Detailed Information on the
Internal Revenue Service Tax Collection Assessment

Program Code 10000424
Program Title Internal Revenue Service Tax Collection
Department Name Department of the Treasury
Agency/Bureau Name Internal Revenue Service
Program Type(s) Mixed
Assessment Year 2008
Assessment Rating Moderately Effective
Assessment Section Scores
Section Score
Program Purpose & Design 100%
Strategic Planning 100%
Program Management 86%
Program Results/Accountability 60%
Program Funding Level
(in millions)
FY2007 $2,025
FY2008 $1,997
FY2009 $2,114

Ongoing Program Improvement Plans

Year Began Improvement Plan Status Comments

Allow the inventory delivery system to analyze and direct cases earlier in the Collection process by enabling it to route all Collection work generated after the first notice is issued instead of after final notice issuance.

No action taken

Improve Collection workload selection and delivery by developing newer more sophisticated decision analytics to route cases earlier and faster to the appropriate employees for resolution.

Action taken, but not completed

Develop an IRS-wide Collection Program plan for 2009 that includes resources and results for all Collection activities.

Action taken, but not completed

Completed Program Improvement Plans

Year Began Improvement Plan Status Comments

Program Performance Measures

Term Type  
Long-term Outcome

Measure: Voluntary Compliance Rate

Explanation:The Voluntary Compliance Rate is the amount of tax for a given year that is paid voluntarily and timely. It is expressed as a percentage of the estimate of true tax liability for that year and reflects the impact of non-filing, underreporting and underpayment combined.

Year Target Actual
2001 NA 83.7% (2006 update)
2009 86%
2010 86%
2011 86%
2012 86%
2013 86%
Long-term/Annual Output

Measure: Collection Coverage

Explanation:Measures the degree to which Collection is keeping up with the demand for work; this measure tracks case dispositions - defined as a case resolution through Collection processes - relative to total available workload.

Year Target Actual
2005 NA 53%
2006 52% 54%
2007 54% 54%
2008 52.5%
2009 53%
2010 53%
2011 53%
2012 53%
2013 53%
Long-term/Annual Efficiency

Measure: Collection Efficiency

Explanation:The number of collection cases completed per FTE (full time equivalent staff year)

Year Target Actual
2005 NA 1514
2006 1650 1677
2007 1723 1828
2008 1835
2009 1835
2010 1890
2011 1947
2012 2005
2013 2065
Annual Output

Measure: Automated Collection System (ACS) Accuracy

Explanation:The percent of taxpayers who receive the correct answer to their collection question by an IRS call center assistor.

Year Target Actual
2006 88% 91.0%
2007 91% 92.9%
2008 92%
2009 92%
2010 92%
2011 92%
2012 92%
2013 92%
Annual Output

Measure: Field Collection Embedded Quality

Explanation:The number of quality elements (important steps in resolution of a collection case assigned to a revenue office in the field) that are scored as "met" by an independent reviewer divided by the total number of quality elements (met and not met). Sample is comprised of closed cases and all quality elements are considered equally.

Year Target Actual
2006 84.2% 84.2%
2007 86.0% 84.0%
2008 86.0%
2009 86.0%
2010 86.0%
2011 87.0%
2012 88.0%
2013 88.0%

Questions/Answers (Detailed Assessment)

Section 1 - Program Purpose & Design
Number Question Answer Score

Is the program purpose clear?

Explanation: The Collection program has statutory authority to use various enforcement tools to protect the government's interest. The Collection program's mission is to collect and secure delinquent taxes and tax returns through the fair and equitable application of the tax laws, including the use of enforcement tools when appropriate, to assist taxpayers in the fulfillment of their tax obligations, and thereby protect and promote public confidence in the American tax system. The Collection program is specifically charged with civil enforcement of the tax laws pertaining to filing and payment compliance. The voluntary compliance rate, defined as the percent of taxes owed that are paid voluntarily and timely, generally reflects programmatic effectiveness.

Evidence: IRS's purpose and authority to collect underpayment of tax and secure delinquent tax returns are provided by the Internal Revenue Code Sections 6301 and 6011.

YES 20%

Does the program address a specific and existing problem, interest, or need?

Explanation: The Collection Program is designed to resolve the accounts of taxpayers who are delinquent in filing and/or paying their taxes, and to utilize statutory enforcement authority in doing so, when appropriate. Enforcement activity provides a deterrent that helps ensure compliance to a broader base than just those who are delinquent.

Evidence: The Collection program specifically targets the Tax Gap, which is the amount of tax that taxpayers should pay under the tax law and the amount they actually pay on time. IRS estimates the gross Tax Gap is approximately $345 billion. The amount of the Tax Gap associated with Collection is $60 billion which is comprised of $33 billion in delinquent taxes and $27 billion from failure to file returns. IRS accounts receivable is the amount of unpaid assessments, which currently total approximately $290 billion.

YES 20%

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The IRS is the only entity which oversees the collection of debt for almost all federal taxes, collecting 96 percent of all federal revenues, totaling $2.7 trillion in 2007.

Evidence: By statute, authority to collect federal taxes rests with the IRS per sections 6301 and 6011 of the Internal Revenue Code. The American Jobs Creation Act of 2004 included enabling legislation for Qualified Tax Collection Contracts to be let to private collection agencies, but their efforts are guided, evaluated and overseen by the IRS.

