, and Methodology
Page 25GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
Objectives
Our objectives in this report are to (1) determine
the relative emphasis on revenue production,
efficiency, and customer service in enforcement
employees' annual written evaluations; (2)
identify features of the evaluation process that
might be used to greater advantage to reinforce
the importance of customer service; and (3)
describe IRS initiatives to promote customer
service, including those to encourage enforcement
employees to be taxpayer oriented.

Scope and Methodology
To determine the relative emphasis on revenue
production, efficiency, and customer service
comments in annual evaluations written under IRS'
former mission statement, we reviewed the two most
recent evaluations for each employee as of June
1998 in a statistically representative sample of
19,096 examination and collection frontline
employees.1 For comments on revenue production, we
included comments such as those discussing (1)
dollars assessed or collected by the employee, (2)
number of cases in which the taxpayer agreed with
IRS' assessment, or (3) use of collection tools by
the employee to secure payment from the taxpayer.
For comments on efficiency, we included comments
such as those discussing (1) timeliness and
output, such as the number of overage cases, which
are cases that have been in inventory for more
than a certain length of time, and (2) the average
number of hours needed to complete work on a
return.

For customer service comments, we included
comments on the extent to which the employee (1)
helped taxpayers to understand and meet their tax
responsibilities and (2) applied the law with
integrity and fairness. We also included a
category for interpersonal skills because IRS has
emphasized that quality interactions with
taxpayers are an important component of customer
service. To validate our approach, we discussed
our criteria with IRS headquarters officials in
the Collection and Examination Divisions, who
agreed that it accurately captured their new
customer-service orientation. Appendix III
provides a more detailed explanation of our
sampling methodology, and appendix IV provides a
summary of the results of our analysis.

To identify features in the current evaluation
process that could be used to reinforce the
importance of customer service, we reviewed the
same two evaluations mentioned above. We counted
the number of evaluations without narrative
descriptions, and the number of evaluations that
contained evidence that they were based on field
visits, case reviews, and midyear progress reviews
that included comments on the customer relations
critical job element. To strengthen our
understanding of how supervisors allocated their
time, we interviewed 30 supervisors from the
Northern California, Kansas-Missouri, and Georgia
District Offices, which we chose because of their
proximity to our offices, and sent a survey to
examination and collection division chiefs in IRS'
33 district offices.

To obtain data describing any IRS initiatives to
promote customer service, we interviewed IRS
headquarters officials, attended IRS training
sessions introducing IRS' new initiatives, and
reviewed draft documents describing the new
initiatives.

Our review was subject to some limitations. Our
choice of evaluative statements as supporting
revenue production, efficiency, and customer
service, and our analysis of supervisors' written
comments required us to make judgments that were,
in part, subjective. To maximize the objectivity
of our analysis, we (1) obtained IRS' concurrence
that the categories we used to characterize the
evaluative statements were appropriate and (2)
conducted two separate and independent assessments
of each sampled evaluation. When differences
arose, a collaborative approach was used to
resolve them. Although we did not verify responses
from our survey of division chiefs, we did discuss
supervisory and administrative responsibilities
with 30 supervisors in the field.

_______________________________
1See GAO/GGD-99-11, Nov. 30, 1998.

Appendix II
Samples of Employee Evaluation Forms
Page 27GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
The evaluation forms for revenue officers, revenue
agents, and tax auditors are very similar and have
three parts. The first part provides basic
information on the employee; assesses the
employee's competence level; and provides an
overall rating of the employee, such as
outstanding or fully successful.

The second part, shown in figures II.1, II.2, and
II.3, is tailored to the job classification. It
lists the critical job elements and provides the
supervisor's numerical rating of how well the
employee performed.

The third part contains the narrative to support
the numerical rating. We have not included a
sample for this part because there is no official
document for the narrative part of the evaluation.
The supervisors attach as many typed or
handwritten pages of narrative as they feel are
necessary.

Figure II.1: Employee Evaluation, Part 2, Revenue
Officer

Figure II.2:  Employee Evaluation, Part 2, Revenue
Agent

Figure II.3:  Employee Evaluation, Part 2, Tax
Auditor

Appendix III
GAO Sampling Methodology
Page 31GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
This appendix discusses the sampling methodology
we used to determine the extent to which
evaluations referred to customer service and the
extent to which supervisors used various features
of the current evaluation system to monitor and
give feedback on employees' customer service
skills.

