Tax Administration: Lessons Learned From IRS' Initial Experience in
Redeploying Employees (Chapter Report, 01/09/97, GAO/GGD-97-24).

GAO reviewed the Internal Revenue Service's (IRS) initial efforts to
redeploy employees under the terms of the Redeployment Understanding,
focusing on whether there were lessons to be learned from: (1) IRS'
initial use of these procedures and their impact on IRS' operations; and
(2) the reaction of redeployed employees and their supervisors to
redeployment and the redeployment process.

GAO found that: (1) if IRS develops new redeployment procedures, there
are several lessons to be learned from its initial redeployment
experiences; (2) although redeployment was intended as a way to move
employees out of jobs that would no longer be needed in IRS' modernized
environment, it was initially used to move thousands of employees whose
jobs were not in immediate jeopardy into new or existing positions that
were expected to be needed in the new environment; (3) many jobs vacated
by redeployed employees had to be filled by new employees, who may
subsequently have to redeployed; (4) training requirements increased and
productivity and taxpayer services declined as experienced employees
were replaced by inexperienced employees; (5) although some operational
inefficiencies, such as reduced productivity and increased training, can
be expected as an inherent part of any redeployment process, the
negotiated Redeployment Understanding exacerbated these inefficiencies
because it generally made many IRS employees eligible for redeployment
years before their jobs were expected to be eliminated, and did not
allow IRS to fill jobs with employees who had related experience before
bringing in volunteers from unrelated areas; (6) GAO's interviews of
redeployed employees and supervisors pointed to other lessons that might
be learned from IRS' initial redeployment efforts; and (7) most
employees were generally satisfied with their new jobs, and supervisors
were generally satisfied with their new employees, but many employees
cited concerns about the information IRS provided to explain the
redeployment process, the assistance IRS provided to help employees find
jobs, and the training IRS provided.

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

 REPORTNUM:  GGD-97-24
     TITLE:  Tax Administration: Lessons Learned From IRS' Initial 
             Experience in Redeploying Employees
      DATE:  01/09/97
   SUBJECT:  Personnel management
             Systems conversions
             Human resources utilization
             Tax administration
             Human resources training
             Federal agency reorganization
             Employee transfers
             Productivity
             Customer service
IDENTIFIER:  IRS Taxpayer Service Program
             IRS Automated Collection System
             IRS Integrated Data Retrieval System
             IRS Problem Resolution Program
             IRS Document Processing System
             
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Cover
================================================================ COVER


Report to the Honorable
Margaret Milner Richardson, Commissioner of Internal Revenue

January 1997

TAX ADMINISTRATION - LESSONS
LEARNED FROM IRS' INITIAL
EXPERIENCE IN REDEPLOYING
EMPLOYEES

GAO/GGD-97-24

IRS' Redeployment Experiences

(268651)


Abbreviations
=============================================================== ABBREV

  ACS - Automated Collection System
  DPS - Document Processing System
  IDRS - Integrated Data Retrieval System
  IRS - Internal Revenue Service
  NTEU - National Treasury Employees Union
  OJT - on-the-job training
  OPM - Office of Personnel Management
  PRP - Problem Resolution Program
  TPS - Taxpayer Service

Letter
=============================================================== LETTER


B-260161

January 9, 1997

The Honorable Margaret Milner Richardson
Commissioner of Internal Revenue
Department of the Treasury

Dear Mrs.  Richardson: 

This report describes IRS' initial efforts to redeploy employees
under the terms of the Redeployment Understanding and provides
information on our analysis of the results of those efforts.  We did
this review under our basic legislative authority. 

The report contains recommendations to you.  As you know, 31 U.S.C. 
requires the head of a federal agency to submit a written statement
on actions taken on our recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight not later than 60 days after the date of the report.  A
written statement also must be sent to the House and Senate
Committees on Appropriations with the agency's first request for
appropriations made more than 60 days after the date of the report. 

We are sending copies of this report to the Secretary of the
Treasury; the Director, Office of Management and Budget; and
interested committees and subcommittees.  We will make copies
available to others upon request. 

Please call me at (202) 512-8633 if you have any questions about the
report.  Other major contributors to this report are listed in
appendix VII. 

Sincerely yours,

Lynda D.  Willis
Director, Tax Policy and
 Administration Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Thousands of employees could have their jobs eliminated or redesigned
as Internal Revenue Service (IRS) continues modernizing its
operations over the next several years.  For instance, many jobs that
involved processing tax returns at IRS service centers could be
eliminated as IRS moves to a paperless environment; and many jobs now
directed at resolving taxpayer account issues, mainly through
correspondence, are to be redesigned as customer-service jobs aimed
at resolving such issues primarily by telephone.  Rather than fire
employees when their jobs become obsolete, IRS decided to give
employees the opportunity to transfer into new jobs--a process
referred to as "redeployment."

Because it is important that IRS have the workforce needed for the
new environment, GAO, under its basic legislative authority, reviewed
IRS' initial use of redeployment procedures.  GAO's objective was to
determine whether there were lessons to be learned from (1) IRS'
initial use of these procedures and their impact on IRS' operations
and (2) the reaction of redeployed employees and their supervisors to
redeployment and the redeployment process.  Among other things, GAO
reviewed redeployment results at four IRS service centers and four
IRS district offices and administered structured interviews to
employees and supervisors at those eight locations.  The results of
GAO's interviews are not projectable. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

In a November 1993 Redeployment Understanding, IRS and the National
Treasury Employees Union (NTEU) outlined the procedures to be used
when redeploying IRS employees who lost their jobs due to
modernization initiatives.  In general, the procedures called for
filling the new jobs through lateral reassignment of volunteers, by
seniority.  If not enough volunteers came forward, IRS had the option
of involuntarily reassigning the least senior employees in the local
area or using IRS-wide competition to fill the remaining openings. 
IRS used the redeployment procedures in fiscal years 1994 and 1995 to
fill new customer-service jobs and vacancies created in the
modernization process as well as more than 4,000 new compliance and
customer-service positions authorized by Congress for fiscal year
1995. 

Large-scale employee displacement had not occurred at the time of
GAO's audit because IRS was still in the early stages of its planned
modernization.  Also, because of funding reductions in fiscal year
1996 and expectations of reduced funding levels in fiscal year 1997,
IRS decided that it could no longer guarantee that employees would be
given the opportunity to transfer into new jobs within the agency. 
Thus, after GAO completed its audit work, IRS terminated the
Redeployment Understanding and began planning for a near-term
reduction-in-force. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

If IRS develops new redeployment procedures, there are several
lessons to be learned from its initial redeployment experiences.  For
example, although redeployment was intended as a way to move
employees out of jobs that would no longer be needed in IRS'
modernized environment, it was initially used to move thousands of
employees whose jobs were not in immediate jeopardy into new or
existing positions that were expected to be needed in the new
environment.  Thus, many jobs vacated by redeployed employees had to
be filled by new employees, who may subsequently have to be
redeployed.  Training requirements increased and productivity and
taxpayer services declined as experienced employees were replaced by
inexperienced employees. 

Although some operational inefficiencies, such as reduced
productivity and increased training, can be expected as an inherent
part of any redeployment process, the negotiated Redeployment
Understanding exacerbated these inefficiencies because it generally
(1) made many IRS employees eligible for redeployment years before
their jobs were expected to be eliminated and (2) did not allow IRS
to fill jobs with employees who had related experience before
bringing in volunteers from unrelated areas. 

GAO's interviews of redeployed employees and supervisors pointed to
other lessons that might be learned from IRS' initial redeployment
efforts.  Most employees were generally satisfied with their new
jobs, and supervisors were generally satisfied with their new
employees.  However, many employees cited concerns about the
information IRS provided to explain the redeployment process, the
assistance IRS provided to help employees find jobs, and the training
IRS provided. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      REDEPLOYMENT PROCEDURES LED
      TO PREMATURE REASSIGNMENTS
      AND OPERATIONAL
      INEFFICIENCIES
-------------------------------------------------------- Chapter 0:4.1

It seems reasonable to expect some operational inefficiencies, such
as an increase in training and a decrease in productivity, as an
inherent part of any redeployment process.  However, these
inefficiencies were compounded at IRS, especially in the service
centers, by the use of redeployment procedures that made too many
employees eligible for redeployment too soon and limited IRS' ability
to take full advantage of employees' job experiences. 

The Redeployment Understanding designated many IRS employees,
including virtually all service center employees, as eligible to be
redeployed, without regard to whether or when their jobs were to be
eliminated.  It allowed many employees to redeploy to new positions
years before their old jobs were to be eliminated.  As a result, many
of the redeployed employees had to be replaced with other,
less-experienced, employees and new hires.  During 1994 and 1995, for
example, IRS redeployed 3,054 career-status employees from service
center processing divisions, but hired 3,886 new career or
career-conditional employees in those divisions.  (See pp.  16 to
19.)

The redeployment procedures also limited IRS' ability to reinvest
experience.  Although many employees are currently performing largely
the same work as is planned for redesigned jobs, the Redeployment
Understanding generally required that IRS fill positions by
reassigning, based on seniority, redeployment-eligible volunteers. 
Such a requirement could result in selecting inexperienced employees
from unrelated areas because it does not allow IRS to select
less-senior staff who are already doing similar work.  Such
procedures, for example, are inconsistent with IRS' planned phased
transfer of experienced employees and their workloads into the newly
designated, customer-service jobs.  (See pp.  19 to 21.)

Because of other variables affecting productivity (such as new or
increased workloads), it is difficult to quantify the degree of
productivity decline specifically attributable to redeployment, much
less the portion that was inherent versus that which was avoidable. 
Nevertheless, GAO thinks it is reasonable to assume that the
redeployment procedures, by making too many employees eligible for
redeployment too soon and by limiting IRS' ability to take full
advantage of employees' job experience, resulted in a greater level
of inexperience than might have otherwise been the case and thus led
to less productivity. 

That position was supported by two internal IRS studies, which
concluded that the service center divisions responsible for
processing tax returns had experienced significant productivity
declines during the 1995 filing season, in part due to redeployment. 
For example, processing divisions lost productivity because more than
1,400 employees who were experienced in processing returns were
redeployed to compliance and customer service jobs and replaced by
inexperienced employees who were either newly hired or reassigned
from other areas.  (See pp.  27 to 30.)

The IRS supervisors GAO interviewed also reported declines in
productivity.  For example, 18 (75 percent) of the 24 interviewed
supervisors who lost employees to redeployment reported that the
volume of their unit's output decreased as a result of redeployment. 
Also, 10 (42 percent) of the 24 supervisors said that the loss of
employees degraded their service to taxpayers causing, for example,
case backlogs and longer amounts of time to answer telephone calls. 
Comments from the 30 supervisors who gained employees were more
mixed.  For example, 10 said that their unit's output declined while
16 said that their unit's output had either increased or had not been
affected by the redeployment.  (See pp.  24 to 27.)

According to IRS officials and supervisors GAO interviewed,
redeployment also led to an increase in training requirements. 
Training requirements can be expected to increase as new jobs are
added.  However, in some cases training requirements increased
twofold because many employees whose jobs were not eliminated moved
to the new jobs.  The employees who moved to the new jobs had to be
trained for them while other employees had to be trained for the jobs
left vacant.  Of the 54 supervisors interviewed, for example, 40 (74
percent) said that the redeployment of experienced employees out of
their units or inexperienced employees into their units increased
their unit's training requirements.  (See pp.  22 to 24.)

