Appendix D 

Management and Governance, Workforce, Oversight, and Budget

Supplementary Information


1. Activities of the Management, Governance, and Workforce Task Force
2. Task Force Documents
3. Summary of Consulting Reports Contracted by the Commission
4. Customer Service Measures for the Internal Revenue Service
5. Interviews with IRS Employees and Managers
6. Presidents’ Budget Requests And Congressional Appropriations For the Internal Revenue Service, 1990-1998


Activities of Management, Governance, and Workforce Task Force


December 6, 1996—Conference Call

· Task force organization
· Proposed areas for review
· Questions that need to be answered to further our work
· Public meetings and working sessions


January 9, 1996—Meeting

· Staff presentation and discussion
· Agreement on core problems or definition of differences
· Agreement on scope of final product
· Agreement on proof needed to ensure full confidence in findings and recommendations
· Map out next steps (reference attached)

1. Task Force
2. Hearings


January 31, 1997—Meeting

Discussion with witnesses:

· Scott Gould, Department of Treasury
· Phil Brand, Former IRS Executive
· Margaret Milner Richardson, Commissioner of IRS
· Mike Dolan, Deputy Commissioner of IRS
· Dave Mader, Chief Management and Administration, IRS


February 27, 1997—Meeting

· Discussion of IRS governance models


March 14, 1997—Meeting

· Findings
· Coordinated Congressional oversight
· Senior Management
· Field Management
· Operational Structure
· Culture


April 7, 1997—Meeting

· Department of Treasury Proposal
· Congressional Oversight of IRS
· IRS Budget Process
· IRS Senior Management Issues

1. Commissioner’s office
2. Chief Counsel
3. Field Offices


April 18, 1997—Meeting

· IRS and Treasury Governance Model


National Commission on Restructuring the IRS

Management, Governance and Workforce Task Force


Issues to be reviewed and debated:


I. Governance:

· Does the current structure work?
· Are there alternative governance structures which would work better?
· What entity has and should have the authority and responsibility with respect to:

1. Accountability for entire enterprise
2. Philosophy/Mission
3. Selection, evaluation, and compensation of senior management team
4. Review and approval of strategic and business plans
5. Review and approval of financial objectives and plans
6. Review and approval of non-ordinary major transactions
7. Monitoring performance against plans
8. Developing framework for and reviewing outsourcing decisions
9. Ensuring ethical behavior and compliance with laws

· If a new structure is needed, who would be involved?
· What are current governance entities roles in the legislative process and what roles would potential new governance entities have in the legislative process?
· Administrative matters for a governance entity: meeting frequency, terms, access to information


II. Management:

· Commissioner: Term and qualifications
· Other Senior Management: Appointments
· Compensation
· Structure and authority


III. Budget Process

· Review of proposals to bring stability and efficiency to process, while not sacrificing accountability to Congress or Department of Treasury.


IV. Strategic Plan and Organizational Performance Measures

· High level priorities and initiatives

· High level measures


Option Sheet for Key Governance Decisions


Criteria (the flip side of problems)

· Set and maintain priorities and strategic direction
· Impose accountability on management
· Impose accountability on a credible governance body
· Develop appropriate measures of success
· Align budget and technology with priorities
· Continuity and coordination of oversight and management
· Focus attention on priorities

I. Responsibilities - Options

1) Set priorities/goals/measures

·Establish mission and objectives?
· Review operating goals and measurements, hold management accountable?
· Review and approve long-range and short-term strategic and business plans?

2) Personnel
· Select, evaluate and compensate Commissioner? Recommend Commissioner?
· Review and approve Commissioner’s recommendations for selection, evaluation and compensation of senior managers?

3) Budget
· Review and approve budget? Send directly to Congress?
· Ensure budget’s alignment with strategic direction?
· Review and approve all non-ordinary, major business expenses?
· Ensure clean financial audit?

4) Operational
· Review and approve all plans for modernization of tax system?
· Contract for reviews and audits of high-risk, low performing operations?
· Develop framework for reviewing and approving all major outsourcing?

5) Stewardship
· Report annually to appropriate Congressional committees?
· Possible consolidation of Congressional oversight, by encouraging disparate committees to coordinate or combine oversight and accountability of high level issues?

II. Administrative Features - Options

1) Nomination and Selection
· President?
· Secretary of the Treasury?
Input/role of:
· Congress?
· Stakeholder groups?
· Professional groups?

2) Terms
· At pleasure of Secretary of Treasury/President?
· Fixed: How many years?
· Staggered?

