Expansion
of the Workforce Planning Process Would Increase Opportunities to Identify and
Address Staffing Risks
August 2002
Reference
Number: 2002-10-154
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
August 20, 2002
MEMORANDUM FOR
COMMISSIONER ROSSOTTI
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for
Audit
SUBJECT: Final Audit Report - Expansion of the Workforce Planning Process Would
Increase Opportunities to Identify and Address Staffing Risks (Audit #
200210004)
This
report presents the results of our review of the Internal Revenue Service’s
(IRS) workforce planning process. The
overall objective of this review was to determine whether the IRS Strategic
Human Resources function has implemented a process to timely develop and
implement an effective workforce planning model to meet the expectations of the
four operating divisions.
In summary, we found the IRS
has initiated actions to incorporate a workforce planning process into its
strategic planning processes. For
example, the overall strategic direction for workforce planning has been set
and the process of establishing organizational goals has generally been
completed. In addition, processes for
evaluating workforce demographic data such as positions, length of government
service, and age of the current employee workforce have been developed to
assist IRS management in its decision-making processes.
Although the IRS has initiated
and completed many tasks necessary to accomplish workforce planning, it should
continue with its effort to complete a comprehensive workforce planning
process. The IRS’ status is not
unusual, as our interviews with the Office of Personnel Management and analysis
of recent Office of Management and Budget and General Accounting Office reports
show that none of the executive branch Departments reviewed have fully
implemented an overall workforce planning process. Our audit identified opportunities to increase the value of the
IRS workforce planning activities and improve management’s ability to monitor
progress.
IRS management has not
established a project plan that assigns responsibilities and includes
milestones for each of the steps in an overall workforce planning process. The lack of a formal plan and consistency in
approaches can be attributed to the fact that the IRS has only recently initiated
a comprehensive workforce planning process.
Preparing a formal project plan and refining selected elements of the
process will enable the IRS to monitor progress and ensure consistency of
activities and information reporting.
Workforce planning guidance
documents do not currently focus on long-term planning, i.e., beyond 3
years. In addition, the workforce
planning process being developed may not effectively address long-term (3 to 5
years) workforce planning goals. The
current focus on a 3-year planning process is the result of IRS plans to
integrate its workforce planning process with the ongoing strategic planning
and budgeting processes. Although the
process requires management to develop and report actual workload and resource
estimates for the short-term (i.e., the current fiscal year and the 2 future
years being planned), quantitative measures for long-term planning are not
always required. Expanding the
workforce planning process and guidance to encompass 5 years will increase the
IRS’ ability to identify risks and provide necessary data to key stakeholders.
Management’s
Response: IRS
management agreed with the recommendations cited in the report and is taking
appropriate corrective actions. The
Chief Human Resource Officer will assign responsibility for expanding the
workforce planning process to the Director Workforce Planning. Among other things, the Director Workforce
Planning will develop a 5-year workforce plan and production schedule through
the Workforce Planning Council.
Management’s complete response to the draft report is included as
Appendix IV.
Copies of this
report are also being sent to the IRS managers who are affected by the report
recommendations. Please contact me at
(202) 622-6510 if you have questions or Daniel R. Devlin, Assistant Inspector
General for Audit (Headquarters Operations
and Exempt Organizations Programs), at (202) 622-8500.
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix
IV – Management’s Response to the Draft Report
Having now entered the 21st century, the federal government
faces a workforce shortage. Within the
next 5 years, nearly 30 percent of the federal workforce will be eligible to
retire and 20 percent more can apply for early retirement. In 2001, the General Accounting Office (GAO)
estimated that 27 percent of the Department of the Treasury workforce on board
in 1998 would be eligible to retire at the end of Fiscal Year (FY) 2006. The GAO further estimated that 16 percent of
the Treasury workforce would actually retire by that time. As a result, agencies must start planning
for the workforce of the future.
Specifically, organizations need to develop effective workforce plans to
ensure they are able to recruit, develop, and retain qualified workforces to
achieve their organizational goals and objectives.