YES 20%

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The Collection program is flexible in its design and allows for targeted shifts in inventory to meet defined objectives of civil enforcement. Delinquent taxpayers who do not file or pay during the notice process are subject to more intense collection activity that may include enforcement tools such as liens, levies, and seizures. Cases needing further enforcement action go through the Inventory Delivery System (IDS) which employs decision analytics and the use of predictive models to help determine the best treatment for the delinquency. Additionally, the IDS provides for special assignment rules to mitigate risk, particularly for high-risk cases such as those over $1 million and abusive tax shelter cases. The IDS ensures a high degree of efficiency in routing cases to the operation most effective for handling them. While the Government Accountability Office (GAO) and Treasury Inspector General for Tax Administration (TIGTA) have, over time, cited concerns with certain aspects of the overall program, IRS has done well to address such issues, particularly those that could be considered major, such as concerns involving the effectiveness of collection actions and the efficiency of the automated substitute for return and federal payment levy programs. Major revisions have also been made to aspects of the collection program that affect large numbers of taxpayers and reach specific populations such as the Installment Agreement and Offer-In-Compromise Programs.

Evidence: Collections from the initial notice have increased by 25.3 percent from 2005 to 2007 ($13.7 billion to $17.2 billion including accruals) while total collections including notices, Taxpayer Delinquent Accounts (TDAs) and installment agreements have increased 16.7 percent between 2005 and 2007 ($37.1 billion to $43.3 billion including accruals). These dollar increases are largely due to improved program efficiencies since the total workload has increased by 14 percent. IRS worked with a private vendor to develop IDS models that identify potentially productive and unproductive work. Models are applied to determine high or low yield and probable outcome, segmented by compliance risk, and then routed to the treatment stream containing the needed skill level to most effectively and efficiently work the case toward resolution. Medium and low risk cases are routed to the Automated Collection System call center (ACS) where they are treated according to case conditions in a bulk processing environment using lower cost resources. Most high risk cases require the skill level of a professional Revenue Officer, which includes face-to-face interaction with the taxpayer and use of the most complex enforcement tools, in order to resolve the account and bring the taxpayer into compliance.

YES 20%

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: The Collection program is designed to most effectively and efficiently utilize resources to resolve taxpayer delinquencies (cases) at the earliest possible time and at the least possible cost to the U.S. Government. There are no discernible unintended subsidies associated with the program. Further, compliant taxpayers benefit from the program because it helps ensure that all taxpayers pay the tax that has been assessed, thereby mitigating a so-called 'free-rider' problem. Resources are expended in direct support of delinquent revenue collection and current and future voluntary compliance. All Collection actions are initiated through a notice process, with taxpayers who do not respond to notices processed through the inventory delivery system (IDS) as described in Question 1.4. In 2006, IRS began using private collection agencies (PCAs) to supplement tax collection efforts for cases that are less complex, meet a number of specific requirements, and would not be worked given workload demands.

Evidence: In FY 2007, 79 percent of balance due notices issued to both individual and business taxpayers, and over 55 percent of notices issued to taxpayers with delinquent returns were resolved through the low cost notice process collecting over $23.6 billion including accruals. There has been a 13 percent increase in the total number of cases resolved through the notice process from FY 2002 to FY 2007. Installment agreement collections increased by 20 percent during the same time frame from $6.8 billion to $8.2 billion. When appropriate, the call centers (ACS) and Collection Field function (CFf) have the authority to help taxpayers become compliant and resolve their cases through use of various enforcement tools, therefore eliminating any further cost to resolve the same issue.

YES 20%
Section 1 - Program Purpose & Design Score 100%
Section 2 - Strategic Planning
Number Question Answer Score

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The IRS' core long-term goal, applicable to virtually all its enforcement programs, is the voluntary compliance rate (VCR) defined as the proportion of tax for a given year that is paid voluntarily and timely. Due to the time, expense and taxpayer burden involved in collecting data to measure voluntary compliance, IRS measures the effects of collection program activities on the VCR (which includes filing and payment compliance) through the long-term proxy measures of Collection Coverage and Collection Efficiency. The Collection Coverage measure tracks the Collection function's work rate relative to workload demand, thereby illustrating taxpayer compliance impact. The Efficiency measure indicates how efficiently Collection is bringing the population touched by Collection into compliance by tracking case completions per full-time equivalent (FTE), or employee. Further, the effects of the Collection program on taxpayer behavior is also evidenced through deterrence, though the effect as such is not measured by the IRS.

Evidence: Collection has maintained the Coverage rate for the past three years at approximately 54 percent even though initial notices have increased the workload. Efficiency has trended upward in all of the various functions of Collection, improving from 1,514 cases completed per FTE in 2005 to 1828 in 2007 and projected to increase to 2,065 by 2013. In June 2007, the IRS launched its new National Research Program (NRP) reporting compliance study for individual taxpayer that will provide updated and more accurate audit selection tools and support efforts to reduce the nation's tax gap. The study launched in 2007 is the first of an ongoing series of individual studies using a multi-year rolling methodology. The study will examine about 13,200 randomly selected tax year 2006 individual audits. Similar sample sizes will be used in subsequent tax years. This new method will allow IRS to combine results over rolling three year periods to make annual updates to its voluntary compliance estimates after the initial three annual studies.