3) Size
· 3 member? 5member? 9member? 15 member? Other?

4) Other
· Compensation?
· Meeting frequency?
· Participation in contracting decisions?
· Political Balance?
· Board has no access to taxpayer data?
· No role in tax policy?


III. Organizational Placement - Options

Executive branch officials

Board within Treasury
Treasury officials?
Other members of administration?
Outside/private sector expertise?
IRS officials?
Union officials?

Agency Status (e.g. SSA)
Treasury officials?
Other members of administration?
Outside/private sector expertise?
IRS officials?
Union officials?

Independent (e.g. U.S. Postal Service)
Treasury officials?
Other members of administration?
Outside/private sector expertise?
IRS officials?
Union officials?


Taskforce Timeline


Relationships Among IRS and Overseers



Consulting Reports Prepared for the Commission


The Commission asked individuals and groups from the private sector to prepare reports on various topics relating to the Commission’s works. Summaries of their findings are available on our Internet site (


Public Strategies Group

The Public Strategies Group was charged with facilitating the development of consensus of a Measures Working Group, which included Commission members, IRS, Treasury, Congress and stakeholder groups, on a small number of customer service measures. The Public Strategies Group interviewed 11 designated representatives of stakeholder groups and 9 Commissioners on the Task Force to understand individual perspectives on IRS customer service issues. Meetings were held April 4 and 25, 1997. (See attached for summary.)


Towers Perrin

Towers Perrin was charged with reviewing middle management staffing levels at IRS district offices and service centers. The objective of the review was to develop a general estimate as to what kinds of staffing reduction and cost savings may be possible in the near term by streamlining deployment of managers at the 10 service centers and 33 district offices. Towers Perrin consultants visited four sites, reviewed IRS organizational charts, and analyzed an IRS database addressing management and non-management deployment throughout all sites. Without fundamental changes in work processes, the consultants believe that the IRS could eliminate a minimum of 400 positions resulting in savings of $27 million to $35 million dollars. This is a conservative estimate, because the consultants did not include analysis and secretarial staff. (See attached for summary.)


Field Interviews

Catherine Moriarty, an independent consultant, interviewed over 300 IRS employees. Employees from all levels and functions were interviewed in an effort to learn what barriers they face in trying to effectively perform their jobs and deliver on the mission of the IRS.


Report on IRS Approach to Addressing Noncompliance

This report, prepared by a graduate student (Adrienne Poulton) under the advisement of an international expert on compliance issues, assesses the IRS strategic approach to the problem of noncompliance. Specifically, it assesses two initiatives in the past decade- Compliance 2000 and the compliance research approach. The report analyzes each approach and offers recommendations to the IRS for ways to address noncompliance in the future.


Alternative Governance Models

This report reviewed alternative governance models for the Commission to consider. The models included Fannie Mae, the Postal Service, AMTRAK, Tennessee Valley Authority, Social Security Administration, and Federal Deposit Insurance Corporation.


Summary Of Towers Perrin Review of Management Staffing At IRS District Offices And Service Centers

 May 20, 1997


· Towers Perrin, a management consulting firm, completed a high-level review of management staffing within IRS District Offices and Service Centers, which collectively employ more than 90 percent of IRS employees

· The objective of the review was to develop a general estimate of staffing reductions and cost savings that may be possible in the near term by streamlining the employment of managers at the 10 Service Centers and 33 District Offices.

· Although the consultants did not examine the operations of every site in detail, they were able to reach general conclusions as to the level of opportunity for savings through visits to four sites, detailed review of organization charts for approximately half the sites, and analysis of an IRS database addressing management and non-management deployment throughout all sites.

· The consultants estimate that a minimum of approximately 400 management positions could be discontinued in the near term without any adverse impacts on performance, or between six and seven percent of the total number of managers at these sites. Annual salary and benefit savings associated with such a reduction, once in place, would total roughly $27 million. These estimates do not assume any fundamental changes in work processes, technology, or geographical deployment, all of which could potentially facilitate larger savings over the longer term.

· In general, the greatest opportunities for streamlining were not at the first level of management, but at middle management levels between Division Chiefs and first-line managers. Opportunities were split fairly evenly between District Offices and Service Centers.

· The consultants believe the 400 position and $27 million savings estimate is conservative, reflecting only the most obvious opportunities, and not including related savings that would be possible in secretarial and other support staff. For planning purposes, a range of $27 to $35 million is suggested.


