Additional Strategies Are Needed to Ensure the
Employee Plans Compliance Resolution System Will Accomplish Its Intended
Purposes
September 2003
Reference
Number: 2003-10-190
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.
September
12, 2003
MEMORANDUM
FOR COMMISSIONER, TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Assistant Inspector General for Audit (Small Business and
Corporate Programs)
SUBJECT: Final Audit Report - Additional
Strategies Are Needed to Ensure the Employee Plans Compliance Resolution System
Will Accomplish Its Intended Purposes
(Audit # 200210048)
This
report presents the results of our review of the Employee
Plans Compliance Resolution System (EPCRS) programs. The overall objective of this review was to determine whether the
Tax Exempt and Government Entities
(TE/GE) Division implemented the processes for the EPCRS programs to accomplish its program goals and consistently apply
the EPCRS guidelines.
In summary, the EPCRS
programs are the centerpiece of the TE/GE Division’s Employee Plans (EP)
function’s efforts to maximize voluntary compliance for more than 700,000
qualified plans with approximately 111 million participants and assets totaling
more than $4 trillion. In the 1990s,
the Internal Revenue Service (IRS) initiated several methods to allow plan
sponsors to correct deficiencies in their plans and retain their tax-exempt
status. These methods were organized
into the following three programs:
·
The Audit Closing
Agreement Program (ACAP), which allows plan sponsors to correct certain plan
failures identified during an examination and negotiate a sanction to be paid
to the IRS as a result of the plan failures.
·
The Self-Correction
Program (SCP), which allows plan sponsors to correct some operational errors
without an IRS sanction and does not require the plan sponsor to report the
correction to the IRS unless the error is identified during an examination.
·
The Voluntary
Correction Program (VCP), which allows plan sponsors to voluntarily notify the
IRS of certain types of plan failures along with a proposed correction
method.
The TE/GE
Division created the Voluntary Compliance (VC) organization to provide the
basis for growth of existing EPCRS programs and development of new programs,
improve coordination and consistency across programs, simplify administration,
and facilitate end-to-end accountability.
Although EP function management has continued to place emphasis on the
EPCRS programs and the EPCRS continues to be the centerpiece of their efforts
to maximize voluntary compliance, the TE/GE Division has not established clear,
measurable EPCRS goals for the three EPCRS programs. The EPCRS revenue procedure establishes general principles for
implementing the system, but it does not contain measurable program goals. Without measurable goals, it is difficult
for management to develop processes for evaluating whether the underlying
principles of the EPCRS are being achieved in the most effective manner.
In addition,
EPCRS procedures do not ensure similar plan failures are handled consistently
among different EP function offices. For
example, Examinations Program coordinators were using different ranges to
determine the ACAP sanctions. Also,
some plan sponsors may have to use ACAP procedures and pay a sanction to
correct operational failures that other plan sponsors are allowed to self-correct.
Furthermore, the
TE/GE Division has not established appropriate goals and measures for the EPCRS
programs in the annual EP Examinations Program operating plan. As a consequence, no accountability exists
for achieving improvements expected from the VC organization. For example, EP function management identified some
Examinations function employees incorrectly closing some self-correction cases
as “no change” cases. While EP function management was unsure
why the cases were closed in this manner, they suspect that using the “no
change” closing procedures assisted in meeting the cycle time goals for the
Examinations Program. When using SCP
procedures, employees are required to verify that the plan sponsor has
appropriately corrected the failure before closing the case.
We recommended that the Director, EP function,
develop measurable
participation goals for each EPCRS program, along with a method to measure the
results, and develop a process to measure the impact of marketing and outreach
efforts. The Director should also
implement standardized procedures for determining ACAP sanctions and the
significance of plan failures, establish measures to incorporate EPCRS goals
into the Examinations Program, and reemphasize the proper Examinations Program
closing procedures for operational failures corrected using the SCP.
Management’s
Response: The Commissioner,
TE/GE Division, generally agreed with our findings and recommendations but had
concerns on how to implement some of the recommendations. EP function management acknowledged that
they have not established numerical goals for the number of corrections made
under the three EPCRS programs and stated several reasons why that would
be difficult to do.