Before the Redeployment Understanding was terminated, IRS and the
NTEU had made some revisions to make better use of employee
experience.  However, those actions had not fully resolved the
problems identified by GAO.  (See pp.  30 and 31.)


      MOST INTERVIEWED EMPLOYEES
      SATISFIED WITH NEW JOBS, BUT
      MANY DISSATISFIED WITH
      REDEPLOYMENT PROCESS
-------------------------------------------------------- Chapter 0:4.2

It may be some time before redeployed employees perform as
productively in their new jobs as in their old ones or as
productively as the experienced employees they replaced.  However,
the comments of the employees and supervisors who GAO interviewed
were encouraging, as the vast majority generally said that they were
able to do their new work in an acceptable manner.  The 30
supervisors GAO interviewed who had gained employees through
redeployment were generally satisfied with the 346 employees
redeployed to their units and said that they were performing at or
above the "fully successful" level--the minimum acceptable level for
performance appraisal purposes.  Most of the 188 redeployed employees
GAO interviewed were satisfied with their new jobs.  However, many of
the redeployed employees GAO interviewed said that they required more
training than that which is normally provided for their positions. 
(See pp.  37 to 41.)

Many of the employees were dissatisfied with the redeployment
process, particularly with the amount and quality of information,
assistance, and training they received.  For example, almost
one-fourth of the employees interviewed were dissatisfied with the
assistance IRS provided to help them find a new position.  Of those
who gave reasons for their dissatisfaction, most said they needed
help in understanding the redeployment process, accessing job
announcements, determining their job qualifications, and researching
their options.  (See pp.  41 to 53.)


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO recommends that the Commissioner of Internal Revenue--should
future redeployment procedures be developed--address the problems
discussed in this report, including (1) limiting redeployment
eligibility to employees whose current jobs have been or are about to
be substantially altered or eliminated and (2) allowing IRS to
redirect employees who are currently and successfully performing
existing jobs to redesigned jobs that are substantially the same
before seeking volunteers from unrelated functions.  GAO also
recommends that, as part of any future redeployment effort, the
Commissioner consider ways to improve management communications with
employees concerning redeployment assistance, information, and
training.  (See pp.  32 and 44.)


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

GAO obtained oral and written comments on a draft of this report from
IRS and NTEU in September 1996.  Those comments and GAO's evaluation
are discussed beginning on pages 32 and 44. 

IRS agreed with GAO that any future redeployment should be more
focused and better timed but said that the report's discussion of the
timing of the past redeployment was oversimplified.  IRS said that
the results would have been different if modernization had proceeded
on the schedule envisioned when the Redeployment Understanding was
signed.  GAO disagrees because it had considered IRS' modernization
schedule in making its assessment.  IRS did not provide any
information to contradict the scheduling information in GAO's report
and said that information in the report was generally factual. 

IRS also said that Congress' authorization of thousands of new
compliance and customer-service positions provided an opportunity to
redeploy many employees and that IRS would have had even more
employees to redeploy if it had filled the new positions with
external hires rather than through redeployment.  GAO is not
suggesting that the new positions should have been filled through
external hires.  It is suggesting, instead, that IRS would have had
less disruption if the redeployment procedures had focused on finding
new jobs for employees as their displacement became imminent and
allowed IRS to redeploy employees who had experience related to the
jobs being filled before those who lacked related experience. 

NTEU said that the report was "flawed in its design" and failed to
present any data to support most of its conclusions.  As an example,
NTEU cited GAO's conclusion that the redeployment procedures led to
premature reassignments and operational inefficiencies.  GAO believes
that its report contains sufficient data to support that conclusion,
much of which came from IRS' own studies and employees. 

However, NTEU said that to accurately reach such a conclusion, GAO
would have had to present some comparative analysis of the
operational impact of the Redeployment Understanding versus some
alternative selection procedure, such as the traditional competitive
selection process.  GAO did not intend to suggest, as NTEU's comment
seems to imply, that IRS should have used the traditional competitive
process in lieu of the redeployment procedures.  What GAO is
suggesting that the redeployment process would have been more
efficient if the procedures had been more focused and better timed. 
However, GAO did not do a comparison of what the operational impact
would have been under different procedures because such a comparison
would have been highly speculative. 


INTRODUCTION
============================================================ Chapter 1

As the Internal Revenue Service (IRS) replaces its outdated computer
and telecommunications systems, it is also overhauling the way it is
organized, staffed, and operated.  These changes are part of a new
business vision designed to take advantage of new capabilities as IRS
moves toward a paperless electronic environment.  As these changes
are phased in over the next several years, thousands of employees
could be displaced as their jobs are eliminated or redesigned. 

IRS pledged in 1990 that employees displaced by modernization would
be given the opportunity for retraining that would allow them to
maintain their employment at the same grade.  To help keep this
pledge while also meeting the job requirements of the new
environment, IRS negotiated standard redeployment policies and
procedures in a November 1993 Redeployment Understanding with the
National Treasury Employees Union (NTEU).  According to the
Understanding and IRS officials, the goal of the redeployment process
was to move employees out of positions that would not continue in the
modernized environment and into positions--new, redesigned, or
existing--that would be needed in the new environment.  At that time,
IRS planned to meet its changing job requirements largely through
redeployment. 

Because of funding reductions in fiscal year 1996 and expectations of
reduced funding levels in fiscal year 1997, however, IRS decided that
it could no longer guarantee that employees would be given the
opportunity to transfer into new jobs within the agency.  Thus, after
we had completed our audit work, IRS terminated the Redeployment
Understanding and began planning for a near-term reduction-in-force. 

Because it is important that IRS' workforce have the knowledge,
skills, and abilities needed for the new environment, we reviewed,
under our basic legislative authority, IRS' initial use of the
procedures established through the Redeployment Understanding. 
Although those procedures have since been terminated, IRS'
experiences in implementing them provide useful information for
developing any future redeployment procedures. 


   ORGANIZATIONAL CHANGE AT IRS
   AND POTENTIAL IMPACT ON
   EMPLOYEES
---------------------------------------------------------- Chapter 1:1

In January 1994, IRS had about 131,000 employees\1 in a National
Office, 7 regional offices, 63 district offices, 10 service centers,
2 computing centers, and 1 compliance center (appendix I has a
detailed breakdown by type of employee).  District operations
included hundreds of local posts of duty, 34 locations that housed
taxpayer service and collection call sites,\2 and 3 forms
distribution centers. 

As part of its modernization, IRS, in 1995 and 1996, reduced the
number of regions from 7 to 4 and consolidated the number of
districts from 63 to 33.  IRS is also consolidating various support
functions that were decentralized in as many as 84 separate
organizations.  For example, most of the staff support for basic
resources management functions, such as personnel, facilities
management, and training, is being consolidated into 21 host
locations.  Similarly, information systems jobs, such as computer
programmers and operators at service centers and district offices,
are to be consolidated into a yet-to-be determined number of field
information systems offices. 

The restructuring of IRS' service centers, which accounted for about
39 percent of its workforce in January 1994, is a major component of
IRS' new business vision.  Currently all 10 service centers process
tax returns and other documents and have various forms of non
face-to-face interaction with taxpayers.  IRS' plan, as of February
1996, was to have (1) all 10 centers function as customer-service
sites,\3 (2) at least 5 of the 10 centers function as submission
processing centers,\4 and (3) 1 of the 5 submission processing
centers also serve as IRS' third computing center.\5

IRS is also changing where and how it provides customer service. 
Until 1994, customer service was provided at the 10 service centers,
the 34 locations that housed ACS and/or TPS sites, and the 3 forms
distribution centers.  Under the new business vision, customer
service is to be provided at only 23 locations--the 10 service
centers and 13 other locations.  Besides absorbing the functions and
workloads of TPS and ACS sites and forms distribution centers,
customer-service sites are to also absorb and attempt to convert, to
the telephone, some work now done by correspondence in various
service center branches, such as collections, adjustments, and
taxpayer relations. 

In December 1993, IRS estimated that these business vision changes
would eliminate more than 19,600 service center jobs and more than
4,600 district office jobs.  In addition, the consolidation of
regions and districts was expected to displace over 1,100 managers
and support staff. 

To maintain employee morale and cooperation during the transition to
its new environment, IRS pledged, in a 1990 policy statement, that
career and career-conditional\6

employees would be given the opportunity for retraining that would
allow them to maintain employment at their current grade.\7 This
pledge did not apply to temporary\8 and term\9 employees.  IRS
officials believed that attrition, the use of term employees for jobs
being phased out, and the need to fill the additional customer
service and compliance jobs authorized by Congress as part of IRS'
fiscal year 1995 appropriation, would enable IRS to meet new job
requirements and keep its job protection pledge.  Under this
workforce transition strategy, displaced employees would have to be
redeployed to new or redesigned jobs that would generally require
greater technical knowledge and communication skills than are needed
for their current jobs. 

Responding to a series of reports citing the need for sound human
resource planning as IRS implements its new business vision,\10 IRS
has done much to prepare for the redeployment of employees whose jobs
are expected to be redesigned or eliminated.  Over the past 3 years,
IRS has (1) developed various models for projecting and comparing
current and future workforce requirements, (2) established standard
redeployment policies and procedures and a Redeployment Resolution
Council\11 in partnership with NTEU, and (3) developed site-specific
plans for redeploying employees.  Appendix II provides a brief
overview of these efforts. 

In the November 1993 Redeployment Understanding, IRS and NTEU
established, for the first time, standard procedures for the
redeployment of bargaining-unit employees\12 whose jobs would be
redesigned or eliminated in the transition to the modernized
environment.  Before they established standard procedures, IRS and
NTEU were negotiating the redeployment of displaced employees on a
project-by-project basis.  According to its general work contract
with NTEU, IRS could involuntarily reassign employees whose jobs were
abolished, but such reassignments were subject to negotiations.\13

The new standard procedures generally required that vacancies for
positions needed in the new environment be filled first through
lateral reassignment of eligible volunteers, in order of their
seniority, as defined by their time in federal service.  If the
number of volunteers was insufficient, IRS had the option of using
involuntary reassignment of the least senior employees in the local
area or using the normal IRS-wide competitive process\14 to fill the
remaining openings.  While the Redeployment Understanding was a
binding document, it could be reopened or terminated at any time by
IRS or NTEU.  As noted earlier, it was terminated effective August
23, 1996. 

Because IRS was still in the early stages of its planned overhaul at
the time of our audit work, the large-scale employee displacement
expected from the consolidation and modernization of the
customer-service and submission processing functions had not yet
occurred.  Thus, with the exception of some displaced National and
Regional Office staff, redeployment in fiscal years 1994 and 1995 was
driven largely by the availability of positions into which employees
in jobs not expected to be needed in the new environment could be
redeployed.  They included new, redesigned, or existing (vacant)
positions that could be expected to continue in the modernized
environment.  According to National Office officials, redeployment in
fiscal year 1994 was driven largely by the need to staff the first
operational customer-service units and to fill vacancies created by
attrition.  Another factor driving redeployment in fiscal year 1995
was the reassignment of existing employees to over 4,300 new
compliance and customer-service jobs authorized that year. 


--------------------
\1 The number had declined to about 126,500 in January 1996. 

