Tax Administration: Allegations of IRS Employee Misconduct (Letter
Report, 05/24/99, GAO/GGD-99-82).
Pursuant to a congressional request, GAO provided information on alleged
misconduct by Internal Revenue Service (IRS) employees in their
treatment of other IRS employees and taxpayers, focusing on: (1) the
specific allegations made at the Senate Committee on Finance hearings;
and (2) any underlying systemic or programmatic problems that need to be
resolved to protect the rights of taxpayers and IRS employees.
GAO noted that: (1) available data showed significant differences
between Senior Executive Service and line staff disciplinary cases in
terms of dispositions and processing times; (2) IRS found that actions
taken against lower-level employees more closely conformed to its
established table of penalties than actions taken against higher-graded
employees; (3) regarding the allegation that the Deputy Commissioner
delayed action on senior manager misconduct cases until the managers
were eligible to retire, GAO focused on actual retirements and did not
reach general conclusions about eligibility to retire; (4) GAO found no
cases in which an individual who was ineligible to retire when an
allegation was filed, retired while the case was pending with the Deputy
Commissioner; (5) GAO could not determine the extent of reprisal against
whistleblowers because IRS did not track whistleblowing reprisal cases;
(6) regarding allegations of IRS retaliation against taxpayers, GAO
previously reported that IRS information systems were not designed to
identify, address, and prevent such taxpayer abuse; (7) with respect to
allegations of improper zeroing out or reductions of recommended taxes
by IRS managers, GAO found no evidence to support the allegations in the
eight specific cases referred to GAO by the IRS employees who testified
at the hearings; (8) on the other hand, IRS did not systematically
collect data on how much additional taxes recommended by auditors were
zeroed out or reduced by IRS employees without a basis in law or IRS
procedure; (9) IRS has acknowledged equal employment opportunity-related
problems, including problems in hiring and promotion, in its Midwest
District Office and has begun addressing them; and (10) IRS' lack of
adequate information systems and documentation in the areas of employee
discipline, retaliation against whistleblowers and taxpayers, and
zeroing out of recommended taxes prevented GAO from doing a more
comprehensive analysis of these issues.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-99-82
TITLE: Tax Administration: Allegations of IRS Employee Misconduct
DATE: 05/24/99
SUBJECT: Whistleblowers
Ethical conduct
Federal employees
Malfeasance
Fair employment programs
Personnel management
Tax violations
Taxpayers
Tax administration systems
Employment discrimination
IDENTIFIER: IRS Automated Labor Employee Relations Tracking System
Senior Executive Service
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TAX ADMINISTRATION Allegations of IRS Employee Misconduct
United States General Accounting OfficeGAO Report to the Chairman
Committee on FinanceU.S. Senate
May 1999
GAO/GGD-99-82
United StatesGeneral Accounting Office Washington, D.C. 20548
General Government Division
B-280651
Page 1 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
GAO
May 24, 1999 The Honorable William V. Roth, Jr.Chairman, Committee
on Finance United States Senate Dear Mr. Chairman: For years, the
Congress has expressed concerns about the InternalRevenue
Service's (IRS) management and treatment of taxpayers. We, and
others, have chronicled IRS' struggle to modernize and have made
scoresof recommendations to improve IRS' operations and its
service to taxpayers. Congressional concerns led to a June 1997
report1 by theNational Commission on Restructuring IRS and a
series of hearings in 1997 and 1998 that focused on problems at
IRS. In April 1998, the Senate Committee on Finance held hearings
on allegedmisconduct by IRS employees in their treatment of other
IRS employees and taxpayers. Witnesses testifying at the hearings
alleged that (1) seniorIRS managers did not receive the same level
of disciplinary action as line staff; (2) the Deputy Commissioner
of Internal Revenue delayed action onsubstantiated cases of
employee misconduct until senior managers were eligible to retire;
(3) IRS retaliated against whistleblowers and againsttaxpayers and
their representatives who were perceived to be noncooperative; (4)
IRS employees zeroed out or reduced proposed taxassessments for
reasons not related to the merits of the cases; and (5) IRS
discriminated against employees in the evaluation process on the
basis ofrace or national origin in its Midwest District Office,
which is headquartered in Milwaukee, WI. You asked us to review
these allegations and, in particular, to evaluateboth the specific
allegations made at the hearings and any underlying systemic or
programmatic problems that needed to be resolved to protectthe
rights of taxpayers and IRS employees in these areas. This report
provides information related to specific allegations regarding IRS
seniormanagers and the Midwest District Office. It also brings
together information bearing on the other allegations from our
current and pastwork on systemic problems at IRS. Because some of
the specific allegations involve taxpayer data that cannot be
publicly disclosed, we areissuing to you at the same time as this
report a separate, restricted letter
1A Vision for a New IRS, Report of the National Commission on
Restructuring the Internal Revenue
Service, June 25, 1997.
B-280651 Page 2 GAO/GGD-99-82 Allegations of IRS Employee
Misconduct that discusses alleged improper zeroing out and
retaliation againsttaxpayers. We did our work in Washington, D.C.,
and Milwaukee between June 1998and March 1999 in accordance with
generally accepted government auditing standards. A complete
description of the objectives, scope, andmethodology for this
report appears in appendix I. A summary of IRS' written comments
on a draft of the report appears at the end of this letter.
Available data showed significant differences between Senior
ExecutiveService (SES) and line staff disciplinary cases in terms
of dispositions and processing times. For example, a much higher
percentage of SES casesthan of lower-level cases was cleared or
closed without action, and SES cases tended to take longer to
complete. Also, IRS found that actions takenagainst lower-level
employees more closely conformed to its established table of
penalties than actions taken against higher-graded
employees.However, there was no basis for a more direct comparison
of the discipline imposed on senior managers and lower-level
employees because SES andline staff offenses, as well as their
associated mitigating and aggravating factors, were different. Our
ability to make other comparisons betweenSES and line staff
disciplinary cases was hindered by the lack of detailed and
accurate data in connection with IRS' disciplinary case database.
Regarding the allegation that the Deputy Commissioner delayed
action onsenior manager misconduct cases until the managers were
eligible to retire, we focused on actual retirements and did not
reach generalconclusions about eligibility to retire. We found no
cases in which an individual who was ineligible to retire when an
allegation was filed, retiredwhile the case was pending with the
Deputy Commissioner. However, cases we studied in depth were
pending for 2 months to 4 years at theDeputy Commissioner's level.
In addition, we estimated, on the basis of a random sample of IRS
SES disciplinary files, that SES cases averagedalmost a year from
the time executive support staff received them until case closure,
compared to a goal of 90 days. To address a variety ofproblems,
including poor case-tracking procedures, inaccurate and incomplete
records and files, and poor communication, IRS has started
torevamp its entire disciplinary system.
We could not determine the extent of reprisal against
whistleblowersbecause IRS did not track whistleblowing reprisal
cases. The only systematic data available related to formal
complaints filed with twoindependent review agencies--the U.S.
Office of Special Counsel (OSC) and the U.S. Merit Systems
Protection Board (MSPB). In fiscal years 1995
Results in Brief
B-280651
Page 3 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
through 1997, OSC received 63 IRS whistleblower reprisal matters
andobtained action from IRS favorable to employees in 4 cases. In
the same time period, MSPB decided 45 initial appeals of
whistleblowing reprisalallegations involving IRS, dismissing the
majority of them but settling more than half of the remainder.
Regarding allegations of IRS retaliation against taxpayers, we
previouslyreported that IRS information systems were not designed
to identify, address, and prevent such taxpayer abuse.2 In
reviewing IRS databases forthis report, we again found that IRS
information systems provided limited and incomplete data on
alleged revenue agent retaliation against taxpayersand their
representatives.
With respect to allegations of improper zeroing out or reductions
ofrecommended taxes by IRS managers, we found no evidence to
support the allegations in the eight specific cases referred to us
by the IRSemployees who testified at the hearings. On the other
hand, IRS did not systematically collect data on how much
additional taxes recommended byauditors were zeroed out or reduced
by IRS employees without a basis in law or IRS procedure. In
particular, IRS had no data on supervisors'improperly limiting
auditors' recommendations of additional tax before an audit was
closed. Although our results were not a measure of
improperreductions in recommended taxes, we recently reported that
the majority of additional taxes recommended during audits was not
assessed. Weattributed this to many factors, including the
complexity of the tax code and the overreliance on additional
taxes recommended to measure auditresults.
IRS has acknowledged equal employment opportunity (EEO)-
relatedproblems, including problems in hiring and promotion, in
its Midwest District Office and has begun addressing them. After
an Equal EmploymentOpportunity Commission administrative judge's
finding that an IRS employee was a victim of discrimination, the
district produced a climateassessment report. In addition,
although a recent outside panel found no discriminatory hiring or
promotion practices, its August 1998 reportcontained many
recommendations related to several district problem areas,
including the hiring and promotion processes. Since the report was
2Tax Administration: IRS Can Strengthen Its Efforts to See That
Taxpayers Are Treated Properly
(GAO/GGD-95-14, Oct. 26, 1994); Tax Administration: IRS Is
Improving Its Controls for Ensuring ThatTaxpayers Are Treated
Properly (GAO/GGD-96-176, Aug. 30, 1996); and Tax Administration:
IRS
Inspection Service and Taxpayer Advocate Roles for Ensuring That
Taxpayers Are Treated Properly(GAO/T-GGD-98-63, Feb. 5, 1998).
B-280651 Page 4 GAO/GGD-99-82 Allegations of IRS Employee
Misconduct issued, a new District Director was named who has
stated her commitmentto overcoming the district's contentious and
long-standing EEO problems. In general, IRS' lack of adequate
information systems and documentationin the areas of employee
discipline, retaliation against whistleblowers and taxpayers, and
zeroing out of recommended taxes prevented us from doinga more
comprehensive analysis of these issues. This lack of information
hinders both congressional oversight and IRS management
fromaddressing any problems in these areas. IRS has acknowledged
the need for more complete and accurate program and management
information onthese issues.
The IRS Restructuring and Reform Act of 1998 included several
provisionsrelated to employee misconduct, abuse, and retaliation.
As a consequence, IRS has taken steps intended to begin reform of
its processes and datacollection in the areas of employee
discipline, retaliation, and the tax assessment process, among
other things. We believe that it is importantthat IRS maintain
adequate information systems and documentation so that employee
and taxpayer complaints, including those related toretaliation,
can be properly reviewed.
Available data showed that case dispositions and processing times
indisciplinary cases during the period of January 1, 1996, through
June 30, 1998, differed for SES employees and lower-level, or
general schedule(GS), staff. In addition, a 1997 IRS internal
study found that actions taken against lower-level employees more
closely conformed to the IRS table ofpenalties than actions taken
against higher-graded employees.
