TREASURY INSPECTOR GENERAL

FOR TAX ADMINISTRATION

Improvements to the Tax Exempt and Government Entities Correspondence Operation Would Enhance Customer Service

May 2001

Reference No. 2001-10-087

Executive Summary

The Tax Exempt and Government Entities (TE/GE) Division is committed to providing its customers with quality customer service by helping them understand and comply with applicable tax laws and to protect the public interest by applying the tax law with integrity and fairness to all. To meet this commitment, the TE/GE Division established a centralized customer service site organized around the three distinct customer segments it serves: Employee Plans, Exempt Organizations, and Government Entities. This audit evaluated whether the TE/GE Division effectively implemented a centralized correspondence operation that provides quality responses to customersí written inquiries.

Results

The TE/GE Division has implemented a centralized correspondence operation that generally provides accurate responses to customersí written inquiries. Managerial reviews and our judgmental sample of 60 written inquiries that were closed from the Correspondence Control System (CCS) database between January 1 and April 29, 2000, showed that customers were provided accurate responses approximately 90 percent of the time. The TE/GE Division has also implemented a quality review process, which is designed to monitor, measure, and improve the quality of responses being sent to customers.

While the TE/GE Division has made considerable progress in implementing the centralized correspondence operation, additional enhancements are needed to ensure that program goals assist in meeting customer expectations of receiving timely responses to written inquiries. Also, the TE/GE Division needs to improve processing controls to increase assurances that customers receive timely responses to their written inquiries and managers are provided with timely information to effectively monitor the status of open inventory in the centralized correspondence operation. In addition, controls over the CCS database need to be enhanced to improve the reliability, completeness, accuracy, and security of correspondence data.

The Tax Exempt and Government Entities Division Needs to Ensure That Program Goals and Processing Controls Assist in Managing the Correspondence Operation

Written inquiries processed by the centralized correspondence operation are not being consistently processed within the 30-day standard required by the Internal Revenue Service (IRS) correspondence handbook. Between October 1, 1999, and April 29, 2000, the centralized correspondence operation averaged approximately 45 days to receive, control, and process customersí written inquiries and initiate the final responses. Our analysis showed that 5,593 of the 8,149 (69 percent) written inquiries closed during this period exceeded the 30-day standard. As a result, many customers did not receive timely responses to their written inquiries.

Specific program goals will assist the TE/GE Division in meeting the expectations of customers and stakeholders

Although program goals were not in place for Fiscal Year (FY) 2000, the TE/GE Division had tasked a Customer Service function sub-team with developing recommendations for improving customer satisfaction and business results. While the sub-team has not issued its report, a sub-team member advised us that the team plans to propose a 30-day program goal for processing written inquiries; this would be consistent with the standard applied in other IRS functions. In the interim, the Director, Customer Account Services established goals for FY 2001 that include program goals for the telephone, R-Mail, and correspondence operations.

Management officials at the TE/GE centralized customer service site advised us that the unique nature of some written inquiries requires employees to use more than 30 days to prepare final responses; thus, a 30-day standard may be unrealistic for a portion of the written inquiries. Our analysis of a judgmental sample of 24 written inquiries also concluded that the 30-day standard should be acceptable for most customers but may be unrealistic for a portion of the written inquiries.

Enhanced processing controls will increase assurances that written inquiries are timely processed and that information reports are accurate

The TE/GE Division has not established sufficient processing controls to ensure that written inquiries are timely processed. In addition, information reports for the centralized correspondence operation did not provide managers with accurate, timely information. This information is essential to effectively monitor the status of open inventory. Processing controls were ineffective because TE/GE Division practices did not establish end-to-end accountability over written inquiries and case-closing practices do not ensure that closing information appropriately captured the date when responses were sent to customers.

Our review of information on the CCS database showed that only 31 percent of the written inquiries received between October 1, 1999, and April 29, 2000, were processed within the 30-day IRS standard. However, by streamlining the processing of incoming written inquiries, the IRS could increase the number of written inquiries processed within 30 days. We reviewed a judgmental sample of 60 written inquiries that took more than 30 days to process and determined that the added step of delivering written inquiries to the Employee Plans and Exempt Organizations Determinations Processing Mailroom added 5 days to the processing time. Our analysis of the CCS database showed that approximately 8 percent of the written inquiries were processed between 31 and 35 days after receipt. Thus, direct mailing to the centralized correspondence operation could increase the number of written inquiries that are processed within 30 days.

Additionally, sufficient controls were not in place to ensure that closing information was timely entered into the CCS. The delays occurred because no requirement existed for clerks to enter closing information within a specified time period.

System Enhancements Are Needed to Ensure That Correspondence Data Are Accurate, Complete, Reliable, and Secure

The TE/GE Division has not established appropriate controls on the CCS database to provide reasonable assurance that correspondence data are accurate, complete, reliable, and secure. As currently structured, the CCS database does not:

These conditions occurred because the TE/GE Division did not follow accepted system practices when developing the CCS database. For example, user needs were not met since requirements were never technically defined. Also, security controls were not adequate to protect correspondence data from unintentional or deliberate disclosure, alteration, or destruction. Security controls were ineffective because minimum security requirements were not defined and incorporated into the CCS database.

Summary of Recommendations

The Commissioner, TE/GE Division, should ensure that the TE/GE Customer Account Services function completes work on the establishment of program goals. The proposed goals should ensure that the expectations of customers and stakeholders are being met. The Commissioner, TE/GE Division, should also eliminate the additional step used to process incoming written inquiries and establish time standards for entering closing information into the CCS database. In addition, the Commissioner, TE/GE Division, should ensure that controls over the CCS database are adequate to provide managers with information needed to effectively and efficiently monitor and manage the performance of the centralized correspondence operation.

Managementís Response: The TE/GE Division agreed with the recommendations in the report and has already implemented several of them. The TE/GE Division now has specific program goals and processing procedures in place to meet the expectations of customers and stakeholders. The TE/GE Division also submitted a Request for Information Services to increase assurances that the CCS database will meet user needs and the minimum IRS security requirements. Managementís complete response to the draft report is included as Appendix IV.