In order to meet this challenge, a uniform process that
provides a disciplined approach for matching human resources with the
anticipated needs of the Internal Revenue Service (IRS) is essential. Workforce planning is a fundamental planning
tool, critical to quality performance that will contribute to the achievement
of program objectives by providing a basis for justifying budget allocation and
workload staffing levels. Workforce
planning ensures that the right people with the right skills are in the right
place at the right time.
The Government Performance and Results Act of 1993 (GPRA)
calls for agencies to address human capital in the context of performance-based
management and requires that annual performance plans describe how agencies
will use their resources to support the accomplishment of their goals and
objectives. Three key federal agencies,
the Office of Management and Budget (OMB), the Office of Personnel Management
(OPM), and the GAO, are leading the drive toward workforce planning and restructuring.
In May 2001 the OMB issued Bulletin No. 01-07, requiring
agencies to prepare a workforce analysis including information on the
demographics of their workforce including retirement eligibility, expected
retirements over the next 5 years, and attrition and to evaluate the skills of
their workforce. Based on their
workforce analyses, agencies were required to develop a 5-year plan as part of
their FY 2003 budget to identify the specific organizational changes being
proposed.
The OPM has prepared a five-step workforce planning model to
help federal agencies strategically assess their human resource needs and
ensure they have the information and tools needed to complete successful
workforce plans. This model provides a
general framework of tasks to be completed in the workforce planning
process. The model was designed to help
agencies identify and complete the following steps:
In January 2001, the GAO added strategic human capital
management to its list of high-risk programs.
The GAO’s Performance and Accountability Series reports make clear that
human capital shortfalls are eroding the ability of many agencies and
threatening the ability of others to effectively, efficiently, and economically
perform their missions.
This audit was conducted between
December 2001 and May 2002 at the Office of Strategic Human Resources in
Washington, D.C., and each of the four business units headquarters offices
located in Washington, D.C. and Atlanta, GA.
The audit was conducted in accordance with Government Auditing Standards. Detailed
information on our audit objective, scope, and methodology is presented in
Appendix I. Major contributors to the
report are listed in Appendix II.
The IRS has acknowledged the
need for a workforce planning process and has begun taking actions to
incorporate this process in the ongoing strategic planning processes. For example, the IRS has generally completed
the initial step of setting the overall strategic direction and establishing
organizational goals. Also, the IRS has
developed a process to evaluate workforce demographic data such as the
positions, length of government service, and age of the current employees,
allowing management to make informed decisions based on this information.
The IRS established a Workforce Planning Division as part of
the Strategic Human Resources function in the National Headquarters
organization. This division is
responsible for providing a planning process and analytical capability to
measure and compare the current workforce (supply) to the future workforce
(demand) and advising how to minimize the gap.
In September 2001, the IRS established the Workforce
Planning Council consisting of senior management representatives from each
operating division. The Director of the
Workforce Planning Division advised us that this Council is the primary vehicle
for communicating workforce planning information among the operating divisions.
The Workforce Planning Division recently drafted an Internal
Revenue Manual Handbook outlining the organizational responsibilities and
is preparing an overall guidance document to share with the IRS operating
divisions. This document further
describes the IRS workforce planning process and provides information on the
purpose and scope of each step in the process.
The IRS has completed many of the actions necessary for
developing a workforce planning model and has many other actions in
process. However, these actions were
focused on placing existing staff into the new organizational footprints designed
in response to reorganization requirements included in the IRS Restructuring
and Reform Act of 1998 (RRA 98), as opposed to being included in a
comprehensive workforce planning process.
Specifically, the IRS could further enhance the workforce
planning process by establishing a project plan that assigns responsibilities
and includes milestones for each of the five steps in an overall workforce
planning process. The Workforce
Planning Division Director established a general timeline for accomplishing the
tasks to be completed. However, this
plan does not provide complete information on responsibility and milestones for
completion and had not been presented for review and approval by the Chief
Human Resource Officer or the Workforce Planning Council.
The lack of a formal plan and consistency in approaches can
be attributed to the fact that the IRS has only recently initiated a
comprehensive workforce planning process.