Sample Design
To minimize disruption of IRS operations, we used
the same sample for this report that we drew for
our report entitled IRS Personnel Administration:
Use of Enforcement Statistics in Employee
Evaluations (GAO/GGD-99-11, Nov. 30, 1998).

To determine the extent to which (1) evaluations
referred to revenue production, efficiency, and
customer service and (2) supervisors used various
features of the current evaluation process, we
reviewed the evaluations of a sample of 300 IRS
employees from the 3 enforcement employee groups
of interest: tax auditors, revenue agents, and
revenue officers.

IRS managers are not required to write performance
narratives for every rating dimension for every
employee each year. To review more narratives, two
ratings were requested from IRS for each employee
in the sample. The results presented in the report
reflect only employees who received two
performance evaluations during the period of our
review.

Sample Disposition
From our sample of 300 IRS employees, we received
usable responses for 267 employees for a response
rate of approximately 89 percent. We eliminated
all nonrespondents, including those for whom we
did not have two evaluations or who functioned in
a specialized capacity, such as computer audit
specialist (known ineligible), and those for whom
we did not receive responses (unknown
eligibility). Disposition of the sampled cases is
provided in table III.1.

Table III.1: Disposition of Sample Cases
Definition      Initial selection   Nonrespondents
of strata
             Number Number  Eligible  Known Unknown
                 in     of  responde inelig eligibi
             popula selecti      nts   ible    lity
               tion    ons
Tax auditors  1,867     30       28      1       1
Revenue      11,796    135      123      6       6
agents
Revenue       5,433    135      116     10       9
officers
Total        19,096    300      267     17      16
Source: IRS data and GAO sample.

Calculation of Survey Estimates
After weighting the responses to account for
selection probabilities and nonresponse, we were
able to make estimates of the percentage of IRS
employees who received a narrative referring to
customer service in at least one of their two most
recent employee evaluations prepared for the
period ending June 1998. In addition, we were able
to make estimates of the percentage of employees
whose files indicated they received field visits,
case reviews, and midyear progress reviews
referring to customer service, as well as the
number of evaluations lacking narrative for one or
more critical job elements.

Sampling Error
Because we reviewed a statistical sample of
employee evaluations, each estimate developed from
the sample has a measurable precision or sampling
error. The sampling error is the maximum amount by
which the estimate obtained from a statistical
sample can be expected to differ from the true
population value being estimated. Sampling errors
are stated at a certain confidence level-in this
case, 95 percent. This means that the chances are
19 out of 20 that if we reviewed evaluations for
all IRS employees in the groups of interest, the
true value obtained for a question on these
evaluations would differ from the estimate
obtained from our sample by less than the sampling
error for that question. Because the confidence
intervals for the different estimates vary in
size, we report all of them in appendix IV.

Appendix IV
Criteria for Categorizing Narrative Statements and
the Results of Our Analysis
Page 37GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
This appendix discusses the criteria we used to
categorize narrative statements in evaluations of
enforcement employees and the results of our
analysis of that data.

We reviewed the two latest evaluations for the
period ending June 1998 for each employee in a
statistically representative sample of 267 of
19,096 examination and collection enforcement
employees. For each narrative describing
performance in a critical job element, we
documented comments on (1) revenue production, (2)
efficiency, and (3) customer service. Comments
about revenue production included statements
discussing the dollars assessed or collected by
the employee, the number of cases in which the
taxpayer agreed with IRS' assessment, or the use
of collection tools by the employee to secure
payment from the taxpayer. Comments on efficiency
included statements discussing timeliness and
output, such as the number of overage cases, and
the average number of hours needed to complete
work on a return. Customer service comments were
categorized as comments regarding (1) helping
taxpayers understand and meet their tax
responsibilities and (2) applying the tax laws
with integrity and fairness. We also included a
category for interpersonal skills because IRS has
emphasized that quality interactions with
taxpayers are an important component of customer
service.

Comments on skills that we looked for in
determining whether the narrative contained a
customer service comment are listed below. IRS
headquarters officials agreed that these behaviors
were appropriate for the customer service critical
job element.