\2 The 34 locations included 3 that housed Automated Collection
System (ACS) call sites, 13 that housed Taxpayer Service (TPS) call
sites, and 18 that housed both ACS and TPS sites.  ACS sites contact
taxpayers to collect overdue taxes and answer calls from taxpayers in
response to collection actions.  TPS sites answer calls from
taxpayers with questions on tax laws, accounts, and procedures. 

\3 Customer-service sites are to resolve taxpayer questions and
problems that do not require face-to-face contact with the taxpayer. 

\4 Submission processing centers are to process paper documents,
including tax returns, information documents (such as forms 1099 and
W-2), and correspondence. 

\5 Computing centers are to process electronic tax returns and
maintain central files of individual and business tax accounts. 

\6 In general, according to Office of Personnel Management (OPM)
regulations, persons not employed on a temporary or otherwise limited
basis are appointed as career or career-conditional employees.  New
federal employees generally attain career status after 3 years of
substantially continuous, creditable service in career-conditional
status. 

\7 As noted earlier, IRS has since decided that it can no longer
guarantee continuing employment and has begun planning for a
near-term reduction-in-force.  Thus, in effect, the 1990 policy
statement has been rescinded. 

\8 OPM regulations authorize federal agencies to make a temporary
limited appointment to fill a short-term position (i.e., one that is
not expected to last longer than 1 year).  The appointment may be
extended up to 2 years, or longer, in increments of 1 year or less,
if the situation meets certain OPM criteria. 

\9 OPM regulations authorize federal agencies to make a term
appointment when the employment need is longer than 1 year but not
more than 4 years.  Term employment ends automatically when the term
expires. 

\10 Managing IRS:  Actions Needed to Assure Quality Service in the
Future (GAO/GGD-89-1, Oct.  14, 1988); Managing IRS:  Important
Strides Forward Since 1988 but More Needs to Be Done (GAO/GGD-91-74,
Apr.  29, 1991); Review of the Tax Systems Modernization of the
Internal Revenue Service, National Research Council, September 1992;
and Tax Systems Modernization:  Automated Underreporter Project Shows
Need for Human Resource Planning (GAO/GGD-94-159, July 8, 1994). 

\11 The five-member Redeployment Resolution Council was composed of
the NTEU National President and one other NTEU member, IRS'
Modernization Executive and Chief of Management and Administration,
and a neutral fifth member.  The Council's duties generally included
interpreting redeployment policies and procedures, approving site
redeployment plans, and making decisions on redeployment related
grievances. 

\12 NTEU represents about 85 percent of the employees in service
center and district office positions.  These employees are referred
to as "bargaining-unit employees." Managers and employees in
positions not represented by NTEU were subject to different
redeployment procedures, which gave regional commissioners the
authority to determine how those employees would be selected. 

\13 The impacts of involuntarily reassigning displaced employees to
locations within 20 miles were subject to subsequent negotiations,
while arrangements had to be negotiated in advance for reassignments
beyond that distance. 

\14 In general, the competitive process ranks applicants by scores
derived mainly from their last performance appraisal in their current
position and, to a lesser extent, from their (1) pertinent experience
and training and (2) incentive awards. 


   OBJECTIVE, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:2

We examined IRS' early experience in redeploying employees to new
jobs using the procedures established in the November 1993
Redeployment Understanding between IRS and NTEU.  Our objective was
to determine whether there were lessons to be learned from (1) IRS'
initial use of these procedures and their impact on IRS' operations
and (2) the reaction of redeployed employees and their supervisors to
redeployment and the redeployment process. 

To address our objective we

  -- reviewed the November 1993 Redeployment Understanding and
     associated supplements and revisions and discussed redeployment
     policies and procedures with cognizant IRS and NTEU officials;

  -- reviewed site redeployment plans and discussed preliminary
     redeployment results at four IRS service centers (Atlanta;
     Brookhaven, NY; Cincinnati; and Fresno, CA) and four district
     offices (Atlanta, Baltimore, Cincinnati, and San Francisco);

  -- reviewed IRS reports on redeployment results, including related
     internal audits or studies;

  -- obtained and analyzed databases showing overall IRS staffing at
     three points in time--January 8, 1994; December 10, 1994; and
     January 6, 1996--in order to identify and monitor significant
     changes;\15 and

  -- administered structured interviews, at the 8 locations we
     visited, to 188 employees who had been redeployed to new jobs,
     30 supervisors who had gained a total of 346 redeployed
     employees, and 24 supervisors who had lost a total of 412
     redeployed employees.  The results of our interviews are not
     projectable to all IRS managers and employees. 

Appendix III contains information on how we selected the locations we
visited and the persons we interviewed. 

Because IRS expected to make significant changes to its initial
estimates of workforce requirements and the extent that employees
would be redeployed to meet those requirements, we did not attempt to
validate IRS' workforce requirements and redeployment models or the
output from those models. 

We conducted our review from June 1994 through July 1996 in
accordance with generally accepted government auditing standards.  We
requested comments on a draft of this report from the Commissioner of
Internal Revenue and the National President of NTEU, or their
designees.  We received written comments from IRS' Chief, Management
and Administration, on September 11, 1996, and from NTEU's National
President on September 17, 1996.  Those comments are summarized and
evaluated on pages 32 and 44 and are reprinted in appendixes V and
VI, respectively. 


--------------------
\15 Although we did not assess the reliability of the databases, the
official from whom we obtained them told us that the data elements we
used were extracted from two highly reliable files maintained for IRS
by the Department of Agriculture's National Finance Center as
components of the Treasury Integrated Management Information System
and are used as a source for employee pay computations.  Some of the
same data elements were also extracted as part of the separate
reassignment databases that we used to identify redeployed employees
for interviewing.  Those data elements were highly reliable based on
verification by the employees we interviewed. 


REDEPLOYMENT PROCEDURES LED TO
PREMATURE REASSIGNMENTS AND
OPERATIONAL INEFFICIENCIES
============================================================ Chapter 2

Because the new redeployment procedures made too many people eligible
for redeployment too soon and precluded IRS from directing
experienced people into new jobs, (1) many employees were redeployed
years before the jobs they left were to be eliminated and (2)
training requirements increased while productivity and customer
service decreased. 

Service centers, particularly their returns processing functions,
were most affected.  To help cope with declining experience levels
and higher error rates, processing divisions increased their use of
overtime and temporary assignments (details).  The processing
divisions also ended up hiring more new career and career-conditional
employees than they had lost through redeployment to sustain paper
returns processing operations until delayed modernization efforts are
implemented. 

Before the Redeployment Understanding was terminated, IRS and NTEU
had worked together to change redeployment policies and procedures to
make better use of employee experience, but they had not fully
resolved these problems. 


   REDEPLOYMENT PROCEDURES MADE
   TOO MANY EMPLOYEES ELIGIBLE TOO
   SOON AND LIMITED IRS' ABILITY
   TO TAKE FULL ADVANTAGE OF
   EMPLOYEES' JOB EXPERIENCE
---------------------------------------------------------- Chapter 2:1

The November 1993 Redeployment Understanding designated many IRS
employees, including virtually all service center employees, as
eligible for redeployment without regard to whether or when their
jobs were to be eliminated.  Consequently, many employees were
redeployed too soon in order to fill new compliance and customer
service positions.  IRS had to hire several thousand new employees to
replace experienced employees who left jobs in service center returns
processing divisions.  Furthermore, the Redeployment Understanding
required IRS to fill positions with volunteers by seniority, rather
than first allowing IRS to redirect experienced employees to new jobs
requiring many of the same tasks as their current jobs.  The
resulting increase in training requirements and decline in
productivity could have been minimized had the Redeployment
Understanding (1) limited redeployment to those employees whose jobs
were being eliminated and (2) allowed IRS to move employees who had
the experience and skills needed for the new jobs. 


      TOO MANY EMPLOYEES WERE
      REDEPLOYED TOO SOON
-------------------------------------------------------- Chapter 2:1.1

As part of IRS' fiscal year 1995 appropriation, Congress authorized
$405 million for IRS to hire the full-time equivalent of 6,238
employees.  According to IRS officials, the new jobs were primarily
compliance and customer-service jobs at service centers and district
offices. 

While some of the new compliance and customer-service jobs were
filled by employees whose National Office or regional office jobs had
been eliminated, most were filled by service center and district
office employees whose jobs were not in jeopardy of being eliminated
for several years.  According to IRS redeployment plans at the time,
the displacement of large numbers of processing employees was not
expected to begin until fiscal year 1997 or later, when IRS was to
begin implementing its Document Processing System (DPS)\16 and
consolidating its paper processing operations into five service
centers.\17

As of September 30, 1995, IRS had filled 5,470 of these jobs--4,325
of them, or 79 percent, with existing employees; and the rest were
filled through new hires.  Many of the employees who transferred into
those new jobs had to be replaced with less-experienced employees. 
As shown in appendix IV, IRS redeployed 1,182 and 1,872 career or
career-conditional employees from its processing divisions to jobs
elsewhere in IRS in 1994 and 1995, respectively.  During the same
years, the processing divisions hired 14 and 3,872 new, career or
career-conditional employees, respectively.  These new career and
career-conditional employees are also eligible for redeployment. 
Although IRS hired mostly term employees in 1994, a National Office
official told us that IRS had to hire new career-status employees in
1995 because term employees could not be used to sustain current
processing operations long enough due to the 4-year limit on term
employment. 

The Redeployment Understanding contributed to this sizeable turnover
of service center staff by making almost all service center employees
eligible for redeployment, since substantial operational changes were
planned for the service centers.  According to our analysis of IRS
staffing data, of 50,580 service center employees on IRS' rolls in
January 1994, 47,317 were designated as eligible for redeployment. 
The only exceptions were 2,796 term and temporary employees and 467
Criminal Investigation Division employees.  According to IRS National
Office officials, NTEU would not agree to limit redeployment
eligibility to employees in specific jobs because IRS had not
finalized the types and numbers of positions needed for its new
environment.  Also, according to an NTEU official, NTEU presumed that
all service center jobs would be affected and that IRS should not
offer available jobs only to displaced employees. 

Because, unlike at the service centers, many district office
positions are expected to continue in the modernized environment, the
Redeployment Understanding generally limited redeployment eligibility
in district offices to employees at closing ACS and TPS sites,
resources management support services employees, and some information
systems employees.  Although redeployment eligibility at district
offices was more restricted than at service centers, many of the
eligible district office employees were designated as eligible long
before their jobs were scheduled for elimination.  For example, among
the district employees designated as redeployment eligible in
November 1993, there were about 5,500 employees at 29 ACS and TPS
sites that were scheduled to close.  At that time, however, 27 of
these 29 sites were not scheduled to close until October 1999.  The
other two sites were scheduled to close in October 1996 and October
1997, respectively. 

According to National Office officials, however, 11 of the 29 ACS and
TPS sites were closed earlier than expected because they experienced
"high attrition."\18 Specifically, nine sites that were scheduled to
close in 1999 and the two sites that were scheduled to close by 1997
were closed 2 to 5 years early--between 1994 and 1996.  Also, as of
September 1996, eight other sites that were scheduled to close in
1999 were rescheduled to close sooner--from 1996 through 1998. 
However, 4 of the remaining 10 sites originally scheduled to close in
1999 are now scheduled to close between 2000 and 2002. 