3 However,
because of dissimilarities in the types of offenses and incomplete
casefiles, these data do not necessarily prove disparate
treatment. Agencies
must consider many factors, such as the nature and seriousness of
theoffense; the employee's job level and type of employment;
whether the offense was intentional, technical, or inadvertent;
the employee's pastdisciplinary record; and the notoriety of the
offense or its impact upon the reputation of the agency, in
deciding what penalty, if any, should beimposed in any given case.
IRS recognized that problems have hindered the processing and
resolution of employee misconduct cases and hasbegun revamping its
disciplinary systems.
For the period we studied, IRS tracked disciplinary cases for GS
and SESemployees in different systems. The Office of Labor
Relations (OLR), which is the personnel office for non-SES staff,
handled GS cases. It
3Guide for Penalty Determinations Report, IRS, Sept. 1997.
Disciplinary Actionsfor Senior Executive Service and Lower-Level
Staff
Background
B-280651
Page 5 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
tracked these cases in the Automated Labor and Employee
RelationsTracking System (ALERTS), although IRS officials told us
that ALERTS data were often missing or incomplete. The Office of
Executive Support(OES), which is the personnel office for IRS
executives, handled SES cases. Although ALERTS was supposed to
also track SES cases, OEStracked SES cases by using a log and
monthly briefing reports. The monthly briefing reports were used
to inform the Deputy Commissionerabout the status of cases.
We selected the cases for our study of disciplinary actions for
SES andlower-level staff as follows: For GS cases, we used ALERTS
data for 22,025 cases received in, or closed by, OLR between
January 1, 1996, and June 30,1998. For SES cases, our information
came from two sources: (1) a 70-case random sample of SES nontax
misconduct case files that were activebetween January 1, 1996, and
June 30, 1998;
4 and (2) for the same time
period, 43 other SES nontax cases reported either in the logs or
as"overaged"
5 SES cases in the monthly briefing reports. In total, we looked
at 113 cases involving 83 SESers. Unless otherwise noted, all SES
statisticspresented in this section are based on the random
sample. See appendix I
for more information on how we selected the cases for our study.
We were unable to make many meaningful statistical
comparisonsbetween SES and GS employee misconduct cases for three
reasons. First, we were able to collect more detailed data through
our SES file reviewthan from the ALERTS database used for GS
cases. This was particularly true regarding dates on which
important events occurred. As a result, wecould not compare
average processing time at each phase of the disciplinary process,
although we were able to compare processing timesfrom case receipt
through case closure.
Second, the level of detail and accuracy of ALERTS data varied
widely.Some IRS regions historically took ALERTS data entry more
seriously than others did, according to an IRS memorandum, and
cases contained varyinglevels of detail about case histories,
issues, facts, and analyses. ALERTS had few built-in system
controls to ensure data integrity. Instead, IRSrelied on managers
to ensure the accuracy of their subordinates' work.
Third, some data were missing for the majority of the cases
tracked inALERTS. For example, we could not analyze the frequency
with which
4We excluded employee tax cases because they were inherently
different from the cases and issues
raised during the April 1998 Senate Finance Committee hearings.
5IRS defined overaged cases as those cases pending in OES for more
than 90 days.
B-280651 Page 6 GAO/GGD-99-82 Allegations of IRS Employee
Misconduct final dispositions were less severe than proposed
dispositions becauseboth pieces of information were available for
only about 13 percent of the ALERTS cases. Because officials said
that ALERTS was OLR's means ofrecording information on lower-level
disciplinary cases, we used it to the extent that it had
information comparable to what we collected on SEScases.
Available data showed that processing time and frequency and type
of casedispositions differed for SES and lower-level staff. On
average, from OES' or OLR's receipt of a case until case closure,
SES cases, on the basis of our70-case random sample, lasted almost
a year (352 days) and lower-level cases lasted less than 3 months
(80 days). We estimated that the largest difference between SES
and GS casedispositions occurred in the closed without action
(CWA) and clearance categories. As shown in table 1, the
dispositions in 73 percent of SES caseswere CWA or clearance,
versus 26 percent for GS cases. CWA is to be used to close a case
when the evidence neither proves nor disproves theallegation(s). A
disposition of clearance is to be used when the evidence clearly
establishes that the allegations are false. In practice,
neitherdisposition results in a penalty. The actual breakdown
between the two dispositions is as follows: for SES cases, 61
percent were CWA and 12percent were clearance; for GS cases, 24
percent were CWA and 2 percent were clearance.
Disposition
Percentage ofsampled
SES cases
Confidenceinterval for SES
casesa Percentageof GS casesbClearance or closed without action 73
63.4 - 83.4 26Caution letter 0 0 - 5 3 Oral or written counseling
9 4.5 - 17.0 13Reprimand 2 0.4 - 7.9 9 Suspension 0 0 - 5 9Removal
0 0 - 5 5 Retired/Resigned 9 4.5 - 17.0 11Other
c 7 3.2 -14.8 25
aThe confidence level for these intervals was 95 percent. bDoes
not add to 100 percent due to rounding. cFor GS cases, "other"
includes admonishments, leave restriction, reassignment,
alternative discipline, cases forwarded to Inspection, missing and
miscoded cases, and other dispositions. For SES cases,"other"
includes missing and miscoded cases.
Sources: GAO analysis based on sample of SES cases and information
from IRS' ALERTS.
Table 1 outlines in order of severity the frequency with which
availabledata indicate that various dispositions were imposed for
SES and lower
Comparisons Between SESand Lower-Level Misconduct Cases
Table 1: Percentages of Closed SES andLower-Level Misconduct Cases
Receiving Various Dispositions
B-280651
Page 7 GAO/GGD-99-82 Allegations of IRS Employee Misconduct level
staff. SES data are based on the 56 closed cases in our 70-
casesample. GS data are based on 15,656 closed cases in ALERTS.
6 Ninety-five
percent confidence intervals for the SES data are presented to
moreaccurately portray our findings. Using these confidence
intervals, the rates
of occurrence differed between SES and GS cases for dispositions
ofclearance and CWA, reprimand, suspension, and other. However,
using 95- percent confidence intervals and eliminating the CWA or
clearancecategory from the analysis, the rates of occurrence
between SES and GS cases were similar for all dispositions, except
oral or written counselingand retired/resigned. In any case, we
will discuss later in this report that differences in dispositions
of SES and GS cases do not necessarily meanthat the dispositions
were inappropriate or that disparate treatment occurred. We also
analyzed disciplinary actions for an additional 43 SES
cases.Because these cases were not randomly selected, the results
may not be representative. Of the 43 cases, we found 9 in the more
seriouscategories--6 instances of counseling, 1 reprimand, 1
suspension, and 1 removal. As further detailed in the upcoming
section of this report on alleged case-processing delays by the
Deputy Commissioner, SES cases took a long time to close for many
reasons. These reasons included poor case-trackingprocedures,
inadequate file management, and poor communication among agency
officials involved in the disciplinary process. We do not know
towhat extent, if any, these difficulties contributed to
differences in processing times between SES and GS cases. Many
factors can affect the discipline imposed in a particular case.
Thesefactors include the nature and seriousness of the offense;
the employee's job level and type of employment; whether the
offense was intentional,technical, or inadvertent; the employee's
past disciplinary record; and the notoriety of the offense or its
impact upon the reputation of the agency.Collectively, these
factors are components of what is known as the Douglas Factors,
and they must be considered in determining theappropriate penalty
in a case.
7 See appendix II for a listing of the Douglas
Factors.
6Excludes duplicate cases and nondisciplinary dispositions.
7Douglas v. Veterans Administration, 5 M.S.P.R. 280 (1981).
Factors Affecting Case-Processing Time and Dispositions
B-280651
Page 8 GAO/GGD-99-82 Allegations of IRS Employee Misconduct Not
all of the Douglas Factors will be pertinent in every case, and,
whilesome factors will weigh in the employee's favor (mitigating
factors), others may weigh against the employee (aggravating
factors). IRS officials told usthat lower-level actions tend to be
more straightforward than SES actions, with fewer mitigating
factors. Since mitigating factors tend to reduce thelevel of
discipline imposed, this could partially explain why penalties
might be imposed differently in lower-level cases than in SES
cases. We found that allegations against SES employees were
usually reported toa hotline, the Department of the Treasury's
Office of Inspector General (OIG), or the IRS Inspection Service.
Because complaints against SESemployees can be anonymous, this
anonymity can affect IRS' ability to follow up on a complaint or
investigate it thoroughly. In contrast, IRSofficials told us that
GS cases were generally filed by managers about their
subordinates. In these cases, the complainant was known and
generallyprovided concrete evidence to support the allegation.
Further, typical issues surrounding lower-level cases may be
lesscomplicated or easier to successfully investigate than those
involving SES employees. Table 2 outlines in more detail the most
common issues in SESand lower-level staff cases. SES data are
based on our 70-case sample. GS data are based on 22,025 cases in
ALERTS. We subjectively classified theissues in SES cases, and our
classifications may not be precise. Overall, we found that the
most common issue in SES cases was prohibited personnelpractices,
8 while time and attendance was the most common issue in GS
cases.
Cases Most commonissue Second mostcommon issue Third mostcommon
issueaSES sample Prohibited personnel
practices Misuse offunds/property; fraud,waste, and abuse
Procurement issues;lying/falsifyingdocuments; abuse of
position/authority;preferential treatment GS Time and attendance
Unauthorizedaccess to taxpayer
information
Unacceptable jobperformance
aThere was a four-way tie among SES cases. Sources: GAO analysis
based on SES case file review and issue data from IRS' ALERTS.
8Defined as actions that, by law, may not be taken by any employee
who can take, direct others to take,
recommend, or approve any personnel actions. Examples include
discrimination, coercion of politicalactivity, and nepotism. 5
U.S.C. 2302(b).
Table 2: Most Frequently Cited Issuesin SES and GS Disciplinary
Cases
B-280651
Page 9 GAO/GGD-99-82 Allegations of IRS Employee Misconduct In
1994, in response to an internal IRS study reporting a perception
thatmanagers received preferential treatment in disciplinary
matters, IRS created a table of penalties, the Guide for Penalty
Determinations.9 Thepurpose of the guide was to ensure that
decisions on substantiated cases of misconduct were appropriate
and consistent throughout IRS. In 1997and 1998, IRS studied the
effect of the guide on GS and SES employees and found that
* actions taken against lower-graded employees more closely
conformed tothe guide than those taken against higher-graded
employees (see table 3);
* for GS employees overall, 91 percent of disciplinary actions
conformed tothe guide, versus 74 percent for SES employees;
* when disciplinary actions did not conform to the guide, the
actions werebelow the guide's prescribed range 93 percent of the
time for GS
employees overall, versus 100 percent of the time for GS-13
through GS-15and SES employees; and
* if admonishments were included as part of reprimands,
conformance withthe guide approached 100 percent for GS-13 through
GS-15 employees.