The following are comments on the extent to which
the employee helped taxpayers understand and meet
their tax responsibilities:

ï¿½    Employee asks questions to identify taxpayer
needs.
ï¿½    Employee explains the examination or
collection process to taxpayer.
ï¿½    Employee provides Publication 1 to taxpayer
without explanation.
ï¿½    Employee explains taxpayer rights to
taxpayer.
ï¿½    Employee checks taxpayer's understanding of
issues involved, process involved, and what's
expected by asking questions or soliciting a
response from the taxpayer.
ï¿½    Employee looks for ways to improve taxpayer's
future compliance.

The following are comments on the extent to which
the employee applied tax law with integrity and
fairness:

ï¿½    Employee applies law objectively.
ï¿½    Employee considers a variety of actions to
try to meet the taxpayer's need.
ï¿½    Employee takes proactive action in favor of
the taxpayer.
ï¿½    Employee balances taxpayer interest with
government interest.

The following are comments on the employee's
customer service interpersonal skills:

ï¿½    Employee treats taxpayer with respect.
ï¿½    Employee treats taxpayer fairly.
ï¿½    Employee is courteous and tactful in dealings
with taxpayer.
ï¿½    Employee is well prepared or organized for
taxpayer contact.
ï¿½    Employee responds quickly to taxpayer's
inquiries or problems.
ï¿½    Employee listens to the taxpayer.

We also documented additional comments about an
employee's interaction with the taxpayer such as
(1) the employee is firm with or demands payment
from the taxpayer and (2) the employee sets time
frames or limits for the taxpayer.

The critical job elements are different for
revenue agents, tax auditors, and revenue
officers. In order to discuss the narrative
comments for all three employee types together, we
grouped the critical job elements for each
employee type into five skill groups, as shown in
table IV.1. IRS Examination and Collection
officials agreed with our grouping of the job
elements into those skill groups.

Table IV.1: Grouping of Critical Job Elements for
Each Employee Classification Into Five Skill
Groups
Skill group            Critical job elements
                Revenue agent Tax auditor  Revenue
                                        officer
How well        Workload      Inventory    Time and
employees       management    management   workload
manage their                             management
time
and workload
How well        Issue         Preexaminat  Case
employees       identificatio ion          decisions
analyze cases   n;            analysis;
and determine   fact finding  tax law
proper                       interpretat
course of                    ion and
action                       application
How well        Application   Examination  Investigat
employees       of accounting techniques   ion and
process or work and auditing              analysis
a case          principles;
               application
               of tax law
How well        Written       Preparation  Accounts
employees       product       of           maintenanc
document their               workpapers   e
actions and                  and reports
conclusions
How well        Customer      Taxpayer     Customer
employees       relations     relations    relations
interact with
the
taxpayer
Tables IV.2 through IV.12 present the results of
our analysis of narrative comments made by
supervisors in our sample of enforcement
employees. We analyzed two evaluations for each
employee. In table IV.3 and table IV.4, we
combined the data from the two evaluations into
one record for each employee.

