Tax Administration: IRS' Fiscal Year 2000 Budget Request and 1999 Tax
Filing Season (Testimony, 04/13/1999, GAO/T-GGD/AIMD-99-140).

This testimony discusses the administration's fiscal year 2000 budget
request for the Internal Revenue Service (IRS) and the status of the
1999 tax filing season. For next year, the administration is requesting
$8.2 billion and nearly 98,000 full-time equivalent positions for
IRS--about the same as for fiscal year 1999. Even so, there are
differences in how IRS plans to spend its fiscal year 2000 funds. For
example, the request includes about $197 million for three critical
initiatives--organizational modernization, implementation of the IRS
Restructuring and Reform Act of 1998, and customer service training.
IRS' current five-year cost estimate to make its information systems
Year 2000 compliant is $1.3 billion--$345 million higher than its
estimate a year ago. IRS is requesting $1.46 billion for information
systems in fiscal year 2000. IRS' plans for spending those funds are
consistent with earlier GAO recommendations and congressional direction.
For fiscal year 2001, IRS is also asking for an advance appropriation of
$325 million for its multi-year capital account for systems
modernization. The agency has not adequately justified that request in
accordance with federal information technology investment requirements.
With respect to the 1999 filing season, GAO found that the accessibility
and quality of IRS' telephone service has deteriorated considerably
since last year; the number of individual income tax returns filed
electronically continues to rise, although fewer returns are being filed
by telephone; many taxpayers have made mistakes with the new child tax
credit; and many systems for processing returns and remittances have
been doing a good job.

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

 REPORTNUM:  T-GGD/AIMD-99-140
     TITLE:  Tax Administration: IRS' Fiscal Year 2000 Budget Request
	     and 1999 Tax Filing Season
      DATE:  04/13/1999
   SUBJECT:  Federal agency reorganization
	     Presidential budgets
	     Tax administration systems
	     Systems conversions
	     Future budget projections
	     Performance measures
	     Strategic information systems planning
	     Electronic forms
	     Customer service
	     Tax returns
IDENTIFIER:  IRS Taxpayer Compliance Measurement Program
	     Y2K
	     EIC
	     Earned Income Tax Credit
	     IRS Integrated Submission and Remittance Processing System

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    United States General Accounting Office GAO
    Testimony Before the Subcommittee on Oversight House Committee on
    Ways and Means For Release on Delivery Expected at
    TAX ADMINISTRATION 1:00 p.m. EDT Tuesday April 13, 1999
    IRS' Fiscal Year 2000 Budget Request and 1999 Tax Filing Season
    Statement of James R. White, Director Tax Policy and
    Administration Issues General Government Division GAO/T-GGD/AIMD-
    99-140 Statement Tax Administration:  IRS' Fiscal Year 2000 Budget
    Request and 1999 Tax Filing Season Mr. Chairman and Members of the
    Subcommittee: We are pleased to participate in the Subcommittee's
    inquiry into the administration's fiscal year 2000 budget request
    for the Internal Revenue Service (IRS) and the status of the 1999
    tax filing season. Our statement is based on (1) our review of the
    administration's fiscal year 2000 budget request for IRS and
    supporting documentation; (2) interim results of our review of the
    1999 tax filing season; (3) our ongoing review of IRS'
    restructuring efforts; and (4) our past and ongoing audits of
    various IRS activities, including efforts to modernize its
    computer systems, make its systems Year 2000 compliant, and
    implement the Government Performance and Results Act. With respect
    the fiscal year 2000 budget request, our statement makes the
    following points: *  For fiscal year 2000, the administration is
    requesting about $8.2 billion and 97,862 full-time equivalent
    (FTE) positions for IRS--almost the same as IRS' proposed
    operating level for fiscal year 1999.  Although the request
    reflects little change in the overall funding available to IRS,
    there are some changes in how IRS plans to use the fiscal year
    2000 funds.  For example, the request includes about $197 million
    for three initiatives-organizational modernization, implementation
    of the IRS Restructuring and Reform Act of 1998 (RRA98), and
    customer service training.1  These are critical initiatives.  We
    cannot comment on the reasonableness of the requested funding,
    however, because IRS (1) is still developing plans that could
    affect the costs associated with organizational modernization and
    (2) did not provide us with sufficient detail to explain how some
    of the estimates were developed. *  Congressional oversight of
    IRS' fiscal year 2000 operations could be made more complex
    because (1) the fiscal year 2000 budget request is formatted in a
    way that may not reflect IRS' organizational structure in fiscal
    year 2000 and (2) many of the performance measures included in the
    fiscal year 2000 budget request are new and two important measures
    (voluntary compliance and taxpayer burden) have yet to be
    developed.  Both of these situations are understandable, however,
    because IRS (1) has not finished planning for the organizational
    modernization and (2) is in the initial stages of a major effort
    to develop a more balanced set of performance measures. 1Public
    Law 105-206, July 22, 1998. Page 1
    GAO/T-GGD/AIMD-99-140 Statement *  IRS' current 5-year cost
    estimate to make its information systems Year 2000 compliant is
    $1.3 billion-about $345 million higher than its March 1998
    estimate.  Changes in business requirements for one of IRS'
    replacement projects and a decision to upgrade or replace hardware
    and software for minicomputers/fileservers and personal computers
    account for some of the increase.  For fiscal year 2000, IRS is
    requesting $250 million for its Year 2000 efforts.  Most of that
    amount has been allocated to the Century Date Change Project
    Office and one of IRS' Year 2000 replacement projects. About $60
    million of the $123.4 million allocated to the Project Office
    covers funding requests for various activities that have not yet
    been approved by IRS. *  IRS is requesting $1.46 billion for
    information systems in fiscal year 2000. IRS' plans for spending
    those funds are consistent with our prior recommendations and
    related congressional direction.  IRS is also requesting for
    fiscal year 2001 an advance appropriation of $325 million for its
    multi-year capital account for systems modernization.  IRS has not
    adequately justified that request in accordance with federal
    information technology investment requirements.  Thus, Congress
    should consider either not funding the request or restricting
    obligation of the funds until IRS develops the requisite cost
    analyses to justify the amount requested. With respect to the 1999
    filing season, preliminary data show that (1) the accessibility
    and quality of IRS' telephone service has deteriorated
    considerably since last year, although accessibility has improved
    in recent weeks; (2) the number of individual income tax returns
    filed electronically is continuing to increase, although fewer
    returns are being filed by telephone; (3) many taxpayers have made
    mistakes with respect to the new child tax credit; and (4) new
    systems for processing returns and remittances have been
    performing well. For fiscal year 2000, the administration is
    requesting $8.249 billion and IRS' Fiscal Year 2000      97,862
    full-time equivalent (FTE) positions, including $144 million and
    Budget Request             2,095 FTEs to be funded outside the
    spending caps for the Earned Income Tax Credit compliance
    initiative.2  As shown in appendix I, that request is Maintains
    Staff and        virtually the same as IRS' proposed operating
    level for fiscal year 1999 Funds at the Fiscal        ($8.246
    billion and 97,959 FTEs).  The overall increase of $3 million Year
    1999 Level            between the fiscal year 1999 operating level
    and the fiscal year 2000 request is the net result of several
    increases and decreases, the most significant of which are 2Fiscal
    year 2000 will be the 3rd year of funding for this 5-year
    initiative. Page 2
    GAO/T-GGD/AIMD-99-140 Statement *  an increase of $197 million for
    various initiatives, including organizational modernization; *  an
    increase of $249 million to maintain current service levels; and *
    a decrease of $444 million in funding for IRS' information
    systems, which includes funding for information technology
    investments and IRS' efforts to make its systems Year 2000
    compliant. The fiscal year 2000 budget request includes $197
    million for three The Reasonableness of         initiatives--$140
    million for organizational modernization, $40 million and
    Requested Funding for         500 FTEs to implement various
    provisions of RRA98, and $17 million for Initiatives Is Uncertain
    training to enhance customer service.  (See appendix II.)
    Although we agree that these are critical initiatives for IRS to
    undertake, we have no basis for determining whether the requested
    funding is reasonable because IRS (1) is still developing plans
    that could affect the amount of funding actually needed for
    organizational modernization and (2) did not provide specific
    details concerning how some of the estimates were developed.
    Beginning in fiscal year 2000, IRS plans to reorganize its
    operations by establishing four main operating divisions to serve
    specific groups of taxpayers, including those with only wage and
    investment income, small business/self-employed individuals, large
    and midsize businesses, and tax exempt organizations.  The
    administration has requested $140 million for organizational
    modernization in fiscal year 2000.  According to IRS, these funds
    are needed to cover the costs for employee buyouts, relocations,
    and retraining in conjunction with the reorganization.  We could
    not assess the reasonableness of the $140 million estimate because
    planning for the reorganization is ongoing.  Until IRS' plans are
    finalized, it will be difficult to estimate such things as
    buyouts, relocation expenses, and training needs. The fiscal year
    2000 budget request also includes $40 million and 500 FTEs for the
    implementation of various customer service provisions in RRA98. Of
    the $40 million, $27 million is being requested to implement
    taxpayer protection and rights provisions, such as increased
    notices and processing for innocent spouse relief and due process
    in collection actions, Spanish language taxpayer assistance,
    grants for low income taxpayer clinics, and enhanced toll-free
    telephone and Internet access to IRS.  The other $13 million is
    earmarked for efforts designed to increase the use of electronic
    filing. Another initiative included in the budget request calls
    for enhancing customer service through improved training.  For
    this initiative, the administration is requesting $17 million.