However, the EP function will continue to work with its stakeholders to
determine the effect the correction programs have on compliance. The Treasury Inspector General for Tax Administration
(TIGTA) believes that participation goals are one indicator of whether
customers are using EPCRS programs. If
EP function management does not want to develop participation goals, they
should consider establishing other goals to determine whether EPCRS programs
are actually increasing voluntary compliance or if plan sponsors are
voluntarily ensuring their plans are compliant.
Also, the
Commissioner, TE/GE Division, indicated that EP function management will analyze the feasibility of surveying applicants under
the VCP to help determine the impact of outreach activities on use of the
correction programs. To address consistency
issues for the SCP and ACAP, EP function management
plans to test three ACAP sanction structure proposals and is developing a peer
review process to review cases closed under the SCP and ACAP. The VC organization is developing a
webpage to provide tools to assist in the consistent application of the
EPCRS.
Finally, the Commissioner responded that
EP function management is proposing adding a
commitment to each area manager’s Performance Management System for
Fiscal Year 2004 to evaluate ACAP and SCP training needs, communicate
the requirement to use procedures outlined in Revenue Procedure 2003-44, and
identify and address barriers. While this
proposed action may bring accountability to the area managers and improve the
accuracy of ACAP and SCP cases, the TIGTA believes it does not provide EP
function management with assurance that the EP function staff are correctly
closing cases consistently nationwide, or that closing procedures are
consistently communicated nationwide. If EP
function management decides not to include this in the Performance Management
System, alternative actions will still be needed. Also, consistency may be improved by having the Director, EP
Examinations, communicate the requirements.
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.
Standardized Procedures Are Needed
to Ensure Case Actions Are Consistent
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
The Tax Exempt and Government Entities (TE/GE) Division’s
Employee Plans (EP) function is responsible for administering the tax code for
more than 700,000 qualified plans with approximately 111 million participants
and assets totaling more than $4 trillion. These qualified plans include various employee benefit plans, such
as pension plans, profit-sharing plans, Internal Revenue Code section 401(k)
retirement plans, employee stock ownership plans, and stock bonus plans. In the past, when deficiencies were
identified in a plan, Internal Revenue Service (IRS) management did not have
any remedies to correct a plan’s failures other than to revoke its tax-exempt
status. This action has tremendous
consequences for the individuals participating in those plans because their
retirement benefits may then become taxable.
To fill this void, in the 1990s, the IRS initiated several methods to allow plan sponsors to correct deficiencies in their plans and retain their tax-exempt status. These methods were eventually organized into the following three programs:
· The Audit Closing Agreement Program (ACAP) was developed within the Examinations Program and allows plan sponsors to correct certain plan failures identified during an examination and negotiate a sanction to be paid to the IRS as a result of the plan failures. The EP function reported that it closed 157 ACAP cases for the first 10 months of Fiscal Year (FY) 2002 and collected $3.2 million of associated sanctions.
· The Self-Correction Program (SCP) allows plan sponsors to correct some operational errors without an IRS sanction and does not require the plan sponsor to report the correction to the IRS unless the error is identified during an examination. As a result, the IRS does not know the total number of plan sponsors that have corrected plans using this method.
· The Voluntary Correction Program (VCP) allows plan sponsors to voluntarily notify the IRS of certain types of plan failures along with a proposed correction method. The plan sponsors submit a processing fee (not a sanction) to obtain the IRS’ written agreement on the appropriate correction method. The EP function reported that it closed 780 VCP cases for the first 10 months of FY 2002 and collected $3.2 million in processing fees.
In 1998, the correction methods were rolled into one system called the Employee Plans Compliance Resolution System (EPCRS) revenue procedure. The EPCRS revenue procedure is based on general principles that include encouraging plan sponsors to voluntarily correct plan failures, enabling plan sponsors to make corrections in a timely and efficient manner, and ensuring that the programs are consistently administered within the EP function. The EPCRS revenue procedure also outlines the eligibility and processing requirements for each of the three programs and is periodically updated to add new methods or change the eligibility requirements.