Table IV.2: Estimated Frequency of Comments on
Customer Service, Revenue Production, and
Efficiency in Evaluations of Employee Technical
Skills
Technical skill               Comment
                 Custome    Revenue Effici    Total
                       r   producti  ency
                 service         on
Manage time and    1,455      2,863 20,135   24,453
workload         [750 to     [1,868 [18,24  [22,065
                  2,161]         to  5 to       to
                             3,858] 22,026  26,842]
                                        ]
Analyze            6,187     17,040 7,539   30,766
cases/determine   [4,791    [14,762 [5,487  [2,6971
proper course of      to         to    to       to
action             ,583]    19,317] 9,592]  34,561]
Process or work    8,923     12,789 6,786   28,497
case              [7,168    [10,555 [4,591  [24,462
                      to         to    to       to
                 10,678]    15,022] 8,980]  32,533]
Document actions   1,736        734 3,554    6,023
and conclusions  [882 to    [267 to [2,358   [4,492
                  2,590]     1,200]    to       to
                                   4,750]   7,554]
Total             18,301     33,425 38,014   89,739
                 [15,377    [28,959 [32,25  [80,358
                      to         to  1 to       to
                 21,226]    37,890] 43,777  99,122]
                                        ]
Note 1: Confidence intervals are bracketed.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.3: Estimated Frequency of Comments
Related to Revenue Production and Efficiency and
Customer Service
Critical element reviewed              Comments
                                   Percen Confidenc
                                       t         e
                                          interval
Customer service only                             
  Revenue production and              26  22 to 30
efficiency comments
  Customer service comments           74  70 to 78
All critical elements                             
  Revenue production and              67  65 to 69
efficiency comments
  Customer service comments           33  31 to 35
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.4: Estimated Frequency of Employees With
Narratives Who Had at Least One Customer Service
Comment in the Customer Service Critical Job
Element
Customer service              Employees
narrative
                   Numbe  Confidence Percen Confide
                      ra   interval      t     nce
                                           interva
                                                 l
Comment present    14,29     13,229     89 84 to94
                       1   to15,353
Comment not        1,742   1,009 to     11  6 to16
present                       2,475
Total with         16,03               100        
narrative              3
aTotal number of employees is 19,096.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.5: Estimated Frequency of Employees With
at Least One Comment on One or Both Evaluations
That Would Support One or Both of the Elements in
IRS' New Mission Statement
Customer service              Employees
narrative
                   Number  Confidence Perce Confiden
                           interval    nt       ce
                                          interval
Comment present    13,667  12,563 to    72 66 to 78
                             14,771
Comment not        5,429   4,325 to    28 23 to 34
present                       6,533
Total              19,096              100         
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.6: Estimated Frequency of Employees With
Evaluations Having Comments That Indicated the
Employee Helps Taxpayers Understand and Meet Their
Tax Responsibilities
Evaluation comment             Employees
                     Number Confidenc Perce Confiden
                         a         e   nt       ce
                            interval      interval
Explained            10,074  8,871 to   53 46 to 59
examination or                11,278
collection process
to taxpayer
Provided Publication 2,391  1,866 to   13 10 to 15
1 to taxpayer                  2,916
without explanation
Employee explained   2,076  1,425 to   11  7 to 14
appeals rights to              2,728
taxpayer
Looked for ways to   1,302    701 to    7  4 to 10
improve taxpayer's             1,903
future compliance
Checked taxpayer's     818    343 to    4   2 to 7
understanding by               1,293
asking questions or
soliciting responses
Asked questions to     526    101 to    3   1 to 5
identify taxpayer                951
needs
aTotal number of employees is 19,096.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.7: Estimated Frequency of Employees With
Evaluations Having Comments That Indicated That
Employee Applies Tax Law With Integrity and
Fairness
Evaluation comment              Employees
                       Numbe Confiden Perce Confide
                          ra      ce    nt     nce
                            interval       interva
                                                 l
Balanced taxpayer's    5,861 4,739 to    31   25 to
interest with                  6,984            37
government interest
Applied law            2,749 1,865 to    14   10 to
objectively                    3,632            19
Considered variety of  1,226  645 to     6  3 to 9
actions to try to meet         1,807
taxpayer's needs
Took proactive action  1,209  620 to     6  3 to 9
in favor                       1,798
of taxpayer
aTotal number of employees is 19,096.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.8: Estimated Frequency of Employees With
Evaluations Having Comments That Described the
Interpersonal Skills of Employee
Evaluation comment              Employees
                       Numbe Confiden Perce Confide
                          ra      ce    nt     nce
                            interval       interva
                                                 l
Listened to the        7,222 6,056 to    38   32 to
taxpayer                       8,389            44
Was courteous or       6,039 4,956 to    32   26 to
tactful with taxpayer          7,121            37
Responded quickly to   4,032 3,056 to    21   16 to
taxpayer inquiries             5,008            26
Was well prepared      3,160 2,262 to    17   12 to
and/or organized for           4,058            21
taxpayer contact
Treated taxpayer       2,484 1,671 to    13 9 to 17
fairly                         3,297
Treated taxpayer with  1,021  458 to     5  2 to 8
respect                        1,584
aTotal number of employees is 19,906.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.9: Estimated Frequency of Employees With
Other Evaluation Comments on Employee Interaction
With Taxpayer
Evaluation comment              Employees
                      Numbe Confiden Perce Confiden
                         ra       ce   nt       ce
                            interval      interval
Is firm with and/or   6,02  4,958 to   32 26 to 37
demands payment from     2     7,085
the taxpayer
Sets time frames or   4,64  3,840 to   24 20 to 28
limits for the           7     5,454
taxpayer
aTotal number of employees is 19,096.
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Table IV.10: Estimated Frequency of Employees
Whose Files Indicated They Did Not Receive Some
Features of the Current Evaluation Process
Features of the                Employees
evaluation
process
                     Numbe Confidence Perce Confide
                         r  interval    nt     nce
                                           interva
                                                 l
Did not receive any  8,725  7,522 to    46   39 to
narrative                      9,928            52
Did not receive      12,46 11,344 to    65   59 to
midyear reviews          0    13,576            71
Did not receive case 5,817  4,696 to    30   24 to
review                         6,938            36
Did not receive      12,62 11,483 to    66   60 to
field visit              8    13,773            72
Source: GAO analysis of employee evaluations for
the 2-year period ending June 1998.