YES 12%

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: IRS's goal is to increase the voluntary compliance rate (VCR) to 86 percent for 2009. However, as stated in 2.1, due to time, expense, and the need to minimize taxpayer burden associated with compliance data collection, the VCR is currently measured only on a periodic basis. However, the National Research Program effort will soon make regular, annual measurement possible. IRS sets ambitious targets for its proxy measures Collection Coverage and Collection Efficiency. Collection Coverage as described in 2.1 is targeted at 53 percent for 2013. Factors used to calculate Collection Coverage include total available workload and total dispositions. These two factors are comprised of nearly 30 data elements, with aggressive improvement factors built into specific underlying components. The target coverage rate is ambitious because of increasing workload, increasingly complex tax laws, and finite resources. Increasing Coverage by one percentage point requires closing an additional 576,000 case closures (requiring an increase of over 2 percent of total closures) in 2008 alone, while holding new receipts at current levels. Furthermore, targets for Collection Efficiency remain ambitious in light of many factors including hiring/retention challenges, workload modeling, case complexity, and the number of compliance assessments. Efficiency is targeted to reach 2,065 cases closed per FTE by FY 2013.

Evidence: Productivity increases are built into the number of closures used to calculate both the Collection Coverage and Efficiency targets. These increases include a 23 percent growth of Taxpayer Delinquent Account (TDAs, or balance-due accounts) closures (from 4.89 million in 2003 to 5.98 million in 2007) and 64 percent nonfiler case closures (from 1.66 million 2003 to 2.73 million in 2007). Associated dollars collected increased by nearly 14 percent from $9.97 billion in 2003 to $11.3 billion in 2007. Collection cycle time on TDAs improved in the Field from 2002 to 2007, from 43.4 weeks to 29.8 weeks and in ACS from 35.2 weeks to 28.8 weeks. Taxpayer Delinquent Investigation (TDIs, or non-filer accounts) cycle time improved from 2002 to 2006 in the Field from 23.2 weeks to 19.2 and in ACS from 26.1 weeks to 19.8.

YES 12%

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: Collection uses its long-term Coverage and Efficiency measures also as annual measures. IRS uses other indicator measures to assist in day-to-day decision making and make adjustments throughout the year to ensure achievement of annual targets. Also, accuracy and quality measures are used annually to track how well collection activities are supporting the long-term compliance goal.

Evidence: The indicator targets for closed Taxpayer Delinquent Accounts (TDAs) and Taxpayer Delinquent Investigations (TDIs) form the basis for determining progress against the overall Coverage target. From 2003 through 2007, TDA closures increased by 23 percent 4.89 million in 2003 to 5.98 million and TDI closures increased by 64 percent 1.66 million 2003 to 2.73 million. Productivity data in each Collection function provide a reliable gauge in determining program success. In the Collection Field function (CFf) from 2002 through 2007, TDA taxpayer closures per FTE increased 90 percent and delinquent investigation closures per FTE increased 111 percent. In the call centers (ACS), closures per FTE have steadily increased from 2002 through 2007, with TDA taxpayer closures per FTE increasing 88 percent and TDI taxpayer closures per FTE increasing 121 percent. Data on cycle time, overage inventories, accuracy and quality are closely examined on a daily, monthly and annual basis. IRS also tracks the dollars collected through the Collection program. While Collection activity targets roughly 18 percent of the total tax gap, it accounts for over 50 percent of the total revenue collected annual through enforcement, with 31.8 billion collected in 2007. See the performance measures section for more information.

YES 12%

Does the program have baselines and ambitious targets for its annual measures?

Explanation: IRS sets ambitious annual and long-term targets for its Coverage and Efficiency measures, and for other indicator measures used to track progress. Despite the influence of exogenous factors on the Coverage and Efficiency measures - such as staffing limitations and economic conditions - aggressive productivity and efficiency gains are implicit in the established targets. Coverage and Efficiency targets for FY 2009 are based on an 8 percent increase in Automated Collection System (ACS) closures and an 11 percent increase in field case closures - the two main operations whose work-in/work-out is under IRS control. These gains help ensure that the Coverage goal of 53 percent is met in the face of expected increases in total workload and finite resources. IRS is limited by the Restructuring and Reform Act (RRA) of 1998 as to what output measures can be used to set targets and gauge success.

Evidence: Enterprise Coverage and Efficiency measures were established and baselined in 2005. Progress for the indicator measures of TDA and TDI closures can be quantified as far back as 1995. IRS sets ambitious targets for both TDA and TDI closures based on expected staffing levels and anticipated productivity and efficiency gains. IRS approaches program performance in a balanced and comprehensive manner and includes reviews of customer and employee satisfaction data as well as business results to gauge success. The IRS uses a standard 3 percent factor in its calculation for productivity. This factor is based on past experience regarding staff levels, competing resource needs, and availability of current staff to train new hires. ACS Accuracy and Field Collection Embedded Quality are performing at high levels, with results consistently near 90 percent. Targets are set based on data collected from prior years, anticipated program improvements and available staffing. IRS is very careful not to project targets for Record of Tax Enforcement Results such as dollars collected, enforcement actions taken, fraud referrals made or other similar measurements of tax enforcement results because they are prohibited by RRA of 1998, may create improper incentives for employees, and undermine taxpayers' trust.

YES 12%

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: IRS uses formal agreements, contracts or memoranda of understanding (MOU) with many partners, including the Financial Management Service (FMS), other federal entities (e.g., Social Security Administration), state tax authorities and private collection agencies (PCAs). All partners contribute to IRS achieving its performance goals. IRS contracts with PCAs to increase the support dedicated to overall achievement of the program goals. Contractors/PCAs assist the IRS in reducing a portion of its accounts receivable inventory by the assignment of delinquencies that otherwise might not be collected given current IRS resource levels. IRS partners allow the IRS to work more cases more efficiently through systemic means, and increase efficiency, coverage, and collections - all contributing to improved voluntary compliance.