    According to IRS, $13 million of Page 3
    GAO/T-GGD/AIMD-99-140 Statement this request is needed to
    permanently increase training funds that had been reduced during
    the past few years.  IRS believes that its limited training funds
    have contributed to a deterioration in the competency of its
    employees, particularly front-line employees who have contact with
    taxpayers. IRS did not provide detailed support to show how it
    developed the budget estimates for implementing the RRA98
    provisions and for training.  This made it difficult for us to
    assess whether IRS had a reasonable basis for those estimates.
    While each of these three initiatives appear to be critical if IRS
    is to provide first-class customer service, without additional
    information it is unclear what level of funding would be adequate
    for these initiatives in fiscal year 2000. Congressional oversight
    of IRS' fiscal year 2000 operations could be more Oversight Could
    Be          complex while IRS is modernizing its structure because
    (1) the budget More Complex While          format may not reflect
    IRS' operating structure in 2000; and (2) many performance
    measures presented in the fiscal year 2000 budget request are IRS
    Modernizes Its          new, and two important measures-voluntary
    compliance and taxpayer Structure                   burden-have
    not been developed.  The absence of a voluntary compliance
    measure, for example, makes it is difficult to assess the effects
    of IRS' diversion of enforcement resources to implement RRA98 and
    enhance customer service. The format of IRS' fiscal year 2000
    budget request may not reflect IRS' Budget Format May Not
    organizational structure in fiscal year 2000.  This is
    understandable given Reflect IRS Operating       the fact that IRS
    has not finalized its restructuring plans.  Until those plans
    Structure in Fiscal Year    are finalized, it would be premature
    for IRS to revise its budget format.  At 2000
    the same time, however, any significant disconnect between the
    existing budget structure and IRS' operating structure could make
    congressional oversight more complex. The format of IRS' fiscal
    year 2000 budget request is consistent with the format of IRS'
    fiscal year 1999 budget and generally reflects IRS' current
    operating structure.  However, starting later this year, IRS will
    be shifting from being geographically based in 33 districts
    offices to a customer-based structure built around four major
    groups of taxpayers-wage and investment income, small business and
    self employed, large and mid-size business, and tax exempt.
    Technology management is to be centralized, with each of the four
    major operating components being the business owner for systems
    that support it.  IRS has not completed its planning for Page 4
    GAO/T-GGD/AIMD-99-140 Statement this organizational modernization
    and, thus, it is not yet clear how much change will actually take
    place in fiscal year 2000 versus years after 2000 and how those
    changes might affect oversight, if at all. In conjunction with its
    organizational modernization, IRS is exploring plans to develop
    new financial and budget structures that could aid Congress in its
    oversight of IRS.  We were told that IRS, as part of that effort,
    would be considering the needs of this Subcommittee and other
    congressional overseers.  In that regard, there are two aspects of
    IRS' current budget structure that could hinder effective
    oversight.  Those two aspects, which we discussed in our testimony
    on IRS' fiscal year 1999 budget3 and which are still relevant,
    involve (1) the inability to determine how many FTEs and dollars
    IRS is devoting to enforcement versus assistance and (2) the lack
    of a separate budget activity for the Office of the Taxpayer
    Advocate. Mix Between Enforcement and    Achieving IRS' mission
    requires a mix of enforcement and assistance. Assistance is Not
    Clear        Congressional oversight would be enhanced, in our
    opinion, if Congress knew how IRS was allocating its resources
    between those two areas.  That information cannot be derived from
    IRS' budget estimates. For example, IRS is requesting $991.5
    million and 20,874 FTEs for the Telephone and Correspondence
    budget activity within the Processing, Assistance, and Management
    appropriation.  That activity covers all non face-to-face contacts
    between IRS and taxpayers.  Such contacts include typical forms of
    assistance, such as answering telephone calls and correspondence,
    as well as several enforcement activities, such as audits handled
    through correspondence and attempts to collect overdue taxes via
    the telephone.  The budget estimates do not show how much of IRS'
    request for Telephone and Correspondence is for assistance versus
    enforcement.  Similarly, despite its name, the Tax Law Enforcement
    appropriation is not exclusively for enforcement.  The $3.3
    billion and 43,677 FTEs being requested for that appropriation
    include an unspecified amount of money and FTEs for various forms
    of assistance, including walk-in service and taxpayer education
    efforts.  Finally, the $144 million and 2,095 FTEs being requested
    for the EIC compliance initiative also involve a mix of assistance
    and enforcement, but, again, that mix is not apparent in IRS'
    budget estimates. 3Tax Administration:  IRS' Fiscal Year 1999
    Budget Request and Fiscal Year 1998 Filing Season (GAO/T-
    GGD/AIMD-98-114, March 31, 1998). Page 5
    GAO/T-GGD/AIMD-99-140 Statement Absence of a Separate Budget
    The Office of the Taxpayer Advocate is responsible, among other
    things, Activity for the Office of the    for the resolution of
    taxpayer problems through the Problem Resolution Taxpayer Advocate
    Program.  Because of concerns about that Office's independence,
    Congress included provisions in RRA98 that, among other things,
    authorized the National Taxpayer Advocate to appoint local
    advocates, evaluate and take personnel action with respect to any
    employee of any local advocate's office, and submit annual reports
    directly to the Senate Committee on Finance and the House
    Committee on Ways and Means.  We believe that congressional
    oversight of the Advocate's Office and IRS' efforts to solve
    taxpayer problems would be further enhanced and any concerns about
    the Advocate Office's independence would be further mitigated if
    funding for that Office was separately identified in IRS' budget.
    According to IRS, the fiscal year 2000 budget request includes
    about $43.6 million and 628 FTEs for the Office of the Taxpayer
    Advocate.  However, those amounts are not separately identified in
    IRS' budget estimates but are included within the Telephone and
    Correspondence budget activity in the Processing, Assistance, and
    Management appropriation.4  According to the National Director for
    Budget, IRS would have had to make substantial coding changes to
    its financial system to set up a separate line item for the
    Advocate's Office in IRS' budget request.  The National Director
    explained that it would not have been practical to start
    developing new financial codes for some organizational functions,
    such as the Advocate's Office, when many other changes may be
    needed later as IRS proceeds with its organizational
    modernization.  We agree that it makes sense to make all needed
    changes to IRS' financial and budget structures at one time.
    Until a separate budget activity is established for the Advocate's
    Office, congressional oversight might be enhanced if the narrative
    part of IRS' budget estimates provided data on the amount of
    resources being devoted to that activity in the current year and
    being requested for the coming year. IRS is changing most of its
    performance measures and the way it uses The Development of
    measures to focus attention on priorities, assess organizational
    Performance Measures Is a         performance, and identify areas
    for improvement.  A balanced set of Work in Process
    performance measures is critical, not only for IRS management but
    also for effective oversight of IRS.  As explained by IRS: "It is
    essential to establish appropriate quantitative performance
    measures for the IRS and for its major component operations.  This
    is required by the Government Performance and 4According to IRS'
    National Director for Budget, the Taxpayer Advocate's share of the
    budget will actually be much higher than the amount included in
    the request because IRS is in the process of transferring to the
    Advocate's Office funding responsibility for caseworkers who had
    been funded by other functions, such as Examination and Customer
    Service. Page 6
    GAO/T-GGD/AIMD-99-140 Statement Results Act and is essential to
    the proper operation of any large organization.  For this reason,
    an integral part of the overall modernization program for the IRS
    is the establishment of balanced performance measures which
    support and reinforce achievement of the IRS' restated mission and
    overall strategic goals." IRS is designing Servicewide performance
    measures in support of its mission and strategic goals as well as
    performance measures at the individual program level.  In
    September 1998, the Commissioner announced a new mission statement
    for IRS.  It says that the mission of IRS is to "provide America's
    taxpayers top quality service by helping them understand and meet
    their tax responsibilities and by applying the tax law with
    integrity and fairness to all."  To achieve this mission, IRS
    established three strategic goals-service to each taxpayer,
    service to all taxpayers, and productivity through a quality work
    environment. To achieve the first goal--service to each taxpayer-
    IRS plans to make filing easier; provide first quality service to
    taxpayers needing help; provide prompt, professional, helpful
    treatment to taxpayers in cases where additional taxes may be due;
    and improve taxpayers' access to toll- free telephone assistance.
    To achieve the second goal-service to all taxpayers-IRS plans to
    increase fairness of compliance and overall compliance.  To
    achieve the third goal-productivity through a quality work
    environment-IRS plans to increase employee job satisfaction and
    productivity while service improves.  IRS said that it is
    realigning processes and activities to ensure that they support
    the mission of IRS and incorporate the principles of a balanced
    measurement system that focuses across three areas-business
    results, customer satisfaction, and employee satisfaction.
    Identifying and defining Servicewide and program level performance
    measures is work in process for IRS.  As shown in table III.1, IRS
    has defined 15 Servicewide performance measures and has one
    placeholder for a productivity measure that has yet to be defined.
    Nine of the 15 Servicewide measures are new.  IRS has also defined
    68 measures to gauge its performance in specific functional
    areas.5 (See table IIL.2.)  Of the 68 program level measures, more
    than half (40) are new. Understandably, the lists of measures
    included with the fiscal year 2000 budget estimates are neither
    final nor complete because IRS is in the process of planning its
    organizational modernization and identifying performance measures.