Prior to FY 2002, the three EPCRS correction programs were administered by different offices within the TE/GE Division. Due to inconsistencies in the way the offices governed the three correction programs, the TE/GE Division modernization redesign team created the Voluntary Compliance (VC) organization, which was staffed in February 2002. The expectations for the VC organization included the following:
·
Provide the basis for growth of existing EPCRS
programs and development of new programs.
·
Improve coordination and consistency across
programs.
·
Simplify administration and facilitate
end-to-end accountability of the EPCRS.
To
assist in the consistent application of EPCRS procedures, EP function
management created the Voluntary Compliance Council (VCC), consisting of
members from the Rulings and Agreements, Examinations, VC, and Customer
Education and Outreach (CE&O) functions.
The VCC is responsible for the development of processes, procedures, and
published guidelines on voluntary compliance matters that cross the
Examinations and Rulings and Agreements functions. EP function management created the Central Coordination Committee
(CCC), consisting of all the coordinators from the Examinations, Determination,
and VC functions. The CCC is
responsible for ensuring that EPCRS procedures are consistently applied across
the three functions.
The audit was conducted in accordance with Government Auditing Standards at the VC organization office located in Washington, D.C., and in selected EP function field offices nationwide between January and June 2003. Data used in this report on the number of plans, plan participants, and total assets came from various IRS reports. As such, we did not verify the accuracy of the information from those sources. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
EP function management has continued to place emphasis on the EPCRS programs, and the EPCRS continues to be the centerpiece of their efforts to maximize voluntary compliance, as stated in their FY 2003 Annual Work Plan. However, the TE/GE Division has not established clear, measurable goals for the three EPCRS programs. The EPCRS revenue procedure establishes general principles for implementing the system, but it does not contain measurable program goals. For example, the general principles encourage plan sponsors to self-identify and correct plan failures. However, the TE/GE Division has not defined how the term “encourage” should be measured and has not set a numerical goal for the number of corrections made under the EPCRS programs. Without measurable goals, it is difficult for management to develop processes for evaluating whether the underlying principles of the EPCRS are being achieved in the most effective manner.
Growth
of existing EPCRS programs
Among
the expectations of the EP function’s voluntary correction programs were to
have more plan sponsors use the EPCRS programs and to develop new programs for
plan sponsors who did not qualify for the current EPCRS programs. To meet these expectations, EP function
management continues to expand eligibility requirements for the EPCRS programs. For
example, the SCP program was expanded in May 2001 to permit small employers to
self-correct insignificant Simplified Employee Pension failures, and the VCP
was expanded in July 2002 in the area of anonymous submissions. However, the TE/GE
Division had not established program goals to evaluate whether the expectations
of the new programs are being met or the effect each program has on the other.
One incentive for plan sponsors to use either the SCP or VCP is
the substantial amount of sanctions that can be associated with the ACAP cases
that are identified during an EP examination.
Because ACAP cases are dependent upon the numbers and types of
examinations (e.g., if there are fewer examinations, there will be fewer
opportunities to identify plan failures that result in ACAP closures), TE/GE
Division management believes it would be difficult to establish ACAP goals.
Two components of management accountability, as defined by the
Office of Management and Budget Circular A-123, Management Accountability
and Control, are that managers are expected to increase program
productivity and control program costs.
In addition, the Government Performance and Results Act of 1993 (GPRA)
requires that major functions of operations specify in their annual plans the
general goals and objectives, including outcome-related goals, to determine the
skills, technology, and human capital necessary to achieve these goals. However, because measurable goals have not
been established for the three EPCRS programs, EP function management cannot
evaluate whether EPCRS programs are actually increasing voluntary compliance in
an effective manner.