This status is not unusual, as our interviews with the OPM and analysis
of recent OMB and GAO reports show that none of the Departments reviewed have
fully implemented an overall workforce planning process.
By preparing a formal project plan and refining selected
elements of the workforce planning process, IRS management will be able to
monitor progress and ensure consistency of activities and information
reporting. Implementing a formal
process will enable the IRS to:
·
Identify customers and goals.
·
Plan specific tasks and assign responsibilities for
completing the tasks.
·
Describe deliverables and establish timelines for
accomplishing tasks and goals.
·
Develop objective measures to evaluate goals and
milestones.
·
Monitor progress and evaluate results.
The OMB Circular A-123 and the GAO Standards for Internal Control require agencies to design
management structures that establish accountability for results when strategies
for implementing or reengineering programs and operations are developed and
executed. Managers should ensure that
appropriate authority, responsibility, and accountability are defined and
delegated to accomplish the mission of the organization and that an appropriate
organizational structure is established to effectively carry out program
responsibilities.
1.
The Chief Human Resource Officer should
apply a project management approach to ensure timely delivery of the guidance
and tools necessary to implement an effective workforce planning process. This approach should include completing the
following actions:
·
Identifying customers and goals.
·
Planning specific tasks and assigning responsibilities
for completing the tasks necessary to accomplish workforce planning goals.
·
Describing deliverables and establishing timelines for
accomplishing tasks and goals.
·
Developing objective measures to evaluate the success
of the workforce planning process.
·
Monitoring progress and evaluating results of the
project.
Management’s Response: The Chief
Human Resource Officer agreed to assign responsibility for the expansion of the
workforce planning process to the Director Workforce Planning. The Director will develop a 5-year workforce
plan and production schedule through the IRS Workforce Planning Council.
The IRS must be able
to accurately forecast future personnel requirements because investments in
human resources require long lead times and take years to reach full
productivity. However, the IRS
workforce planning process being developed is short-term (covering the current
fiscal year plus 2 future fiscal years) and may not effectively address
long-term (3 to 5 years) workforce planning goals.
The attrition of mission critical employees will affect
agency goals due to the direct loss of experienced higher-graded personnel who
are assigned to more complex work, and the need to assign remaining employees
to train those that are currently being hired.
In its 2000-2005 Fiscal Years Strategic Plan, the IRS included human
resource issues as 1 of the 12 major trends, issues, and problems facing the
bureau. This plan noted that
significant numbers of employees in mission critical front-line compliance and
information technology positions will be eligible for retirement.
In 2001, the GAO reported that retirement rates could be
significant in the following IRS mission critical occupations by 2006:
OPM data show that between September 2000 and December 2001,
the number of Revenue Agents and Revenue Officers has actually declined despite
recent hiring initiatives (521 and 174 positions, respectively).
The OPM workforce planning model along with recent GAO reports reference
the GPRA requirement for agencies to prepare strategic plans that address
program objectives and goals and the resources necessary to accomplish these
over at least a 5-year period.
The current process is the result of the IRS integrating its
workforce planning process with the ongoing strategic planning and budgeting
processes. The IRS budget planning
guidance includes milestones for preparing and delivering data that will also
be used in the workforce planning efforts for these periods. The IRS strategic planning and budgeting
process requires management to develop and report actual workload and resource
estimates for the short-term (i.e., the current fiscal year and the 2 future
years being planned). However,
quantitative measures for long-term planning are not always required in the
budget process. Neither the budget nor
the workforce planning documents include milestones for delivering all of the
data necessary to complete long-term workforce planning efforts.
Each of the IRS operating divisions has separate human
resources and budget planning functions with responsibility for planning the
application of resources and working with the IRS Agency-wide Shared Services
function to recruit and hire employees.
Managers from each of these functions were selected to serve on the IRS
Workforce Planning Council. The charter
for the Council assigns responsibility for development of a 2-year staffing and
hiring plan, as opposed to addressing long-term workforce planning
requirements.