    According to IRS' National Director for Budget, 5IRS' functional
    area include such activities as Submission Processing, Telephone
    and Correspondence, Examination, and Collection. Page 7
    GAO/T-GGD/AIMD-99-140 Statement IRS will continue to revise and
    add other measures as it proceeds with the organizational
    modernization and implementation of RRA98.  In that regard, IRS'
    list of Servicewide performance measures does not include two
    critical measures-voluntary compliance and taxpayer burden.  Also,
    one existing Servicewide measure-toll-free level of access-is not,
    in our opinion, the most appropriate measure of IRS' performance
    in providing telephone service. IRS' Performance Measures Do
    IRS' performance measures do not yet include any measures of
    voluntary Not Address Voluntary           compliance and taxpayer
    burden.  While performance in both areas is Compliance and
    Taxpayer         difficult to measure, they are two critical
    indicators of IRS' performance Burden                          and
    thus should be a vital part of any measurement system that IRS
    develops.  According to IRS officials, IRS recognizes the
    importance of measuring these two areas of performance and plans
    to continue to explore valid and reliable ways to measure them at
    the strategic level to gauge IRS-wide performance. Voluntary
    Compliance-IRS' Organizational Performance Management Executive
    told us that IRS would be unable to measure voluntary compliance
    without something similar to the discontinued Taxpayer Compliance
    Measurement Program (TCMP).  In the past, IRS used TCMP studies to
    assess voluntary compliance among taxpayers.  Those studies
    involved detailed audits of valid samples of tax returns.  IRS
    projected the results of those audits to determine the extent of
    voluntary compliance among various groups of taxpayers.  IRS
    conducted its last TCMP studies on returns filed for tax years
    1987 and 1988.  IRS abandoned the TCMP studies due to concerns
    about the additional cost and burden placed on taxpayers.  Since
    then, IRS has not considered TCMP studies to be a viable option
    for assessing voluntary compliance. Additionally, the
    Organizational Performance Management Executive explained that the
    TCMP studies had other limitations.  For example, the TCMP studies
    could not be used to gauge compliance in "real time"- either
    during the tax year in question or the year after the tax year in
    question.  Also, IRS can not attribute all changes in compliance
    to its performance because voluntary compliance can be affected by
    other factors, such as the economy and geographical location. We
    believe that a modified version of the TCMP studies, that reduces
    the burden on taxpayers, could be useful in assessing voluntary
    compliance. For example, IRS could (1) use smaller samples that
    project nationwide results, (2) sample groups of taxpayers and
    project the results to specific Page 8
    GAO/T-GGD/AIMD-99-140 Statement groups of taxpayers, or (3)
    continuously sample a small number of returns over a period of
    several years. Taxpayer Burden-IRS discontinued a performance
    measure it once used to gauge taxpayer burden-a ratio that
    compared private sector costs to the cost for IRS to collect $100
    in "net tax" revenue.6  IRS discontinued this measure because it
    was based on an outdated methodology and was considered to be a
    poor indicator of overall burden.  IRS is currently working with a
    consultant to develop a new means to measure taxpayer burden.
    Additionally, results of IRS' taxpayer satisfaction surveys may
    provide some valuable insights on taxpayer burden. Level of
    Service Would Be a       One important way that IRS helps
    taxpayers understand and meet their tax More Appropriate
    Servicewide      responsibilities is through toll-free telephone
    assistance.  By calling IRS, Measure of IRS' Performance in
    taxpayers can, among other things, get answers to tax law
    questions, Providing Telephone Service       inquire about the
    status of their account, or order forms and publications. It is
    important that IRS and Congress know how well IRS provides this
    critical service.  Toward that end, IRS has included "toll-free
    level of access" as one of its Servicewide performance measures.
    We believe, however, that toll-free level of access is not the
    most appropriate Servicewide measure for assessing IRS'
    performance in providing telephone service.  The more appropriate
    measure, in our opinion, is "toll- free level of service." The
    only difference between these two measures, and the reason we
    favor level of service, is the way in which abandoned calls are
    handled in computing the measures.7  IRS computes level of access
    by adding the number of calls answered and the number of abandoned
    calls and dividing that sum by the total number of call attempts
    (which is the sum of calls answered, calls that are abandoned, and
    calls that receive a busy signal).8 Level of service is computed
    by dividing the number of calls answered by total call attempts.
    Thus, in effect, level of access considers abandoned calls as
    successful call attempts while level of service considers them
    unsuccessful.  Although level of access is a useful measure
    because it indicates the extent to which taxpayers are able to
    access IRS' system (i.e., 6Net tax revenue is defined to include
    all revenue collected (i.e. income, employment, estate and gift,
    and excise taxes) less refunds. 7Abandoned calls are ones in which
    the taxpayer has gained access to IRS' system but subsequently
    decided, for unknown reasons, to hang up before an IRS assistor
    came on the line. 8Appendix I of IRS' Fiscal Year 2000
    Congressional Justification incorrectly describes this measure as
    being computed by dividing calls answered by calls attempted.
    That is actually the way level of service is computed. Page 9
    GAO/T-GGD/AIMD-99-140 Statement not get a busy signal), it does
    not indicate the extent to which taxpayers are successful in
    actually talking to someone in IRS.  For that reason, we believe
    that level of service is the more appropriate Servicewide measure
    of IRS' performance in providing telephone assistance. IRS' budget
    request for fiscal year 2000 discusses the diversion of Impact of
    Diversion of    resources in fiscal year 1999 to implement various
    provisions of RRA98 Resources Is Uncertain    and to provide
    assistance to taxpayers.  There is insufficient information,
    however, for IRS or Congress to assess the overall impact of these
    diversions. RRA98 contains various provisions that give additional
    protection to taxpayers (such as a relief from joint liability for
    innocent spouses), shift the burden of proof from taxpayers to IRS
    in certain circumstances, and make IRS liable for some legal fees
    incurred by taxpayers.  IRS says that it plans to divert about
    2,500 FTEs and $200 million in fiscal year 1999 to implement these
    provisions.  According to IRS, this diversion marks the "beginning
    of a continuing curtailment of some compliance activities,
    primarily the examination of tax returns and the collection of
    delinquent accounts."  In addition, IRS says that another 200 FTEs
    will be detailed from the Collection function to the Customer
    Service function in fiscal year 1999 to increase the quality of
    service to taxpayers through the walk- in program.  Other
    diversions are possible as IRS attempts to improve the quality of
    its telephone service, which we discuss later. Although IRS has
    made statements in the past about the potential impact of these
    resource diversions on enforcement revenue, its current position
    is that the monetary effect of such diversions is unknown.  We
    agree with that position.  To correctly assess the monetary effect
    of such diversions, IRS needs to be able to estimate not only the
    negative effect on enforcement revenues but also the potential
    positive effect on non- enforcement revenues from any improved
    taxpayer service resulting from the resource diversions. It is
    expected, for example, that implementation of RRA98 will result in
    better service to taxpayers.  Better taxpayer service could lead
    to an increase in voluntary compliance, which, in turn, could lead
    to increased revenues.  Without a measure of voluntary compliance,
    as discussed earlier, there is no way for Congress, IRS, or others
    to assess such an impact. Page 10
    GAO/T-GGD/AIMD-99-140 Statement IRS' efforts to make its systems
    Year 2000 compliant represent one of the The 5-Year Cost
    most expensive civilian agency programs.9  The current 5-year cost
    Estimate for Making              estimate for IRS' Year 2000
    efforts is $1.3 billion-about $345 million more than its March
    1998 cost estimate. IRS estimates that if its Year 2000 IRS'
    Systems Year 2000 efforts are unsuccessful, the adverse effects
    could include millions of Compliant Has
    erroneous tax notices and delayed or erroneous refunds.
