The Effectiveness of Management and Union Partnering Could
Be Improved
May 2003
Reference
Number: 2003-10-122
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.
May
23, 2003
MEMORANDUM
FOR DEPUTY COMMISSIONER
FROM: Gordon C. Milbourn III /s/ Gordon C. Milbourn III
Acting Deputy Inspector
General for Audit
SUBJECT: Final Audit Report - The Effectiveness of
Management and Union Partnering Could Be Improved (Audit # 200210036)
This
report presents the results of our review of Management and Union
Partnering. The overall objective of
this review was to determine which activities are covered by the Internal
Revenue Service (IRS) and National Treasury Employees Union (NTEU) partnering
agreements and whether the benefits derived from these activities are recorded
and quantified. This review was
initiated at the request of Senator Charles Grassley, Chairman of the Senate
Finance Committee.
In
summary, although IRS management and NTEU officials were able to cite examples
of successes through partnering, the consensus was that the benefits of
partnering would be difficult to measure.
Partnering councils did not provide assessments on the results or
benefits of their activities. The most
often cited benefit of the partnering initiative was the relationships built
between IRS managers and NTEU members, which in certain instances have helped
facilitate work process changes.
Nonetheless, there are a number of steps the IRS could take to increase
the cost effectiveness of partnering.
We
recommended that partnering councils establish performance measures so that
they can prepare self-assessments using objective criteria. We also recommended that the IRS, in
coordination with the NTEU, track costs associated with partnering efforts;
focus on issues at council meetings which would help reduce formal bargaining
time; ensure council members have a proportionate level of decision-making
authority and understanding of national positions; coordinate with each other
on similar issues; and reduce the number of councils, membership levels, and
frequency of the meetings.
NTEU Comments: NTEU
management generally agreed with our findings and recommendations and concurred
that there was room for improving the effectiveness of the partnering
process. The NTEU disagreed with one
recommendation related to ensuring that council members possess a proportionate
level of decision-making authority. The
NTEU National President stated that the NTEU has vested its council members
with full authority to decide issues that the NTEU has placed on the
partnership councils’ agendas for decisions, but noted that these councils
rarely deal with matters that can be collectively bargained. The NTEU also expressed some concerns and
provided additional information and perspective on certain issues. We have included a summary of the NTEU comments
after each recommendation to which the comments are related.
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.
Partnering Councils Should Perform Assessments of the
Results or Benefits of Their Activities
The Cost Effectiveness of Partnering Efforts Could Be Increased
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Listing of Partnering Councils
Appendix V – Estimated Annual Cost of Partnering
Appendix VI – Management’s Response to the Draft Report
This audit was initiated at the request of Senator Charles Grassley, currently the Chairman of the Senate Finance Committee. Senator Grassley requested that we determine which activities are covered by partnering agreements and if the Internal Revenue Service (IRS) records and quantifies the benefits of these activities. To respond to this request, we obtained information from the IRS and the National Treasury Employees Union (NTEU) related to partnering agreements, the number and composition of the partnering councils, the minutes from the council meetings, the total cost of partnering activities, and whether there were any measurable benefits.
The general purpose of labor-management partnering is to forge cooperative relationships and involve employees and their union representatives early in the process of considering and deciding on issues that affect the workplace. This is referred to by IRS management and the NTEU as “pre-decisional involvement.” The methods used to achieve this purpose include frequent, on-going interactions in formal partnering councils, business process improvement teams, committees, and informal discussions.
On October 1, 1993, President Clinton issued Executive Order 12871, Labor-Management Partnerships, which required all Federal Government agencies to form partnerships with their employees and union representatives to identify problems and develop solutions to better fulfill agencies’ missions and serve their customers. Even prior to the issuance of the Executive Order, the IRS had formed partnering councils with the NTEU based on the IRS’ regional and district structure. These councils included a national partnership council, regional partnership councils, district partnership councils, and service center partnership councils.
In 1998, the IRS began
reorganizing, eliminating geographic regions and districts, and creating units
serving groups of taxpayers with similar needs. In November 2000, after the IRS reorganized, the NTEU and the IRS
entered into the Modernization Partnering Agreement (MPA). This agreement formalized the activities of
the IRS’ partnering councils and authorized each
division and function to have a national partnering council. The IRS now administers 23 partnering
councils at the IRS-wide, Divisional/ Functional, and Sub-Divisional
levels. During Calendar Year 2002, at
least 221 people participated in partnering activities. Shown below is the distribution of these
councils (see Appendix IV for a complete listing of the councils).