Employee level Degree of conformancewith the penalty guideGS-2
through GS-7 92% - 93% GS-8 through GS-12 88 - 91GS-13 through GS-
15 77 - 87 All SESa 74 Note: Nonconformance with the penalty guide
does not necessarily mean that a particular penaltywas
inappropriate.
aIRS reviewed 164 executive cases. Of these, 43 cases had
dispositions that were subject to the provisions of the guide.
Source: Report of the Employee Complaints Analysis Group, IRS,
1998.
The IRS study and IRS officials agreed that the guide had
limitations andno longer met IRS needs. Specifically, the guide
covered all employees but did not address statutory and regulatory
limitations that restrictedmanagement's ability to impose
disciplinary suspensions on SES employees. IRS officials said that
governmentwide, there was no level ofdiscipline available for SES
employees that was more severe than a reprimand but less severe
than a suspension of at least 15 days.10 Incontrast, GS employees
could have received suspensions of 14 days or less. While the
guide prescribed a penalty range of "reprimand tosuspension," the
only option for SES employees, because of the statutory
9Report of the Double Standard Study Group, IRS, May 1992.
105 U.S.C. 7542 and 5 C.F.R. 752.601(b).
IRS Study of Penalty GuideEffects Table 3: Degree With
WhichDisciplinary Action Conformed to Guide for Penalty
Determinations, 1994-97
B-280651
Page 10 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
limitations against suspensions of less than 15 days, was a
reprimand ifmanagement wished to impose a penalty, but not the
harshest available penalty. IRS officials also told us that in
certain cases, they might haveimposed discipline in between a
reprimand and a 15-day suspension had they had the option to do
so. According to IRS officials, IRS' 1995 attemptto have the
Office of Personnel Management deal with this issue was
unsuccessful. Statutory and regulatory requirements could
partiallyexplain why reprimands might have been imposed when a
harsher disciplinary action might have seemed more appropriate.
Applying to employees at different levels, the IRS penalty guide
wasconstructed with very broad recommended discipline ranges to
provide for management discretion. However, one IRS study pointed
out that, in someinstances, this rendered the guide useless (e.g.,
when the penalty range was "reprimand to removal").11 IRS created
a disciplinary review team in September 1998. Among otherthings,
the team was to
* develop an action plan that addressed case handling, complaint
systems,and employee awareness;
* review and revise IRS' Guide for Penalty Determinations; and*
develop a process to review and monitor complaints.
As of March 1999, the team was proposing a new integrated IRS
complaintprocess. Its intent was to overcome problems with
complaint processing systems' not (1) communicating or
coordinating with each other, (2)capturing the universe of
complaints, (3) specifically tracking or accurately measuring
complaints, and (4) following up on complaints toensure that
appropriate corrective action had been taken. The team was
proposing a 26-person Commissioner's Review Group to, among
otherthings, manage and analyze complaints sent to the
Commissioner of Internal Revenue, monitor other IRS complaint
systems, and coordinatewith the systems' representatives. The team
was also redesigning the penalty guide.
11For the 51 offenses listed in the penalty guide, 15 offenses (or
29 percent) had a range of "reprimand
to removal" or "admonishment to removal."
IRS Is Making Changes toIts Complaint System
B-280651
Page 11 GAO/GGD-99-82 Allegations of IRS Employee Misconduct On
the basis of our review of SES cases, we did not find a case in
which anindividual who was ineligible to retire at the time an
allegation was filed, retired while the case was pending with the
Deputy Commissioner.However, we found cases that spent up to 4
years at this stage in the disciplinary process and cases that
stalled at various points throughout theprocess. Although OES'
goal for closing an SES case was 90 days, on the basis of our
random sample, cases averaged almost 1 year for OES toclose.
Further, IRS had poor case-tracking procedures, inadequate file
management, missing and incomplete files, and poor
communicationamong officials involved in the disciplinary process.
Because IRS' 1990 and 1994 written SES case-handling procedures
wereout of date, IRS officials described the operable procedures
to us.
12 During
the period covered by our review, OES handled SES misconduct
cases. Itsgoal for closing a case was 90 days from its receipt of
a case. Once OES
received a case, it was to enter it into ALERTS, although it did
not alwaysdo this, and prepare a case analysis. The case analysis
and supporting documents were then to be forwarded to the
appropriate RegionalCommissioner, Chief, or Executive Officer for
Service Center Operations, who was to act as the "recommending
official." Within 30 days, therecommending official was to review
the case with the help of local labor relations experts, develop
any additional facts deemed appropriate, andreturn a case report
to OES, including a recommendation for disposition.
If OES disagreed with the report for any reason, it was to include
a"statement of differences" in its case analysis. OES was to
forward the field report and the OES analysis to the Deputy
Commissioner's office forconcurrence or disapproval. If the Deputy
Commissioner concurred with the proposed disposition, the
recommending official could take action. Ifthe Deputy Commissioner
did not approve, he could impose a lesser disposition or return
the case to OES for further development.13 IRSexecutive case-
handling procedures did not define a time period within which the
Deputy Commissioner was to act on case dispositions. We collected
information on SES cases from two sources: (1) the fivespecific
cases mentioned during the April 1998 Senate Finance hearings, and
(2) a 70-case random sample of the SES misconduct case files
aspreviously described, plus 43 more cases from OES tracking logs
and
12Offices and positions in existence when the procedures were
written had changed or disappeared but
were still official links in the processing chain. 13IRS officials
told us that, procedurally, it would be difficult for the deciding
official to impose a more severe penalty than what was proposed.
Alleged Delays by IRSDeputy Commissioner on Senior
ExecutiveService Misconduct Cases
Background
B-280651
Page 12 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
monthly briefing reports, for a total of 113 cases. These 113
cases involved83 individuals. Again, see appendix I for more
details on how we selected the cases to study. Of the 113 SES
cases we reviewed, we did not find a single instance inwhich an
individual who was ineligible to retire at the time the allegation
was filed, retired while the case was pending with the
DeputyCommissioner. Overall, of the 83 individuals involved in the
113 cases, 25 people, or 30 percent, had retired from IRS by
December 31, 1998.14 Ofthese 25 people, 13 retired before their
cases were closed or the cases were closed because the individuals
retired. At the time of retirement,cases for 2 of the 13 people
were pending in the Deputy Commissioner's office, but both of
these individuals had been eligible to retire at the timethe
complaints against them were originally filed. Cases for the
remaining 11 of the 13 people either were still being investigated
or were pending inOES, that is, they had not yet reached the
Deputy Commissioner's office. In doing our analyses, we focused on
actual retirements and did not reachgeneral conclusions about
eligibility to retire.
As table 4 shows, of the five executive cases mentioned during the
April1998 hearings, two of the executives were already eligible to
retire when the allegations against them were filed. We refer to
the executives in thefive cases as Executives A through E. One of
the two eligible executives-- Executive B--was still an IRS
employee as of September 30, 1998. Theother--Executive D--retired
while, in OES' view, his case was pending in the Deputy
Commissioner's office.15 Of the three individuals who were
noteligible to retire when the allegations against them were
filed, one retired 16 months after his case was closed. The other
two executives, one ofwhom was not found culpable, were still
employed by IRS as of September 30, 1998.
14The 25 individuals do not include people for whom specific
retirement dates were unavailable or
individuals whose cases were received in OES after they had
retired. 15Executive D was transferred about 7 months after the
Inspection investigation was completed. The Deputy Commissioner
considered the case closed with the individual's transfer, but OES
was unawareof the Deputy Commissioner's view and did not formally
close the case until 3 months after Executive
D retired, or 35 months after the transfer.
No Cases ShowingRetirement Linked to Deputy CommissionerDelays in
Case Processing
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SESer
Employmentstatus at ourSeptember 30, 1998, cutoff date
Retirementstatus at time of allegation
Case pendingwith Deputy Commissioner(months) Case outcome A IRS
employee Not eligible toretire a Not found to beculpable for
violationB IRS employee Eligible to retire 2 Counseled,confirmed
in writingC Retired Not eligible to retire 18 CounseledD Retired
Eligible to retire
a Transferred
E IRS employee Not eligible toretire 48 Counseled,confirmed in
writing aDisciplinary file did not document the duration of the
Deputy Commissioner's review. Sources: GAO analysis based on IRS
misconduct case files and retirement eligibility information.
IRS records showed that the misconduct cases spent from 2 months
to 4years at the Deputy Commissioner level. See appendix III for
more details about the five cases. As shown in table 5, on the
basis of our random sample, the totalprocessing time for SES
misconduct cases averaged 471 days (almost 16 months) from the
date the complaint was filed until the case was closed.Most of
this time involved OES case analysis and referral to the
recommending official for inquiry (214 days, or about 7 months)
andinvestigation by the recommending official (124 days, or more
than 4 months). These averages exceeded IRS' most recent, written
case-processing time guidelines, which were 14 and 30 days,
respectively. The average total time from OES' receipt of a case
to the case's closure was352 days, compared to a goal of 90 days.
As previously mentioned, there was no targeted time frame for the
Deputy Commissioner's review.However, on average, cases spent 42
days at this level.
Table 4: Information on the FiveMisconduct Cases Cited at the
April 1998 Senate Finance CommitteeHearings
Case Processing Not Timely
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Stages of process
Percentage ofsample cases
withinformation
a
Mediannumber
of days
Meannumber of days
Requirednumber
of days Range of daysComplaint filed to OIG/Inspectionbeginning
investigation
21 41 60 10-15 0 - 280
Complaint filed toOIG/Inspection declining toinvestigate
66 40 57 10-15 0 - 306
OIG/Inspectionstarting investigation to referral to IRS
21 123 130 No standard 7 - 355
OES receipt totransmittal to recommending official(RO)
60 161 214 14 43 - 690
RO's receipt of caseto RO's completion of inquiry
56 99 124 30 13 - 514
OES transmittal todeciding official (DO) to DO's decision
57 30 42 No standard 2 - 143
DO's decision to caseclosure 57 0 12 No standard 0 - 202 OES
receipt to caseclosure 79 252 352 90 13 - 1,275 Overall
time:complaint filed to case closure
79 390 471 No standard 104 - 1,467
Note: Ninety-five-percent confidence intervals surrounding the
mean number of days for allprocessing stages were less than plus
or minus 10 percent. aSome percentages were relatively low because
not all cases went through every phase, case files did not always
include all dates, and open cases still had processing phases to
go through. Sources: GAO analysis based on IRS misconduct case
data and executive case-handlingprocedures.