On the basis of our analyses of staffing and reassignment data
provided by IRS, we believe that the early closure of some sites and
the changes to scheduled closure dates for other sites occurred, at
least in part, because employees who had been declared redeployment
eligible in November 1993 were redeployed earlier than expected.  For
example, staffing data for the Brooklyn TPS site showed that of the
240 employees who were on the site's rolls on January 8, 1994, 105
had been reassigned to other jobs; 3 had been assigned to other TPS
sites as of December 10, 1994; and 18 were no longer employed with
IRS.  At least 76 of the 108 reassigned employees were reassigned
before the office was closed in October 1994.\19

Employees at four ACS and TPS sites were also designated as eligible
even though their jobs were to be merged with customer-service
centers in the same local area.  As a result, many of these employees
were redeployed out of the closing sites while other career or
career-conditional employees were hired or redeployed into the
closing sites. 

Our structured interviews of 24 service center and district office
supervisors who lost redeployed employees provided further evidence
of premature redeployment.  According to the supervisors, who
reported losing 412 employees, none of the positions vacated by those
employees had been eliminated.  The supervisors said that IRS planned
to fill 350 (85 percent) when funding became available, leaving 62
(15 percent) to be eliminated. 

Many of the service center officials and supervisors we interviewed
expressed the belief that too many employees were designated as
eligible for redeployment.  For example, the Chief of the Collections
Branch at one center said that "blanket redeployment [eligibility]"
for the entire service center was a "mistake." A Processing Division
Chief at another center said that redeployment eligibility should be
limited to displaced employees and should not include employees who
will not be displaced for many years, such as those in the Processing
Division.  A supervisor of a section at that center who had gained
redeployed employees said it had been a "costly transition" because
"all employees were considered redeployment eligible even if their
job had not been abolished."


--------------------
\16 Currently, data from most types of paper returns are manually
transcribed into machine- readable format for further automated
processing and posting to taxpayer accounts.  With DPS, paper returns
were to be electronically scanned and automatically converted to
machine-readable format. 

\17 IRS is reassessing its paper processing plans.  It announced, on
October 8, 1996, that DPS was being terminated.  According to IRS, it
is considering other options, including contracting out and/or
acquisition of a new manual data entry system. 

\18 National Office officials told us that this attrition required
IRS to redistribute call-site equipment and workloads among the
remaining sites that were scheduled to close and accelerate the
planned migration of workloads into customer-service centers. 

\19 We only had redeployment data for the eight sites we visited and
thus could only identify reassignment dates for employees who were
reassigned to those sites. 


      REDEPLOYMENT PROCEDURES
      LIMITED IRS' ABILITY TO
      DIRECT EXPERIENCED EMPLOYEES
      TO RELATED JOBS
-------------------------------------------------------- Chapter 2:1.2

With some exceptions, such as hardships and placement actions
resulting from a grievance, the November 1993 Redeployment
Understanding generally required that vacancies for bargaining-unit
positions that would be needed in the new environment were to be
filled as follows: 

  -- Lateral reassignment (or change to lower grade), based on
     seniority,\20 of eligible\21

volunteers (1) from within the local commuting area and then, if the
number of volunteers was insufficient, (2) from outside the local
commuting area. 

  -- When the number of volunteers for lateral reassignment (or
     change to lower grade) was insufficient, IRS could consider
     making directed (involuntary) reassignments, by inverse
     seniority, from eligible employees within the local commuting
     area. 

  -- When the number of volunteers for lateral reassignment (or
     change to lower grade) was insufficient and IRS did not use the
     directed reassignment process, IRS could fill the vacancy
     through IRS-wide competition.\22

  -- When there were no redeployment-eligible internal applicants,
     IRS could fill vacancies for jobs that would be continued in the
     new environment with external hires.  Vacancies for
     noncontinuing jobs were to be filled by temporary or term
     appointments. 

In October 1994, IRS and NTEU made an exception to the Redeployment
Understanding to allow district customer-service sites to staff their
new units with volunteers from closing ACS and TPS sites, before
using the established redeployment process, since staff in those
sites would already have experience in resolving taxpayer account
matters via the telephone.  At the same time, four service centers
(Andover, Atlanta, Cincinnati, and Philadelphia) were authorized to
fill up to 30 percent of their new customer-service positions with
volunteers from ACS and TPS sites that were closing in nearby
districts (Boston, Atlanta, Cincinnati, and Philadelphia).  The
Cincinnati Service Center requested this exception in order to
optimize the mix of experience needed to begin its new
customer-service operations. 

Except for certain resources management employees, no other
exceptions were made to take advantage of service center employee
experience.  Thus, the redeployment procedures did not give service
centers a viable opportunity to redirect experienced employees to
related new or redesigned jobs before seeking volunteers from
unrelated jobs.  The Redeployment Understanding technically allows
IRS to make directed reassignments before using the competitive
process; however, using this option was not practical because it
required that directed assignments be made in inverse seniority order
from within the entire local commuting area.  This provision would
mean that a center's newest employee (and least likely to have
related experience) must be the first one directed to fill a vacancy. 

The redeployment of employees into new customer-service units
illustrates how these procedures limited IRS' ability to reinvest
experience.  IRS' customer-service workload migration plans called
for the phased transfer of related work, workers, and funding,
concurrently, from the district and service center sites currently
doing the work to the new customer-service units.  In that regard,
IRS had directed 137 staff from related areas into the
customer-service prototype unit at the Fresno Service Center before
the Redeployment Understanding took effect.  However, staffing of
subsequent customer-service vacancies at Fresno and customer-service
units established at other centers was subject to the Redeployment
Understanding. 

In the service centers, related work includes that being handled
through correspondence by employees in the Adjustments, Taxpayer
Relations, and Collections branches.  For example, employees in the
Adjustments Branch generally correspond with taxpayers to resolve
account-related problems and make necessary adjustments to taxpayer
accounts using the Integrated Data Retrieval System (IDRS). 
Employees in the customer-service units being phased in at service
centers generally do the same type of work, except that they
communicate with taxpayers primarily by telephone rather than
correspondence.  Thus, experienced Adjustments Branch employees might
need training in telephone techniques but would need little or no
additional training in how to resolve account-related problems or how
to adjust accounts using IDRS. 

However, employees redeployed by seniority or the competitive process
may come from areas such as the Processing Division, where they
worked as mail handlers, data transcribers, or in other jobs totally
unrelated to the kind of work they would be expected to do in the
customer-service units.  These employees would require significant
training not only in telephone techniques but also in resolving
account-related problems and using IDRS. 


--------------------
\20 Seniority is determined by an employee's government service
computation date, which generally reflects all federal service. 

\21 Redeployment-eligible employees generally included all career and
career-conditional IRS employees in (1) the National Office, regional
offices, service centers, computing centers, and Austin Compliance
Center; (2) certain district office operations, including ACS and TPS
locations; and (3) resources management and information systems
functions. 

\22 Competition differs from lateral reassignment in that employees
are competing for a promotion or a higher career ladder giving them
the potential for later advancement without further competition. 


   REDEPLOYMENT RESULTED IN
   INCREASED TRAINING, DECREASED
   PRODUCTIVITY, AND REDUCED
   SERVICE TO TAXPAYERS
---------------------------------------------------------- Chapter 2:2

Even in a well-timed and properly targeted redeployment, some
temporary increase in training and decline in productivity and
customer service can be expected as an inherent consequence.  At a
minimum, the redeployment of employees increases training
requirements and decreases productivity and service because neither
the experienced employees serving as instructors nor the trainees are
actively contributing to the organization's business while they are
involved in classroom training.  Nor are they contributing fully
during on-the-job (OJT) training.  Because of other variables
affecting productivity (such as new or increased workloads, equipment
failure, etc.), it is difficult to quantify the degree of
productivity decline specifically attributable to redeployment, much
less the portion that was inherent versus that which was avoidable. 
Nevertheless, we think it is reasonable to assume that the
redeployment procedures, by making too many employees eligible for
redeployment too soon and by limiting IRS' ability to take full
advantage of employees' job experience, resulted in a greater level
of inexperience than might have otherwise been the case and thus led
to more training, less productivity, and less service to taxpayers. 


      TRAINING REQUIREMENTS
      INCREASED
-------------------------------------------------------- Chapter 2:2.1

Although training requirements increased due to redeployment that
occurred in fiscal year 1994, they increased substantially in fiscal
year 1995 due to the availability of several thousand additional
compliance jobs authorized that year.  As stated earlier, IRS
redeployed existing employees to fill 4,325 (or 79 percent) of the
5,470 additional compliance jobs authorized for fiscal year 1995. 
Because these jobs were filled by redeployment-eligible employees
whose vacated positions, such as those in processing or customer
service, also had to be filled and the persons filling them had to be
trained, training often occurred two or more times\23 in order to
fill one new job.  Service center and district officials and
supervisors expressed concern about this increase in training
requirements. 

For example, one service center official said that redeployment had a
big effect on training, and that training costs had increased over
$240,000, or 34 percent, during the first 6 months of 1995 from the
same period in 1994. 

According to another center's June 1995 assessment of its first year
redeployment results,

     "The Center expended 92,086 more training hours over the same
     period of time in [fiscal year] 95 than [fiscal year] 94. 
     Compliance Division accounted for 57,799 of these hours, due to
     the hiring initiative, while [the] Processing Division accounted
     for an additional 31,040."

According to data provided by the Center, the 92,086 additional hours
was an increase of 24 percent over the 377,442 hours used in fiscal
year 1994. 

A compliance division manager at a third service center said that his
division had exceeded its fiscal year 1995 training allotment by over
14,000 hours, or 62 percent. 

Similarly, although fewer district employees were eligible for
redeployment than at service centers, an official at one district
said that because TPS and ACS work in that district could not be
absorbed at sites in other districts, vacancies had to be filled with
new temporary and term employees, which created concerns about
quality and additional training costs. 

Many of the supervisors we interviewed also said that redeploying
experienced employees out of their units and/or inexperienced
employees into their units increased their training requirements.  We
interviewed 30 supervisors (hereafter referred to as "gaining
supervisors") who had, altogether, received 346 redeployed employees
and 24 supervisors (hereafter referred to as "losing supervisors")
who had lost 412 employees to other units.\24

As shown in figure 2.1, 20 (83 percent) of the 24 supervisors who
lost employees and 20 (67 percent) of the 30 supervisors who gained
employees said redeployment had increased training requirements in
their units. 

   Figure 2.1:  Supervisors' Views
   on How Redeployment Affected
   Their Units' Training
   Requirements

   (See figure in printed
   edition.)

Source:  GAO-structured interviews with 30 supervisors who gained and
24 supervisors who lost redeployed employees. 

According to many of the service center and district office officials
and supervisors we interviewed, the increased training requirements
also decreased the number of experienced employees on line--since
these employees are often used as training instructors--thus further
eroding unit productivity. 


--------------------
\23 Because the number of times an eligible employee could be
redeployed was not limited until December 1994, many employees were
redeployed two or more times, further increasing training
requirements. 

\24 In general, gaining supervisors were selected from high-gain
areas while losing supervisors were selected from high-loss areas. 
However, each could have gained and lost employees, and some of the
412 employees lost by supervisors in our sample could have been among
the 346 employees gained by other supervisors in our sample. 