Strategic workforce planning is a management framework for
making staffing and related decisions based on an organization’s mission,
strategic plan, budgetary resources, and workforce competencies. The strategic workforce planning processes
implemented by the IRS should not be limited by the current 2-year budget
planning process. Unless the workforce
planning process is expanded to cover a 5-year period, sufficient data will not
be available to assess the long-term workforce planning needs, as suggested by
the GPRA and reinforced in recent governmentwide reports and direction.
The GAO has recommended that the IRS work with Congressional
and other stakeholders to establish long-term customer service goals and obtain
the support and resources needed to reach customer service program goals. Data developed through a comprehensive
long-term workforce planning process can provide management with the
information necessary to support future appropriation requests by demonstrating
specific measurable impacts on organizational goals.
2.
The Chief Human Resource Officer should
expand the workforce planning process to encompass a 5-year period, including
developing and reporting the data necessary to assess potential risks
associated with staffing shortfalls and the impact on agency goals through this
period.
Management’s Response: The Chief
Human Resource Officer agreed to develop a 5-year workforce plan that will be
available along with other pre-planning materials necessary for the IRS
strategic planning, budgeting, and performance management process.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this
audit was to determine whether the Internal Revenue Service (IRS) Strategic
Human Resources (SHR) function has implemented a process to timely develop and
implement an effective workforce planning model to meet the expectations of the
four operating divisions.
Because workforce planning is an
ongoing process and the IRS has not yet completed each of the five steps in the
Office of Personnel Management (OPM) planning model, we evaluated the
accomplishments through the two initial steps, setting strategic direction and
analyzing workforce supply, demand, and discrepancies. Additionally, we determined whether the
workforce analysis step included guidance on actions necessary to provide
sufficient detail to support the workforce planning process.
To accomplish our objective, we
performed the following audit tests:
I.
Interviewed the IRS Chief Human Resource Officer and the
Director Workforce Planning, along with reviewing available documentation, to
determine whether management established a workforce planning process to
effectively:
A.
Identify and schedule the tasks necessary for completing a
workforce planning model for the IRS.
B.
Meet the workforce planning expectations of the operating
divisions by evaluating the process used by SHR to solicit needs and
expectations.
C.
Identify and assign responsibility for delivering the guidance
necessary for each of the steps included in the IRS planning model, along with
establishing reasonable milestones for completion.
II.
Confirmed workforce planning expectations and needs of the
four operating divisions by interviewing human resource and strategic planning
managers in the four operating divisions to determine the types of guidance and
direction they expect SHR to deliver and when they must have this guidance.
III.
Compared the current status of SHR efforts to deliver a
workforce planning model and analysis to that of other government agencies by
interviewing representatives from the OPM, Office of Management and Budget, and
General Accounting Office.
IV.
Evaluated the potential benefits to be derived from effective
designing and implementing workforce planning efforts by obtaining the data on
the number of IRS mission critical positions eligible to retire.
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant Inspector General
for Audit (Headquarters Operations and Exempt Organizations Program)
Mary V. Baker, Director
James V. Westcott, Audit Manager
James T. Avery, Senior Auditor
E. John Thomas, Senior Auditor
Gregory W. Holdeman, Auditor
Marjorie A. Stephenson, Auditor
Appendix III
Deputy Commissioner
Commissioner, Large and Mid-Size Business Division LM
Commissioner, Small Business/Self-Employed Division S
Commissioner, Tax Exempt and Government Entities
Division T
Commissioner, Wage and Investment Division W
Chief, Agency-Wide Shared Services A
Chief Human Resource Officer N:ADC:H
Director, Management and Finance LM:M
Director, Human Resources
S:HR
Director, Human Resources
T:HR
Director, Human Resources
W:HR
Director, Strategy and Finance W:S
Chief Counsel CC
National Taxpayer Advocate
TA
Director, Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
N:ADC:R:O
Office of
Management Controls N:CFO:F:M
Audit
Liaison: Chief Human Resource
Officer N:ADC:H:I
Appendix IV
The response was removed due to its size. To see the complete response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.