Table
1 – Number of Partnering Councils
|
Area
of Responsibility |
Number of Partnering Councils |
|---|---|
|
IRS-wide |
1 |
|
Tax Exempt and Government Entities |
5 |
|
Small Business/Self-Employed |
4 |
|
Wage and Investment |
7 |
|
Large and Mid-Size Business |
1 |
|
Agency-Wide Shared Services |
1 |
|
Modernization, Information Technology and Security Services |
1 |
|
Taxpayer Advocate Service |
1 |
|
Appeals |
1 |
|
Communications and Liaison |
1 |
|
Total |
23 |
Source: IRS Office of Cooperative Efforts.
On February 17, 2001, President Bush revoked Executive Order 12871 with Executive Order 13203. Although this latter Executive Order rescinded the mandate for partnering, it did not rescind the authority to partner.
Audit work was performed in Washington, D.C., from August 2002 through February 2003 in the Office of Cooperative Efforts as well as the IRS operating divisions and functions. 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.
While IRS management and NTEU officials were able to cite examples of successes through partnering, the consensus was that the benefits of partnering would be difficult to measure. The most often cited benefit of the partnering initiative was the relationship built between IRS managers and NTEU members. IRS management considered establishing good working relationships with the NTEU to be smart business.
Both the IRS and the NTEU stated that the working relationships and partnership arrangement under the previous IRS organizational structure enhanced the ability to make the needed changes to accomplish the IRS’ reorganization (in Fiscal Years 1999 and 2000) through joint efforts, cooperation, and successful work process changes.
More recently, with the realignment of the partnering councils, there have been additional examples of work process changes which IRS and NTEU officials believe were facilitated by partnering efforts. These include the Limited Issues Focused Examinations process, which was designed to reduce the average length of time for the examination of certain types of tax returns, and the refocusing of the Automated Collection System to provide better service through improved training, communication, and procedures.
Both IRS and NTEU officials stated that it would be difficult to determine specifically how the above processes would have progressed without past partnering efforts as well as the formal partnering councils—notwithstanding the shared view that partnership contributed to their success. Nonetheless, pursuant to joint agreement between the NTEU and the IRS in forming the councils, the partnering council Charters and Operating Procedures require the councils to perform annual self-assessments. However, none of the 23 partnering councils provided the assessments. IRS management stated that they did not know why assessments were not provided. Recently, IRS management has reemphasized this requirement and has encouraged all councils to prepare these assessments annually.
While partnering council Charters and Operating Procedures require annual self-assessments, they did not establish objective criteria for assessing the benefits derived from partnering efforts. Performance measures for these benefits would provide the councils with objective criteria to perform the annual self-assessments. Without measures or assessments of the results of partnering activity, the ability to gauge success and identify areas for improvement is limited.
1. The Deputy Commissioner should ensure partnering councils prepare self-assessments using objective criteria. When possible, councils should establish performance measures for measuring success. These measures should be consistent with the goals of partnering.
Management’s Response: The Deputy Commissioner and the NTEU National President will jointly sign a memorandum to reemphasize the requirement for councils to complete self-assessments. Copies of the self-assessments will be submitted to the Director of Cooperative Efforts. In addition, the Deputy Commissioner will work with the NTEU to develop measures and methods for evaluating performance that consider the key interests of the stakeholders. The method selected will address partnering goals in relation to the councils’ performance measures. Results of this effort will be proposed to the IRS/NTEU Service-wide Partnering Council.
NTEU Comment: The NTEU National President agreed with this recommendation and affirmed the importance of managing the partnering program just as effectively as any other program.
The IRS did not track costs associated with partnering activities. Based on the reported hours and estimated travel costs associated with partnering, we estimate that the IRS spends approximately $7.4 million per year on the partnering initiative.
Table 2 – Estimated Annual Cost of Partnering Activities
|
Type of Cost |
Amount |
|---|---|
|
Salary |
$ 6.6 Million |
|
Travel |
$ 0.8 Million |
|
Total |
$7.4 Million |
Sources: IRS Reports for
Chapter/Steward Hours and Bargaining Hours; IRS Office of Cooperative Efforts.
An assessment of the costs in relation to the results and benefits would provide IRS management and the NTEU with the ability to better determine the optimum level of resources that should be devoted to partnering.