In addition, we found that some cases took a particularly long
time to beresolved. For example, in our sample cases, from the
date the complaint was filed to the date the case was closed, 8
cases took at least 2 years, anadditional case took more than 3
years, and still another case took longer than 4 years. In 1992,
IRS acknowledged that the best way to prevent employees
fromretiring before their cases closed was to improve timeliness.
16 Although we
found no cases in which individuals ineligible to retire when
allegations
16IRS' Program to Combat Senior-Level Misconduct: Getting Stronger
but Still a Long Way to Go, Forty
First Report by the Committee on Government Operations, Nov. 23,
1992.
Table 5: Processing Time at SelectedStages in the Disciplinary
Process for SES Misconduct Cases
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Page 15 GAO/GGD-99-82 Allegations of IRS Employee Misconduct were
made retired with the case pending before the Deputy
Commissioner,the longer it takes to close cases, the more likely
that individuals would retire or resign while their cases were
open. Our review and a recent IRS task force report identified
numerousproblems with the executive misconduct case-handling
process.
17 These
problems included inadequate staffing, poor communication,
inaccurateand incomplete records and files, outdated procedures,
conflicts over
proposed case dispositions, and internal disagreement about
caseinvestigations. These problems contributed to the lengthy
case-processing times in the available data and case files.
According to IRS officials, IRS' downsizing a few years ago
significantlyaffected OES and field staff resources. From late
1996 through early 1998, OES devoted only one staff year to
executive misconduct cases. The staffyear was divided between the
Director and one employee. In mid-1998, the Director moved to
Labor Relations, and the employee retired, leaving OESwith no
resident expertise. Previously, four or five case experts handled
executive cases. In total, according to an IRS official, the
office wasunderstaffed for about 18 months, which caused a case
backlog. However, the new Chief of OES was able to bring the
staffing level up to eight,including two individuals with employee
relations backgrounds to act as team leaders. She also used
detailees and a technical contractor to reducethe case backlog.
The understaffing issue also extended to the labor relations
functions inthe regions. These functions supplied the staff that
recommending officials used to investigate misconduct cases. When
the regional offices wereconsolidated several years ago, they lost
their labor relations functions as well as a central repository
for program administration and expertise. IRS did not enter
executive misconduct cases into ALERTS from late 1996through early
1998. IRS officials told us they did not have enough labor
relations experts to properly track cases on ALERTS because the
systemrequired significant detail about each case. Instead, it
tracked these cases using logs and monthly briefing reports. OES
also used the briefing reportsto inform the Deputy Commissioner of
case status. IRS officials acknowledged that these independent
systems often disagreed with eachother about the details and
status of the cases.
17Task Force to Review Handling of Executive, Grade 15 and
Inspector General Referrals and
Investigations, IRS, July 28, 1998.
Problems With the SESMisconduct Case-Handling Process
Lack of IRS Staff Resources
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Page 16 GAO/GGD-99-82 Allegations of IRS Employee Misconduct Our
review found that poor communication among IRS support staff,
theDeputy Commissioner's office, IRS Inspection, and OIG
contributed to case-processing delays. As previously mentioned,
the DeputyCommissioner considered one case to be closed with the
transfer of the individual, but OES was not told to formally close
the case. In anotherinstance, the Deputy Commissioner told us that
he inadvertently allowed a case to be lost in the system. Case
information in the ALERTS, OES, andIRS Inspection tracking systems
was also found to be inconsistent and inaccurate in many
instances. For example, according to IRS officials,cases recorded
as "overaged" in the IRS Inspection system were recorded as
"closed" by the field offices, leading to confusion among
officials as towhether a case was open or closed and where a
particular case was pending at a given time. An internal IRS study
found that many cases had timeliness problems,especially cases
that had been referred to IRS from OIG. In certain instances,
cases stayed at a particular phase in the process for monthsbefore
an OES employee inquired about their status. In one instance, for
nearly 2 years, OES did not follow up on the status of an OIG
investigation.IRS officials told us that these problems occurred
primarily because IRS had no contact person for OIG cases before
early 1997, and because OESlacked staff resources to properly
monitor cases.
Our review identified several concerns surrounding IRS' files,
records, andmiscellaneous procedures for executive misconduct
cases. Examples included the following:
* Poor filing. Executive misconduct cases were to be filed
alphabetically.Several times, we happened upon misfiled cases only
because we went
through all of the files to draw our sample. Also, in one
instance, a closingletter addressed to the executive involved in a
case was filed instead of being mailed to the individual. It took
nearly 5 months for the error to bediscovered and rectified.
* Missing files and records. We requested eight case files for
our review thatIRS could not provide, even after more than 4
months.
* Incomplete files. In some cases, the case files did not
document importantinformation, such as dates, transmittal
memorandums, and final case
dispositions. In one instance, the case file consisted of a single
E-mailmessage. The case was serious enough to warrant suspending
the individual.
Poor Communication Administrative Practices ThatRaised Concerns
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Page 17 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
* Noncompliance with procedures. In several instances, field
staff imposeddiscipline before the Deputy Commissioner had
concurred with the
proposed action. Several files contained memorandums to the field
staff,reminding them not to impose discipline or close a case
until the Deputy Commissioner had indicated his approval. Further,
as mentioned inappendix III, a premature disposition occurred in
one of our case studies.
According to two 1998 IRS internal studies, outdated procedures
led toinefficient case handling and confusion as to who was
responsible for what. Because of regional and district
consolidations and a national officerestructuring, the written,
1994 case-handling procedures no longer accurately depicted the
proper flow of cases. Although procedures wereinformally adjusted
and work kept moving, it was not efficient. As a result, ad hoc
procedures were developed in each region, leading tocommunication
problems between the regions and the national office. IRS
recognized this problem in March 1998 and completed a draft of new
caseprocedures in July 1998. During that time, the Internal
Revenue Service Reform and Restructuring Act of 199818 established
the Treasury InspectorGeneral for Tax Administration (TIGTA), and
procedures were again revised to accurately depict TIGTA's role.
According to IRS officials, draftprocedures were sent to IRS field
offices for comment in mid-March 1999.
Another factor contributing to case-processing delays was
internaldisagreement surrounding the proper level of discipline to
impose in particular cases. In our case studies, we noted
instances in which internaldisputes significantly lengthened case-
processing times.
19 OES officials
told us that this situation occurred much more frequently in the
past.However, over the past few years, IRS has made a concerted
effort to
resolve disputes below the Deputy Commissioner level. As shown in
table 6, in the cases involving Executives C and D,disagreements
were serious. In fact, they warranted formal statements of
differences. In each of these two cases, OES endorsed a stronger
level ofdiscipline than that suggested by the recommending
official. In the case of
18P.L. 105-206.
19See appendix III for information on these disagreements.
Outdated Procedures Internal Disagreements
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Page 18 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Executive E, IRS officials disagreed among themselves over the
facts ofthe case. Although an IRS Internal Security investigation
confirmed the allegations, the Deputy Commissioner was not
comfortable with theallegations' correctness. However, he
eventually agreed that the allegations had some merit. The Deputy
Commissioner issued a letter ofcounseling 5-1/2 years after the
complaint was filed, which was more than 4 years after he received
the case.
SESer
Recommendingofficial's proposed disposition
OES' originalproposed disposition Final dispositionC Close without
action Letter of reprimand
a Closed without action,
but employee wascounseled
D Counseling 15-day suspensionand consideration of
transferring theemployee
Transferred, accordingto Deputy Commissioner;according to OES,
closed without action"administratively" due to retirementbE Letter
of reprimand Letter of reprimand c Letter of counseling
aOES subsequently changed its position and recommended a
disposition of "close without action." bSee footnote 15 of this
report. cThe proposed disposition was later changed to "letter of
reprimand or letter of counseling."
Source: GAO analysis based on IRS misconduct case files.
As of March 1999, an IRS disciplinary review team was proposing
changesto overcome problems with complaints processing. One of the
units of its proposed Commissioner's Review Group was to provide
labor relationssupport for SES and other cases. This unit would
have 11 employees. In addition, the Commissioner's Review Group
would have a contractoravailable to supplement it and support
field investigations when management believed help was needed. As
previously mentioned, thegroup would also be responsible for
overcoming communication and coordination problems among
complaint-processing systems.
Table 6: Disputes Surrounding CaseDispositions in Three Executive
Misconduct Cases
Recent IRS Actions
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Page 19 GAO/GGD-99-82 Allegations of IRS Employee Misconduct IRS
did not comprehensively collect and analyze information on
reprisalsagainst IRS employee whistleblowers or on IRS retaliation
against taxpayers. Some information was available on the number of
IRS-relatedwhistleblowing reprisal cases resolved by the two
agencies responsible for considering such cases. For example, one
of the agencies, OSC, received63 IRS whistleblower reprisal
matters over the fiscal years 1995 through 1997 and obtained
action from IRS favorable to employees in 4 cases.Concerning
allegations of IRS retaliation against taxpayers, we reported in
1996 and 1998 that IRS did not systematically capture information
neededto identify, address, and prevent such taxpayer abuse.
During this review, we also found limited and incomplete IRS
information of past revenueagent retaliation against taxpayers.
The IRS Restructuring and Reform Act of 1998 included several
provisionsrelated to abuse or retaliation against taxpayers, their
representatives, or IRS employees. As of March 1999, the IRS
disciplinary review team wasproposing how data needed to fulfill
the act's requirements would be assembled. It is against the law
to take a personnel action as a reprisal against awhistleblower.
20 More specifically, an employee with personnel authority is
not allowed to take, fail to take, or threaten a personnel action
against anemployee because the employee made a protected
disclosure of
information. Protected disclosures include disclosures that an
employeereasonably believes show a violation of law, rule, or
regulation; gross mismanagement; gross waste of funds; or an abuse
of authority. If federal employees believe they have been subject
to reprisal, they maypursue their complaint through the agency
where they work. Alternatively, they may direct their complaint to
OSC or MSPB. We could not determine the extent of reprisal against
whistleblowersbecause IRS did not track information on
whistleblower claims of reprisal. According to a knowledgeable IRS
official, until recently, the ALERTSdatabase did not have a code
to capture information on retaliation associated with individuals,
including reprisal against whistleblowers.However, OSC and MSPB
provided the number of complaints filed with them. Under the
Whistleblower Protection Act of 1989, OSC's main role is toprotect
federal employees, especially whistleblowers, from prohibited
205 U.S.C. 2302(b)(8).
Number ofWhistleblowing Reprisal Cases andExtent of Information on
Alleged IRSRetaliation Against Taxpayers
Reprisals AgainstWhistleblowers
Office of Special Counsel Cases
B-280651
Page 20 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
personnel practices. In this role, OSC is to act in the interests
of theemployees by investigating their complaints of whistleblower
reprisal and initiating appropriate actions. Whistleblowing
employees may file acomplaint with OSC for most personnel actions
that are allegedly based on whistleblowing. As shown in table 7,
between fiscal years 1995 and 1997, OSC received 63whistleblowing
reprisal matters related to IRS, compared to 2,092 for the federal
government as a whole. However, OSC concluded that a muchsmaller
number of IRS and governmentwide reprisal matters involved
potentially valid statutory claims and therefore warranted more
extensiveinvestigation. OSC closed cases without further action
for many reasons, including lack of jurisdiction over an agency or
employee, absence of anelement needed to establish a violation,
and insufficient evidence.