The only EPCRS measurable goal the TE/GE Division included in its
FY 2002 Annual Work Plan was the total number of VCP cases closed compared to
an estimated number. The estimated
number includes a compilation of factors, such as an estimated number of
submissions, prior year closures, and an adjustment for an estimated increase
of SCP cases. However, this type of
goal is difficult to attain because EP function management may not always be
able to accurately estimate the number of VCP submissions that will be
received. If the volume of submissions
drops, there will be fewer cases to work and fewer closures. This is what occurred in FY 2002. The number of VCP closures decreased, and EP
function management believes that plan sponsors were using the SCP instead of
the VCP; however, there are no objective data to validate this assertion. Because plan sponsors are not required to
report SCP corrections, it is difficult
for EP function management to know whether use of the SCP has actually
increased.
The TE/GE Division has not established a measurable goal for the
SCP because it has been unable to develop a feasible method by which to capture
the number of participants without discouraging their participation. TE/GE Division management considered
including the SCP as a question on the Annual Return/Report of Employee Benefit
Plan (Form 5500); however, they thought plan sponsors would be reluctant to
answer the question for fear an examination might result. Another method considered was to require all
EP Examinations function employees to request the SCP packages from the plan
sponsor during the initial interview to document the number of participants in
the SCP; however, TE/GE Division management decided this line of questioning
could also discourage the use of the SCP.
Because the SCP is such an important, but
currently unmeasured, part of the EPCRS, EP function management should consider
participation goals for this program that can be measured. EP function management should consider
collecting these data using customer surveys or, at a minimum, requiring that
examiners include an SCP question in their initial interviews. EP function management agreed to consider
these alternatives, but stated the surveys would not provide a complete picture
of the use of the SCP. For example, EP function
management could send customer surveys to those who had been examined in the
past year asking how many had self-corrected, but only a small percentage of
the population is examined. TE/GE
Division management will need to determine whether this type of limited
quantifiable data for the SCP will be of benefit to the EP function.
Marketing
EPCRS programs
In
November 2002, VC organization management worked with the CE&O function to
create a VC organization marketing plan with two established goals. The first goal is to make every plan sponsor
aware of the necessity of internal control and monitoring systems for ensuring
retirement plans are in compliance with the law. The second goal is to increase the use of EPCRS correction
programs offered by the IRS.
To
accomplish these goals, the VC organization is creating educational material
with technical guidelines that explain the requirements for maintaining
employee plans, flowcharts that guide the applicant through the eligibility
process of each program, and a section that provides responses to frequently
asked questions. The educational
material will be available on the IRS Retirement Plans
web site.
In addition, the CE&O function continually works with the VC
organization to schedule speeches, benefit conferences, and panel discussions
that educate customers and promote the various EPCRS programs. As of February 2003, EP function employees
had either performed or scheduled over 160 of these events for FY 2003.
EP function management informed us that
customers are aware of the EPCRS programs.
For example, the participants in the EPCRS seminars verbally informed
the presenters that they are using the SCP instead of the VCP. Although EP
function management is able to quantify the number of presentations given, they
have not established an effective process that will substantially evaluate
whether the educational and marketing efforts will achieve the desired goals in
the VC organization marketing plan, as required by the GPRA.
Expanding and promoting EPCRS programs will assist sponsors in the
identification and correction of plan failures. However, because EP function management has not established an
effective way to measure the impact of these educational and marketing efforts
on compliance, they cannot determine whether the appropriate amounts of
resources have been applied to increase voluntary compliance through increased
marketing of the EPCRS programs.
1.
The Director, EP function, should develop measurable
participation goals for each EPCRS program, along with a method to measure the
results. TE/GE Division management will
also need to determine whether limited quantifiable data for the SCP will be of
benefit to the EP function.
Management’s Response: EP function management does not believe use
of formal surveys is a feasible alternative in measuring the use of the SCP and
establishing participation goals for this program. With respect to the VCP, the number of applications received is
not within the IRS’ control.
Establishing participation goals for the ACAP is both difficult and troubling. However, the
EP function will continue to work with its
stakeholders to determine the effect its correction programs have on compliance
and solicit suggestions on ways to improve the EPCRS programs.
Office of Audit Comment: Participation goals are one indicator of
whether customers are using EPCRS programs.
If EP function management does not want to develop participation goals,
they should consider establishing other goals to determine whether EPCRS
programs are actually increasing voluntary compliance or if plan sponsors are
voluntarily ensuring their plans are in compliance with the law.