    Accordingly, the Increased, and Some              Commissioner of
    Internal Revenue has designated this effort a top priority. Needs
    for Fiscal Year            IRS is requesting about $250 million
    and 239 FTEs for its Year 2000 efforts 2000 Are Still
    for fiscal year 2000.10  About $34 million of the $250 million is
    for a contingency fund for needs that may be identified later in
    calendar year Uncertain                        1999. To make its
    information systems Year 2000 compliant, IRS was to (1) fix
    existing systems by modifying application software and data and
    upgrading hardware and system software where needed, (2) replace
    systems if correcting them is not cost-effective or technically
    feasible, and (3) retire systems that will not be needed after the
    year 2000.  IRS' Year 2000 efforts include the following two major
    system replacement projects: *  The Service Center Mainframe
    Consolidation (SCMC) project involves consolidation of IRS'
    mainframe computer processing operations from 10 service centers
    to 2 computing centers.  Specifically, SCMC was to (1) replace
    and/or upgrade mainframe hardware, systems software, and
    telecommunications networks; (2) replace about 16,000 terminals
    that support frontline customer service and compliance activities;
    and (3) replace the system that provides security functions for
    on-line taxpayer account databases with a new system called the
    Security and Communications System.  Replacement of the terminals
    and implementation of the Security and Communications System are
    critical to 9IRS' Year 2000 efforts are necessary because IRS'
    information systems were programmed to read two- digit date
    fields.  Therefore, if unchanged, these systems would interpret
    2000 as 1900, seriously jeopardizing tax processing and collection
    activities. 10The $250 million is referred to as an increase in
    IRS' budget request because IRS' fiscal year 1999 appropriation
    did not specifically include funds for IRS' Year 2000 efforts. For
    fiscal year 1999, IRS' Year 2000 efforts were funded from a
    governmentwide Year 2000 fund that was established in the Omnibus
    Consolidated and Emergency Supplemental Appropriations Act for
    Fiscal Year 1999 (P.L. 105- 277).  This Act provided $2.25 billion
    in emergency funding for Year 2000 computer conversion activities
    for nondefense activities.  The Director of the Office of
    Management and Budget (OMB) is responsible for allocating these
    funds. As of February 12, 1999, OMB had released $1.56 billion;
    $690 million remains available for emerging requirements.  IRS
    received $483.3 million from the fund, of which $358.3 million is
    to be used for Year 2000 activities.  According to Department of
    the Treasury budget documents, Congress earmarked the remaining
    $125 million for other information systems investments that were
    initially included in IRS' fiscal year 1999 budget request. Page
    11
    GAO/T-GGD/AIMD-99-140 Statement IRS' achieving Year 2000
    compliance. *  The Integrated Submission and Remittance Processing
    System (ISRP) is to replace IRS' two primary tax return and
    remittance input processing systems (the Distributed Input
    Processing System and the Remittance Processing System) with a
    single system that is to be Year 2000 compliant. IRS established a
    goal to complete most of its Year 2000 work by January 31, 1999,
    to help ensure that it would (1) have a Year 2000 compliant
    environment implemented for the 1999 filing season and (2) provide
    time for resolving any problems that surfaced during the 1999
    filing season and its Year 2000 end-to-end testing. For fiscal
    year 2000, IRS is requesting (1) $123.4 million for the activities
    of the Century Date Change (CDC) Project Office, which oversees
    the conversion and testing of changes made to existing systems;
    (2) $100.6 million for SCMC; and (3) $26.4 million for ISRP. The
    5-year cost estimate for IRS' Year 2000 efforts increased by
    $345.2 5-Year Cost Estimate                     million between
    March 1998 and March 1999.  In March 1998, the 5-year Increased
    cost estimate for fiscal years 1997 through 2001 was about $1
    billion; IRS' current cost estimate is $1.35 billion.  Table 1
    shows that the activities under the purview of the CDC Project
    Office and SCMC account for most of the increase. Table 1: 5-Year
    Cost Comparison (in
    Fiscal years              Fiscal years Millions)
    19972001                19972001 (March 1998              (March
    1999 Spending category                                estimate)
    estimate) DIfference CDC Project Office
    $572.0                  $701.4          $129.4 SCMC
    332.2                   499.8           167.6 ISRP
    101.7a                   149.9             48.2 Total
    $1,005.9                $1,351.1          $345.2 aDoes not include
    estimates for fiscal years 2000 and 2001.  IRS budget documents
    indicate that these estimates were identified in April 1998.  If
    these amounts are included, the ISRP cost estimate is $146.3
    million-only $3.6 million less than the current estimate. Source:
    IRS' Year 2000 cost summaries for fiscal years 19972001. CDC
    Project Office                       The CDC Project Office is
    responsible for (1) overseeing efforts to fix over 60 million
    lines of application software, (2) ensuring that hardware and
    systems software are compliant, and (3) overseeing the Year 2000
    testing of IRS' information systems.  As shown in table 1, IRS' 5-
    year cost estimate for CDC increased by $129.4 million between
    March 1998 and March 1999. Most of the increase-$99 million-is for
    fiscal year 1999. Page 12
    GAO/T-GGD/AIMD-99-140 Statement We had difficulty identifying
    which aspects of the CDC Project Office budget accounted for all
    of the $99 million increase because at the time IRS officials
    developed the March 1998 estimate they were still refining their
    Year 2000 needs.  At that time, IRS had allocated about $50
    million to a contingency fund that was to become available for
    needs as they emerged.  According to IRS officials, for those
    needs that were defined as of March 1998, the largest cost
    increases are for certain contractor services and for computer
    hardware and software for IRS' personal computers and
    minicomputers/file servers. As we noted in our June 1998 report on
    IRS' Year 2000 efforts, IRS placed priority on assessing and
    fixing its mainframe computers, which encompass most of IRS' tax
    processing systems.11  Accordingly, the needs for IRS'
    minicomputers/file servers and personal computers were less
    defined at that point in time.  For example, since developing the
    March 1998 estimate, IRS has decided to replace about 35,000
    personal computers and the associated systems and commercial off-
    the-shelf software.  As part of this replacement effort, IRS plans
    to reduce the number of commercial software and hardware products
    for personal computers in its inventory from about 4,000 to 60
    core standard products. Table 2 shows the CDC Project Office's
    spending categories and associated dollar amounts for fiscal year
    1999 as of February 23, 1999. 11IRS' Year 2000 Efforts:  Business
    Continuity and Contingency Planning Needed for Potential Year 2000
    Failures (GAO/GGD-98-138, June 15, 1998). Page 13
    GAO/T-GGD/AIMD-99-140 Statement Table 2: CDC Project Office
    Spending    Spending category
    Amount (in millions) Categories and Associated Dollar
    Personal computers
    $51.0 Amounts for Fiscal Year 1999            End-to-end testinga
    48.2 Labor and discretionary
    38.3 Program inventory and management
    23.2 Applications and development
    19.6 Minicomputers/file servers
    16.7 Telecommunications
    14.0 Noninformation technology
    9.2 Contingency fund
    8.8 Independent ver ification and validationb
    8.8 Mainframe computers
    1.1 Total
    $239.0c aThe end-to-end test is to verify that a defined set of
    interrelated systems, which collectively support a business
    function, interoperate as intended in an operational environment.
    The test is to have two parts-the first part is scheduled from
    April to July 1999; the second part is scheduled from October to
    December 1999. bProvides for an organization that is technically,
    managerially, and financially independent of the systems
    developers to assess, among other things, whether a system meets
    the user's requirements. cTotal does not add due to rounding.
    Source: CDC budget data. We cannot comment on the adequacy of the
    amounts that IRS has allocated to each of these categories.
    However, as we would have expected, IRS has allocated large
    portions of its budget to those major Year 2000 activities that
    are to be completed in fiscal year 1999-the replacement effort for
    its personal computers and its end-to-end testing activities. To
    help ensure that agencies have sufficient funds for Year 2000
    activities, OMB has authority to release funds from the
    government-wide Year 2000 fund.  OMB notified agencies to request
    funding for unforeseen requirements as they emerge.  Accordingly,
    in March 1999, after allocating the $8.8 million in its
    contingency fund, IRS requested an additional $35 million from the
    OMB Year 2000 fund to cover the net unfunded needs for fiscal year
    1999.  As of March 1999, OMB had approved $22.3 million.12 IRS'
    fiscal year 2000 budget request includes $123.4 million for the
    CDC Project Office.  According to CDC Project Office budget
    documents, as of March 31, 1999, about $29 million of the $123.4
    million has been allocated, primarily for CDC Project Office labor
    and discretionary costs.  The CDC 12IRS requested funds for
    several activities such as contingency planning,
    telecommunications, minicomputers/file servers, and independent
    verification and validation.  OMB approved funding for most of the
    areas, but reduced the amount for some areas.  According to IRS
    officials, OMB approved funding for those areas in which IRS had
    demonstrated an actual need and not for anticipated needs. For
    example, an anticipated need would include any fixes that might be
    needed as a result of end-to- end testing. Page 14
    GAO/T-GGD/AIMD-99-140 Statement Project Office has received
    funding requests for about $60 million which are still subject to
    approval, leaving a contingency amount of about $34 million.  IRS
    officials said that the contingency funds are to be used for needs
    that may be identified through (1) end-to-end testing, (2) risk
    management activities,13 (3) Year 2000 contingency plans for IRS'
    core business processes,14 and (4) an independent review of IRS'
    application software and commercial off-the-shelf software Year
    2000 changes. SCMC                                     SCMC cost
    increases account for $167.6 million of the $345.2 million
    increase in the 5-year Year 2000 cost estimate.  As shown in table
    3, IRS' March 1998 cost estimate for SCMC was $332.2 million,
    compared to its current cost estimate of $499.8 million. Table 3:
    Comparison of March 1998 and    Year of                    FY 1997
    March 1999 SCMC 5-Year Cost              estimatea
    actual            FY 1998b                FY 1999
    FY 2000               FY 2001                     Total Estimates
    March 1998 estimate                          43.8
    167.3                   76.0                   38.4
    6.7            $332.2c March 1999 estimate
    43.8                 168.3                 111.6
    97.3                   78.8              $499.8 Difference
    0                  1.0                 35.6                   58.9
    72.1             $167.6 aEstimate includes only contractor costs,
    except where noted.  According to IRS officials, there are $64
    million in additional costs excluded from the estimates.  As of
    March1999, these costs include (1) additional IRS staffing costs
    of $32 million, (2) $20 million for maintenance costs in the seven
    service centers that have not yet had their tax processing
    activities moved to the computing centers, and (3) $12 million in
    relocation and training costs for fiscal years 1999, 2000, and
    2001. bAccording to SCMC officials, the estimates for fiscal year
    1998 also include relocation, training, and IRS staffing costs.
    cIn March 1998, IRS' cost estimate for the Year 2000 portions of
    SCMC was $265 million. IRS no longer reports SCMC Year 2000 costs.
    Source: SCMC expenditure and budget documents. When we testified
    in March 1998, we said that two of the factors that had the
    potential to increase SCMC costs were pending expanded business
    requirements and schedule delays.  According to IRS officials,
    those two factors together with a decision to upgrade one of the
    tax processing systems, ultimately contributed to cost increases.
    13IRS' CDC Project Office outlined a risk management process that
    is to, among other things, (1) identify risks to the successful
    completion of Year 2000 goals, (2) coordinate the development of
    risk mitigation strategies, and (3) oversee the execution of these
    strategies. 14In our June 15, 1998, report, we said that IRS' Year
    2000 contingency planning efforts fell short of meeting the
    guidelines included in our Year 2000 Business Continuity and
    Contingency Planning Guide. Accordingly, we recommended that IRS
    take steps to broaden its contingency planning efforts to help
    ensure that it had adequately assessed the vulnerabilities of its
    core business processes to potential Year 2000 induced failures.
