The Internal Revenue Service’s (IRS) toll-free telephone system is the cornerstone of its customer service operations. The Fiscal Year (FY) 2000 budget for toll-free telephone services exceeded $346 million for salaries and benefits alone. During FY 1999, taxpayers attempted nearly 108 million calls to the IRS’ 3 main toll-free telephone lines. The IRS has perhaps the world’s largest peak telephone demand of any call center operation, since the majority of the calls are received between January and April each year. The staffing at the IRS’ call centers peaks at about 15,000 during each filing season.

The Government Performance and Results Act of 1993 (GPRA) requires all federal agencies to prepare strategic plans, covering at least a 6-year period, for how they will deliver high-quality products and services to the American public. These plans must consist of a comprehensive mission statement, a set of general goals and objectives, and the approach that will be used to achieve them, including the necessary resources. Strategic plans are the starting point and basic underpinning for a system of program goal-setting and performance measurement.

This review was conducted to determine whether Customer Service function management has an effective strategic planning process for developing, implementing, and managing its efforts to provide world-class telephone service to taxpayers.

The past efforts by IRS management to strategically plan and implement improvements to the toll-free telephone operations, while extensive, have not resulted in the delivery of a high level of quality service to taxpayers. Although the level of service provided to taxpayers on the 3 main toll-free telephone lines has increased from 50 percent in FY 1999 to 59 percent in FY 2000 (through July 1, 2000), it remains well below the 68 percent level achieved in FY 1998. In addition, the quality of the answers provided to taxpayers did not achieve planning goals in FY 2000. Tax law quality was 72 percent rather than the planned 80 percent, and account inquiry quality was 59 percent rather than the planned 75 percent.

The IRS is in the process of implementing an agency-wide strategic planning process that provides a more structured approach than its prior planning efforts. The effectiveness of this process can be enhanced by implementing a "customer-driven" planning system to better understand customer needs and by developing a monitoring system that enables management to more quickly respond to problems.

Current and future customer requirements are the driving force behind the creation of strategic direction for the best-in-class organizations. At the IRS, Customer Service function management has increased its efforts to learn more about its customers’ needs, but does not have the resources to conduct a thorough analysis. As a result, long-range strategic planning, as well as annual planning, for the toll-free telephone operations is being done without a comprehensive understanding of customer needs.

This is a significant and fundamental deficiency in the strategic planning process given that the demand for toll-free telephone services has consistently exceeded the IRS’ capacity to provide it. Survey results show that taxpayers are not satisfied with their ability to contact the IRS by telephone. A comprehensive understanding of why taxpayers called (i.e., why making a call was necessary, rather than just the nature of the question) and whether their reasons for calling were satisfied would enhance the IRS’ efforts to improve toll-free telephone service performance and meet customer requirements.

Despite significant efforts at developing various planning processes for toll-free telephone service, strategic improvement goals are not being met. While the IRS has begun implementing a well-structured agency-wide strategic planning process, the development, execution, and monitoring of annual performance plans remain the responsibility of its operating divisions. The FY 2000 planning processes for toll-free telephones did not include effective monitoring systems to allow management to link accountability, costs, quality, and timetables through which problem areas could be identified and responded to on a timely basis.

The IRS needs to enhance the strategic planning process for its toll-free telephone system in order to serve taxpayers more effectively. To help provide the world-class level of customer service that it would like, the IRS needs to conduct a thorough analysis of customer needs. A comprehensive understanding of the actual number of taxpayers who called, how many times they called, why they called, and whether the reasons for calling were satisfied would enhance the IRS’ efforts to improve toll-free telephone service performance and meet customer requirements. Further, the IRS needs to enhance its annual planning processes to include effective monitoring systems that will allow management to tie together accountability, costs, quality, and timetables through which problem areas could be identified and reacted to on a timely basis.

Management’s Response: Management’s response was due on October 10, 2000. As of October 12, 2000, management had not responded to the draft report.