      PRODUCTIVITY AND SERVICE TO
      TAXPAYERS DECLINED
-------------------------------------------------------- Chapter 2:2.2

We asked losing supervisors how the loss of employees through
redeployment affected their unit's productivity in terms of volume,
accuracy, and timeliness.  Their views varied.  As shown in figure
2.2, of the 24 supervisors interviewed, 18 (75 percent) said that the
volume of their unit's output decreased, 9 (38 percent) said that the
accuracy of their output decreased, and 9 (38 percent) said that the
timeliness of their output decreased.  Conversely, 6 (25 percent), 15
(62 percent), and 15 (62 percent) of the managers said that their
units' volume, accuracy, and timeliness, respectively, either had not
been affected by the redeployment or had increased. 

   Figure 2.2:  Losing
   Supervisors' Views on How
   Redeployment Affected Their
   Units' Productivity

   (See figure in printed
   edition.)

Source:  GAO-structured interviews with 24 losing supervisors. 

The 30 gaining supervisors we interviewed also had mixed views on how
the redeployment process affected their unit's productivity.  As
shown in figure 2.3, decreased volume, accuracy, and timeliness were
reported by 10 (33 percent), 7 (23 percent), and 11 (37 percent),
respectively, of those supervisors.  Conversely, 16 (54 percent), 18
(60 percent), and 15 (50 percent) of them said their units' volume,
accuracy, and timeliness, respectively, either had not been affected
by the redeployment or had increased. 

   Figure 2.3:  Gaining
   Supervisors' Views on How
   Redeployment Affected Their
   Units' Productivity

   (See figure in printed
   edition.)

Source:  GAO-structured interviews with 30 gaining supervisors. 

Moreover, 4 of 16 gaining supervisors and 11 of 20 losing supervisors
whose units normally used overtime said redeployment had increased
their use of overtime.  Similarly, 4 of 16 gaining supervisors and 8
of 18 losing supervisors whose units normally used temporary details
from other units said that their use of details had also increased
due to redeployment. 

We also asked supervisors whose employees were redeployed how this
loss affected their unit's service to taxpayers.  Of the 24
supervisors, 10 (42 percent) said the loss of employees degraded
their service to taxpayers.  The degraded services mentioned most
often included (1) taking longer to answer telephone calls and
correspondence from taxpayers, (2) increases in the number of calls
waiting and abandoned, and (3) growing backlogs of cases to be
processed. 

Service center and district officials we interviewed also mentioned
that productivity and taxpayer service had declined with the erosion
of unit experience.  For example: 

  -- A customer-service branch chief at one center said that the
     branch was answering only 83 percent of its scheduled calls in
     June 1995, due to inexperienced employees and their requirement
     for training time, which had not been considered in developing
     the work schedule. 

  -- A collections branch chief said that all the movement of
     employees associated with redeployment had reduced the branch's
     timeliness in answering correspondence.  In June 1995, the
     branch's cumulative rate was 8.4 days over the 21-day standard. 
     And, in some peak months, the rate rose as high as 40.1 days. 

Officials made similar comments in unit self-assessment reports of
redeployment results.  For example, one district's June 1995
assessment of its first-year redeployment results, said that

     "Redeployment losses have had a major impact on the Problem
     Resolution Program [PRP].  It is well known that PRP caseworkers
     do not become truly efficient for 2 - 3 years; the training
     curve is slow because of the difficulties of the cases.  Many of
     the more experienced caseworkers were the first to be selected
     as compliance hires.  Even though we replenish the staff, they
     continue to apply for redeployment positions.  The result in
     Taxpayer Service was a reduction in PRP productivity in 1995
     from .5 [cases] per hour (one of the highest rates in the
     country) to .2 [cases] per hour."

The most significant productivity declines may have been experienced
within the service center processing divisions.  Two internal IRS
studies confirmed that the processing divisions lost productivity
because employees who were experienced in processing returns were
redeployed to compliance and customer-service jobs and replaced by
inexperienced employees who were either newly hired or reassigned
from other functional areas.\25

According to a 1995 IRS study of service center productivity,
redeployment hurt service center productivity by "encouraging
[permanent] pipeline employees to transfer out of the Processing
Division."\26

According to the study, as illustrated in figure 2.4, the percentages
of permanent employees transferring out of returns processing jobs in
the 1995 filing season increased substantially from the prior filing
season at 8 of the 10 service centers, and the increases were much
larger at centers that have not been designated to continue as
processing centers. 

   Figure 2.4:  Permanent Employee
   Transfer Rates at Submission
   and Nonsubmission Processing
   Centers

   (See figure in printed
   edition.)

Source:  IRS Analysis and Studies Division memorandum on the impact
of personnel policies on service center pipeline productivity, April
17, 1995. 

The study also said that new processing employees were significantly
less productive than experienced employees.  It estimated that
employees in their second filing season were 20 percent more
productive than in their first. 

According to a November 1995 IRS internal audit report,\27

     "During the 1995 filing season, processing functions in the
     service centers expended 40 percent more overtime hours than
     during 1994.  In addition, the time expended by employees who
     were detailed-in from non-processing jobs increased by 19
     percent in 1995."

Internal Audit attributed the above results, in part, to an
inexperienced workforce.\28

According to the report,

     ".  .  .  Processing functions nationwide suffered a significant
     experience drain prior to the beginning of the 1995 filing
     season.  Management indicated that between 1400 and 1800
     employees had been moved from Processing Divisions to fill
     Customer Service and Compliance jobs .  .  ."

The report explained that redeployed or newly hired replacements
could not perform some processing steps at rates used to schedule the
work. 


--------------------
\25 Consistent with this finding, in our report on the 1995 filing
season (The 1995 Tax Filing Season:  IRS Performance Indicators
Provide Incomplete Information About Some Problems, GAO/GGD-96-48,
Dec.  29, 1995), we noted declines in some of the indicators IRS uses
to track the performance of its service centers in processing
individual income tax returns.  For example, the accuracy of returns
processed by data transcribers declined from 95.84 percent in 1994 to
93.93 percent in 1995, and the average number of days it took the
centers to process individual income tax returns declined from a
range of 5 to 7 days in 1994 to a range of 5 to 9 days in 1995. 

\26 Permanent employees are those appointed to career or
career-conditional status and can include employees with seasonal and
nonseasonal work schedules.  Unlike term or temporary employees,
permanent employees do not have specified limits on their employment
with IRS. 

\27 National Office Oversight Provided to the Service Centers During
the 1995 Filing Season, Nov.  14, 1995 (reference no.  060702). 

\28 Other contributing factors cited by Internal Audit included an
increase in the number of individual tax returns that had to be
processed at the centers, mostly due to a shift from electronic
returns to paper returns, and the need to manually transcribe data
from forms 1040EZ because automated scanning systems were unable to
process the scheduled volume of those returns. 


   IRS AND NTEU MADE SOME CHANGES
   TO REDUCE EXPERIENCE LOSS
---------------------------------------------------------- Chapter 2:3

Before the Redeployment Understanding was terminated, IRS and NTEU
had taken some actions designed to minimize the loss of employee
experience during the transition to the new business vision.  IRS and
NTEU had also been discussing (1) whether to migrate related work,
workers, and funding together into the new customer-service
environment, and (2) the need to curtail personnel turnover and the
resulting erosion of experience and productivity.  According to a
National Office official, as of June 1996, IRS was also validating
skill assessment tools that it hoped to use in the redeployment
process. 

In October 1994, the Redeployment Resolution Council withdrew the
designation of resources management employees in grades GS-9 and
above at host sites\29 as redeployment eligible.  Although the
Council decided not to withdraw the designation of employees who were
occupying positions that would, over time, be transformed into the
new customer-service positions, it did restrict the lateral movement
of employees out of these new positions after they had used their
redeployment eligibility to move into them. 

In the meantime, the Council authorized district offices to staff
their continuing customer-service sites with volunteers from closing
ACS and TPS sites before using normal redeployment procedures. 
Similarly, as discussed earlier, the Council authorized four service
centers to fill up to 30 percent of their new customer-service
positions with volunteers from ACS and TPS sites that were closing in
nearby districts instead of using normal redeployment procedures. 
Although only on a voluntary basis, these exceptions to the
established redeployment process helped to minimize the loss of ACS
and TPS employees who were experienced in performing customer-service
functions. 

In April 1995, IRS customer-service officials were planning to
request an exception to the redeployment process that would have
allowed the phased migration of related work, workers, and funding,
concurrently, into customer service, in accordance with
customer-service workload migration plans.  According to IRS
officials, this exception request was never formally sent to the
Redeployment Resolution Council.  Instead, officials said the matter
was informally discussed among IRS and NTEU council members.  We were
told in February 1996 that IRS and NTEU were still working informally
on how best to deal with excessive turnover and experience loss
IRS-wide, resulting from procedures specified in the Redeployment
Understanding. 


--------------------
\29 Resources management host sites are those that will serve
multiple IRS locations. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 2:4

Although it seems reasonable to expect some operational
inefficiencies as an inherent part of any redeployment process, those
inefficiencies were exacerbated at IRS, in our opinion, by
redeployment procedures that made employees eligible for redeployment
too soon and prevented IRS from redirecting employees to new jobs on
the basis of their related work experiences.  Redeployment occurred
long before the expected large-scale displacement of employees
associated with the implementation of planned modernization projects
and consolidation efforts.  Consequently, many of the jobs vacated by
redeployed employees had to be filled again by newly hired employees. 
Thus, IRS' first redeployment experience came too early to be very
effective in achieving the goal of redeployment--which is to move
employees out of jobs that would not be needed in the new environment
and into jobs that would.  Because employees experienced in certain
areas were often redeployed to areas requiring very different skills
and were, in turn, replaced by inexperienced staff, IRS lost valuable
experience and in some instances incurred training cost twice,
especially at its service centers. 

Before the Redeployment Understanding was terminated, IRS and NTEU
had worked together to resolve a number of problems, but they had not
yet agreed on using current job experience in making redeployment
decisions.  Unless future redeployments are structured in a way that
allows IRS to redirect current employee experience and skills to jobs
in the new environment, considerable experience could be lost during
the transition, bringing about further increases in training costs
and declines in productivity and customer service.  For that same
reason, it is also important that future redeployment be timed to
coincide more closely with the implementation of modernization
projects and consolidation efforts to better ensure that experienced
employees are not vacating jobs long before those jobs are
eliminated. 


   RECOMMENDATION TO THE
   COMMISSIONER OF INTERNAL
   REVENUE
---------------------------------------------------------- Chapter 2:5

We recommend that the Commissioner of Internal Revenue--should future
redeployment procedures be developed--address the problems identified
in this report, including

  -- limiting redeployment eligibility to employees whose current
     jobs have been or are about to be substantially altered or
     eliminated, so that redeployment of employees is timed closely
     with the implementation of modernization projects or
     consolidation efforts and

  -- allowing IRS to redirect employees who are currently and
     successfully performing existing jobs to redesigned jobs that
     are substantially the same before seeking volunteers from
     unrelated functions (similar to the exceptions made for district
     ACS and TPS employees). 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 2:6

We requested comments on a draft of this report from the Commissioner
of Internal Revenue and the National President of NTEU, or their
designees.  We received written comments from IRS' Chief, Management
and Administration, on September 11, 1996, and from NTEU's National
President on September 17, 1996.  The written comments from IRS and
NTEU are reprinted as appendixes V and VI, respectively.  We also met
with both parties, separately, on September 13, 1996, to discuss
their comments. 

