WASHINGTON -- The Internal Revenue Service's enforcement program is expected to fall far short of the staffing and revenue increases that Congress anticipated when it funded a series of new compliance initiatives two years ago, according to a report released last week by the General Accounting Office.
In its fiscal year 1991 appropriation for the IRS, Congress included $191 million to hire 3,476 additional staff members to implement nine compliance initiatives. The nine initiatives were expected to produce an additional $5.7 billion in enforcement revenues over five years, the GAO report says.
More than half of the $5.7 billion of enforcement revenues, or $3.2 billion, was to result from three of the nine broad-based initiatives that covered municipal bond-related as well as other enforcement activities.
These three initiatives, which accounted for $140 million of the $191 million for appropriation and would have resulted in the addition of 2,226 staff, were designed to increase auditing and collections of delinquent taxes as well as to revise the training program. The revisions would help insure that experienced staff could spend more time auditing instead of training.
But the General Accounting Office, which was asked by the Senate Budget Committee to review the progress of the IRS on these three initiatives, found that the IRS' own projections show it will not meet the staffing and revenue targets within the targeted five-year period.
The IRS projections show that the three initiatives will increase enforcement revenues by only $2.4 billion in enforcement revenues, 25% less than the $3.2 billion expected to be gained over the five-year period.
The decrease in expected revenues results from a combination of factors, the IRS told the GAO, including changes in productivity assumptions and the failure to account for unexpected costs associated with the training program.
But those revenues will probably be even lower than the $2.4 billion projected by the IRS, the GAO report says, because the agency's estimates do not appear to take into account any of the reductions that have occurred in the enforcement program's overall baseline staff. In other words, GAO officials said, the staff added for the new initiatives is somewhat offset by losses in the baseline staff.
The GAO said it had been told by the IRS that the baseline enforcement staff associated with the examination and collection initiatives had been reduced by between 106 and 145 full-time positions in fiscal years 1991 and 1992. A reduction of 106 full-time positions could translate into a revenue loss of about $56 million, the GAO said.
The reductions in baseline staff were made in part to accommodate changing program priorities and to fund unbudgeted costs, the report says. In addition, said one GAO official, not all of the money appropriated for the initiatives was used for them. Some of the money was used for other activities, the official said.
The congressional watchdog agency said the enforcement program's baseline staff reductions were not taken into account by the IRS in its quarterly reports on the initiatives to the Senate Finance Committee. The IRS reported the amount of the staff it had added to implement the initiatives, but failed to report reductions in the baseline staff.
The GAO report recommends that the IRS revise its method of tracking and reporting to Congress on the staff and revenue related to the initiatives. The IRS should report the net revenue effect of the staffing increases authorized by Congress, taking into account the reductions in baseline staff, the GAO said.
The IRS also should compare the total staffing and revenue levels for examination and collections to the targets that Congress had hoped the IRS would meet, the report says. The IRS should then explain why it is unable to meet those targets, the GAO said.
Further, the report says the IRS' current "quarterly tracking reports do not provide Congress and other interested parties with enough meaningful information on the impact of providing additional staff that was authorized."