    In response to our recommendations, IRS determined that it needed
    to develop 37 contingency plans to address various Year 2000
    failure scenarios for its core business processes.  IRS officials
    told us that 26 plans were done as of March 31, 1999; the
    remaining 11 plans are to be completed by May 31, 1999. Page 15
    GAO/T-GGD/AIMD-99-140 Statement According to IRS officials, IRS'
    fiscal year 2000 budget request of $100.6 million15 for SCMC
    reflects much of the costs associated with implementing expanded
    requirements and the contractor costs, staff relocation costs, and
    training costs for moving the tax processing activities of five
    service centers in fiscal year 2000.  According to SCMC officials,
    cost estimates for fiscal years 2000 and 2001 could decrease
    because (1) they believe the contractor's cost estimates may be
    overstated and (2) some SCMC activities may be funded from IRS'
    Operations and Maintenance budget activity as systems are fully
    implemented. According to SCMC officials, expanded business
    requirements for disaster recovery16 and a decision to upgrade the
    hardware and software for one of its tax processing systems17
    account for the vast majority of the $167.6 million increase in
    the 5-year cost estimate for SCMC.  For disaster recovery, IRS
    plans to obtain contractor services and purchase hardware,
    software, and related telecommunications for its tax processing
    mainframe computers and telecommunications networks.  SCMC
    officials said that the tax processing system upgrade is to (1)
    increase production capacity and disaster recovery capabilities,
    (2) provide the necessary systems architecture for IRS' planned
    modernization blueprint, and (3) provide substantial savings by
    reducing the hardware, software, and maintenance costs associated
    with the existing system. According to SCMC officials, the need to
    have contractor staff on board longer than anticipated to
    accommodate schedule delays accounts for some of the $167.6
    million cost increase.   Specifically, in March 1999, IRS decided
    to delay moving the tax processing activities of five service
    centers, instead of completing these moves in 1999.18 15This
    $100.6 million includes $3.3 million in relocation and training
    costs that is not included in the March 1999 estimate for fiscal
    year 2000 shown in table 3. 16Disaster recovery refers to the
    procedures or plans for responding to the loss of an information
    system due to flood, fire, or computer virus. Under the original
    SCMC disaster recovery plan, in the event of a disaster, 70
    percent of the computing center's processing capability was to be
    restored in 36 hours. Under the expanded requirements, 100 percent
    of the processing capability is to be restored in 6 hours. 17This
    tax processing system encompasses IRS' automated collection
    function and the print capabilities for notices to taxpayers.
    18This decision represents the second significant schedule change
    for SCMC.  Originally, IRS had planned to have the tax processing
    activities of the 10 service centers moved to the computing
    centers by the end of calendar year 1998.  In May 1998, IRS
    revised the schedule and established two new schedules-one for the
    Year 2000 portion of SCMC and another for the tax processing
    activities.  The Year 2000 portion was to be completed by December
    31, 1998.  The schedule for tax processing activities called for
    moving the activities of five service centers by 1998 and the
    remaining five service centers in calendar year 1999.  As of
    January 31, 1999, IRS had completed the Year 2000 portion of Page
    16
    GAO/T-GGD/AIMD-99-140 Statement IRS officials cited several
    reasons for changing the SCMC schedule. Specifically, IRS'
    business organizations had limited involvement in SCMC during its
    early stages.  As their involvement increased, they expressed
    concern about the ambitious schedule and helped identify certain
    critical success factors that needed to be addressed for SCMC to
    be successful. Some of these critical success factors include (1)
    fully implementing the automated processes associated with the
    consolidations before the service centers' tax processing
    activities were moved to the computing centers, (2) providing
    adequate numbers and types of staff in the service centers and
    computing centers, and (3) developing new business procedures for
    operating under consolidation.  Also, SCMC officials said that the
    original schedule did not acknowledge that new issues might
    surface during each move because of operational differences among
    the service centers. According to IRS officials, the revised
    schedule provides additional time for addressing these issues.
    Beginning in 1995, we reported on serious and pervasive
    information Information           technology (IT) management and
    technical weaknesses.  Since then, we Technology Budget:    have
    monitored IRS' progress in implementing our recommendations to
    correct these weaknesses and have reviewed IRS' annual budget
    requests Observations and      to ensure that they are consistent
    with IRS' modernization capability and Suggestions           are
    otherwise adequately justified. IRS' IT budget request for fiscal
    year 2000 includes $1.46 billion and 7,399 FTEs to fund such
    things as operation and maintenance of existing systems,
    activities to make IRS' systems Year 2000 compliant, correction of
    IT management weaknesses, and development of systems to sustain
    IRS operations until IRS is ready to modernize.  These funding
    categories for fiscal year 2000 are consistent with our prior
    recommendations and related congressional direction concerning IT
    spending. In addition to the $1.46 billion, IRS is requesting for
    fiscal year 2001 an advance appropriation of $325 million for IRS'
    multiyear capital account for systems modernization, referred to
    as the "Information Technology Investments Account" (ITIA).
    However, IRS has not adequately justified this ITIA request
    because IRS has not yet developed its modernization strategic plan
    and supporting cost-benefit analyses for proposed system
    investments.  Accordingly, we suggest that Congress consider
    either denying (i.e., not funding) the $325 million advance
    request or restricting SCMC and moved the tax processing
    activities of three service centers.  In March 1999, IRS revised
    the schedule for moving the tax processing activities.  Under the
    revised schedule, two additional moves are to occur in calendar
    year 1999, four in calendar year 2000, and one in early January
    2001. Page 17
    GAO/T-GGD/AIMD-99-140 Statement its obligation until IRS develops
    the requisite cost analyses to justify the amount requested, which
    IRS plans to do by September 30, 1999. In July 1995, we reported
    on serious management and technical IRS Acting to Correct IT
    weaknesses with IRS' modernization and made over a dozen
    Management and Technical recommendations to help IRS build the
    capability necessary to Weaknesses
    successfully modernize it systems.19  In June 1996, we reported
    that IRS had made progress in implementing our recommendations.20
    However, to minimize the risk of IRS investing in systems before
    the recommendations were fully implemented, we suggested that
    Congress limit IRS' IT spending to certain cost-effective
    categories.  These spending categories were those that (1) support
    ongoing operations and maintenance; (2) correct pervasive
    management and technical weaknesses, such as a lack of requisite
    systems life cycle discipline; (3) are small, represent low
    technical risk, and can be delivered in a relatively short time
    frame; or (4) involve deploying already developed systems that
    have been fully tested, are not premature given the lack of a
    complete systems architecture, and produce a proven, verifiable
    business value.  The act providing IRS' fiscal year 1997
    appropriations21and the related conference report limited IRS' IT
    spending to efforts consistent with these categories. In 1997, IRS
    continued to address our recommendations.  For example, in May
    1997, IRS issued its modernization blueprint.  We briefed IRS
    appropriations and authorizing committees on the results of our
    assessment of IRS' modernization blueprint in September 1997.  In
    those briefings and in a subsequent report, we concluded that the
    modernization blueprint was a good first step that provided a
    solid foundation from which to define the level of detail and
    precision needed to effectively and efficiently build a modernized
    system of interrelated systems.22  However, we also noted that the
    blueprint was not yet complete and did not provide enough detail
    for building and acquiring new systems.  As a result, the
    conference report accompanying IRS' fiscal year 1998
    appropriations act again limited IRS' fiscal year spending to
    efforts that were consistent with the aforementioned spending
    categories.  IRS' fiscal year 1999 19Tax Systems Modernization:
    Management and Technical Weaknesses Must Be Corrected If
    Modernization Is To Succeed (GAO/AIMD-95-156, July 26, 1995).
    20Tax Systems Modernization:  Actions Underway But IRS Has Not Yet
    Corrected Management and Technical Weaknesses (GAO/AIMD-96-106,
    June 7, 1996). 21Public Law 104-208, September 30, 1996. 22Tax
    Systems Modernization:  Blueprint Is a Good Start But Not Yet
    Sufficiently Complete to Build or Acquire Systems (GAO/AIMD/GGD-
    98-54, Feb. 24, 1998). Page 18
    GAO/T-GGD/AIMD-99-140 Statement appropriation act and conference
    report continued these spending limitations.23 In its budget
    requests for fiscal years 1998 and 1999, IRS requested over $1
    billion for ITIA.  In our testimonies before this Subcommittee on
    these requests, we questioned the justification for these funds
    because (1) all or major parts of the amounts being requested were
    not based on analytical data or derived using formal cost
    estimating techniques, as required by OMB, and (2) IRS had not yet
    developed the capability to modernize.24 Subsequently, Congress
    provided $506 million for the account. Specifically, it
    appropriated $325 million in fiscal year 1998, of which $30
    million it rescinded in May 1998 for urgent Year 2000 century date
    change requirements.  Congress also provided $211 million in
    fiscal year 1999.  In providing these sums, Congress prohibited
    their obligation until IRS and the Department of the Treasury
    submitted to Congress for approval an expenditure plan that (1)
    implements IRS' modernization blueprint; (2) meets OMB investment
    guidelines; (3) is reviewed and approved by OMB and Treasury's IRS
    Management Board and is reviewed by us; (4) meets requirements of
    IRS' life cycle program; and (5) is in compliance with acquisition
    rules, requirements, guidelines, and systems acquisition
    management practices of the federal government. In December 1998,
    IRS awarded its Prime Systems Integration Services Contract
    (PRIME) for systems modernization.  IRS is working with the PRIME
    and other support contractors to develop a strategic business
    systems plan and complete the modernization blueprint, as we
    recommended, and to account for (1) changes in system requirements
    and priorities caused by IRS' organizational modernization and (2)
    changes to accommodate new technology and to implement RRA98
    requirements. IRS is also working with the PRIME to establish
    disciplined life cycle management processes and structures,
    including mature software development and acquisition
    capabilities, before IRS begins building modernized systems.  By
    June 30, 1999, IRS plans to have these processes and structures in
    place and have the necessary approvals to begin using ITIA funds
    to modernize systems.  By September 30, 1999, IRS also plans to
    have its strategic business systems plan for the entire
    modernization, which is to identify the systems to be modernized
    over the next 5 years, their estimated costs, business case
    justification, the sequence in which 23Public Law 105-277, October
    21, 1998. 24GAO/T-GGD/AIMD-98-114 and Tax Administration:  IRS'
    Fiscal Year 1997 Spending, 1997 Filing Season, and Fiscal Year
    1998 Budget Request (GAO/T-GGD/AIMD-97-66, Mar. 18, 1997). Page 19
    GAO/T-GGD/AIMD-99-140 Statement they will be developed and
    deployed, and the architecture standards governing their
    development. IRS' fiscal year 2000 request of $1.46 billion for
    information systems Fiscal Year 2000             appears
    consistent with the aforementioned spending categories.