While agreeing that future redeployments should be better targeted
and timed, IRS said that our discussion of the timing of past
redeployments oversimplified the issue.  According to IRS, it did, in
retrospect, allow reassignments to occur too soon but that the result
would have been different if IRS' modernization plans had proceeded
on the schedule envisioned when the Redeployment Understanding was
signed.  We do not agree.  We considered IRS' modernization plans and
schedules in making our assessment, and we cited specific examples in
our report where reassignments occurred well before sites were to be
closed or implementation of a new system was to begin.  IRS did not
provide any information to contradict the scheduling information
cited in our report and noted in its comments that the information in
our report was generally factual. 

IRS also commented on the relationship between redeployment and the
hiring initiative, under which Congress authorized thousands of new
compliance and customer-service positions.  According to IRS, that
initiative provided an opportunity to redeploy many employees who
were in noncontinuing positions and that if it "had not used these
new positions for redeployment, and instead filled them with external
hires, the number of employees still occupying non-continuing
positions when the transition was scheduled to occur would have been
much larger."

We recognize that the timing of the hiring initiative was partly
responsible for increased training requirements and reduced
productivity, since over 4,000 additional jobs were made available to
redeployment-eligible employees in fiscal year 1995--well before
large-scale employee displacement was expected.  Nevertheless, we
still believe that IRS would have experienced less disruption in
fiscal years 1994 and 1995 had redeployment procedures focused on
finding new jobs for employees as their displacement became imminent
and allowed IRS to redeploy employees with related experience before
those without such experience.  More importantly, we believe that the
lessons learned from IRS' early redeployment experience will help it
establish procedures aimed at minimizing disruption in the future,
when there is no guarantee of additional hiring initiatives. 

In its comments on our draft report, NTEU said that the report is
"flawed in its design, particularly with regard to its first stated
objective, and that it fails to present any data to support the
majority of the conclusions that are reached." As an example, NTEU
cited our conclusion that the redeployment procedures led to
premature reassignments and operational inefficiencies.  We disagree. 
Our conclusion about premature reassignments was based on an analysis
of staffing and reassignment data for IRS service centers and for ACS
and TPS sites; discussions with IRS officials and with service center
and district office supervisors who lost redeployed employees; and
reviews of IRS' modernization and site closure plans.  In our
opinion, the results of that work, which are discussed on pages 16 to
21, provide a sufficient basis for concluding that the redeployment
procedures led to premature reassignments.  We reached our conclusion
about operational inefficiencies after interviewing officials and
supervisors in many of the affected organizational units and
reviewing various documentation including several internal IRS
reports and studies.  Again, we believe that the results of our work,
which are discussed on pages 21 to 30, provide sufficient data to
support our conclusion. 

NTEU also said that to draw such a conclusion we would need to
present some comparative analysis of the operational impact of the
Redeployment Understanding versus some alternative selection
procedure, such as the traditional competitive selection process.  We
did not intend to suggest in our report that IRS should have used the
traditional competitive process in lieu of the redeployment
procedures.  That process, like the lateral redeployment process, can
also result in the selection of employees without related experience,
since a key factor in ranking employees is the appraised performance
in their current jobs, which may not be related to the jobs being
filled.  Conversely, we also did not intend to suggest that IRS
should be precluded from using competitive procedures in filling its
new jobs.  Such procedures would have to be used when redeploying
employees to new jobs having higher career ladders than their current
jobs.  They might also have to be used when the number of employees
with related experience or skills is less than the number of new
positions. 

What we are suggesting is that the redeployment should have been more
focused and better timed.  While we acknowledge in the report that
some operational inefficiencies can be expected with any redeployment
process, we believe that the process would have been more efficient
if the procedures were structured to (1) allow management to give
priority to employees occupying positions that were closely related
to the types of positions being filled and (2) time employee
eligibility more closely to the dissolution of their jobs.  We did
not do a comparison of the operational impact of the Redeployment
Understanding versus a redesigned redeployment that would have been
more focused and better timed because it would have been highly
speculative on our part to have attempted to quantify what the
results would have been if IRS had used different redeployment
procedures.  Nevertheless, we think it is reasonable to assume that
the Redeployment Understanding, by making too many employees eligible
for redeployment too soon and by limiting IRS' abililty to take full
advantage of employees' job experience, resulted in a greater level
of inexperience than might have otherwise been the case and thus led
to more training, less productivity, and less service to taxpayers. 

NTEU suggested that our conclusions were based on an "erroneous
assumption that the IRS could have simply reassigned, either
voluntarily or involuntarily, its most qualified and most experienced
employees" into the new compliance and customer-service jobs "without
any further consideration and without any negative impact on
processing division productivity." NTEU said that such an assumption
was incorrect because (1) involuntary reassignment has a "negative
impact on employee morale, overall performance, and productivity;"
(2) the requirement that an employee cannot be noncompetitively
reassigned to a position having a higher career ladder than that of
the employee's current position greatly reduces the field of eligible
employees outside of the processing division; and (3) we apparently
assumed that IRS would not have had to backfill any of the vacancies
created by filling the new compliance and customer-service jobs with
employees who had related experience. 

We did not assume that IRS could reassign its most qualified and
experienced employees without any negative impact on productivity. 
To the contrary, as noted earlier, we believe that some decrease in
productivity can be expected even with a well-timed and properly
targeted redeployment.  We did not attempt to assess the relative
effects of voluntary and involuntary reassignment on employee morale,
performance, or productivity nor are we implying that all
reassignments should be done on an involuntary basis.  Under the
procedures envisioned by our recommendation, IRS could try the
voluntary process before using the involuntary process or the normal
competitive process.  If it became necessary to use the competitive
process to fill certain jobs, IRS could narrow the areas of
consideration to certain groups of employees (e.g., those within the
local commuting area, those in immediate jeopardy of losing their
jobs, or those with current and directly related experience or
skills).  In addition to minimum qualification requirements, IRS
could also apply selective ranking factors requiring directly related
experience.  By contrast, the Redeployment Understanding required IRS
to fill a new job with the most senior volunteer for lateral
assignment, even if that volunteer had no related experience or
skills.  Thus, IRS was precluded from selecting a less-senior
volunteer who had related experience or skills. 

We agree with NTEU that the number of employees eligible for lateral
redeployment might not have been enough to fill all of the new
compliance and customer-service jobs without some impact on the
processing division.  However, we believe that the impact would have
been minimized if procedures had (1) made employees eligible for
redeployment only when the event that was to displace them became a
near-term reality and (2) allowed IRS, in filling jobs laterally, to
give preference to employees who were in immediate jeopardy of being
displaced from their current positions and who had related
experience.  If additional positions remained to be filled, we agree
that IRS might have had to select some processing division employees. 

We did not assume that no vacated position would have to be
backfilled.  However, although the redeployment of employees with
related experience before those without such experience could still
require filling some of the jobs vacated by the experienced
employees, we believe that the need to do this could be less, using
the kind of procedures suggested in our recommendation.  For example,
those procedures would allow the concurrent and phased migration of
customer-service-related work and workers as planned by IRS and as
done in initially staffing the customer-service prototype at the
Fresno Service Center.  Thus, IRS would be transferring positions
rather than creating vacancies. 

In summary, we are not suggesting that IRS should be precluded from
staffing any new jobs using employees whose jobs are not in jeopardy
or who are not the most experienced.  What we are saying is that
redeployment procedures should apply to employees who are expected to
be displaced by the imminent implementation of modernization projects
or reorganization efforts.  They should also be structured to give
preference to employees whose jobs are in immediate jeopardy and to
those who have experience related to the jobs being filled.  Instead,
the procedures adopted by IRS and NTEU made virtually all service
center employees eligible for redeployment, without regard to when
their jobs were to be eliminated or redesigned and required IRS to
fill new jobs at the same grade, using the most senior volunteers
from both related and unrelated areas throughout the center before
using other options, such as directed reassignments. 

Our responses to other comments made by IRS and NTEU can be found in
appendixes V and VI. 


REDEPLOYED EMPLOYEE JOB
SATISFACTION AND INITIAL
PERFORMANCE RESULTS WERE
ENCOURAGING
============================================================ Chapter 3

To obtain some input on redeployment from those most affected and to
identify other issues that might warrant IRS' attention in future
redeployments, we interviewed some redeployed employees and some of
their new supervisors.\30 Those interviews identified some concerns
relating to such things as training and the amount of redeployment
information provided to employees; but they also indicated that
employees were generally satisfied with their new jobs, and
supervisors were generally satisfied with their new employees.  While
there is room for improvement, as evidenced by the interviews and the
declining productivity discussed in chapter 2, the reactions of
employees and supervisors were encouraging. 


--------------------
\30 We interviewed 188 employees who had been redeployed and 30
managers who supervised a total of 346 employees who had been
redeployed. 


   MOST REDEPLOYED EMPLOYEES WERE
   MEETING PERFORMANCE STANDARDS
   AND WERE SATISFIED WITH THEIR
   NEW JOBS
---------------------------------------------------------- Chapter 3:1

Of the 30 supervisors we interviewed, the great majority were either
very satisfied (11) or generally satisfied (15) with their new
employees.  The supervisors also said that 92 percent (or 320) of
their 346 new employees were meeting established standards for a
"fully successful" level of performance--the minimum acceptable level
for performance appraisal purposes.  While we recognize the
limitations associated with self-reporting, we also asked employees
about their performance.  Of the 177 employees we interviewed who had
received feedback, 155 (88 percent) said that they were performing at
or above the "fully successful" level.\31

Some of the 22 employees we interviewed who said they were performing
below the fully successful level offered suggestions on what would
help them improve their performance.  The most frequently cited
suggestions were

  -- more job knowledge, skills, or experience;

  -- more or better training; and

  -- consistent guidance and/or more feedback from their supervisors
     or managers. 

Some employees who were unable to perform successfully in their new
positions had returned to their former positions.  In one district,
an official we interviewed who coordinated the redeployment at that
site told us that 12 (8 percent) of 150 employees were reinstated in
their old jobs after "failing to make the transition" to their new
jobs.  And, at least at that site, employees who returned to their
old jobs were redesignated as eligible for redeployment.  Some of the
supervisors included in our sample said that employees who are unable
to meet performance standards will be reassigned to other positions. 
At some sites, employees may be given an "opportunity period" of 1
year to improve their performance, at which time they may be
reassigned. 

Of the 188 employees we interviewed, 70 percent (131 employees) were
satisfied with their new jobs, as shown in figure 3.1.  Commonly
mentioned reasons for this satisfaction included (1) the type of work
or the work environment, (2) the challenging or interesting nature of
the work, and (3) the sense of teamwork among coworkers and managers
in their new units. 

The reasons most frequently cited by the 17 percent (32 employees)
who were dissatisfied included (1)inadequate training; (2)
unrealistic productivity expectations, especially for employees with
little or no related experience; and (3) stress and fatigue from the
length of time spent on the telephone or at a computer terminal. 

   Figure 3.1:  Redeployed
   Employees' Job Satisfaction

   (See figure in printed
   edition.)

Source:  GAO interviews of 188 redeployed employees. 


--------------------
\31 Eleven of the 188 had not received feedback on their performance
and thus could not characterize it. 