Issues discussed at council meetings should reduce formal bargaining time
The MPA allows for the bargaining rights of both management and the NTEU to be preserved. However, it is the goal of partnering to address and resolve issues using cooperative techniques and, therefore, to minimize the amount of time spent in formal bargaining sessions.
In general, partnering council meetings did not focus on issues that would help reduce bargaining time. Most of the agendas focused on topics such as employee satisfaction, employee suggestions, various surveys, and quality improvement processes. There were few examples of issues that affect working conditions or how work is performed. The following table shows examples of how often key issues were discussed at the meetings, according to the minutes that we reviewed.
Table 3 – Examples of Council Meeting Issues
Issue
|
Number
of Councils |
Number
of Meetings |
|---|---|---|
|
Bargaining Issues: |
|
|
|
Awards |
7 |
16 |
|
Grievances |
2 |
2 |
|
Flexi-place |
1 |
1 |
|
Work Schedules |
0 |
0 |
|
Nonbargaining Issues: |
|
|
|
Employee Satisfaction Survey |
14 |
66 |
|
Various
Surveys |
11 |
34 |
|
Employee Suggestion Program |
10 |
29 |
|
Quality Improvement Process |
9 |
20 |
Source:
Meeting Minutes for 17 Partnering Councils from June 2000 through August
2002.
While the issues that were discussed most often are important and should be valid concerns of IRS managers, the majority of partnering council members agreed that these are not issues that require extensive, if any, bargaining time.
Council members should have a proportionate level of authority and understanding of national positions
The MPA cites proper representation as a key element in successful partnering. In this respect, it is important that individuals representing both IRS management and the NTEU are knowledgeable about the issues and can provide their counterparts with a reasonable level of assurance that their respective national parties will accept council decisions. This would help ensure that partnering is meeting its goal of reducing formal bargaining time.
IRS managers stated that there have been a number of instances in which NTEU partnering council representatives did not appear to have the authority or understanding of the issues to represent NTEU positions. For example, council members engaged in discussions for implementing five accelerated processing centers for determination letters, which provide information on whether retirement plans met certain legal requirements. However, the partnering council members from the NTEU did not have the authority to represent the NTEU position. In addition, a proposal to engage in pilot projects for identifying whether process improvements could be made was not approved by the NTEU national officials. NTEU officials stated that individuals are generally selected to participate on councils based on functional expertise when possible; it is sometimes difficult to identify individuals with both the needed authority and the knowledge of national positions who can serve on the councils.
As a result, the efforts of the partnering council did not reduce formal bargaining time or help to implement decisions. IRS managers became frustrated because time spent on negotiable issues did not produce results. Consequently, councils focused on the less controversial issues.
Partnering
councils should coordinate with each other on similar issues
While there was some coordination among the councils within individual operating divisions, there was little coordination among the four Business Operating Divisions and the five Functional Operating Divisions. As a result, there was some redundancy among councils, and several councils were working on similar issues. For example, 17 councils discussed communication techniques, 16 councils discussed partnering logistics, and 14 councils discussed partnering documents (such as charters, processes, and procedures).
The four Business Operating Divisions serve different types of taxpayers and, to an extent, operate independently. This contributes to the inadequate coordination among the councils in different divisions and functional areas. However, many issues discussed apply to all of the operating divisions. A coordinated effort to identify a national resolution to similar issues could save both time and resources, particularly on negotiable issues.
Reducing the number of councils, membership levels, and frequency of the meetings could increase the cost‑effectiveness of partnering
The MPA allowed for each division and function to have a national partnering council. Consequently, the IRS established an IRS-wide partnering council and 22 separate partnering councils that represent 5 Functional Operating Divisions, 4 Business Operating Divisions, and 13 functions within the 4 Business Operating Divisions. The number of members on these councils ranged from 5 to 21 people, and the council Charters and Operating Procedures prescribed meetings every month.
IRS managers were concerned there were too many partnering councils, citing that some council members were finding it difficult to identify productive agendas. For example, at least three councils documented concerns in the meeting minutes, including such comments as “Meeting was… not well prepared or planned,” “Not a lot of issues dealt with partnering,” and “Have not tackled tough issues.”
Managers were also concerned that councils may involve too many members to be able to accomplish anything productive during the time period of the council meetings. Senior managers told us that large councils were slow to make decisions because the number of people who weighed in on issues made it difficult to reach a consensus. In addition, the councils could not move onto new issues because time was spent giving everyone on the council an opportunity to speak on each issue.
