TREASURY INSPECTOR GENERAL

FOR TAX ADMINISTRATION

Additional Management Actions Are Needed to Ensure the Timely and Successful Modernization of the Tax Exempt and Government Entities Division

December 2000

Reference No. 2001-10-026

Executive Summary

The key component of the Internal Revenue Serviceís (IRS) modernization effort is the desire to provide quality service to its customers through more focused customer service and to enhance accessibility to IRS personnel and information. The Tax Exempt and Government Entities (TE/GE) Division is committed to providing customers top quality service and protecting the public interest by applying the tax laws with integrity and fairness to all. The TE/GE Division met its target start-up goal of December 1999 and is currently in the implementation phase of its modernization efforts.

The overall objective of this review was to assess the transition to and implementation of the new TE/GE Division business unit.

Results

The IRS has taken positive steps toward ensuring the successful migration to the new TE/GE Division. TE/GE Division management has established a budget and financial office to administer its budget, selected critical Division executives and filled key management positions; established delegations of authority to fulfill its mission; developed a communication plan to reach customers, stakeholders, and employees; implemented some "workarounds" to minimize disruptions to operations; and established performance measures for the TE/GE Division.

Nonetheless, additional actions are needed to minimize the inherent risks associated with such a major endeavor. Timely addressing these risks is critical to ensure the successful implementation of the TE/GE Divisionís modernization vision. To effectively manage the risks associated with the TE/GE Division modernization initiatives, management should:

Management Actions Are Needed to Establish Overall Responsibility That Will Ensure End-To-End Accountability for Managing Risks During the Modernization of the Division

The TE/GE Division did not incorporate the concept of a single executive or senior-level person with end-to-end accountability into its implementation governance structure to manage its modernization initiatives. Currently, the Commissioner, TE/GE Division, oversees all work associated with business and systems modernization while also being responsible for maximizing customer service in TE/GE Division core processes. This broad-based management approach presents a major challenge for this executive. The appointment of an executive or senior-level person to assist the Commissioner in managing the modernization activities should provide the TE/GE Division with a greater opportunity to achieve its modernization vision.

Additional Actions Are Needed to Enhance the Divisionís Efforts to Monitor the Transition of Key Processes

The TE/GE Division has developed a communication plan to facilitate completion of its modernization initiatives. However, additional actions should be taken to better control, evaluate, and report internal and external stakeholder concerns and comments. TE/GE management would then be in a better position to readily identify and resolve critical issues facing transition from the old to the new organization. TE/GE Division executives advised us that several initiatives are underway to develop a permanent method to collect, evaluate, and report internal and external stakeholder concerns to appropriate TE/GE Division management officials.

Managerial Actions Are Needed to Ensure Workarounds Are Timely Developed

A "workaround" is a temporary solution to a problem that allows a new organization to be operational until a final solution can be developed and implemented. Workarounds are designed to ensure no disruption of operations and customer service and to facilitate the successful stand-up of the new organization. The TE/GE Division does not have an effective process to identify and monitor the status of workarounds. The inability to adequately capture and monitor workarounds may prevent the Division from effectively tracking its efforts to timely replace vital processes with permanent solutions. Workarounds that are not timely replaced with permanent solutions could result in work stoppage and prevent the TE/GE Division from achieving its modernization vision.

Additional Management Actions Are Needed When Transferring Work to the New Organizational Elements

Our review of TE/GE Division implementation plans to transfer the cases to the new organizational elements showed that Division management needs to monitor the transfer of work and ensure that appropriate tests are conducted using the new Audit Information Management System (AIMS) organization codes. We did not identify any specific procedures to monitor the transfer of work to the new TE/GE Division organizational elements or plans to test the systemic updates to the AIMS prior to actual transfer of work to the new organizational elements. The development of an effective process for monitoring, transferring, and controlling cases to the new organizational elements would help ensure the timely transfer and processing of cases during the planned case transition period. Otherwise, cases may be inappropriately removed from the AIMS control system.

Increased Actions Are Needed by Management to Effectively Oversee the Work Performed by Non-Tax Exempt and Government Entities Division Functions

Now that it has become an independent entity within the IRS, the TE/GE Division must rely on other business units to assist its managers in meeting the modernization vision. Without establishing effective working relationships with these non-TE/GE Division functions, the new TE/GE Division could be at risk of not fully accomplishing its mission, goals, and objectives. Additionally, ensuring the establishment of end-to-end accountability through the effective use of formal agreements with other non-TE/GE business entities would enhance the TE/GE Divisionís ability to manage the support services provided by these organizations.

Summary of Recommendations

The Commissioner, TE/GE Division, should select a senior-level official as a project manager with the authority to manage and oversee modernization activities currently underway and planned. Also, the TE/GE Division Commissioner should establish an effective communication process to ensure that all internal and external stakeholder concerns and comments are properly captured and evaluated. Additionally, the Commissioner, TE/GE Division, should ensure that the Program Management function identifies and monitors the risks associated with TE/GE Division core processes that could result in disruptions to customer service. The Commissioner, TE/GE Division, should consider the establishment of organizational elements to plan, control, and oversee the work performed by non-TE/GE Division Functions and develop Service Level Agreements that will specify the services to be provided and the methodology to be used to monitor the quality of services.

Managementís Response: IRS management agreed with the facts cited in the report and is taking the appropriate corrective actions. The TE/GE Division will establish a senior management official who will oversee future modernization activities and will establish ownership and oversight responsibility for addressing stakeholder concerns and comments. Also, the TE/GE Division will identify and monitor the risks associated with core processes that could result in disruptions to customer service and ensure that permanent solutions are in place and working as intended. Additionally, management will validate the transfer of casework from the old organizational structure to the new organizational structure. The TE/GE Division will establish the organizational elements to plan, control and oversee the work performed by the Collection function and enhance the service level agreement with the Information Systems (IS) organization. Managementís complete comments are included in the body of the report, where appropriate and their complete response to the draft report is included as Appendix IV.