   SOME EMPLOYEES, ESPECIALLY
   THOSE WHO LACKED RELATED
   EXPERIENCE, REQUIRED ADDITIONAL
   TRAINING
---------------------------------------------------------- Chapter 3:2

As discussed in chapter 2, IRS field officials indicated that
redeployment had increased their training requirements.  The impact
on training was also evident from our interviews of redeployed
employees and the supervisors who gained redeployed employees. 

Nearly a fifth of the redeployed employees we interviewed required
more training than that which is normally provided for their
positions.  Many of these employees lacked related experience. 
Furthermore, although the Redeployment Understanding authorized only
one additional training opportunity for employees who are not
successful the first time, some supervisors said that they were told
to allow as many training opportunities or as much time as necessary. 

Almost all of the redeployed employees included in our sample
received classroom and/or OJT training.\32 However, many of them
either had their formal training period extended or had to repeat
some or all of the training segments.  In that regard, 32 (17
percent) of the employees we interviewed said they received
additional training.  Similarly, the gaining supervisors we
interviewed said that 47 (14 percent) of their redeployed employees
required additional training.  According to a report by IRS
headquarters officials after visiting one district office,\33 6 of 25
redeployed employees training to be revenue agents in that district
failed the 12-week second phase of OJT twice.  The six employees were
either returned to their former positions or transferred to other
compliance jobs.  A supervisor we interviewed at another site said
that she had an employee who had been on OJT for almost 1 year, and
that, before redeployment, he probably would not have been allowed
more than 6 months of OJT.  The supervisor was told that since the
employee was obtained through redeployment, he would continue OJT
"indefinitely."

Employees without related experience often required the most
training.  For example, employees at one service center who were
training for the customer-service representative position were
divided into three groups on the basis of their knowledge of tax law
and the computer system used to adjust taxpayer accounts (i.e.,
IDRS).  The group with the least amount of knowledge required almost
twice as much training as the group with the most knowledge.  At
another service center, where employees were trained together to
minimize costs, officials told us they saw a correlation between
related or unrelated experience and performance in training.  For
example, according to training records, employees redeployed from
unrelated areas, who comprised about half of the class, failed tests
more than twice as often as employees redeployed from related areas. 
Additionally, more than half of the employees from unrelated areas
were still receiving OJT nearly 4 months after completion of
classroom training, while those from related areas had completed
their OJT in as little as 1 month and, in no case, more than 3
months. 

Of the 30 gaining supervisors included in our sample, 18 said that
previous experience was a factor in the amount of training needed by
new employees.  One supervisor said that three of his four redeployed
employees were receiving almost twice as much OJT as they would have
if they had the related experience needed to perform the work. 

Some employees also needed training in basic skills to be able to
perform their new jobs.  Of 184 employees who responded to our
question, 54 (29 percent) said that they needed skills training in
areas such as math, language, or communications to perform
successfully in their new positions.  Of the 54 employees, 46 said
that they received at least some of the needed skills training. 
According to an IRS report on the results of a site visit, "Some of
our employees don't have the basic skills needed to be successful in
these new positions, and we can't underestimate the magnitude of the
training investment need[ed] to support the transition." Also,
selection standards were sometimes relaxed.  For example, according
to one district's June 1995 assessment of its first-year redeployment
results,

     "The requirement to select low-ranking redeployment eligibles
     from competitive certificates has had a negative impact on the
     Compliance functions as well as several employees.  .  .  . 
     Many of the employees would not have been selected under normal
     circumstances because of mediocre evaluations, or marginal
     interviews.  This mandatory selection created 'false hopes' for
     the employees--setting them up to fail.  These mandatory
     selections have resulted in several class failures, exorbitant
     training expenditures, [and] disgruntled employees who have had
     to return to ACS and TPS."


--------------------
\32 OJT is a period of formal instruction whereby employees begin
performing the duties required of the job but with an instructor's
supervision. 

\33 IRS headquarters officials provided reports of their visits to
one service center and 10 districts made between April and June 1995
to assess the progress of redeployment. 


   MANY EMPLOYEES FOUND
   REDEPLOYMENT ASSISTANCE,
   INFORMATION, AND TRAINING
   INADEQUATE
---------------------------------------------------------- Chapter 3:3

We asked employees to rate the adequacy of various aspects of the
redeployment process including (1) the assistance--such as career
counseling, skill assessments, and job placement services--IRS
provided in helping them find new positions; (2) the information IRS
provided to explain the redeployment process; and (3) training--both
classroom and OJT.  Of the 188 employees we interviewed, 95 said that
they experienced problems in at least one of those areas. 

As shown in table 3.1, 44 of the 187 employees (24 percent) who
responded to our question found the redeployment assistance
inadequate, while 51 employees (27 percent) said they had no basis to
comment on the adequacy of the assistance because they did not
receive assistance.  Of the 76 employees who cited specific
inadequacies,\34 most said they needed help in understanding the
redeployment process, accessing job announcements, determining the
qualifications required for jobs, and researching their available
options. 



                                    Table 3.1
                     
                      Redeployed Employees' Opinions on the
                       Adequacy of Redeployment Assistance,
                            Information, and Training

             Assistance       Information      Class training         OJT
          ----------------  ----------------  ----------------  ----------------
            Number  Percen    Number  Percen    Number  Percen    Number  Percen
                of    tage        of    tage        of    tage        of    tage
          responde      of  responde      of  responde      of  responde      of
Opinion        nts   total       nts   total       nts   total       nts   total
--------  --------  ------  --------  ------  --------  ------  --------  ------
Adequate        63      34       104      57       113      60       111      59
As              29      16        35      19        29      15        24      13
 adequate
 as
 inadequ
 ate
Inadequa        44      24        36      20        29      15        31      16
 te
No basis        51      27         8       4        17       9        22      12
 to
 judge
================================================================================
Total          187   100\a       183     100       188   100\a       188     100
--------------------------------------------------------------------------------
\a Percentages do not total to 100 because of rounding. 

Source:  GAO interviews of redeployed employees. 

Of the 183 employees who responded to our question on the adequacy of
redeployment information, 36 (20 percent) considered it inadequate. 
Of those who gave reasons, almost all said that IRS did not explain
the redeployment process well enough for them to fully understand it. 
Employees wanted to know the policies and procedures so they could
better determine what their options were. 

The third aspect of redeployment that many employees found inadequate
was the quality of training.  For example, 31 of 188 employees (16
percent) said that OJT was inadequate.  The most frequently mentioned
reasons were

  -- OJT instructors lacked either sufficient subject knowledge or
     the communication skills to be able to teach the practical
     application of the classroom instruction and

  -- too many employees were assigned to each instructor for
     employees to receive adequate attention to individual needs. 

Although such complaints may not be unique to a redeployment
situation, we believe that they may have been partly the result of
overextending training resources to respond to the increase in
training requirements discussed in chapter 2. 

A slightly lower percentage of employees--29 of 188 (15
percent)--found classroom training inadequate.  The most frequently
mentioned reasons were that

  -- the amount of time allotted for classroom training was
     insufficient, particularly for those with little or no related
     experience and

  -- the subject coverage was inadequate or the training lacked a
     "hands-on" component for the related computer systems. 


--------------------
\34 Thirty-three employees cited inadequacies even though they did
not characterize redeployment assistance as inadequate.  Conversely,
one employee who characterized assistance as inadequate did not
provide a reason. 


   MANY SUPERVISORS WERE ALSO
   DISSATISFIED WITH THE
   REDEPLOYMENT PROCESS
---------------------------------------------------------- Chapter 3:4

As table 3.2 shows, 13 of the 30 gaining supervisors and 9 of the 24
losing supervisors said that they were dissatisfied with the way IRS
handled the redeployment process. 



                               Table 3.2
                
                Gaining and Losing Supervisors' Opinions
                  of How IRS Handled the Redeployment
                                Process

                            Gaining Supervisors    Losing Supervisors
                            --------------------  --------------------
                              Number  Percentage    Number  Percentage
                                  of          of        of          of
                            responde  respondent  responde  respondent
Opinion                          nts           s       nts           s
--------------------------  --------  ----------  --------  ----------
Satisfied                         11          37         5          21
Neither satisfied nor              5          17         9          38
 dissatisfied
Dissatisfied                      13          43         9          38
No basis to judge                  1           3         1           4
======================================================================
Total                             30         100        24       100\a
----------------------------------------------------------------------
\a Does not total to 100 percent because of rounding. 

Source:  GAO interviews of gaining and losing supervisors. 

The gaining supervisors most frequently cited the following reasons
for their dissatisfaction with the redeployment process: 

  -- redeployment allowed movement by seniority (the amount of time
     the employee had been with the federal government) rather than
     by work experience, and thus some of the employees redeployed
     were unqualified for the positions and

  -- redeployment resulted in too much personnel turnover. 

The reasons cited by losing supervisors were similar to those cited
by the gaining supervisors.  They said that

  -- their units received inexperienced employees through
     redeployment;

  -- they lost experienced employees; and

  -- communication between IRS management and employees was poor. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:5

Overall, the results of our interviews of redeployed employees and
their supervisors suggested that many employees can be successfully
redeployed to meet new job requirements.  While it may take some time
for redeployed employees to become fully productive in their new
jobs, the vast majority of the redeployed employees included in our
sample, and many more who were represented by the supervisors we
interviewed, were reportedly meeting new job performance standards
for their experience levels, although some needed supplemental
training. 

Our results also suggested some dissatisfaction with the information,
assistance, and training provided as part of the redeployment process
to better prepare employees for jobs in the modernized environment. 
Although most redeployed employees were satisfied with their new
jobs, many were dissatisfied with the quality and availability of
redeployment information, assistance, and training.  These employees
said that they needed a more consistent, thorough, and understandable
explanation of the redeployment process and how and when their jobs
would be affected.  They also said that they needed (1) information
on available assistance, training, and job vacancies; (2) job
placement assistance, including help in determining the
qualifications required by the new jobs; and (3) more and better
qualified OJT instructors. 


   RECOMMENDATION TO THE
   COMMISSIONER OF INTERNAL
   REVENUE
---------------------------------------------------------- Chapter 3:6

We recommend that, as a part of managing any future redeployment
effort, the Commissioner of Internal Revenue consider ways to improve
management communications with employees concerning redeployment
assistance, information, and training.  In doing so, IRS might ask
itself such things as whether it is providing information that
clearly explains (1) redeployment policies and procedures; (2) which
jobs are expected to be eliminated, continued, and redesigned and
when; and (3) the nature and extent of available redeployment
assistance. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 3:7

We requested comments on a draft of this report from the Commissioner
of Internal Revenue and the National President of NTEU, or their
designees.  We received written comments from IRS' Chief, Management
and Administration, on September 11, 1996, and NTEU's National
President on September 17, 1996.  We also met with both parties,
separately, on September 13, 1996, to discuss their comments. 
Neither party raised any objection to our recommendation or to the
factual content of this chapter. 


IRS STAFFING IN JANUARY 1994 AND
JANUARY 1996
=========================================================== Appendix I



                               Table I.1
                
                IRS Staffing in January 1994 and January
                                  1996

                                             Staffing as   Staffing as
Appointment type                                of 01/94      of 01/96
------------------------------------------  ------------  ------------
Career and career conditional/nonseasonal        100,558        99,164
Career and career conditional/seasonal            24,261        21,634
Term/nonseasonal                                     506           612
Term/seasonal                                      2,318         2,401
Temporary/nonseasonal                              2,949         2,465
Temporary/seasonal                                   230           168
======================================================================
Totals                                           130,822       126,444
----------------------------------------------------------------------
Source:  GAO analysis of IRS staffing data. 