We noted that some of the councils had reduced the frequency of their meetings from the monthly schedule established by the Charters and Operating Procedures to a less frequent schedule (e.g., bi-monthly). Both IRS management and NTEU officials believe that councils should assess the frequency of their meetings to ensure that members are productively engaged in the resolution of meaningful issues.
The Deputy Commissioner, in coordination with the NTEU, should:
2.
Ensure costs related to
partnering activities are tracked to provide a basis for evaluating the cost
effectiveness of specific partnering activities.
Management’s Response: The Deputy
Commissioner will require that each partnering council submit quarterly
summaries of both costs and benefits associated with partnering to the Director
of Cooperative Efforts. The benefits to
be tracked will be specified in the report resulting from the measurement and
evaluation process.
NTEU Comment: The NTEU National
President agreed with this recommendation.
She stated further that it was advisable to track the costs of
activities at the IRS in general, not just the cost of partnering. She also pointed out that in conducting a
cost/benefit analysis, the IRS should consider the cost of alternative
resolution approaches that may have been avoided through partnering, when
assessing its benefits.
3. Ensure partnering councils focus meeting agendas on issues that would help reduce the need for bargaining at a later time, especially issues such as working conditions and how work is performed.
Management’s Response: The Deputy Commissioner will work with the NTEU National President to jointly reemphasize the Modernization Partnering Agreement requirement for councils to focus meeting agendas on performance measures that address employee and customer satisfaction and business processes and results. A memorandum will also be issued to advise the councils that they must provide the agenda for each council meeting to the Director of Cooperative Efforts, who will coordinate any feedback and guidance from the IRS/NTEU Service-wide Partnering Council Co-Chairs.
NTEU Comment: The NTEU National
President stated that there have been many issues for which bargaining was
avoided because the issues were dealt with totally in partnering. She also pointed out that one of the
councils created a process known as “Early Bargaining Intervention” to shorten
bargaining on major work system changes for the Small Business/Self-Employed
Division. However, she also stated that
very few issues that are bargainable come to the partnership councils unless
one party or the other goes out of its way to put it in that venue; partnership
was created to primarily deal with those issues that are not bargainable or
which would be highly unusual bargaining discussions.
4.
Ensure that
council members possess a proportionate level of decision-making authority and
that members have a full understanding of their organizations’ positions on
council issues.
Management’s Response: The IRS/NTEU
Service-wide Partnering Council Co-Chairs will disseminate a document to
council members that reemphasizes council members’ roles, responsibilities, and
authority from a national perspective.
In addition, the Deputy Commissioner will establish an IRS communication
process for council members to help improve awareness of their respective
organizations’ positions on council issues.
The process will be shared with the NTEU National President to consider
as a communication process for the NTEU.
NTEU Comment: The NTEU National
President disagreed with the concern that its partnership council members do
not have the authority to decide issues and make agreements. She stated that the councils are fully
empowered to make decisions for issues on their agendas, but that they rarely
deal with matters that can be collectively bargained.
5. Oversee the partnering process to ensure that issues which are applicable to more than one Division/Function and overlap more than one council are coordinated to help facilitate a common goal.
Management’s Response: The Director of Cooperative Efforts will begin reviewing the agenda items the councils submit and, when appropriate, coordinate council and stakeholder involvement and sources of information.
NTEU Comment: The NTEU National
President stated that the resistance to IRS-wide solutions comes from the IRS
divisional managers. The NTEU would be
willing to undertake any effort identified that would result in more IRS-wide
solutions and reduce the need to discuss the same problems in a number of
different councils.
6. Evaluate the need for a council at every divisional, sub-divisional, and functional level. The evaluation should involve possibilities for partnering councils to be reduced in number, size, and frequency of meetings.
Management’s Response: The Deputy Commissioner will work with the NTEU National President to review the number of division and function national partnering councils and report the results to the IRS/NTEU Service-wide Partnering Council. As partnering councils establish their council objectives based on performance measures, and conduct their self-assessments, they should reevaluate the size of their council membership and the frequency of meetings. To initiate the process, the Deputy Commissioner and the NTEU National President will require the division national partnering councils’ and function national partnering councils’ Co-Chairs to assess the size of the council and the frequency of the meetings and report the results to the Director of Cooperative Efforts.