Table IV.11: Estimated Frequency of Employees With
Some Discussion of Customer Service on Their
Progress Reviews, Field Visits, or Case Reviews
Features of the                 Employees
evaluation process
                      Numbe Confidenc Perce Confiden
                         r         e   nt       ce
                            interval      interval
Midyear progress      2,380  1,581 to   36 26 to 46
review                         3,179
Review of completed   3,092  2,167 to   23 17 to 30
cases                          4,018
Supervisor field      1,146    546 to   18  9 to 26
visit                          1,746
Source: GAO analysis of employee evaluations for
the 2-year period ending June 1998.

Table IV.12: Estimated Frequency of Employees With
Missing or Duplicate Narratives in at Least One of
Their Evaluations
Condition of the               Employees
narrative
                     Numbe Confidenc Percen Confiden
                         r        e     t       ce
                           interval       interval
No narrative in      1,948 1,238 to    10  6 to 14
either evaluation             2,659
No narrative in at   6,776 5,622 to    35 29 to 42
least one evaluation          7,931
Duplicate narrative  2,304 1,514 to    12  8 to 16
in both evaluations           3,094
No narrative for at  2,536 1,715 to    13  9 to 18
least one critical            3,358
job element in at
least one evaluation
Narratives included  5,532 4,432 to    29 23 to 35
for all critical job          6,631
elements for both
years
Total                19,09             99         
                         6
Note:  Percentage does not total to 100 due to
rounding.
Source: GAO analysis of employee evaluations for
the 2-year period ending June 1998.

Appendix V
Examples of Supervisors' Comments From Employee
Evaluations
Page 39GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
This appendix provides examples of written
comments by supervisors from evaluations of the
enforcement employees reviewed for this report.
The comments are grouped in two categories: (1)
comments on revenue production and efficiency that
reflect IRS' old mission statement and (2)
comments on customer service behaviors that
reflect IRS' new mission statement. At the
beginning of each excerpt from an employee
evaluation, we note which of the critical job
elements the statements are from.

Comments That Reflect Revenue Production and
Efficiency
The following illustrate comments that would
appear to encourage and support revenue production
and efficiency.

ï¿½    Critical Job Element Category: Analyze Cases
to Determine Course of Action

"Time spent, both in terms of hours applied and
months in process, was on the high end of an
acceptable range. Decisions need to be made in a
more timely manner and weighed against the
ultimate tax potential of the issues being
developed."

"You do not hesitate to use the full array of
collection tools to resolve a case or move it
along. Summonses, prompt assessments, levies, and
seizures have all been frequently used with great
success throughout the rating period . . . . You
have maintained a vigorous program of appropriate
enforcement with many seizures resulting in full
payment and some others going to Chapter 11. These
have included restaurants, an attorney's office, a
bakery, a social club and several vehicles."

ï¿½    Critical Job Element Category: Managed Time
and Workload

"You set clear, reasonable deadlines and follow-up
on them promptly, usually with an appropriate
collection tool rather than a phone call. Your
success in that regard is referenced above. During
the selection of cases for one entity review it
was noted that 84% of your inventory was less than
5 months old. On another it was noted that only 4
of your cases had been assigned for longer than
six months."