OVERVIEW OF IRS' REDEPLOYMENT
PLANNING
========================================================== Appendix II

In July 1994, we reported that the fundamental human resource
planning tasks facing IRS included

  -- identifying its workforce requirements--the number of workers,
     types of positions, and skills needed to operate in the new
     environment;

  -- assessing the knowledge, skills, and abilities of its existing
     workforce;

  -- determining the gap between existing workforce capabilities and
     those required for the new environment; and

  -- developing detailed recruiting, training, retraining, and
     redeployment plans to meet projected workforce requirements
     while providing continued employment for its current
     workforce.\35

IRS has taken several steps toward satisfying those recommendations
and related ones made in earlier reports by us and the National
Research Council.  Specifically, IRS developed independent models
that produced initial estimates of future workforce requirements for
key functions such as customer service, submission processing, and
resources management support services.  The outputs from the various
workforce requirements models then became inputs for a redeployment
model, which compared these estimated workforce requirements to the
estimated supply of workers (i.e., the existing workforce, adjusted
for expected attrition), by site, job series, and grade for fiscal
years 1995 through 2001. 

Outputs from the redeployment model were then used as the starting
points for site-specific redeployment plans, which were approved in
October 1994.  These plans had to be consistent with redeployment
policies and procedures established by IRS and NTEU. 

According to IRS officials, the workforce requirements models and the
redeployment model will be refined and reused periodically to keep
human resource plans in sync with modernization plans and schedules. 

In November 1995, according to the IRS official in charge of the
Business and Employees Competency Reengineering Project, IRS acquired
off-the-shelf skill assessment tools for eight core jobs.\36 In June
1996, the same official said that IRS had completed the testing
needed to confirm the validity of these tools in assessing the skills
and other competencies needed to effectively perform the eight core
jobs and was awaiting test results.  After some experience using
these tools to identify training needs for individuals redeployed to
core jobs, and provided that NTEU concurs, IRS intends to use skill
assessment results to help select individuals for redeployment to the
core jobs.  Because many returns processing employees whose jobs will
no longer be needed are lower-graded clerical employees who lack
basic communication or math skills, such tools could prove useful in
determining training needs and making redeployment selections. 


--------------------
\35 GAO/GGD-94-159. 

\36 According to the IRS official, the eight core jobs are revenue
agent, revenue officer, tax auditor, customer-service representative,
taxpayer service representative, ACS tax examiner, service center
collection tax examiner, and nonpipeline tax examiner. 


INFORMATION ON HOW WE SELECTED THE
IRS SITES WE VISITED AND THE
EMPLOYEES AND SUPERVISORS WE
INTERVIEWED
========================================================= Appendix III

To do this study, we visited IRS service centers in Atlanta,
Brookhaven, Cincinnati, and Fresno and district offices in Atlanta,
Baltimore, Cincinnati, and San Francisco.  At those locations, we
administered structured interviews to a total of 188 employees who
had been redeployed to new jobs, 30 supervisors who had gained a
total of 346 redeployed employees, and 24 supervisors who had lost a
total of 412 redeployed employees. 

We selected the Atlanta and Fresno service centers because IRS had
estimated that each would lose nearly 3,000 jobs as their
returns-processing functions were phased out.  Fresno was also a
prototype customer-service center and the first operational
customer-service units were established there in January 1994.  We
selected the Brookhaven and Cincinnati service centers because
initial customer-service units were rolled out at these sites in the
fall of 1994. 

We selected the Atlanta, Cincinnati, and San Francisco district
offices because their TPS and ACS call sites were scheduled to be
phased out in conjunction with the planned consolidation of
customer-service locations.  We selected the Baltimore District
Office because it had been designated as a continuing
customer-service site.  Furthermore, unlike the Atlanta, Cincinnati,
and San Francisco areas, which were designated as host sites for
resources management support services, the Baltimore area was
designated as a client site for such services.  This meant that
resources management positions in Baltimore were being eliminated. 

In the absence of a centralized IRS database that identified the
universe of redeployed employees, we worked with IRS to develop, for
each of the eight locations, a database of employees who were
reassigned between November 1993 (the date of the Redeployment
Understanding) and April 1995.  Temporary reassignments were not
included in the databases.  For sampling purposes, we selected
employees who changed their job series and/or work unit.  From these
databases, we judgmentally selected a cross section of redeployed
employees to interview, considering such factors as their previous
functional area experience and grade level. 

We used April 30, 1995, as the cutoff point to help ensure that the
redeployed employees would have had several months to adjust to their
new jobs by the time our structured interviews were administered.  We
administered those interviews from August through December 1995. 
Subsequent analysis showed that the 188 employees had been in their
new jobs from about 4 to 22 months, and, on average, about 11 months. 

As agreed with IRS, for the service centers we visited, we selected
employees reassigned to compliance functions as tax examiners and
correspondence examiners and to customer-service units as tax
examiners.  For the district offices, we selected employees
reassigned as revenue agents, revenue officers, tax auditors, and tax
examiners.  In addition, we administered structured interviews to a
few employees who were redeployed to various types of jobs in newly
established District Office Research and Analysis units.\37

The results of our employee interviews are not projectable because
statistical sampling methods were not used.  We judgmentally selected
samples because, among other things, (1) a centralized universe of
redeployed employees was not available when we began our work and (2)
the use of statistical sampling methods would have required
considerably more audit time and resources, with the results only
projectable on a site-by-site basis. 

In selecting supervisors to interview, we generally attempted to (1)
select gaining supervisors who had received at least one of the
employees included in our sample of redeployed employees and (2)
select losing supervisors who were in the functional areas at each
location that had lost the greatest number of redeployed employees. 

Table III.1 shows the numbers and types of structured interviews done
at each site. 



                              Table III.1
                
                     Structured Interviews by Site

                                        Number of interviews
                              ----------------------------------------
                                             Supervisors   Supervisors
                                              who gained      who lost
                                Redeployed    redeployed    redeployed
Site                             employees     employees     employees
----------------------------  ------------  ------------  ------------
Atlanta District                        25             5             5
Atlanta Service Center                  25             5             5
Baltimore District\a                    17             4            \b
Brookhaven Service Center               25             5             5
Cincinnati\ District                    23            \c            \c
Cincinnati Service Center               23            \c            \c
San Francisco District                  25             5             4
Fresno Service Center                   25             6             5
======================================================================
Total                                  188            30            24
----------------------------------------------------------------------
\a Fewer employee interviews were needed at Baltimore because
generally only its resources management and information systems
employees were eligible for redeployment. 

\b We did not interview any losing supervisors because (1) we
diverted staff to complete work at Brookhaven after we closed our New
York Field Office and (2) we did not expect the relocation of
resources management and information systems employees to have a
direct effect on either the customer service or compliance function. 

\c We were unable to complete the planned interviews at both
Cincinnati locations because of the closure of our Cincinnati Field
Office. 


--------------------
\37 District Office Research and Analysis units are to help IRS'
National Office of Research and Analysis identify ways to improve
compliance for segments of taxpayers that share certain
characteristics or behaviors. 


CHANGES IN STAFFING AT SERVICE
CENTER PROCESSING DIVISIONS
========================================================== Appendix IV



                                    Table IV.1
                     
                     Changes in Processing Division Staffing
                      Between January 1994 and December 1994

                                    To
                                 other     Changed      From
Appointm     As of                 IRS  appointmen     other    New to     As of
ent type     01/94  Left IRS     areas      t type     areas       IRS     12/94
--------  --------  --------  --------  ----------  --------  --------  --------
Career      18,282   (2,997)   (1,182)         (6)       385        14    14,496
 and
 career
 conditi
 onal
Term         1,784     (828)      (17)         126         5     2,849     3,919
Temporar       783     (352)       (2)       (120)         1       608       918
 y
================================================================================
Totals      20,849   (4,177)   (1,201)                   391     3,471    19,333
--------------------------------------------------------------------------------
Source:  GAO analysis of IRS staffing data as of January 8, 1994, and
December 10, 1994. 



                                    Table IV.2
                     
                     Changes in Processing Division Staffing
                      Between December 1994 and January 1996

                                    To
                                 other     Changed      From
Appointm     As of                 IRS  appointmen     other    New to     As of
ent type     12/94  Left IRS     areas      t type     areas       IRS     01/96
--------  --------  --------  --------  ----------  --------  --------  --------
Career      14,496   (1,663)   (1,872)       1,562       397     3,872    16,792
 and
 career
 conditi
 onal
Term         3,919   (1,640)     (164)     (1,332)         3     1,053     1,839
Temporar       918     (480)      (19)       (230)         0       713       902
 y
================================================================================
Totals      19,333   (3,783)   (2,055)                   400     5,638    19,533
--------------------------------------------------------------------------------
Source:  GAO analysis of IRS staffing data as of December 10, 1994,
and January 6, 1996. 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE INTERNAL REVENUE
SERVICE
========================================================== Appendix IV



(See figure in printed edition.)

See comment 2. 

See comment 2. 



(See figure in printed edition.)

See comment 2. 

See comment 2. 


The following are GAO' comments on IRS' letter dated September 11,
1996. 


   GAO COMMENTS
-------------------------------------------------------- Appendix IV:1

1.  These developments, which occurred after we had completed our
audit work, are reflected on pp.  2 to 3 and 10. 

2.  These suggested changes have been made. 




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE NATIONAL
TREASURY EMPLOYEES UNION
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on NTEU's letter dated September 17,
1996. 


   GAO COMMENTS
-------------------------------------------------------- Appendix IV:2

1.  We have reworded the statement to make our point more clear (see
p.  4 of the report).  Pursuant to the Redeployment Understanding,
IRS had to select volunteers on the basis of seniority.  Thus, IRS
had to select more senior, less experienced volunteers for positions
before less senior but more experienced persons could be selected. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII


   GENERAL GOVERNMENT DIVISION,
   WASHINGTON, D.C. 
------------------------------------------------------- Appendix VII:1

David J.  Attianese, Assistant Director
James G.  O'Donnell, Evaluator
Stuart M.  Kaufman, Technical Assistant


   ATLANTA FIELD OFFICE
------------------------------------------------------- Appendix VII:2

Robert V.  Arcenia, Evaluator-in-Charge
Kim M.  Rogers, Site Senior
Ronald J.  Heisterkamp, Evaluator
A.  Carl Harris, Tax Group Manager
Sara L.  Bingham, Reports Analyst


   BOSTON/NEW YORK FIELD OFFICE
------------------------------------------------------- Appendix VII:3

George F.  Degen, Evaluator


   CINCINNATI FIELD OFFICE
------------------------------------------------------- Appendix VII:4

Laurie R.  Housemeyer, Evaluator
Lori A.  Koehne, Evaluator
Thomas M.  McDonald, Evaluator


   SEATTLE/SAN FRANCISCO FIELD
   OFFICE
------------------------------------------------------- Appendix VII:5

Arthur L.  Davis, Senior Evaluator
Suzy Foster, Senior Evaluator


*** End of document. ***