Not included in the scope of the analysis were management staffing outside the District Offices and Service Centers, and management/analytical support staffing within the sites, both of which could harbor further opportunities for efficiency.


Customer Service Measures
for the
Internal Revenue Service

Executive Summary


The Public Strategies Group was charged by the National Commission on Restructuring the IRS with facilitating the development of consensus among stakeholders in the IRS on a small number of customer service measures. It interviewed 11 designated representatives of stakeholder groups and 9 Commissioners on the Management, Governance, and Workforce Task Force to understand individual perspectives on IRS customer service issues. A Measures Working Group (MWG) met on April 4 and 25, 1997.


There was general consensus among the MWG that:

· Customer service is a strategic element of the IRS;
· There were a few key descriptors or dimensions of customer service quality:
· Fairness
· Respect
· Ease
· Understandability
· Accuracy
· Timeliness
· Access
· Customers define quality; and
· Executive responsibilities included monitoring "high level" service quality indicators, and ensuring that performance indicators were aligned throughout the organization.

The MWG Stakeholders also agreed that customer service was embedded in all functions of the IRS, and the service dimensions of "Accuracy," "Understandability," "Respect," and "Access" were of the highest priority to measure and track.

Specific indicators of customer service performance agreed upon (and measures and performance standards should be developed for) were:

· Number of taxpayers who contact the IRS that receive resolution at their first inquiry;
· Understandability of all information, including notices, instructions, audit procedures;
· Customer perceptions of respectful treatment;
· Level of telephone access to citizens and tax professionals; and
· Number of notices that are error-free.



IRS Customer Service Measures

Other indicators receiving significant support by the MWG include:

· Convenience and cost to taxpayers of filing and payment;
· Perceived consistency in the application of tax laws;
· Percent of correctly filed returns;
· Time to resolution of inquiries; and
· Time on hold for telephone access.


Measures Working Group Participants


Brian Caudill
House Committee on Government Reform and Oversight

Alan Einhorn
Deloitte & Touche, LLP, representing the American Institute of Certified Public Accountants

Donna Steele Flynn
House Ways and Means Committee
Subcommittee on Oversight

Michelle Kaplan
Internal Revenue Service
Compliance Research

John Murphy
Department of Treasury
Office of Strategic Planning

Michael Murphy
Tax Executives Institute

Pam Olson, Esq.
Skadden, Arps, Slate, Meagher & Flom, representing the American Bar Association

Tammy Perrin
Senate Committee on Appropriations

Betsy Phillips
House Committee on Appropriations

Tom Roesser
Senate Committee on Finance

Ron Watson
Internal Revenue Service

Andrew Weiss
Senate Committee on Governmental Affairs


Commission Members:

Fred T. Goldberg, Jr.
Skadden, Arps, Slate, Meagher & Flom

David Keating
Executive Vice President, National Taxpayers Union

Robert Tobias
President, National Treasury Employees Union


Interviews with IRS Employees and Managers


As a part of its work plan, the Commission hired a consultant to conduct a series of interviews with Internal Revenue Service employees in order to add to the Commission’s understanding of the issues mentioned above and to identify areas of concern within the IRS. IRS employees from all levels and functions were interviewed in an effort to learn what barriers they are facing in trying to effectively perform their jobs and deliver on the mission of the IRS

Interview locations were selected in order to gain a broad understanding of the current barriers to achieving the mission and goals of the IRS and the specific issues outline by Congress. All four Regions were visited. Ten Districts were selected based on criteria such as population density of area served, recent organizational changes, and management challenges resulting from the recent IRS consolidation. The goal of this selection criterion was to gain an understanding of issues which may be specific to a location and those which effect the entire organization. In addition to the regions and districts, two Service Centers were visited. Interviewee selection criteria differed by job level. Most management interviewees were randomly selected, controlling for a spread of levels and functions. However, some interviews were specifically requested, such as those with Directors of Information Systems. Bargaining unit employees were selected by requesting volunteers from which specific personnel were chosen at random. The Commission was informed by IRS management that the need for requesting volunteers at the bargaining unit level was based on NTEU requirements. In total, 334 interviews were conducted. Of these 41 were with Regional personnel, 224 were with District employees, and 69 with Service Center employees. The following information breaks down interviewees by office, title, and function:

Direct Interviews:


 Regional Interviews:

Service Center Interviews:

Given the existence of the Survey Action Feedback survey and other statistical studies of IRS employees, the decision was made to use an interview and interview guide method in this study. The reason for this decision was to avoid duplicating information which already exists and to gain a degree of flexibility in discussions with employees.