Category IRS Governmentwide Matters received 63 2,092Matters
referred for field
investigation 13 621Actions favorable to employees 4 237 Source:
OSC.
Since IRS had about 100,000 employees during this period, the
ratio ofmatters received to the number of employees was less than
a tenth of 1 percent. Similarly, although OSC received
whistleblowing reprisal mattersfrom throughout the federal
government, the number of matters received was an extremely small
percentage of the civilian employee federalworkforce that numbered
almost 2 million people.
As table 7 further shows, at times both IRS and the federal
governmenttook "favorable actions" as a result of OSC
investigations. In general, favorable actions are those that may
directly benefit the complainingemployee, punish the supervisor
involved, or systematically prevent future questionable personnel
actions. Agencies take these actions after receivinga request from
OSC or with knowledge of a pending OSC investigation. The four
favorable actions taken by IRS between fiscal years 1995 and
1997entailed removing disciplinary letters from a personnel file,
correcting an employee's pay level, presenting a performance
award, and promoting anemployee retroactively and providing back
pay.
Employee complaints of whistleblowing reprisal may reach MSPB in
twoways. First, if employees do not obtain relief through OSC,
they may appeal to MSPB. Second, employees may appeal directly to
MSPB without
Table 7: OSC Whistleblower ReprisalMatters for Fiscal Years 1995-
97
Merit Systems Protection BoardCases
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Page 21 GAO/GGD-99-82 Allegations of IRS Employee Misconduct first
going through OSC. They may do this for actions including
adverseactions, performance-based removals or reductions in grade,
denials of within-grade salary increases, reduction-in-force
actions, and denials ofrestoration or reemployment rights. MSPB
categorizes both types of appeals as "initial appeals." MSPB
administrative judges throughout the country decide initial
appeals.The judges either dismiss the cases or decide them on
their merits. Common reasons for dismissing cases are that they do
not raise appealablematters within MSPB's jurisdiction or that
they are not filed within the required time limit. The parties to
the dispute also may enter into avoluntary settlement, sometimes
with assistance from the judge. Cases not dismissed or settled are
adjudicated on their merits. Possible outcomes arethat the agency
action may be affirmed or reversed or the agency penalty may be
mitigated or otherwise modified. A party dissatisfied with a case
decision may file a "petition for review" byMSPB's three-member
board. The board may grant a petition if it determines that the
initial decision was based on an erroneousinterpretation of law or
regulation or if new and material evidence became available. It
may dismiss a petition that is untimely, withdrawn by theparties,
or moot. Petitions may also be denied or settled.
As with OSC, the number of whistleblowing reprisal decisions
issued byMSPB was very small compared to the size of the IRS and
federal workforces. As shown in table 8, for fiscal years 1995
through 1997, MSPBdecided 45 initial appeals of whistleblowing
reprisal allegations involving IRS. Similar to MSPB's rulings
involving the rest of the federal government,MSPB dismissed the
majority of initial appeals involving IRS and denied the majority
of petitions for review. However, settlements occurred inmore than
half of the initial appeals that were not dismissed, which could
mean that employees were getting some relief. MSPB also
occasionallyremanded petitions for review, that is, sent them back
for further consideration. MSPB ordered IRS corrective action
(canceling anemployee's removal and mandating back pay) in one
initial appeal case when due process measures unrelated to
reprisal were not followed. Toour knowledge, except for this case,
MSPB did not reverse any IRS actions regarding alleged
whistleblower reprisal matters over the 3-year period.For
government initial appeals as a whole, MSPB ordered agency
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Page 22 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
corrective action 11 times and otherwise reversed agency actions
in 24instances.
21
Decision IRS Treasury Governmentwide Initial appeals Dismissed 27
63 882
Corrective action not ordered 1 6 70 Corrective action ordered 1
3 11 Settled 11 22 324
Affirmed 4 11 127 Reversed 0 0 24 Modified/Mitigated 1 4 21 Total
45 109 1,459
Petitions for review Dismissed 1 1 23 Settled 0 2 14 Denied 13
23 229
Denied then reopened 0 3 26 Granted - affirmed 0 2 10 Granted -
reversed 0 0 7 Granted - remanded 3 5 32 Granted - mitigated 0 1
1
Granted - other 1 1 4 Other 0 0 3 Total 18 38 349 Sources:
Information compiled by GAO from MSPB, IRS, and the Internet.
Before the IRS Reform and Restructuring Act of 1998, IRS did
notsystematically collect information on retaliation against
taxpayers. As we have previously reported,22 IRS information
systems were designed fortracking disciplinary and investigative
cases or correspondence and not for identifying, addressing, or
preventing retaliation against taxpayers. Thesystems contained
data elements that encompassed broad categories of employee
misconduct, taxpayer problems, and legal action. Information inthe
systems related to allegations of taxpayer abuse was not easily
distinguishable from information on allegations not involving
taxpayers.
21Although we did not have any governmentwide statistics for 1998,
we did have 1998 information for
IRS. The only decisions in these cases that could have been
construed to be favorable to the originalcomplainants were 6
settlements out of the 25-case total.
22GAO/GGD-95-14, GAO/GGD-96-176, and GAO/T-GGD-98-63.
Table 8: Number of MSPB DecisionsCovering Whistleblower
Disclosures for Fiscal Years 1995-97
Extent of Information onIRS Retaliation Against Taxpayers
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Page 23 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Consequently, we found limited information on potential taxpayer
abuse inIRS information systems, as shown in table 9.
23
Database Results of GAO queries Internal Security
ManagementInformation System IRS found information on two cases of
confirmedretaliation in 4 years but said coding in database
could not ensure comprehensiveness.Automated Labor and Employee
Relations Tracking System Until recently, database did not include
a code forretaliation for cases associated with
individuals.Problem Resolution Office Management Information
System Database did not include a code for retaliation. Executive
Control ManagementSystem IRS case summaries described four cases
astaxpayer retaliation during 1 year for this system, in
existence since mid-1997. According to IRS, thesystem's coding was
becoming more specific. Source: GAO analysis of various IRS
databases.
Recent changes in the law and IRS' progress on information systems
areintended to improve IRS' ability to determine the extent to
which its employees might have retaliated against taxpayers or
employees forwhistleblowing. Enacted in July 1998, the IRS
Restructuring and Reform Act of 1998 included several provisions
related to abuse or retaliationagainst taxpayers, their
representatives, or IRS employees.
Section 1203 of the act provided for firing IRS employees who
commit any1 of 10 acts. For example, the act required the
Commissioner of Internal Revenue to fire any IRS employee for
"violations of the Internal Revenue Code of 1986, Department of
Treasury regulations, or policies of the Internal Revenue Service
(including the Internal Revenue Manual) for the purpose of
retaliating against, or harassing, a taxpayer, taxpayer
representative, or other employee of the Internal Revenue Service"
...or ... "threatening to audit a taxpayer for the purpose of
extracting personal gain or benefit."
The act also required the Treasury Inspector General for
TaxAdministration to include in its annual report summary
information about any termination under section 1203 or about any
termination that wouldhave occurred had the Commissioner not
determined there were mitigating factors. In March 1999, the
disciplinary review team previouslydescribed was proposing that
the Commissioner's Review Group report these data to the Inspector
General as well as broader data on the numberof taxpayer
complaints and the number of taxpayer abuse and employee
23For information on specific allegations of retaliation against
taxpayers, see Tax Administration:
Investigation of Allegations of Taxpayer Abuse and Employee
Misconduct Raised at Senate FinanceCommittee's IRS Oversight
Hearings (GAO/OSI-99-9R, May 24, 1999).
Table 9: IRS Information on RetaliationAgainst Taxpayers
Restructuring Act ReportingRequirements
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Page 24 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
misconduct allegations. The group would collect, consolidate, and
validatedata from existing systems and obtain supplemental
information to fill gaps. However, according to the team, the
group would have to qualify theinitial reports to the Inspector
General, waiting for data reliability to be established. With
respect to allegations of improper zeroing out or reductions
ofrecommended tax by IRS managers, we found no evidence to support
the allegations in the eight specific cases referred to us by the
IRS employeeswho testified at the hearings. On the other hand, IRS
does not systematically collect data on the extent to which
additional taxesrecommended by IRS auditors are zeroed out or
reduced without a basis in law or IRS procedure. While there are
no data on improper reductions,there are data on IRS
recommendations of additional tax that were not ultimately
assessed. On the basis of such data, we recently reported thatthe
majority of recommended additional taxes was not assessed. We
attributed this result to a variety of factors, including the
complexity of thetax code and the overreliance on taxes
recommended as a measure of audit results. IRS' process for doing
audits of taxpayers' returns and closing relateddisputes over
additional recommended taxes has several steps. In an audit, an
IRS auditor usually reviews the taxpayer's books and records
todetermine compliance with tax laws and identify whether the
proper amount of tax has been reported. To close an audit, the
auditor mayrecommend increasing, decreasing, or not changing the
tax reported. If a taxpayer disagrees with the recommendation at
the close of theexamination, the taxpayer may request an immediate
review by the auditor's supervisor. If the taxpayer agrees with
the recommended additional tax or does notrespond to IRS' notices
of examination results, IRS assesses the tax. With an assessment
notice, IRS formally notifies the taxpayer that the
specifiedamount of tax is owed and that interest and penalties may
accrue if the tax is not paid by a certain date. The assessed
amount, not the amount anauditor recommends at the end of the
audit, establishes the taxpayer's liability. If the taxpayer
disagrees with an examination's recommendation, therecommendation
may be protested to IRS' Office of Appeals or the dispute can be
taken to court.24 The Office of Appeals settles most of these
24Taxpayers may appeal to Tax Court without paying the tax or pay
the tax and claim a refund in the U.S. Court of Federal Claims or
a federal district court.