ï¿½    Critical Job Element Category: How Well
Employee Processed Case

"On another case, she found that the taxpayers had
no mortgage on their home, she dealt with the
taxpayers and convinced them that they needed to
take out a mortgage. They took out that mortgage
and fullpayed the liability."

ï¿½    Critical Job Element Category: Interaction
With Taxpayers

"Your case files show that you consistently demand
full payment, warn T/Ps [taxpayers] of enforcement
and document Publication 1. receipt. Taxpayers'
rights are fully observed with respect to lien
filing and final notice issuance before levy.
During the year you have had frequent enforcement
activity with BMF [Business Master File] cases . .
.. The fact that so many of these led to full
payment is indicative of your proper direction and
refusal to accept less. With many of these types
of cases, effective customer relations means
standing firmly behind your correct decisions and
you have done that very well."

"[Employee name] does a very good job in
developing pertinent information through the
interview process. On several cases [employee
name] was able to pick up subsequent and related
returns, get agreement, collect deficiency and
close returns out in a short time frame."

"Your attention to the aspects of this element has
remained high. You continue to observe the rights
of taxpayers by professionally demanding full
payment and/or delinquent returns. You also
continue to consistently explain and warn of
enforcement actions, which you also document
fully. You conduct yourself in a very businesslike
way and demonstrate an industrious manner."

"Your personal contacts and discussions are
conducted in a firm business-like and professional
manner. The customer relation aspects of the -A-
and -B- case examinations are significant. The
examinations were conducted in a timely manner
with documented efforts to maintain the forward
momentum of the examinations. You applied good
time saving techniques, conducted the majority of
the audit at the taxpayer's place of business and,
in general, conducted the examinations in a prompt
and efficient manner. In both instances, you
proposed significant adjustments as a result of
your audit efforts, and secured the taxpayer's
agreement and checks in full settlement of the
resulting tax, which, again, was significant. Not
only did you save the taxpayer from additional
charges by collecting the tax on the spot, but you
also supported the Servicewide objective of
maintaining a high collectibility rate, thereby
reducing costs of collecting taxes due."

Comments That Reflect Customer Service
In contrast to the above comments that appear to
support revenue production and efficiency, the
following comments appear to support the type of
customer service that is more reflective of IRS'
new mission statement.

ï¿½    Critical Job Element Category: Analyze Cases
to Determine Course of Action

"You approach your audits in an objective manner
and always consider the taxpayer's position on
issues that are unagreed. You generally cite the
tax law for each adjustment you make ..You
document the taxpayer's position on unagreed
issues and explain to them your position and the
tax law's applications."

"You make a point to explain all the facts, apply
the proper code section, regulations, and include
numerous cases to support your position and
conclusion. You are able to identify factual
differences between your issues and those in court
cases and rulings. You ensure taxpayer is in
agreement as to the facts and the only
disagreement is the question of the law."

ï¿½    Critical Job Element Category: Interaction
With Taxpayers

"You are open minded when dealing with your
customers and willing to listen to their point of
view as well as other information they may provide
prior to making case decisions. Overall the case
decisions you have made as well as the information
you share have been presented in a professional
and understandable manner."

"You have a difficult inventory, inhabited by
difficult taxpayers and even more difficult
exasperating representatives. In spite of this,
you handled all of your customers well. You were
extremely fair and did an excellent job in
balancing the rights of your taxpayers with the
protection of the interests and revenue of the
Service . . . .You projected an excellent image of
the Service."

"You have displayed a very helpful and courteous
attitude towards taxpayers and have demonstrated
that you are willing to take every step possible
to ensure that the Service is represented to the
public in the best possible light. You treat
everyone you come into contact with both within
the Service and outside of the Service, in a
respectful manner, which not only enhances agreed
cases but also contributes in a significant way to
positive customer relations. Overall you are very
good at securing cooperation during the course of
examinations, thus facilitating case closings and
demonstrating skill in explaining findings and
conclusions with technical competence, while also
effectively listening and considering the
taxpayer's point of view . . . In your discussions
with taxpayers or their representatives, you will
always disclose all facts and will never
misrepresent the Service policies or
interpretations of case law. You carefully listen
to the opposing view and will tell the taxpayer
that you need to research further and will get
back to him in an expeditious manner. You employ a
tactful manner in discussions of controversial tax
issues while at the same time demonstrating your
technical knowledge, always in attempting to
resolve cases at the lowest possible level."