Evidence: Total revenue collected through the Federal Payment Levy Program (FPLP) increased from $89 million in 2003 to $345 million in 2007. Levies on Federal contractor payments generated an increase in revenue from $7 million in 2003 to $48 million in 2007. IRS partners with FMS via the FPLP which since its inception in FY 2000, has collected over $1.1 billion in tax payments through FY 2007. The IRS also partners currently with 27 states under the State Income Tax Levy program (SITLP). Levies can attach taxpayer assets, wages and state income tax refunds when a taxpayer has a balance due to the IRS. Revenue from SITLP has doubled over the past five years, from nearly $59 million generated in 2002 to over $103 million generated in 2007. SITLP will expand to add three more states in 2008. IRS also partners with individual state taxing authorities to share data and these reciprocal agreements provide additional sources for collection of delinquent taxes. IRS launched the State Reverse File Match Initiative (SRFMI) in 2007 to increase data sharing with state taxing authorities. Nine states were engaged in 2007 for information sharing; 15 states will be on board for 2008, and 41 will share information for 2009. Finally, IRS' use of PCAs is authorized in its current form by the American Jobs Creation Act of 2004 and statutory authority can be found in section 6303 of the Internal Revenue Code. As noted in a 2006 Congressional Research Service report, "[T]he IRS has the authority to hire PCAs to assist with the collection of delinquent individual taxes in a manner that protects taxpayer rights." The low complaint rate and performance-based contract associated with the PCAs illustrates commitment to IRS' goals.

YES 12%

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The Tax Collection program is highly scrutinized due to its prominent roles interacting with the American public and securing much of the finances needed to fund the federal government. Virtually all facets of the IRS collection program are independently audited and evaluated by the Government Accountability Office (GAO), and the Treasury Inspector General for Tax Administration (TIGTA). Results on the IRS' ability to improve efficiency and effectiveness in Enforcement of Tax Laws, a High Risk area, are reported directly to Congress. Further, the National Taxpayer Advocate (NTA) reports to Congress annually on the collection processes and continues to ensure there is an equitable balance between enforcement and service, and taxpayer rights are being protected during the compliance process. The Internal Revenue Service Oversight Board oversees the IRS in its administration, management, conduct, direction, and supervision of the execution and application of tax laws. The Internal Revenue Service Advisory Council (IRSAC) provides an organized public forum for IRS officials and representatives of the public to discuss relevant tax administration issues. The group suggests operational improvements; offers constructive observations about IRS' current or proposed policies, program, and procedures; and advises the IRS on particular issues having substantive effect on federal tax administration.

Evidence: The GAO and TIGTA regularly evaluate and provide written reports including recommendations for collection program improvements that will contribute to the reduction of the tax gap, improve tax debt collection and target specific compliance activities. Additionally, GAO evaluates IRS' progress on Unpaid Assessments and the TIGTA evaluates actions the IRS' is taking to resolve its material weaknesses. GAO testifies before Congress on the results of their evaluations of the Collection program. While not entirely independent of IRS, other boards and organizations review and evaluate IRS Collection activity.

YES 12%

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The integration of IRS' budget and performance plan is evident in its annual Congressional Justification document that defines the relationship between resources requested and annual performance targets as well as the impact on IRS' long-term performance goals. Resources for the Enforcement portion of the budget (under which Collection falls) are reported in supplemental tables with clear performance targets and a discussion of the impact of resource levels on annual performance. IRS requests for additional resources are represented as "Initiatives" in the budget. Each budget initiative includes detailed costs (direct/indirect) and measurable impacts on outputs and outcomes with performance impacts of the initiatives rolled into the annual performance targets. Initiative justifications include many other data elements such as revenue estimates, qualitative benefits to the IRS and benefits/burden to the taxpayers. This link is also reflected in the Budget Enforcement Act Program Integrity Cap Adjustment proposed in the FY 2009 Budget. This cap adjustment provides additional resources for the IRS but only to the extent that the resources are used for enforcement activities (including Collection).

Evidence: FY 2008 Congressional Justification including enforcement initiative "Improve Compliance among Small Business & Self-Employed Taxpayers" (page IRS-29 - IRS-32) and full enforcement resources with performance information (pages IRS-69 - IRS-73). FY 2009 Congressional Justification including enforcement initiative "Reduce the Tax Gap for Small Business/Self-Employed" (pages IRS-27 - IRS-34) and the discussion on enforcement resources with performance information (pages IRS-72 - IRS-76). For a summary of budget and performance integration, see: IRS FY 2008 and FY 2009 Congressional Budget Submissions -- Table 3.2.4, Budget and Performance by Budget Activities. See also pages IRS 5 - IRS 7 for information on full funding of the enforcement program in the proposed Cap Adjustment. The Adjustment is further explained on pages 216 through 220 of the Analytical Perspectives volume of the FY 2009 President's Budget.

YES 12%

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: In FY 2000, the Treasury Inspector General for Tax Administration (TIGTA) reported that IRS did not have a centralized process to ensure that all requirements of the Government Performance and Results Act of 1993 (GPRA) were fulfilled and maintained. Since that time, IRS has developed and implemented an extensive Strategic Planning, Budgeting and Performance Management process led by the Commissioner and the senior management team. The process allows the IRS to set priorities and performance targets through the annual budget process for all programs, including Collection, and continuously adjust to changing circumstances. Quarterly performance meetings are the cornerstone of the process where performance is presented, issues are raised, and decisions articulated through to the budget development process. At the program level, Collection has a planning process that calls for a bi-annual environmental scan or strategic assessment which identifies significant issues facing the program. Resultant strategies and priorities are incorporated into the Collection program letter which is issued annually to all employees and managers. The program letter sets the direction of the organization and ensures that all employees understand how the work they do contributes to the overall objective of the program. Overall, IRS has taken many meaningful steps to optimize and leverage its planning process despite some issues remaining unresolved, such as remaining open reports.