Alleged ImproperZeroing Out or Reduction ofRecommended Tax
Background
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disputes, and the remainder are docketed for trial. Agreements
made insettlements and court decisions determine the assessed part
of the disputed tax. The issue of reductions in recommended tax
was raised in the Committee'shearing by IRS auditors who alleged
that some supervisors "zeroed out" or reduced the results of
audits--that is, the audits were closed with no orreduced
recommended additional tax, without a basis in law or IRS
procedure. The witnesses further alleged that the reasons for
zeroing outincluded retaliating against auditors to diminish their
chances for promotion, favoring former IRS employees in private
practice, andexchanging zeroing out for bribes and gratuities from
taxpayers.
25
IRS has not systematically collected data on the extent to which
additionaltaxes recommended by auditors have been zeroed out or
reduced without a basis in law or IRS procedure. In particular,
IRS had no data onsupervisors' improperly limiting auditors'
recommendations of additional tax before an audit was closed.
However, IRS collects data on the amountsof recommended taxes that
were not assessed and the number of examinations closed with no
change in tax liability. One of our recent reports illustrates the
lack of data on the extent to whichsupervisors improperly limit
auditors' recommendations of additional tax.
26
We found that an estimated 94 percent of IRS workpapers
lackeddocumentation that the group manager reviewed either the
support for
adjustments or the report communicating the adjustments to the
taxpayer.IRS managers acknowledged that because of competing
priorities, they could not thoroughly review workpapers for all
audits. IRS officialscommented that supervisory reviews were
usually completed through other processes, such as reviewing time
spent on an audit, conducting on-the-job visits, and discussing
cases with auditors. We recommended that the IRS Commissioner
require all audit supervisors to document theirreview of all
workpapers to help ensure the quality of all examinations.
In another recent report, we found that most additional
taxesrecommended by IRS auditors were not assessed. Table 10 shows
taxes recommended by IRS auditors and the percentage of these
amountsassessed for audits closed in fiscal years 1992 through
1997. During these
25Further information on these issues is in GAO/OSI-99-9R.
26IRS Audits: Workpapers Lack Documentation of Supervisory Review
(GAO/GGD-98-98, Apr. 15, 1998).
Data Collected by IRS
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Page 26 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
years, at most, 41 percent of the additional taxes recommended
duringaudits were assessed.
Dollars in billions Fiscal year Recommendedamount Percentage
assessed1992 $24.8 34 1993 22.0 401994 22.6 41 1995 27.2 401996
30.8 36 1997 31.7 38 Note: Dollars are in current dollars.
Source: Tax Administration: IRS Measures Could Provide a More
Balanced Picture of Audit Resultsand Costs (GAO/GGD-98-128, June
23, 1998).
Other IRS data showed that many examinations were concluded with
norecommended additional tax. For example, according to IRS'
Fiscal Year 1997 Data Book, 24 percent of the corporate
examinations completedduring fiscal year 1997 were closed with no
proposed tax change.
Our previous work identified several factors that, in part,
explained whyrecommended additional taxes were not assessed after
audits were closed.27 Factors like these could also explain some
actions by supervisorsto zero out or reduce recommended tax
amounts prior to audits being closed. However, IRS does not
collect data on the extent to which thesefactors, or others,
contribute to supervisors' decisions prior to audits being closed.
We reported that the complexity and vagueness of the tax code was
oneexplanation for recommended taxes not being assessed after a
corporate audit was closed. Because of the complexity and
vagueness of the taxcode, IRS revenue agents had to spend many
audit hours to find the necessary evidence to clearly support any
additional recommended taxes.In addition, differing
interpretations in applying the tax code to underlying
transactions increased the likelihood of tax disputes. Because
corporaterepresentatives usually prevailed in Appeals or the
courts, additional taxes recommended were often not actually
assessed. We also reported that aspects of the corporate audit
process for largecorporations also made it difficult for revenue
agents to develop enough support to recommend tax changes that
could survive a taxpayer appeal.
27Tax Administration: Factors Affecting Results From Audits of
Large Corporations (GAO/GGD-97-62,
Apr. 17, 1997).
Table 10: Status of Additional AmountsRecommended for Individual,
Corporate, and Other Audits Closed in Fiscal Years1992-97, as of
September 27, 1997
Reasons for ReducingRecommended Tax
B-280651
Page 27 GAO/GGD-99-82 Allegations of IRS Employee Misconduct For
example, revenue agents worked alone on complex, large
corporationaudits with little direct assistance from district
counsel or their group managers. In addition, when selecting
returns for audit, the agents hadlittle information on previously
audited corporations or industry issues to serve as guideposts.
Finally, the agents had difficulty obtaining relevantinformation
from large corporations in a timely manner.
IRS Internal Audit28 recently cited several factors that
contributed to lowproductivity, as partially manifested by high
no-change rates, in the Manhattan District Office. IRS
acknowledged that in 1995, it tookaggressive action to close old
examinations. Also, audit group managers in Manhattan and two
other districts did not have enough time to performworkload
reviews to ensure quality examinations. Manhattan was below the
IRS regional average in complying with IRS audit standards for
suchthings as depth of examinations and workpaper support for
conclusions.
We also reported that relying too heavily on additional
taxesrecommended as a measure of audit results might create
undesirable incentives for auditors. We found that audits of large
corporations raisedconcerns that relying on recommended taxes as a
performance indicator might encourage auditors to recommend taxes
that would be unlikely towithstand taxpayer challenges and thus
not be assessed.
29 Supervisors on
guard against this incentive, which might have also influenced
them, mighthave been accused of improper zeroing out. In this
connection, we recently
reported that IRS examination and collection employees perceived
thatmanagers considered enforcement results when preparing annual
performance evaluations.30 IRS is increasing its efforts to ensure
that enforcement statistics are notused to evaluate its employees.
In commenting on our report on enforcement statistics, the
Commissioner stated that IRS was takingseveral actions to ensure
that all employees comply with its policies on the proper use of
enforcement statistics. These actions included
redraftingapplicable sections of the Internal Revenue Manual,
establishing a panel responsible for answering all questions IRS
received on enforcementstatistics, and establishing an independent
review panel to monitor compliance with restrictions on using
enforcement statistics. In addition,
28Productivity of the General Examination Program in the Manhattan
District, IRS Internal Audit
Report, Reference No. 680904, Jan. 30, 1998. 29GAO/GGD-98-128.
30IRS Personnel Administration: Use of Enforcement Statistics in
Employee Evaluations (GAO/GGD-99- 11, Nov. 30, 1998).
B-280651 Page 28 GAO/GGD-99-82 Allegations of IRS Employee
Misconduct in January 1999, IRS proposed establishing a balanced
system oforganizational measures focusing on quality and
production measures, but not including tax enforcement results.
Several of the individual allegations made by IRS employees that
wereviewed involved the issue of improper zeroing out of
additional taxes by IRS managers. The eight specific cases in
question involved largeorganizations, and the issues generally
related to complex financial transactions. We found no evidence to
support the allegations that IRS managers'decisions to zero out or
reduce proposed additional taxes were improper. Instead, we found
that the managers acted within their discretion andopenly
discussed relevant issues with involved IRS agents, technical
advisors, and senior management. Ultimately, the decisions were
approvedby appropriate individuals and were documented in the
files.
Several of the cases demonstrated some of the concerns and issues
wehave raised in our prior work concerning audits of large
corporations. For example, the complexity and vagueness of the tax
code create legitimatedifferences in interpretation and
administering the tax system creates a tension in seeking a proper
balance between the tax administrator's needfor supporting
documentation and the taxpayer's burden in providing such
information. IRS has acknowledged problems related to the EEO
climate in itsMilwaukee, WI, area offices and over the last few
years has moved to address them. After a finding of discrimination
in 1995 in the case of oneemployee, a new district director
initiated an internal review, and, afterwards, IRS appointed an
outside review team to study the EEOsituation. The internal study
made 53 recommendations in broad categories related to creating a
supportive work culture, understandingissues, preparing employees
for promotion, and examining the promotion process. The outside
study found no discriminatory hiring or promotionpractices, but it
did make recommendations related to hiring and promotions, among
other things. Problems with the EEO climate in IRS' Midwest
District Office, which isheadquartered in Milwaukee, date back
several years. In 1995, Treasury agreed with an Equal Employment
Opportunity Commissionadministrative judge who found that a
district employee was the victim of discrimination and
retaliation. Also, Wisconsin congressional officesreceived EEO-
related complaints from IRS employees, and internal and
Witness Allegations ofImproper Zeroing Out Equal
EmploymentOpportunity Issues in IRS' Midwest DistrictOffice
Background
B-280651
Page 29 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
external groups were critical of district EEO matters. According
to theDistrict Director who arrived in early 1996, the district
was perceived to run on "good-old-boy" connections. Also, the
district, which was created in1996 through the merger of three
smaller districts, was facing possible layoffs, further
contributing to tense labor-management relations. To try to better
identify some of the underlying causes of the problems inIRS
Milwaukee area offices, the District Director commissioned an IRS
team in April 1996 to assess the EEO climate and make
recommendationsfor corrective action. As part of its review, the
team distributed a survey to all Milwaukee area district employees
to gather EEO-related perceptions. On the basis of its review of
the survey results and other data, in December1997, the team
reported that a lack of trust and goodwill pervaded the work
environment. The survey revealed that people in all groups
(e.g.,males, females, nonminority whites, African Americans, and
Hispanics) believed they were less likely than people in other
groups to receivepromotions, significant work assignments,
training opportunities, and formal recognition or rewards.
Specific problems cited in the reportincluded little recent
diversity training, a belief by certain minority employees that
stereotypes negatively affected their treatment, difficultiesin
widely disseminating information, gaps in EEO communication, no
formal mentoring program, and much dissatisfaction with how
employeeswere selected for promotion.
On the basis of its findings, the assessment team made
53recommendations in 4 categories. The categories covered creating
a supportive culture, creating a greater understanding of issues,
preparingemployees for promotion, and examining ways that
employees were selected for promotion. In a 5th category--
examining the representation ofminorities in the district--the
team made 21 more recommendations that were expected to be
suspended pending an IRS analysis of theramifications of certain
court cases.
The District Director who commissioned the climate assessment
reportpraised it and the process that produced it. During his
tenure, many actions were taken to address the district's EEO
problems. For example,(1) policy statements were issued tolerating
no discriminatory behavior, (2) minority representation in the
Director's and EEO offices wasincreased, (3) the EEO office was
given more privacy, (4) baselines were set to measure the impact
of any improved hiring or promotion policies,(5) minorities were
promoted to positions of authority, and (6) training was provided.
Goals were also set to open communications with
Two Studies of the EEOClimate Made Numerous Recommendations
B-280651
Page 30 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
employees, employee and community groups, and the media;
treatindividual performance cases fairly; and not debate
emotionally charged personnel issues in the press. In spite of the
climate assessment team's efforts and the various changesmade or
planned, the district's EEO problems persisted. Consequently, IRS
and certain members of the Wisconsin congressional delegation
agreedthat another team should independently review the situation.