    Information Systems          Specifically, 78 percent of the
    request, or $1.14 billion, is to (1) operate and Budget Request Is
    in Line    maintain information systems that support tax
    administration, (2) With GAO and                 consolidate
    mainframe computing from 10 centers to 2, and (3) restructure the
    information systems organization.  Seventeen percent of the
    request, or Congressional Spending       $250 million, is for Year
    2000 conversion activities.  The remaining 5 Categories
    percent, or $66 million, is for initiatives to correct IT
    management weaknesses or to develop systems to sustain IRS
    operations until it implements modernized systems.  For example,
    funding from this activity is to be used to complete and implement
    the modernization blueprint, including establishing system life
    cycle management processes. Key provisions of the Clinger-Cohen
    Act, the Government Performance IRS Has Not Adequately       and
    Results Act, and OMB Circular No. A-11 and supporting memoranda,
    Justified Its Fiscal Year    require that, before requesting
    multiyear funding for capital asset 2001 ITIA Request
    acquisitions, agencies develop accurate, complete cost data and
    perform thorough analyses to justify the business need for the
    investment.  For example, agencies must show that investments (1)
    support a critical agency mission; (2) are justified by life cycle
    cost-benefit analyses; and (3) have cost, schedule, and
    performance goals. IRS has not performed the requisite analyses to
    justify its fiscal year 2001 investment account request of $325
    million because the information it needs to prepare such analyses
    will not be available until IRS completes its strategic business
    planning in September 1999.  Consequently, IRS was unable to base
    its budget request on a clear and complete definition of fiscal
    year 2001 IT investments and did not justify these investments
    with cost-benefit analyses.  Instead, IRS officials told us that
    they needed to develop an estimate for the fiscal year 2000 budget
    process in order to ensure that funds would be available for
    modernization in fiscal year 2001. These officials stated that if
    they did not have a budgetary "placeholder" for modernization, IRS
    faced the possibility of a funding shortfall in fiscal year 2001
    when IRS plans to be building modernized systems. Consequently,
    IRS developed its budget request using (1) cost estimates from its
    March 1998 PRIME request for proposal (RFP) and (2) a cost
    estimate that was documented following our inquiries and using
    what IRS termed "rough order of magnitude" cost estimating
    processes.  However, these estimates have shortcomings.  First,
    IRS officials acknowledged that the RFP cost estimates are out-of-
    date and are for IT projects underway Page 20
    GAO/T-GGD/AIMD-99-140 Statement now and not planned for fiscal
    year 2001.  Second, the "rough order of magnitude" estimate lacked
    verifiable analysis and supporting data. Finally, neither estimate
    was based on a specified set of fiscal year 2001 IT investments
    because these investments have yet to be defined. We support IRS'
    efforts to first strengthen its modernization capability and
    Matter for Consideration by then acquire modernized systems.
    However, IRS' fiscal year 2001 request the Congress
    for ITIA funds is not justified in accordance with federal IT
    investment requirements.  Accordingly, we suggest that Congress
    consider either denying (i.e., not funding) the $325 million
    advance request or restricting its obligation until IRS develops
    the requisite cost analyses to justify the amount requested, which
    IRS plans to do by September 1999.  Neither of these congressional
    actions should impact fiscal year 1999 and 2000 modernization
    efforts because the ITIA has enough funds to cover IRS' proposed
    spending in both years.  Specifically, of the $506 million in the
    ITIA, IRS plans to spend about $361 million during fiscal years
    1999 and 2000-$79 million and $282 million, respectively-which
    will leave $145 million for fiscal year 2001. At the request of
    this Subcommittee, we are reviewing IRS' performance Preliminary
    Data on               during the 1999 tax filing season.  Our
    preliminary work has shown some mixed results.  Specifically, (1)
    taxpayers have experienced a significant the 1999 Filing Season
    decline in IRS' telephone service, although service has improved
    in recent Show Mixed Results                weeks; (2) the number
    of individual income tax returns filed electronically has
    continued to increase, although the number filed over the
    telephone has decreased; (3) there appears to be a significant
    amount of confusion among taxpayers with respect to the new child
    tax credit; and (4) new computer systems for processing returns
    and remittances appear to be performing well. According to IRS'
    data, taxpayers who called IRS with tax questions during
    Significant Decline in            the first few weeks of the 1999
    filing season had considerable difficulty Telephone Service
    reaching IRS on the telephone and, once they did reach IRS,
    getting an accurate answer to their questions.  Although that
    situation has improved in recent weeks, IRS' performance overall
    has declined significantly compared to its level at the same point
    in time last year. Page 21
    GAO/T-GGD/AIMD-99-140 Statement Ability of Taxpayers to Reach
    Over the last few years, there has been a steady increase in the
    ability of IRS on the Telephone Has                     taxpayers
    to reach IRS by telephone.  This year, however, there have been
    Worsened Since Last Year                     serious problems.  As
    shown in table 4, IRS data for the first 3 months of this filing
    season compared to the same period last year show a significant
    decline in IRS' performance.25 Table 4: Toll-Free-Telephone Level
    of
    1999                        1998 Access and Level of Service for
    the First    (a) Calls answered
    27.9                        29.6 3 months of the 1999 and 1998
    Filing         (b) Calls abandoned
    7.3                         6.5 Seasons (in Millions)
    (c) Subtotal-Calls that got into IRS' system
    35.2                        36.1 (d) Busy signals
    16.9                          3.5 (e) Total call attempts
    52.1                        39.6 Level of accessa
    68%                         91% Level of serviceb
    54%                         75% Percent of calls that received
    busy signalsc
    32%                           9% Percent of calls that got into
    IRS' system but were abandonedd
    21%                         18% Note:  Data are for January 1
    through March 27, 1999, and January 1 through March 28, 1998.
    aLevel of access is the sum of the number of calls answered plus
    the number of calls abandoned divided by the total call attempts--
    computed in this table by dividing row (c) by row (e). bLevel of
    service is the number of calls answered divided by the total call
    attempts--computed in this table by dividing row (a) by row (e). c
    Computed in this table by dividing row (d) by row (e). dComputed
    in this table by dividing row (b) by row (c). Source:  GAO
    analysis of data in IRS' Weekly Customer Service Report. The
    significant declines in level of access (from 91 percent to 68
    percent) and level of service (from 75 percent to 54 percent) come
    at a time when IRS, in an attempt to improve service, extended its
    operating hours to 24 hours a day, 7 days a week. Cognizant IRS
    officials have mentioned several factors that they believe
    contributed to the declines in telephone access and service.  One
    factor was IRS' decision to discontinue the use of a procedure
    that it had used in 1997 and 1998 to handle calls involving
    complex tax topics.  Under that procedure, callers with questions
    in certain complex areas of the tax law, such as self-employment
    income and sale of a residence, were automatically connected to a
    voice messaging system.  They were instructed to leave their name,
    address, telephone number, and the best time for IRS to call them
    back.  Within 2 to 3 business days, an IRS employee knowledgeable
    in that area of the tax law was to return the taxpayer's call.