Evidence: Evolution of IRS' budget requests for the period 2005-2009 provide evidence that the strategic planning process results in a fully developed and supported budget. Additionally, through the revised Strategic and Performance Planning process, the IRS addresses TIGTA and GAO findings related to any strategic planning deficiencies. This process has allowed the IRS to close 564 of the 588 findings issued since 1990 (24 findings on 16 reports remain open). The 16 open reports address Collection of Estate Taxes, Bankruptcy Stay Violations, Offer-In-Comprise cases, Lien-due-Process Procedures, Compliance of Employees who Receive Tips, and Contracting Out Collection.

YES 12%
Section 2 - Strategic Planning Score 100%
Section 3 - Program Management
Number Question Answer Score

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Monthly operational reviews with Collection executives are conducted to address performance targets and other management indicators, and make program adjustments as necessary to ensure year-end targets are met. Additionally, executives at every level -- including the IRS Commissioner and Deputy Commissioners -- regularly review performance information through quarterly Business Performance Review meetings to gauge progress toward plan and variances from the prior year's performance. Business results data are collected systemically from IRS Master File and sub-systems. Employee and Customer Satisfaction data are collected by credible vendors using statistically valid survey methods.

Evidence: Face-to-face Business Performance Reviews (BPR) are conducted quarterly with program executives to establish accountability, jointly review and assess current performance metrics, identify areas needing improvement, discuss significant issues affecting tax administration, and identify work plan revisions to be integrated into the strategic planning and budgeting cycle. These rigorous reviews have substantially contributed to increases in business results, and improvements in employee and customer satisfaction over the past several years, The same rigorous review process is performed on the PCAs and adjustments are made as appropriate. In addition, a Collection Governance Council (CGC) ensures development of strategic, tactical, and resource priorities that are consistent with those addressing tax gap issues and tax administration. The CGC is a decision making body for service-wide Collection inventory objectives, focusing on upstream compliance activities and their impact on downstream Collection process. This council meets monthly and is comprised of top executives representing four major business units and the operating units. The Council uses performance information and diagnostic indicators to validate overarching policies, processes or procedures.

YES 14%

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: IRS Collection managers are held accountable for all program results through their annual performance plans. The IRS Performance Management System covers all levels of management and is designed to ensure accountability for achieving strategic goals, operational priorities, and specific program goals. All Private Collection Agency (PCA) contracts in the Private Debt Collection initiative are performance-based contracts and include financial disincentives for validated complaints. IRS regularly conducts reviews of contractor performance to ensure adherence to the contract and the TIGTA conducts reviews of contractor invoices and fees paid. The Federal Contractor Tax Compliance (FCTC) Task Force led by IRS includes representatives from Financial Management Service, Government Services Administration, Centers for Medicare and Medicaid Services, the Department of Defense, the Office of Management and Budget, and the Department of Justice. FCTC oversees and evaluates the matching process for the Federal Payment Levy Program, through which IRS partners with the Financial Management Service (FMS) to identify and collect Federal payments from qualified delinquent taxpayers.

Evidence: All Collection executive and managerial annual performance plans include commitments to deliver the targets related to Business Results, Employee Satisfaction, Customer Satisfaction, in addition to performance indicators relating to the Coverage, Efficiency and Quality outlined in the IRS budget. Private Collection Agencies are evaluated on a balanced scorecard that includes case quality and resolution, customer satisfaction, employee satisfaction and dollars collected. The TIGTA audit #200710003 Invoice of Audit Fees Paid Under the Private Debt Collection Initiative determined that fees charged were accurate, supported and allowable, the IRS invoice verification process was adequate and contract deliverables were acceptable. All FMS managers are also held accountable for program results. FMS uses three specific measures to gauge the efficiency and effectiveness of their debt collection program - Amount of Delinquent Debt Collected per $1 spent, Amount of Debt Collected Through all Available Tools, and Percentage of Delinquent Debt Referred to FMS for Collection Compared to Amount Eligible for Referral. FMS has met their target for each of these goals in FY 2006 & 2007.

YES 14%

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: The Collection program fully obligates its funding and adheres to annual financial plans. Funding for the overall Collection program resides within several Financial Plans which are administered at the Operating Division and Functional Division level and monitored by the IRS Chief Financial Officer (CFO) at the service-wide level. The executive Financial Plan Managers provide monthly status reports to Collection program executives, and together they ensure that obligations are on track plus, when necessary, put plans in place to mitigate any identified surpluses or shortfalls.

Evidence: The Collection program obligates more than 99 percent of its allocated resources each year. The executive Financial Plan Managers participate in CFO-led financial reviews throughout the year that ensure appropriate and timely obligations in all program components. GAO's annual Financial Audit of the IRS has resulted in unqualified financial statement opinions for the last eight fiscal years.

YES 14%

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: The IRS has procedures in place to ensure both efficiency and effectiveness, including: the leveraging of existing technology wherever possible to reduce expenditures, the identification and implementation of new technology to improve current case processing algorithms, and fully-implemented Collection employee evaluations. For example, over the past several years the IRS has engaged in continuous business reengineering processes. This effort is aimed at streamlining or replacing the current case selection methodology to guarantee those cases with the highest projected yield are put in the hands of those employees most capable of resolving them at the earliest opportunity.