31
To try to preserve its independence, the team purposefully had
norepresentation from IRS. Also for this reason, it solicited no
IRS comments on its draft report. The team interviewed more than
100 people and examined over 130records and files, although it did
not scientifically select interviewees or broadly survey all
district employees. Team members told us they tried toensure broad
coverage by talking to many people and to all sides of general
issues. Moreover, they relied on the climate assessment survey
tosummarize perceptions. They also, however, relied extensively on
anecdotal information without determining its objectivity or
accuracy. In August 1998, the team reported, among other things,
that (1) manyemployees had no confidence in the EEO process and
feared retaliation if they filed complaints or participated in a
way considered adversarial tomanagement, (2) separating EEO
functions into outreach and traditional EEO/counseling components
was not working effectively, (3) thecounseling program was in
disarray, and (4) confusion existed over the role of Treasury's
Regional Complaint Center in the formal EEO complaintprocess.
Also, although anecdotes collected by the team did not support a
sweeping indictment of Milwaukee IRS management practices, the
reportconcluded that, intentionally or not, some practices
perpetuated a work environment that was historically insensitive
to the concerns of female andminority employees.
On the basis of its review, the team made recommendations in
differentareas. For instance, many recommendations dealt with the
team's findings related to the district's EEO process for
resolving issues in a precomplaintstage and its relationship to
Treasury's formal complaint process. The team also made
recommendations relating to hiring and promotions inspite of
finding no discriminatory pattern or practice in promoting or
31Members of the congressional delegation were Senators Russell
Feingold and Herb Kohl and
Representatives Tom Barrett and Gerald Kleczka.
B-280651 Page 31 GAO/GGD-99-82 Allegations of IRS Employee
Misconduct hiring minorities or women. The report noted that
African Americans inIRS' Milwaukee and Waukesha, WI, offices
appeared underrepresented when compared to the Milwaukee civilian
labor force.32 Although district managers and representatives of
employee groupsdisagreed with many of the issues and assertions in
the report, there was general agreement with many of the
recommendations. For instance, thehead of the diversity office at
the time of the study informed us that he agreed with the
substance of, had actually taken action related to, orwould favor
forwarding to Treasury many of the report's recommendations. After
the report was released, IRS initiated several significant actions
toaddress problems identified. Chief among these was appointing a
new District Director who arrived in the district in mid-November
1998 with astated commitment to overcome past problems. In that
regard, she described to us her intent to open communication
channels and deal withdisrespect, nastiness, and mean-spiritedness
at all levels. She emphasized her themes of communication,
responsibility, and accountability and toldus that on her second
day in the district she discussed these themes at an off-site
meeting with top managers and union, EEO, and diversity officials.
The new District Director also expressed to us her commitment to
workwith various interest groups. In addition, she combined the
district's EEO and diversity functions, made EEO positions
permanent as opposed torotational, and invited a union
representative to be present for interviews for a new EEO officer.
The new District Director stated that these actions were on the
right track,but because of the long and contentious history of EEO
problems in the district, improvements and success will take time.
She also noted thatbetter communication and cooperation among IRS
and the various internal and external stakeholders will be
extremely important in dealing with thedistrict's long-standing
problems.
In commenting on a draft of this report, the Commissioner of
InternalRevenue described IRS actions on the issues we noted. For
instance, he shared our concern that IRS needed to improve how it
managed executivemisconduct cases. He noted that the recently
created Commissioner's
32The head of the study team acknowledged that the proper
statistical comparison was with the local
qualified labor force, not the civilian labor force. However,
according to another study team member,the relevant qualified
labor force statistics were not available.
Agency Comments
B-280651
Page 32 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Complaint Processing and Analysis Group, proposed as
theCommissioner's Review Group, will coordinate IRS' efforts to
improve complaint information, especially relating to alleged
reprisal againstwhistleblowers, so that complaints will be
promptly and fairly resolved. IRS will also share more information
with employees and the public onresponses to reprisals and other
complaints to highlight a message that all employees will be held
accountable for their actions. The full text of theCommissioner's
comments is reprinted in appendix IV.
As agreed with your office, unless you publicly announce its
contentsearlier, we plan no further distribution of this report
until 30 days from the date of this letter. At that time, we will
send copies to Senator DanielPatrick Moynihan, the Ranking
Minority Member of the Senate Committee on Finance; the Honorable
Charles O. Rossotti, Commissioner of InternalRevenue; other
interested congressional committees; and other interested parties.
This work was done under the direction of Joseph E. Jozefczyk,
AssistantDirector for Tax Policy and Administration Issues. Other
major contributors are listed in appendix V. If you have
questions, you maycontact me on (202) 512-9110.
Sincerely yours,
James R. WhiteDirector, Tax Policy
and Administration Issues
Page 33 GAO/GGD-99-82 Allegations of IRS Employee Misconduct Page
34 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Contents
1Letter 36Disciplinary Actions for Senior Executive Service and
Lower-Level Staff 36Alleged Delays by IRS Deputy Commissioner on
SES Misconduct Cases 37Number of Whistleblowing Reprisal Cases and
Extent of Information on IRS Retaliation Against Taxpayers
38Alleged Improper Zeroing Out or Reduction of Recommended Tax
38EEO Issues in IRS' Midwest District Office 38
Appendix IObjectives, Scope, and Methodology
40Appendix II The Douglas Factors
41Executive A Allegations 41 Executive B Allegations 41Executive C
Allegations 41 Executive D Allegations 42Executive E Allegations
43
Appendix IIISummaries of Alleged Senior-LevelMisconduct Cases
44Appendix IV Comments From theInternal Revenue
Service
46Appendix V Major Contributors toThis Report
Contents
Page 35 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Abbreviations ALERTS Automated Labor and Employee Relations
Tracking System CWA closed without action DO deciding official EEO
equal employment opportunity GS general schedule IRS Internal
Revenue Service MSPB Merit Systems Protection Board OES Office of
Executive Support OIG Office of Inspector General OLR Office of
Labor Relations OSC Office of Special Counsel RO recommending
official SES Senior Executive Service TIGTA Treasury Inspector
General for Tax Administration
Appendix IObjectives, Scope, and Methodology
Page 36 GAO/GGD-99-82 Allegations of IRS Employee Misconduct We
organized our work to bring together information bearing on the
fiveissues contained in your May 21, 1998, request letter.
Accordingly, our objectives were to (1) determine if senior
Internal Revenue Service (IRS) managers receivedthe same level of
disciplinary action as line staff;
(2) determine to what extent, if any, the IRS Deputy Commissioner
mighthave delayed action on substantiated cases of employee
misconduct until senior managers were eligible to retire; (3)
ascertain the extent to which IRS employees might have
retaliatedagainst whistleblowers and against taxpayers or their
representatives who were perceived as uncooperative; (4) determine
the extent to which IRS employees might have zeroed out orreduced
the additional tax recommended from examinations for reasons not
related to the merits of the examinations; and (5) describe equal
employment opportunity (EEO) issues in IRS offices inthe Milwaukee
metropolitan area.
Our scope and methodology related to each of these objectives
follow. To compare disciplinary experiences of Senior Executive
Service (SES)and lower-level employees, we matched data
accumulated by sampling senior executives' misconduct cases
against data for lower-levelemployees extracted from IRS' broader
disciplinary database, the Automated Labor and Employee Relations
Tracking System (ALERTS). Wecompiled general statistics on how
long senior executive cases took by collecting information from
every second nontax SES case file in IRS'Office of Executive
Support (OES) that was active sometime between January 1, 1996,
and June 30, 1998.1 Our sample included 70 cases. For each case in
our sample, we extracted and recorded data from therelevant case
file. These data included issues involved, processing dates,
information on whether allegations were substantiated by
investigators,disciplinary actions proposed and adopted, and
information related to retirement.
1We excluded cases related to employees' tax compliance because
they were different in nature from
the cases raised at the April 1998 Senate Finance Committee
hearings.
Disciplinary Actionsfor Senior Executive Service and Lower-Level
Staff
Appendix I Objectives, Scope, and Methodology
Page 37 GAO/GGD-99-82 Allegations of IRS Employee Misconduct For
lower-level employees, that is, general schedule (GS) employees,
weobtained selected parts of the ALERTS database from IRS. We ran
our statistical analyses on ALERTS cases that IRS' Office of Labor
Relationsreceived between January 1, 1996, and June 30, 1998, and
on cases that were closed within that period. More specifically,
we focused onadministrative and IRS Inspection Service cases
within ALERTS because they were the categories in which conduct
matters were found. Althoughwe did not audit ALERTS, IRS officials
told us that this data system had over the years had flaws, but
they also told us it was better than it used tobe. Because ALERTS
was the only source of information available on lower-level
disciplinary actions, we used it to the extent that it
hadinformation comparable to what we collected on senior-level
cases.
We also reviewed recent internal IRS and independent studies of
IRS'disciplinary systems and interviewed IRS officials about their
plans for revamping the systems. One IRS study we reviewed used
the lower-leveldisciplinary database to assess the effect of IRS'
using a guide to determine appropriate disciplinary action. We
also became familiar with the DouglasFactors, shown in appendix
II, governing disciplinary actions imposed and asked IRS officials
about the differences, if any, they perceived betweenSES and
lower-level cases.
We examined the question of alleged delays in dealing with cases
ofalleged misconduct by senior executives by taking several steps.
First, we studied in depth the five specific cases mentioned in
the April 1998hearings. This involved examining investigative and
personnel files as well as files maintained by OES. In addition,
we interviewed various IRSofficials, including the Deputy
Commissioner, about these cases.
