TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
Management Advisory Report: The Wage and Investment Division Substantially Completed the Five Stand-Up Elements
Reference No. 2001-40-033
In early 1998, the Internal Revenue Service (IRS) Commissioner outlined a program to modernize the IRS, offering more efficient work processes and better service to American taxpayers. The Congress subsequently passed the IRS Restructuring and Reform Act of 1998 (RRA 98), mandating that the IRS reorganize its structure to better serve its customers. The IRS modernization plan includes four operating divisions: Wage and Investment, Small Business/Self-Employed, Large and Mid-Size Business, and Tax Exempt and Government Entities. The Wage and Investment (W&I) Division is designed to serve individual taxpayers who earn incomes only from wages and investments, such as interest, dividends, or capital gains. W&I Division will serve approximately 116 million individual taxpayers that have an estimated total annual tax liability of $380 billion.
The IRS reorganization process included an event called the "standing-up" of a new organizational unit. Stand-up occurs when a new unit completes five specific actions that are minimum requirements (elements) for operating. The five elements are: filling key management positions, completing actions to realign positions, establishing a finance office and separate budget, ensuring necessary delegations of authority are in place, and ensuring management systems or workarounds are developed and in place.
Stand-up is not the final act of creating a new organizational unit. Additional actions are required after the stand-up before the process of becoming a new organizational unit is complete. The actions are covered in the Restructuring Agreement Between the Internal Revenue Service & National Treasury Employees Union (NTEU). These actions include an adjustment phase (where the IRS notifies NTEU of any changes in employment conditions), a bargaining phase (where the IRS and NTEU negotiate those changes, if any), and an implementation phase. These three phases take several months to complete.
The overall objective of this review was to evaluate the effectiveness of the W&I Divisionís stand-up process. The review did not include an evaluation of transition efforts unrelated to the stand-up process.
Overall, the W&I Division substantially completed the five elements required for standing up on October 1, 2000. Specifically, most of the key management positions were selected, the finance office and budget were established, delegations of authority were revised, and significant changes to management systems were not required. However, progress is needed in the area of staffing for 1,558 unfilled positions. Approximately 199 of these positions are executives, managers, and Budget and Finance personnel critical for the stand-up, according to the IRS.
Most of the Key Management Positions Were Filled
The W&I Division Commissioner and majority of other key management positions were selected prior to October 1, 2000. In September 2000, W&I Division executives and managers met to discuss the vision, organizational structure, and management roles and responsibilities of the new Division.
Actions to Realign Positions Were Substantially Completed But Progress is Needed for Filling Some Positions, Including Positions Critical for the Stand-Up
As of September 8, 2000, an estimated 37,385 of the 45,282 (83 percent) positions in W&I were filled with employees who were realigned without having to compete for the positions. The remaining 7,897 positions were competitive vacancies that will be filled by employees who compete for the positions. W&I anticipated filling 175 of these vacancies by October 1, 2000, and filling 6,164 vacancies for the 2001 Filing Season. Of the remaining 1,558 positions, approximately 199 are executives, managers, and Budget and Finance personnel critical for the stand-up. The IRSí contingency plan is to leave the teams involved in the design of the W&I Division in place until these positions are filled. The specific role of these teams in carrying out the duties of the vacant positions was not known at the time of our review and, therefore, we could not assess whether this contingency plan will be effective.
The Financial Office and Budget Were Established
The W&I Division Director for Strategy and Finance and the financial managers for the three W&I Division units have been selected. In Fiscal Year (FY) 2001, W&I Division will receive a budget and execute a financial plan. Procedures and controls, including financial codes, for the W&I Division accounting system were established and the financial systems were updated.
Delegations of Authority Were Revised
The IRSí Delegation Orders were revised, giving the W&I Division the authority to operate. The W&I Division developed new functional statements that described the organizational components and their responsibilities. In order to be fully functional, some authorities must be redelegated to those who will actually perform that duty. The divisions prepare "Local Delegation Orders" to redelegate authority. At the time of our review, revisions to the Local Delegation Orders were in process and expected to be signed by the stand-up.
Significant Changes to Management Systems Were Not Required
We determined that significant changes to management systems were not required for the W&I Division to stand up.