Evidence: Collection is testing new treatments for cases that will eventually be programmed into the existing Inventory Delivery System. Besides leveraging existing technology to improve processing efficiency, the IRS is testing the use of Private Collection Agencies to collect dollars on lower priority work that might not otherwise be subject to Collection action based on existing resource levels. Additionally, employees are encouraged to achieve efficiencies through an annual appraisal system. All employees engaged in front line operations including Collection employees are held to and evaluated against a set of Critical Job Elements that outline both standard and heightened levels of performance. The standards are designed to measure the employee against factors such as the quality of the case investigation, the efficiency and timeliness of case actions taken, and meeting customer satisfaction standards such as protecting taxpayer rights.

YES 14%

Does the program collaborate and coordinate effectively with related programs?

Explanation: IRS has strong partnerships with other Federal agencies and state government taxing authorities, resulting in an increase in revenue received by Collection's systemic activity. Data matching between IRS and FMS can lead to a growth of up to 15 percent of qualified federal payments being offset to satisfy tax liabilities and beginning in FY 2009, qualifying Medicare and Medicaid payments will be added to the Federal Payment Levy Program (FPLP). In addition, the IRS collaborates with other agencies to form the Federal Contractor Tax Compliance (FCTC) task force to improve the tax compliance of delinquent Federal Contractors and with states to issue levies against state income tax refunds to satisfy federal tax liabilities. The State Reverse File Matching Initiative (SRFMI) identifies state filers who have not filed a federal return, state amnesty program participants who have not filed a federal return, and state filers with differences in income being reported on both the state and federal tax return. SRFMI provides the IRS with an external reliable tool to identify additional nonfiler cases. The State Income Tax Levy Program (SITLP) also partners the IRS with state revenue agencies, with 27 states currently working with the IRS to facilitate the payment of federal tax debt with state income tax refunds.

Evidence: Total revenue collected through FPLP increased from $89 million in 2003 to $345 million in 2007. Levies on Federal contractor payments generated an increase in revenue from $7 million in 2003 to $48 million in 2007. Since its inception in FY 2000, the FPLP has collected over $1.1 billion in tax payments through FY 2007. Regarding SITLP, the IRS expects to engage at least 3 additional states in FY 2008 to add to its 27 current partners. Revenue from SITLP has doubled over the past five years, from nearly $59 million generated in CY 2002 to over $103 million generated in CY 2007 SRFMI, piloted with 4 states in 2007 and engaged a total of 9 states for 2007 information sharing; 16 states will be on board for 2008, and 45 will share information for 2009. Early results from the pilot were positive. Over 1200 cases were closed by the automated substitute for return program (ASFR, a systemic system used by IRS to prepare returns on non-filers), with an average assessment of just over $2900. Over 800 returns were referred to Examination for non-filers or underreported income resulting in a no change rate of 3 percent and an average assessment of over $11,400.

YES 14%

Does the program use strong financial management practices?

Explanation: Over the past several years, IRS has received unqualified financial statement opinions from GAO's annual financial audit, demonstrating that IRS accurately accounts for approximately $2.7 trillion in tax revenue receipts, $292 billion in tax refunds, and $11 billion in IRS appropriated funds. Additionally, IRS has made great strides in addressing financial management challenges and progress in improving its cost accounting capabilities. These actions are moving the Agency forward in developing the information needed to make better informed managerial decisions. Collection successfully accomplished the downgrade of the 20-year old Collection of Unpaid Taxes Material Weakness to a Reportable Condition (and received concurrence from GAO) by taking action to improve systemic capabilities, improve efficiencies and increase the number of accounts worked and dollars collected. While IRS continues to exhibit a strong commitment to addressing its ongoing financial management issues, the continued existence of a financial management reportable condition represents an obstacle that IRS needs to overcome to achieve effective financial management.

Evidence: GAO has issued an unqualified financial statement opinion to IRS for the past eight fiscal years. The downgrade of the Collection of Unpaid Taxes Material Weakness to a Reportable Condition was achieved with many accomplishments, the most notable being the creation of an Unpaid Assessments database, development of a compliance risk-based collection case assignment system, a centralized ACS database, development of enterprise-wide outcome measures for collection coverage and efficiency and the implementation of predictive modeling, predictive dialer technology, specialized inventory to focus resources, and an organizational restructuring. Financial management deficiencies noted within Collection operations are addressed and monitored. Both the Collection of Unpaid Taxes Reportable Condition and the Release of Federal Tax Liens compliance issue have current detailed action plans with defined completion dates to address all aspects of operations contributing to the deficiencies and take steps to prevent future findings. These plans are monitored routinely by executives and managers within the Collection program, and reported on quarterly to the IRS Financial & Management Controls Executive Steering Committee.

NO 0%

Has the program taken meaningful steps to address its management deficiencies?

Explanation: IRS Collection management practices and technology improvements have led the way to significant increases in program performance since 2002. Processes are in place for long-term strategic planning, annual budget and performance planning, and regular operational and performance reviews. Operational reviews of programs and performance reviews conducted during the year result in assessments of management practices and recommendations to continue program improvements. Additionally, the IRS fully participates in pay-banding that covers executives and managers, and is designed to align compensation with individual performance. Executive and manager annual performance plans are linked to key business objectives and goals. Increases to base pay are dependent on performance in accomplishing management responsibilities and commitments. The IRS Performance Management System includes a mid-year progress review, during which any management deficiencies are identified and steps are taken to address them.