Appendix VI
Data on Field Visits, Case Reviews, and Midyear
Progress Reviews
Page 41GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
This appendix provides the results of our review
of IRS enforcement employee evaluations to
determine how often supervisors used various
features of the evaluation process to support
their written evaluations and the extent to which
supervisors addressed customer service when using
them.

Table VI.1: Estimated Frequency of Evaluation
Files Supported by Field Visits, Case Reviews, and
Midyear Progress Reviews and the Number of Field
Visits, Case Reviews, and Midyear Progress Reviews
Discussing Customer Service
Features used            Summary category
to support
evaluations
                 Employees with     Employees with
                    evaluations   customer service
               supported by the        discussions
                        feature  documented by the
                                           feature
                  Number  Percen     Number Percent
                               t
Field visits       6,468      34      5,321     82
or sit-ins
Midyear            6,636      35      4,256     65
progress
reviews
Case reviews      13,279      70     10,186     77
Source: GAO analysis of enforcement employee
evaluations for the 2-year period ending June
1998.

Appendix VII
Results of Survey to Determine How IRS Supervisors
Allocate Their Time
Page 43GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
This appendix provides data on the results of our
survey of 30 supervisors selected by IRS in 3
district offices (see table VII.1) and examination
and collection division chiefs in all 33 IRS
district offices (see table VII.2). As shown in
the tables, both supervisors and division chiefs
agree that supervisors, the immediate managers of
frontline enforcement employees, spend little time
on field visits and a significant amount of time
on clerical, administrative, and collateral
duties.

Table VII.1: Information Received From Supervisors
on Their Time Allocation During a Typical Month
Activity                           Average percent
                                  of time spent in
                                  an average month
Performance evaluation activities                 
  Field visits                                   5
  Case reviews                                  12
  Employee evaluations (annual,                  8
midyear progress reviews)
    Subtotal                                    25
Clerical and administrative                       
activities
  Clerical activities                            9
  Other administrative and                      20
collateral duties
    Subtotal                                    29
Other activities                                  
  Workload/inventory reviews                     7
  Review of employee time charges                2
  Responding to employee                        14
questions
  Group meetings                                 3
  Closing conferences                            2
  Taxpayer meetings                              4
  Continuing education for group                 2
manager
  Training provided to employees                 4
  Leave                                          8
    Subtotal                                    46
Total                                          100
Source: Interviews with 30 supervisors from the
Northern California, Kansas-Missouri, and Georgia
District Offices.

Table VII.2: Information Received From District
Offices on Supervisors' Time Allocation During a
Typical Month
Activity                          Average percent
                                 of time spent in
                                 an average month
Performance evaluation activities 
  Field visits                    7
  Case reviews                    12
  Employee evaluations (annual,   9
midyear progress reviews)
    Subtotal                      28
Clerical and administrative       
activities
  Clerical activities             6
  Other administrative and        12
collateral duties
    Subtotal                      18
Other Activities                  
  Workload/inventory reviews      11
  Review of employee time charges 3
  Responding to employee          14
questions
  Group meetings                  5
  Closing conferences             3
  Taxpayer meetings               5
  Continuing education for group  2
manager
  Training provided to employees  4
  Leave                           8
    Subtotal                      55
Total                             101
Note: Percentages do not sum to 100 due to
rounding.
Source: Survey sent to the Examination and
Collection division chiefs in all 33 IRS district
offices.

Appendix VIII
Comments From the Internal Revenue Service
Page 48GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives

Appendix IX
GAO Contacts and Staff Acknowledgments
Page 49GAO/GGD-00-1 Balancing Customer Service and
Compliance Objectives
GAO Contacts
Margaret T. Wrightson (202) 512-3516
Ralph T. Block (415) 904-2000

Acknowledgments
In addition to those named above, Wendy Ahmed,
Robert V. Arcenia, Benjamin Douglas, Suzy Foster,
Ronald J. Heisterkamp, Sidney H. Schwartz, Sam
Scrutchins, Jonda Van Pelt, and John N. Zugar made
key contributions to this report.

*** End of Document ***