NTEU Comment: The NTEU National President stated that the NTEU would be willing to reduce the number of councils if IRS management would vest these councils with the power to bind everyone below them.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of our review was to determine
which activities are covered by the Internal Revenue Service (IRS) and National
Treasury Employees Union (NTEU) partnering agreements and whether the benefits
derived from these activities are recorded and quantified. To accomplish this objective, we completed
the following sub-objectives and steps:
I.
To determine
what activities are covered by the IRS and NTEU partnering agreements, we:
A.
Reviewed the charters, minutes of
meetings, presentations, and other documentation outlining the activities
engaged in by the national partnering councils and sub-councils.
B.
Evaluated the results of the IRS’ review of
its partnering agreements, policies, and procedures.
C.
Compared the partnering activities engaged in
by the national partnering councils and sub-councils with the
requirements of Executive Order 13203.
D.
Interviewed members of the national
partnering councils and sub-councils
and the Director of Cooperative Efforts, IRS/NTEU Service-wide Partnering
Council.
II.
To determine
whether the benefits derived from the IRS and NTEU partnering agreements are recorded and quantified, we:
A.
Reviewed documents prepared by the national
partnering councils and sub-councils to
identify benefits derived from partnering activities.
B.
Reviewed self-assessment documents prepared
by the national partnering councils and sub-councils.
C.
Evaluated the methodologies used by the national
partnering councils and sub-councils to
quantify the benefits derived from partnering activities.
D.
Interviewed
members of the national partnering councils and sub-councils and the Director of Cooperative Efforts,
IRS/NTEU Service-wide Partnering Council.
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant Inspector General
for Audit (Headquarters Operations and Exempt Organizations Programs)
Michael E. McKenney, Director
Carl L. Aley, Audit Manager
Richard J. Viscusi, Senior Auditor
Michael Della Ripa, Auditor
Appendix III
Commissioner N:C
President, National Treasury Employees Union
Commissioner, Large and Mid-Size Business Division LM
Acting Commissioner, Small Business/Self-Employed Division S
Commissioner, Tax Exempt and Government Entities Division T
Commissioner, Wage and Investment Division W
Director, National Headquarters Management and Finance N:ADC:M
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:AR:M
Audit Liaison: Director, National Headquarters Management and Finance N:ADC:M
Appendix
IV
Listing of Partnering
Councils
Service-wide (IRS-wide)
Tax Exempt and Government Entities (National)
Tax Exempt and Government Entities (Employee Plans)
Tax Exempt and Government Entities (Exempt Organizations)
Tax Exempt and Government Entities (Government Entities)
Tax Exempt and Government Entities (Accounts Management)
Small Business/Self-Employed (National)
Small Business/Self-Employed (Taxpayer Education and Compliance)
Small Business/Self-Employed (Compliance)
Small Business/Self-Employed (Campus)
Wage and Investment (National)
Wage and Investment (Stakeholder Partnerships, Education, and Communication)
Wage and Investment (Compliance)
Wage and Investment (Field Assistance)
Wage and Investment (Media and Publications)
Wage and Investment (Submission Processing)
Wage and Investment (Accounts Management)
Large and Mid-Size Business (National)
Agency-Wide Shared Services
Modernization, Information Technology and Security
Taxpayer Advocate Service
Appeals
Communications and Liaison
Appendix
V
Estimated
Annual Cost of Partnering
Staff
Costs
National Treasury Employees Union Staff Hours........... 106,548
Internal Revenue Service (IRS) Staff Hours........... 106,548
Total Staff Hours 213,096
GS-09 Salary With Benefits........... $ 52,780
GS-12 Salary With Benefits........... $ 77,116
Average Salary With Benefits........... $ 64,948
Hours per Staff Year........... 2,088
Average Hourly Rate. $
31.11
Total
Staff Cost per Year $ 6,629,417
Travel
Costs
Number of Councils........... 23
Average Number of Meetings Annually........... 6
Total Number of Meetings Annually (23 x 6)........... 138
Percentage of Meetings When Costs Were Incurred........... 81%
Total Number of Meetings When Costs Were
Incurred (138 x 81%)............... 112
Average Costs per Meeting. $
6,767
Total
Travel Cost per Year (112 x $6,767)
$ 757,904
Total Partnering Cost per Year $ 7,387,321
Appendix
VI
Management’s Response to the Draft Report
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.