Evidence: Improved management practices and technology improvements have led to attainment of our goals and increases in program performance. Efficiency and Collection measures have increased from 1514 in 2005 to 1828 in 2007. Coverage was maintained at 54 percent even though initial notices increased the workload and program FTE were reduced. Further, GAO and the Treasury Inspector General for Tax Administration (TIGTA) jointly agreed to the downgrade of the Collection of Unpaid Taxes Material Weakness to a Reportable Condition. The action plan to address the only reportable condition associated with the Collection program includes activities designed to improve resource allocation and program efficiency by applying the most effective treatment to cases and pursuing development of improved strategic and tactical measures.

YES 14%
Section 3 - Program Management Score 86%
Section 4 - Program Results/Accountability
Number Question Answer Score

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The most recent Voluntary Compliance Rate (VCR) is estimated at 83.7 percent and is based on the National Research Program (NRP) evaluation of 2001 individual income tax returns and extrapolation of earlier estimates attributed to other taxpayer segments. The goal for the VCR is 86 percent for 2012. As stated in question 2.1, IRS will assess progress against the 2012 target after completion of the examination process for targeted 2012 returns for which the filing period does not end until 2013. Collection has maintained Coverage at 53 to 54 percent since it was baselined in 2005 even though notice receipts have increased by nearly 20 percent since 2002. Collection continued to meet its Efficiency target and improved from 1514 closures per full time equivalent (FTE) in 2005 to 1828 per FTE in 2007. Collection achieved results with productivity through automation efforts, technology improvements, and more appropriate case routing routines.

Evidence: Collection Coverage has been maintained for the past three years at approximately 54 percent even though notice receipts have increased by nearly 20 percent since 2002. Efficiency has consistently improved in all of the various functions of Collection, improving from 1514 closures per FTE in 2005 to 1828 closures per FTE in 2007 and is projected to increase to 2065 by 2013. Productivity data in each Collection function provides a reliable gauge in determining how successful the program is in moving toward achievement of the Efficiency target. In the Collection Field function (CFf) from 2002 through 2007, Taxpayer Delinquent Accounts (TDAs) taxpayer closures per FTE increased 90 percent and Taxpayer Delinquent Investigation (TDIs) closures per FTE increased 111 percent. In the call centers (ACS), closures per FTE have increased steadily from 2002 through 2007, with TDA taxpayer closures per FTE increasing 88 percent and TDI taxpayer closures per FTE increasing 121 percent. Collection cycle time, (the number of weeks to close an account) on TDAs has improved in the CFf from 2002 to 2007, from 43.4 weeks to 29.8 weeks (a 46 percent improvement) and in ACS from 35.2 weeks to 28.8 weeks, (22 percent improvement). TDI cycle time improved from 2002 to 2006 in the CFf from 23.2 weeks to 19.2, (a 22 percent improvement) and in ACS from 26.1 to 19.8, (a 32 percent improvement).


Does the program (including program partners) achieve its annual performance goals?

Explanation: In light of increasing workloads and resource constraints over the past several years, Coverage and Efficiency goals were achieved, with the FY 2007 Efficiency goal exceeded by 6 percent. While the coverage and efficiency measures are fairly new (baselined in 2005), progress for the component indicators (TDA and TDI closures) can be quantified as far back as 1995. IRS partners add significantly to the success of collection operations and contribute to the long-term goals by allowing the IRS to work more cases, more efficiently through systemic means, and increase efficiency, coverage and collections, plus improve voluntary compliance.

Evidence: Although coverage and efficiency measures were established and baselined in 2005, additional indicators at the operational level for both the Collection Field function (CFf) and the call centers (ACS) help to gauge success. The number of TDA and TDI closures form the basis for determining how successful the program is toward achieving its long-term goals. From 2003 through 2007, TDA closures increased by 23 percent from 4.89 million in 2003 to 5.98 million in 2007, and TDI closures increased by 64 percent from 1.66 million in 2003 to 2.73 million in 2007. These accomplishments helped to maintain Coverage at a 54 percent rate despite a simultaneous increase in notice issuances and increasing available workload. While Collection is associated with 18 percent of the tax gap, it accounts for over 50 percent of the enforcement revenue collected annually, with $31.8 billion being collected in 2007. Dollars collected from TDA and TDI closures have shown significant improvement, increasing by 14 percent between 2003 and 2007. Collection enforcement activity has also grown as evidenced by substantial increases in the number of liens, levies and seizures. Although targets or goals for revenue and enforcement activities cannot be set by law, IRS monitors these areas and uses the information to gauge effectiveness of program operations. Customer Satisfaction scores are used as key indicators of how well the Collection Field function is responding to taxpayer needs. Customer Satisfaction has increased from 55 percent in 2002 to 62 percent in the first quarter of 2008. Customer accuracy is over 90 percent for each of the ACS, Compliance Services Collection Operations (CSCO), and Centralized Offer in Compromise (COIC) functions. Quality reviews indicate a stable rate between 82 and 84 percent over the past five years. Employee Satisfaction scores in the various collection functions range between 60 and 65 percent for FY 2007. The Embedded Quality process supplies managers with valuable information and National Quality Reviews focus on improvement recommendations related to policy changes, training needs, and procedural guideline changes.