    During our review of the 1997 filing season, IRS told us 25In
    reporting telephone data, IRS combines data on six of its toll-
    free telephone lines-tax law assistance, Earned Income
    Credit/refund inquiry, account inquiry, forms ordering, Automated
    Collection System, and the fraud hotline. Page 22
    GAO/T-GGD/AIMD-99-140 Statement that it decided to use this
    procedure after a study showed that calls dealing with complex
    topics involved 20- to 30-minute telephone conversations and that
    an assistor could answer about 5 simpler calls in that same amount
    of time. According to cognizant officials, IRS decided to
    discontinue the use of voice messaging for complex topics because
    they expected to have sufficient staff available in 1999 to allow
    all calls to be directed to "live" assistors.  There was also some
    concern that IRS was not providing the best possible service when
    it asked taxpayers to leave a message and wait a few days for a
    return call.  Thus, IRS started this filing season by attempting
    to answer all taxpayer calls with live assistors. Other
    contributing factors mentioned by IRS officials included *
    unanticipated staffing problems associated with the expansion to
    24 hours- a-day, 7 days-a-week service; *  start-up issues
    associated with IRS' new call routing system; and *  the lack of
    reliable data on accessibility during the first weeks of the
    filing season. IRS has taken steps to address these contributing
    factors.  For example, during the week of February 15, 1999, IRS
    reestablished the use of the messaging system for questions
    involving certain tax law topics.  IRS' actions appear to have had
    a positive effect.  In that regard, IRS' data show that telephone
    accessibility and service have improved in recent weeks. For
    example, IRS data on calls received during the week of March 21
    through 27, 1999, showed an 83 percent level of access and a 66
    percent level of service during that week-significantly better
    than the cumulative percentages shown in table 4.26 The Accuracy
    of IRS' Answers to IRS data show that taxpayers are more likely to
    receive inaccurate Tax Law Questions Has Also          responses
    to their tax law questions this year compared to last.  IRS
    Declined                            checks the quality of its
    telephone service by monitoring a sample of telephone calls.  IRS'
    monitoring during the period October 1, 1998, through February 28,
    1999, showed that the accuracy rate had dropped 11 percentage
    points (from 80 percent to 69 percent) compared to the same time
    period a year ago.  Although still well behind last year, the 69
    percent accuracy rate as of the end of February 1999 is better
    than the 66 percent rate that IRS reported as of the end of
    January 1999. 26For the same week in 1998, IRS reported a 91
    percent level of access and a 72 percent level of service. Page 23
    GAO/T-GGD/AIMD-99-140 Statement According to a cognizant IRS
    official, the decline in quality compared to 1998 can be
    attributed to many of the same factors that contributed to the
    decline in telephone accessibililty.  For example, the decision to
    stop using voice messaging required customer service
    representatives to handle complex topics that they were not
    responsible for last year. As noted in our report on the 1998
    filing season, the number of returns Use of Electronic Filing
    filed electronically increased about 28 percent between 1996 and
    1997 and Continues an Upward Trend about 28 percent again in
    1998.27  According to IRS data, as shown in table 5, that growth
    is continuing, although at a reduced rate. Table 5: Individual
    Income Tax Returns
    Percent                                              Percent
    Received by IRS (in Thousands)
    1/1/97 to                  1/1/98 to                  change:
    1/1/99 to                  change: Filing type
    4/04/97                   4/03/98 1997 to 1998
    4/02/99 1998 to 1999 Paper Traditional
    45,306                    42,470                          -6.3
    41,538                          -2.2 1040PCa
    4,488                      3,534                      -21.3
    3.084                       -12.7 Subtotal
    49,794                    46,004                          -7.6
    44,622                          -3.0 Electronic Traditionalb
    13,007                    16,306                         25.4
    20,167                         23.7 TeleFilec
    4,072                      5,116                       25.6
    4,829                         -5.6 Subtotal
    17,079                    21,422                         25.4
    24,996                         16.7 Total
    66,873                    67,426                           0.8
    69,618                           3.3 aUnder the Form 1040PC method
    of filing, a taxpayer or tax return preparer uses personal
    computer software that produces a paper tax return in an answer-
    sheet format.  The Form 1040PC shows the tax return line number
    and the data for that line number.  Only numbers for those lines
    on which the taxpayer has made an entry are included on the Form
    1040PC. bTraditional electronic filing involves the transmission
    of returns over communication lines through a third party, such as
    a tax return preparer or electronic return transmitter, to an IRS
    service center. cUnder TeleFile, certain taxpayers that are
    eligible to file a Form 1040EZ are allowed to file using a toll-
    free number on touch-tone telephones. Source:  IRS' Management
    Information System for Top Level Executives. As table 5 shows,
    although there has been an overall increase in electronic filing,
    there has been a decrease in one form of electronic filing-
    TeleFile. It is unclear at this point why the use of TeleFile has
    declined.  It is also unclear whether there are any particular
    factors that primarily account for the overall increase in
    electronic filing. One factor that may be contributing to the
    increase in electronic filing this year, but which has broader
    implications for future years, is IRS' effort to find workable
    alternatives to paper signatures.  Generally, taxpayers using the
    traditional form of electronic filing have to send IRS a paper
    signature form along with copies of their Forms W-2.  The fact
    that electronic filing 27Tax Administration:  IRS' 1998 Tax Filing
    Season (GAO/GGD-99-21, Dec. 31, 1998). Page 24
    GAO/T-GGD/AIMD-99-140 Statement has not been completely paperless
    has been cited as a major barrier to its greater use.  In that
    regard, IRS has been conducting tests this year directed at making
    electronic filing truly paperless by allowing participants to use
    electronic signatures and by waiving the need for participants to
    send their W-2s to IRS.28  In one test, for example, taxpayers are
    to choose a personal identification number to use when filing
    through certain tax preparers.  We will be following up on the
    results of these tests as we continue our review of the filing
    season. The individual income tax returns being filed this year
    include, for the first The New Child Tax Credit    time, the
    opportunity for eligible taxpayers to claim a child tax credit.
    Has Been the Source of      According to IRS data, of about 1.88
    million error notices sent to taxpayers Many Taxpayer Errors
    as of March 12, 1999, about 202,000 (almost 11 percent) involved
    errors with the child tax credit.  Those errors generally involved
    taxpayers either (1) miscalculating the credit or (2) not claiming
    the credit even though they appear to be eligible. With respect to
    the latter, taxpayers are to indicate whether a dependent is a
    qualifying child for purposes of the child tax credit by checking
    a box on the front of the Individual Income Tax Return (Form 1040
    or Form 1040A). They are then to use a worksheet included in the
    Form 1040/1040A instructions to compute the amount of their
    credit, if any, and enter that amount on the back of the form.
    According to data from IRS' Taxpayer Usage Study, which is a
    sample of filed individual income tax returns, about 36 percent of
    the returns filed as of March 12, 1999, included dependents that
    the taxpayer indicated, by a checkmark on the front page, were
    qualifying children for the child tax credit.  However, the same
    data show that only about 24 percent of the returns filed as of
    that date claimed the credit.  Thus, about one-third of the
    taxpayers who indicated eligibility for the credit did not claim
    it.  This apparent discrepancy may be an indicator of the
    complexity of the new credit or may just reflect taxpayer
    oversight.  Some of the discrepancy could also be explained by the
    possibility that taxpayers, after completing the worksheet, found
    that they were ineligible for the credit and, therefore, did not
    claim it. Last month, IRS changed its procedure for processing
    returns when taxpayers do not claim a child tax credit even though
    they indicate on the front of the return that they have one or
    more dependents who qualify for 28According to a cognizant IRS
    official, IRS can waive the submission of W-2s because there is no
    statutory requirement that these forms be attached to tax returns.
    Page 25
    GAO/T-GGD/AIMD-99-140 Statement the credit.  Initially, IRS'
    procedure called for adjusting the taxpayer's return to include
    the credit if information on the return indicated that the
    taxpayer met the adjusted gross income test and certain other
    eligibility criteria.  However, the procedure did not require
    verification of the qualifying child's age.29 IRS modified its
    procedure in March by instructing service centers to do research
    to determine if the child meets the age criteria before adjusting
    the return.  If the research determines that the taxpayer
    qualifies for the credit, the service center is to adjust the
    taxpayer's return and include the credit.  If the research
    determines that the taxpayer does not qualify for the credit, the
    service center is to process the return as filed (i.e., without
    the credit).  If the research is inconclusive, the service center
    is to process the return as filed but notify the taxpayers that
    they (1) may be eligible for the credit and (2) should file an
    amended return to claim the credit, if they determine that they
    are eligible. Our work to date has not identified any significant
    disruption of IRS' Computer Systems    ability to process returns
    and issue refunds that might be indicative of Performing Well
    computer-related problems. IRS has made major changes this year to
    the computer systems it uses to process returns and remittances.
    One major change involved replacement of the returns processing
    system at all 10 service centers and replacement of the remittance
    processing system at 6 centers.  According to an IRS spokesperson
    for that project and processing officials at one service center,
    the transition to the new systems has gone well, and workloads are
    being processed as intended.  A second major change involves the
    consolidation of mainframe service center computer equipment at
    IRS' two computing centers in Martinsburg, WV, and Memphis, TN.
    So far, three service centers have undergone consolidation.