In addition, we used the 70-case sample of senior executive
casespreviously described to obtain more broad-based information
about any possible delays. Although most of our analyses were
based on this sample,to learn more about the cases that took the
most time, we also examined every case file IRS could find that
appeared on lists of cases awaitingaction at OES for at least 90
days during the January 1, 1996, through June 30, 1998, period we
were studying. We also examined cases that appearedon logs that
IRS kept so we could better ensure we were not overlooking cases
we did not otherwise encounter for the period. In all, we
examinedthe 70 cases in our sample plus 43 more cases on lists and
logs for a total of 113 cases. Because some individuals were
involved in more than 1 case,the 113 cases we analyzed covered 83
senior executives. We extracted the same type of information from
each of the case files that we extracted
Alleged Delays by IRSDeputy Commissioner on SES MisconductCases
Appendix I Objectives, Scope, and Methodology
Page 38 GAO/GGD-99-82 Allegations of IRS Employee Misconduct from
the sampled case files. Examining lists, logs, and files allowed
us tosee if recordkeeping practices might have contributed to any
delays. To examine the relationship between case-processing and
retirementdates, we analyzed where in the case-processing sequence
the retirement dates provided us by OES fell. In instances in
which OES was also able toreadily provide retirement eligibility
dates, we considered them in examining processing timeliness as
well. To tabulate the number of whistleblowing reprisal cases, we
obtainedinformation from the Office of Special Counsel (OSC) and
the Merit Systems Protection Board (MSPB). We did this for the
number of casesinvolving IRS employees, and for contextual
purposes, for cases from throughout the federal government. For
governmentwide data, we used either information already published
ordata generated specifically for us. For IRS data, the agencies
did special searches of their databases. We did not audit the OSC
or MSPB datasystems. Because in the MSPB data system not all IRS
cases could be isolated, we examined actual case rulings that MSPB
gathered for us orthat we located on the Internet, looking for
Department of the Treasury cases that were really IRS cases. For
Treasury cases for which MSPB wasnot able to give us timely
information and information was not on the Internet, we asked IRS
to identify whether they involved IRS employees. In looking for
information on IRS employees who might have retaliatedagainst
taxpayers or their representatives who were perceived to be
uncooperative, we studied our reports on taxpayer abuse. In
addition, weinterviewed IRS officials and investigated entries
under specific codes in various databases to see if relevant
issues appeared. Finally, we discussedwith IRS officials changes
to the information systems that might be coming in the future.
Concerning information on the improper zeroing out or reduction
ofadditional tax recommended, we studied our and Inspection
Service reports dealing with examination issues related to audit
results. Wespecifically considered our and IRS information on the
extent to which IRS audit recommendations were actually assessed
and the factors that couldexplain the results.
To describe EEO issues in the Milwaukee area, we examined the
report ofan outside team studying the program and the documents
that the team accumulated in doing its work, including an IRS
internal EEO climate
Number ofWhistleblowing Reprisal Cases andExtent of Information on
IRS RetaliationAgainst Taxpayers
Alleged ImproperZeroing Out or Reduction ofRecommended Tax
EEO Issues in IRS'Midwest District Office
Appendix I Objectives, Scope, and Methodology
Page 39 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
assessment study. We also interviewed key study participants and
affectedparties in Washington, D.C., and Milwaukee to better
understand what the EEO climate in the area was, how the study
report was done, and what hadhappened since the report was
finished.
In addition to addressing the concerns of the Senate Committee
onFinance, we planned our work to respond to a mandate in the
Conference Report on the IRS Restructuring and Reform Act of 1998.
The confereesintended for us to review the study team report.
We did our work in Washington, D.C., and Milwaukee between June
1998and March 1999 in accordance with generally accepted
government auditing standards.
Appendix IIThe Douglas Factors
Page 40 GAO/GGD-99-82 Allegations of IRS Employee Misconduct The
Douglas Factors are as follows:1
* The nature and seriousness of the offense, and its relation to
theemployee's duties, position, and responsibilities, including
whether the
offense was intentional or technical or inadvertent, or was
committedmaliciously or for gain, or was frequently repeated;
* the employee's job level and type of employment, including
supervisory orfiduciary role, contacts with the public, and
prominence of the position;
* the employee's past disciplinary record;
* the employee's past work record, including length of service,
performanceon the job, ability to get along with fellow workers,
and dependability;
* the effect of the offense upon the employee's ability to
perform at asatisfactory level and its effect upon supervisors'
confidence in the
employee's ability to perform assigned duties;
* consistency of penalty with those imposed upon other employees
for thesame or similar offenses;
* consistency of the penalty with the applicable agency table of
penalties;
* the notoriety of the offense or its impact on the reputation of
the agency;
* the clarity with which the employee was on notice of any rules
that wereviolated in committing the offense, or had been warned
about the conduct
in question;
* potential for employee's rehabilitation;
* mitigating circumstances surrounding the offense such as
unusual jobtensions, personality problems, mental impairment,
harassment, or bad
faith, malice or provocation on the part of others involved in the
matter;and
* the adequacy and effectiveness of alternative sanctions to
deter suchconduct in the future by the employee or others.
1Douglas v. Veterans Administration, 5 M.S.P.R. 280 (1981).
Appendix IIISummaries of Alleged Senior-Level Misconduct Cases
Page 41 GAO/GGD-99-82 Allegations of IRS Employee Misconduct This
appendix summarizes information about the five senior-
levelmisconduct allegations cited in the April 1998 Senate Finance
Committee hearings. The summaries include information about when
the executiveswere eligible to retire and about whether their
eligibility dates might have related to how their cases were
processed. We refer to the executives inthese five cases as
Executives A through E.
An IRS employee filed a complaint that Executive A and two other
IRSemployees violated IRS ethics rules. The IRS employee also
alleged that Executive A and the two other employees retaliated
against her forreporting the ethics violations. The alleged
violations included manipulating a rating system, giving an
improper award, falsifying records,and not reporting time card
fraud, although Executive A was only alleged to be involved in the
last violation. Treasury's Office of Inspector General(OIG) did
not find that Executive A was culpable for ethics violations but
found that the other two employees were culpable. IRS
attorneysreviewing the case concluded that the information in the
OIG report did not demonstrate misconduct on Executive A's part.
Executive A was not eligible for retirement when the allegation
was madeor when the OIG investigation was closed.
This case started when the OIG received an anonymous allegation
thatExecutive B abused travel authority.
1 IRS officials reviewed the allegation
and found that Executive B had authorized unjustified travel
expenditures.Local management then counseled Executive B that all
expenditures
needed to be authorized according to IRS procedures. This
counseling wasconfirmed in writing. However, contrary to IRS
policy, the counseling took place before the Deputy Commissioner
concurred with the proposed caseresolution.
Executive B was already eligible for retirement at the time the
allegationwas made. The OIG received an anonymous complaint that
Executive C was abusingofficial travel. The OIG report concluded
that Executive C made personal use of some travel benefits earned
on government travel. The offices considering the case disagreed
among themselves over thefacts, the adequacy of the investigation,
and the steps to be taken next. The
1The allegation included two other issues that were immediately
closed because they had been
previously reviewed.
Executive AAllegations Executive BAllegations Executive
CAllegations
Appendix III Summaries of Alleged Senior-Level Misconduct Cases
Page 42 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Director of IRS' Human Resources Division, which was involved
inexecutive misconduct cases earlier in the 1990s, advocated a
reprimand, but the recommending official thought that significant
circumstancesmitigated any disciplinary action. OES prepared a
statement of differences and recommended a reprimand.2 A few
months later, the recommendingofficial, finding no abuse and
unclear IRS guidance in the area, recommended closing the case
without action but cautioning theexecutive. The next month, the
OES official who previously recommended a reprimand sent the case
to the Deputy Commissioner, this time agreeingwith the
recommending official's position. A few months after that, the OIG
reminded the Deputy Commissioner of the previous year's report
andrequested appropriate action. Later, OIG officials told OES
that they disagreed with OES' recommendation to close the case
without action.Finally, OES wrote the Deputy Commissioner
reaffirming the recommendation for closure without action but with
cautioning. The Deputy Commissioner counseled the executive 5-1/2
years after thecase began and 18 months after receiving the case.
When we asked the Deputy Commissioner why the final stage of case
processing took so long,he had no explanation.
Executive C was not eligible for retirement at the time the
allegation wasmade or at the time he was counseled. The IRS sexual
harassment hotline received an anonymous allegation thatExecutive
D might have harassed a staff member. During the Inspection
Service investigation, Executive D refused to answer a question
hebelieved was irrelevant. In its report, the Inspection Service
summarized the facts of the investigation and did not conclude
whether there was aviolation of IRS ethical standards.
OES and the recommending official disagreed in their analyses of
thereport and their resulting recommendations. OES concluded that
a 15-day suspension was warranted for the refusal to answer a
question eventhough IRS counsel was not sure a violation really
occurred. OES also raised the possibility of reassigning Executive
D. The recommendingofficial believed that, in this case, refusal
to answer a question did not violate ethics rules, but that
counseling was warranted.
2OES was previously known as the Office of Ethics and Business
Conduct, but in this section only the
designation OES will be used.
Executive DAllegations
Appendix III Summaries of Alleged Senior-Level Misconduct Cases
Page 43 GAO/GGD-99-82 Allegations of IRS Employee Misconduct About
39 months after OES prepared a statement of differences,
anInspection Service case-tracking entry indicated that IRS
management planned no action on the case. The next year, OES
closed the case"administratively" due to the employee's
retirement.
The Deputy Commissioner told us that, several years before
itsadministrative close, the case was "de facto closed" with
Executive D's transfer. He stated that the transfer was the
appropriate disciplinary actionbecause Executive D was too
familiar with local employees.
OES did not close the case until the individual retired several
years afterthe transfer. It did not realize that the Deputy
Commissioner considered it closed earlier. Also, IRS officials we
asked could not find the case file forat least a few months.
Executive D was eligible for retirement at the time the allegation
wasmade. The Inspection Service began an investigation after an
anonymous callerreported to Internal Security that Executive E
abused her authority. More than a year later, the investigation
confirmed the allegation, and theDirector of the Human Resources
Division recommended that a letter of reprimand be issued. More
than 4 years after that, OES recommendedsending a letter of
reprimand or a letter confirming counseling. The Deputy
Commissioner sent Executive E a letter of counseling 5-1/2 years
after theoriginal complaint and more than 4 years after receiving
the case.
The Deputy Commissioner explained to us that he had not
beencomfortable with the allegations' correctness, but that he
eventually agreed that the allegations had some merit. He added
that the delay inclosing the case occurred because he allowed the
case to be lost in the system. He did not, he said, cover up for
Executive E. Specifically, hestated that reduced OES staffing and
a poor information system were contributing factors to the case
being delayed without a disposition. Executive E was not eligible
for retirement at the time the allegation wasmade or at the time
the counseling letter was sent.
Executive EAllegations
Appendix IVComments From the Internal Revenue Service
Page 44 Appendix IV Comments From the Internal Revenue Service
Page 45 Appendix VMajor Contributors to This Report
Page 46 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Lawrence M. Korb, Evaluator-in-Charge, Tax Policy and
AdministrationIssues Leon H. Green, Senior EvaluatorDeborah A.
Knorr, Senior Evaluator Anthony P. Lofaro, Senior
EvaluatorJacqueline M. Nowicki, Evaluator Patricia H. McGuire,
Assistant DirectorMacDonald R. Phillips, Senior Computer
Specialist James J. Ungvarsky, Senior Computer SpecialistEric B.
Hall, Computer Technician
General GovernmentDivision, Washington, D.C.
Page 47 GAO/GGD-99-82 Allegations of IRS Employee Misconduct Page
48 GAO/GGD-99-82 Allegations of IRS Employee Misconduct Ordering
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