YES 20%

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: Collection continues to meet its efficiency targets by increasing productivity through automation efforts, technology improvements, and through more appropriate case routing to the call centers (ACS) and the Collection Field function. The Notice process continues to be the most cost effective and efficient resource for collecting delinquent accounts. Accounts that remain outstanding after the notice process are routed to the Inventory Delivery System (IDS) where decision analytics and business rules are applied. High compliance risk, high yield cases are routed to the queue and subsequently to the CFf for immediate assignment to a revenue officer while medium and low compliance risk cases are routed to the call center (ACS). It is difficult to fully illustrate improved cost effectiveness due, in part, to the statutory limitations placed on the IRS which do not allow performance measurement using revenues collected.

Evidence: Collection efficiency has consistently improved in all functions. Efficiency has improved from 1514 in 2005 to 1828 in 2007 and is projected to increase to 1947 by 2011. Collection operations have significantly increased the number of TDAs and TDIs closed from 2003 through 2007 - TDAs increased by 23 percent (4,896,000 to 5,980,000) and TDIs increased by 64 percent (1,664,000 to 2,729,000). In CFf, TDA productivity increased 90 percent from 90 taxpayer cases per FTE in 2002, to 171 in 2007, and TDI closures increased 111 percent from 18 per FTE in 2002 to 38 in 2007. In the call centers (ACS), TDA productivity increased by 88 percent (351 per FTE in 2002 to 659 in 2007), and TDI closures per FTE increased 121 percent (from 70 in 2002 to 155 in 2007). These gains were achieved without sacrificing customer satisfaction, quality. or accuracy. Customer satisfaction in the CFf has remained steady at an average of 62 percent, and employee satisfaction increased from 49 percent in 2002 to 65 percent in 2007. Collection Field quality has remained constant for the past two years at 84 percent. ACS customer accuracy has increased from 89 percent in 2004, when it was baselined, to nearly 93 percent in 2007.


Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Available performance comparisons reflect very positively on IRS Collection. IRS participates in the Organization for Economic Cooperation and Development (OECD) and the Tax Debt Collection sub-group which identifies and shares best practices from around the world. OECD partners look to the IRS for guidance and advice on the collection of taxes. IRS is second only to Italy in a comparison of ratios for the aggregate administrative costs per net revenue collection of the thirty OECD countries and sixteen selected non-OECD countries. This comparison, however, is problematic because other countries are less reliant on income taxes and most rely on a value added tax (VAT) collected at the point of sale where the taxpayer has no choice but to pay the tax or not receive the goods. The '2008 Agency Benchmarking Survey' commissioned by the Association of Credit and Collection Professionals International, reports that collection agencies achieved an industry-wide median 'recovery rate' lower than the recovery rate of the IRS.

Evidence: In 2004, IRS had the lowest ratio (0.56) for the aggregate administrative costs per net revenue collection of the thirty OECD countries and sixteen selected non-OECD countries with the exception of Italy (0.52) whose ratio excludes substantial costs associated with tax fraud work that is done by the Guardia di Finanza, while costs for tax fraud work are included in the IRS ratio. The '2008 Agency Benchmarking Survey' commissioned by the Association of Credit and Collection Professionals International, reports that collection agencies achieved an industry-wide median 'recovery rate' (collection) of 13.8 percent during FY 2007 while the IRS collection recovery rate is estimated at approximately 21.23 percent, not including collections from insolvent taxpayers or collections/offsets on taxpayer accounts reported not collectible. (The collection recovery rate is not a measure for which there are targets or goals and is used here for comparative purposes only. It is not an official measure).


Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: IRS collection program has been the subject of many Government Accountability Office (GAO) and Treasury Inspector General of Tax Administration (TIGTA) independent third party evaluations. The TIGTA reports annually on IRS compliance trends for the previous fiscal year and the GAO reports regularly on the tax gap. Additionally, both the TIGTA and GAO evaluate specific compliance activities including the effectiveness of collection actions. Independent evaluations include mandatory reviews of liens, levies, and seizures, and procedural changes that could enhance tax collections. While these evaluations identify improvement opportunities, overall they validate the effectiveness of the IRS Collection Program.

Evidence: During the period 2002 to 2006, Enforcement revenue increased 43 percent and GAO cited the noticeable progress IRS made in enforcement efforts including increasing the amount of direct enforcement revenue collected, number of collection activities undertaken, and the overall expertise of its enforcement staff. In 2006, GAO downgraded a long standing material weakness related to the Collection of Unpaid Taxes to a reportable condition based on tremendous improvements made by IRS. The TIGTA reported in a study commissioned by the IRS Oversight Board that IRS 2006 gross tax collections were at a ten year high and that corporate income tax collections alone increased by 96 percent, and individual income tax collection increased by 25 percent. The IRS Oversight Board praised the IRS in its 2006 Annual Report for improvements in the enforcement (including Collection) program. While not completely independent bodies, both the IRS Oversight Board and the Internal Revenue Service Advisory Committee (IRSAC) commended the IRS on its progress in the Collection programs. The IRS Oversight Board reported that real progress has been achieved over the past six years and cited dramatic increases in enforcement revenue collected during that period. The Oversight Board reported that the IRS increased collections in 2006 by three percent over the previous year. The Internal Revenue Service Advisory Committee (IRSAC) reported in the November 2006 Public Meeting Briefing Book that the IRS was successful in recovering approximately $55 billion of the Tax Gap. Additionally, of 287 reports containing 588 findings issued from 1990 to present, only 24 finding (16 reports) remain open. Open reports/findings have action plans showing corrective actions and time frames for completion.

Section 4 - Program Results/Accountability Score 60%

Last updated: 09062008.2008SPR