    According to a cognizant official at one of those centers, the
    consolidation has not adversely affected the center's ability to
    process returns. That concludes my statement.  We welcome any
    question that you may have. 29A qualifying child, for purposes of
    this credit, is a son, daughter, adopted child, grandchild,
    stepchild, or foster child who (1) is claimed as a dependent, (2)
    is a U.S. citizen or resident alien, and (3) was under the age of
    17 at the end of the tax year. Page 26
    GAO/T-GGD/AIMD-99-140 Page 27    GAO/T-GGD/AIMD-99-140 Appendix I
    IRS' Fiscal Year 2000 Budget Request Compared With Proposed Fiscal
    Year 1999 Operating Level Dollars in thousands
    FY 1999                               FY 2000
    Percent change Budget activity                           Dollars
    FTEs             Dollars              FTEs         In dollars
    In FTEs Submission  Processing                  $884,000
    15,384          $973,599             15,475              10.14
    0.59 Telephone and Correspondence             812,651
    19,650           991,456             20,874              22.00
    6.23 Document Matching                         60,683
    1,555            60,395              1,555               -0.47
    0.00 Inspectiona                                        0000 N A N
    A Management Services                      563,122
    6,952           615,941              6,652               9.38
    -4.32 Rent and Utilities                       664,322
    135           671,144                 135              1.03
    0.00 Subtotal: Processing, Assistance, and Management
    Appropriation           $2,984,778            43,676
    $3,312,535            44,691              10.98               2.32
    Criminal Investigation                   367,099
    3,824           374,306              3,824               1.96
    0.00 Examination                             1,717,775
    23,768          1,835,346            23,588               6.84
    -0.76 Collection                               679,385
    11,195           707,411             11,095               4.13
    -0.89 Employee Plans and Exempt Organizations
    139,845              2,055           148,999              2,109
    6.55               2.63 Statistics of Income
    27,513                464            28,731                 479
    4.43               3.23 Chief Counsel
    232,572              2,582           242,045              2,582
    4.07               0.00 Subtotal: Tax Law Enforcement
    Appropriation                          $3,164,189
    43,888         $3,336,838            43,677               5.46
    -0.48 Operations and Maintenance              1,166,583
    8,000          1,138,814             6,976               -2.38
    -12.80 Year 2000                                          0
    0          250,426                 239                NA
    NA Investments                               92,947
    184            66,161                 184            -28.82
    0.00 Subtotal: Information Systems Appropriation
    $1,259,530             8,184         $1,455,401             7,399
    15.55              -9.59 Information Technology Investmentsb
    $211,000                   0                  0                  0
    NA                    NA Year 2000 Emergency Fundc (outside caps)
    $483,300                239                   0                  0
    NA                    NA Earned Income Credit (outside caps)
    $143,000              1,972          $144,000              2,095
    0.70               6.24 Total
    $8,245,797            97,959         $8,248,774            97,862
    0.04              -0.10 aIn accordance with Public Law 105-206,
    the IRS Inspection activity was transferred to the Treasury
    Inspector General for Tax Administration on January 19, 1999. bNew
    funding for fiscal year 2000 is not needed since IRS will use
    carryover balances; however, IRS is requesting an advance
    appropriation of $325 million in fiscal year 2001 for funding of
    the Prime Systems Integration  Services Contract. cFor fiscal year
    1999, IRS' Year 2000 efforts were funded from a governmentwide
    Year 2000 fund that was established in the Omnibus Consolidated
    and Emergency Supplemental Appropriations Act for Fiscal Year 1999
    (P.L. 105-277). Source: IRS' February 1, 1999, budget estimates
    for fiscal year 2000. Page 28
    GAO/T-GGD/AIMD-99-140 Appendix II Comparison of IRS' Fiscal Year
    1999 Proposed Operating Level and Fiscal Year 2000 Budget Request
    Dollars in thousands                                     Subtotal
    Total Fiscal year 1999 proposed operating level
    $8,245,797 Decreases for fiscal year 2000 IT investment (non-
    recur)                               $211,000 Year 2000 emergency
    fund (non-recur)
    483,300 Absorption of mandatory non-labor costs
    50,566 Subtotal-decreases
    $744,866 Increases for fiscal year 2000 Adjustments necessary to
    maintain current levels
    $299,369 Year 2000 conversion
    250,426 Organizational modernization
    140,000 RRA98
    40,000 Customer service training
    17,048 Increase in Earned Income Tax Credit compliance initiative
    1,000 Subtotal-increases
    $747,843 Fiscal year 2000 budget request
    $8,248,774 Source:  IRS' Fiscal Year 2000 Congressional
    Justification. Page 29
    GAO/T-GGD/AIMD-99-140 Appendix III IRS Performance Measures Tables
    III.1 and III.2 show the Servicewide and program performance
    measures included in IRS' February 1, 1999, budget estimates for
    fiscal year 2000.  IRS' performance measures will continue to
    evolve as IRS continues to implement its organizational
    modernization.  Fiscal year 1999 represents a transition period
    for IRS to introduce and baseline (gather and analyze data) the
    new measurement system.  Performance measures with "baseline"
    noted in the fiscal year 1999 or fiscal year 2000 column indicate
    that these are new IRS measures.  As shown in both tables, IRS
    plans to establish the baselines for most of its performance
    measures in fiscal year 1999. Table III.1: Servicewide Performance
    Measures With Performance Report Based on Fiscal Year 1998 Data FY
    1998       FY 1999      FY 2000 Servicewide performance goal
    Performance measure
    Actual     Final plan    Proposed Service to each taxpayer Toll-
    free level of access
    89.96%        80-90%      80-90% Number of calls answered,
    includes automated (million)a                               113.3
    120.3        120.3 Tax law accuracy rate for taxpayer inquiries
    (toll free)                              93.8%          85%
    85% Customer satisfaction-toll free
    b      Baseline            c Number of taxpayers served-walk-in
    (millions) a                                        10.1
    10.0         10.0 Customer satisfaction-walk-in
    b      Baseline            c Customer satisfaction-field and
    office examination                                         b
    Baseline            c Field collection quality
    b      Baseline            c Field and office examination quality
    b      Baseline            c Customer satisfaction-field
    collection                                                     b
    Baseline            c Service to all taxpayers    Total net
    revenue collected (billions) a
    $1,616.0      $1,725.0     $1,785.0 Total enforcement revenue
    collected (billions) a                                      $35.2
    $33.3        $33.3 Total enforcement revenue protected (billions)
    a                                       $7.2          $7.2
    $7.2 Alternative treatment revenue
    b      Baseline            c Productivity through a      Employee
    satisfaction (Servicewide)
    b      Baseline            c quality work environment IRS
    productivity measure (placeholder)
    bb Baseline aWorkload projections only. bMeasure not applicable to
    this period. cTo be determined. Source:  IRS' Fiscal Year 2000
    Congressional Justification. Page 30
    GAO/T-GGD/AIMD-99-140 Appendix III Table 2: Program Performance
    Measures with Performance Report Based on Fiscal Year 1998 Data FY
    1998     FY 1999       FY 2000 Performance measure
    Actual    Final plan    Proposed 1. Total number of individual
    refunds issued (millions)a.
    87.9         92.2         94.2 2. Refund timeliness-paper (%)
    Baseline             c 3. Refund timeliness-e-file(%)
    98.7%          98%          98% 4. Processing accuracy rate-paper
    filing Distributed Input System
    94.6%        94.6%         94.6% Code and edit
    96.1%          96%          96% 5. Processing accuracy rate-e-file
    98.9%          99%          99% 6. Notice accuracy rate
    98.4%        98.5%         98.5% 7. Number of individual returns
    filed through electronic returns originators (millions)       17.7
    20.9         22.9 8. Number of eligible quarterly forms (Form 941)
    filed through TeleFile (thousands)          677.4      1,146.1
    1,186.0 9. Number of TeleFile returns (millions)
    5.96          6.6       7  7.8 10. Number of primary returns
    processed (millions)a
    209.8        211.9        213.9 11. Percent of individual returns
    filed electronically                                       19.8%
    23%          25% 12. Percent of dollars received electronically
    67.7%          78%          78% 13. Automated Collection System
    (ACS)-online accuracy
    b     Baseline             c 14. ACS-Cycle timeliness
    b     Baseline             c 15. ACS-Customer relations
    b     Baseline             c 16. ACS-Overage inventory
    b     Baseline             c 17. Tax law accuracy rate for
    taxpayer inquires (toll free)
    93.8%          85%          85% 18. Accounts accuracy rate for
    taxpayer inquires
    87.9%        87.9%         88.5% 19. Toll free timeliness
    b     Baseline             c 20. Toll free customer relations (tax
    law and accounts)                                           b
    Baseline             c 21. Service Center examination-overage
    inventory                                                  b
    Baseline             c 22. Service Center examination accuracy
    b     Baseline             c 23. ACS level of service
    b     Baseline             c 24. Toll free-level of service
    b     Baseline             c 25. Toll free-adherence to scheduled
    hours                                                        b
    Baseline             c 26. Service Center examination-volume/mix
    (placeholder)                                           bb b 27.
    Customer satisfaction-toll free
    b     Baseline             c 28. Customer satisfaction-ACS
    b     Baseline             c 29. Customer satisfaction-Service
    Center examination                                              b
    Baseline             c 30. Employee satisfaction-toll free
    b     Baseline             c 31. Employee satisfaction-ACS
    b     Baseline             c 32. Employee satisfaction-Service
    Center examination                                              b
    Baseline             c 33. Taxpayer Advocate average processing
    time (days)                                           37.8
    37.8         37.8 34. Taxpayer Advocate quality customer service
    rate                                            80.8         81.3
    81.3 35. Currency of Taxpayer Advocate inventory (days)
    91.3         91.8         91.8 36. Field and office examination-
    volume/mix (placeholder)                                         b
    Baseline             c 37. Field and office examination quality
    b     Baseline             c 38. Percent of field and office
    examination cases overage
    b     Baseline             c 39. Customer satisfaction-
    field/office examination
    b     Baseline             c Page 31
    GAO/T-GGD/AIMD-99-140 Appendix III FY 1998         FY 1999
    FY 2000 Performance measure
    Actual       Final plan    Proposed 40. Employee satisfaction-
    field/office examination
    b     Baseline             c 41. Appeals customer satisfaction
    b     Baseline             c 42. Appeals employee satisfaction
    b     Baseline             c 43. Appeals nondocketed cycle time
    (days)
    210          210          210 44. Field collection-volume/mix
    b     Baseline             c 45. Field collection quality
    b     Baseline             c 46. Percentage of field collection
    cases overage
    b     Baseline             c 47. Percentage of offers-in-
    compromise processed within 6 months
    60.5%           59.3%         59.3% 48. Customer satisfaction-
    field collection
    b     Baseline             c 49. Employee satisfaction-field
    collection
    b     Baseline             c 50. Employee Plans (EP) determination
    letter timeliness (days)
    118          145             c 51. Exempt Organizations (EO )
    determination letter timeliness (days)
    85           85           81 52. EP examination timeliness(days)
    193          200          230 53. EO examination timeliness (days)
    251          259          294 54. EO determination customer
    satisfaction
    b     Baseline             c 55. EP determination customer
    satisfaction
    b     Baseline             c 56. EO examination customers
    satisfaction
    b     Baseline             c 57. EP examination customer
    satisfaction
    b     Baseline             c 58. Employee satisfactionEP/EO
    b     Baseline             c 59. Percent of Statistics of Income
    projects delivered on time
    100%             90%          90% 60. Quality customer service
    rate
    98%         90%          90% 61. Guidance and assistance-
    volume/mix
    b     Baseline             c 62. Litigation case-volume/mix
    b     Baseline             c 63. Chief Counsel quality
    bb Baseline 64. Chief  Counsel customer satisfaction
    bb Baseline 65. Chief Counsel employee satisfaction
    bb Baseline 66. Master file weekend update completion times
    66.0%           85.6%         97.0% 67. Corporate file on-line
    availability to front line personnel
    99.7%           99.0%         99.0% 68. Integrated Data Retrieval
    System real time availability to front line personnel
    99.4%           99.0%         99.0% aWorkload projections only.
    bMeasure not applicable to this period. cTo be determined Source:
    IRS' Fiscal Year 2000 Congressional Justification. Page 32
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