2.
The Director,
EP function, should develop a process to measure the impact of the marketing
and outreach efforts on the desired marketing goals.
Management’s
Response: The
Director, EP CE&O, will request that the number of visits during FY 2004 to
the correction topic of the Retirement Plans webpage be tracked. In addition, EP function management will
track the number of EPCRS products distributed as well as the number of
speeches delivered by EP function representatives and the number of speech
attendees. During FY 2004, EP function
management will analyze the feasibility of surveying applicants under the VCP
to help determine the impact of outreach activities on use of the correction
programs.
Another expectation of the new VC
organization is to improve coordination and consistency among programs. This
expectation coincides with the EPCRS general principle that these programs be
administered in a consistent and uniform manner. However, we found that EPCRS procedures do not ensure similar
plan failures are handled consistently among different EP offices within the
Examinations, Determination, and VC functions.
Establishing fees or
sanctions
After the EP function identifies a
failure that will disqualify a plan, an employee works with the designated
EPCRS coordinator to arrive at the appropriate correction method and the amount
of any fee or sanction. Because of the
wide variety of plans and the level of significance of plan failures, it is
difficult to set specific sanction amounts that would equitably address every
type of plan failure. The EPCRS
coordinators and the two councils are intended to help ensure consistency in this
process. It is the coordinators’ responsibility
to ensure the different EP offices consistently apply an appropriate correction
method and fee or sanction. If a
coordinator has a question or concern with the EPCRS procedures or case
actions, the issue can be elevated to the CCC.
Nonetheless, each coordinator,
along with his or her manager, must determine whether a proposed action should
be implemented. In addition, EPCRS
correction methods and sanctions are not subject to a centralized review that would
ensure consistent case actions. This
latitude presents a risk that sanction amounts will be determined
inconsistently and result in inequitable treatment of customers.
We identified an area that might
result in inconsistent treatment. The
six Examinations Program coordinators do not agree on a standard range for the
ACAP sanctions. As a result, each
coordinator works with individual EP function employees to assist the employee
in negotiating a sanction amount with the plan sponsor. The sanction amounts are generally
negotiated within a range that could be as high as the amount of tax if the
plan was disqualified, and as low as the amount the plan sponsor would have
paid in processing fees if the sponsor had volunteered to correct the failure
using the VCP. The VCP fees are grouped
into six different ranges depending upon the number of plan participants. The processing fees could range anywhere
from $500 to $70,000, with the suggested amount being the median within each
range. Three of the Examinations
Program coordinators advised us that they used the median amount as their low
end, and the other three advised us that they used the high end of the VCP
range as their lower limit.
Only the VC organization has decided
to implement a fixed fee structure for all VCP cases, which will ensure
consistent processing fees. These new
VCP procedures were incorporated into the EPCRS revenue procedure issued in
June 2003. EP function management
recognizes that similar guidelines in determining ranges for ACAP sanctions are
needed in the Examinations Program to ensure more consistency in that Program
and has developed six different proposals.
They are still evaluating the proposals and have not yet agreed on the
appropriate method.
Deciding the
significance of the failure
Another EPCRS case action
that may be inconsistently administered is the decision to determine the
significance of a plan’s operational failure.
If the operational failure identified during an EP function examination
is insignificant, EPCRS procedures allow the plan sponsor to self-correct under
the SCP. If the failure does not
qualify for the SCP, EPCRS procedures state the plan sponsor would need to
correct it using the ACAP and also pay a sanction.
The EPCRS revenue procedure
provides several elements that should be considered when deciding the
significance of a plan failure; however, the decision is left to the group
managers. Some of these factors
include:
·
The number of plan
participants that are affected by the failure.
·
The percentage of plan assets
involved in the failure.
·
The number of years operating
with a failure.
If the correction method is not
covered in the EPCRS revenue procedure or if the group manager needs
assistance, cases should be elevated to the Examinations Program
coordinator. However, five of the six
Examinations Program coordinators have no set percentages or standards to use
when deciding whether a plan failure qualifies for the SCP. One Examinations Program coordinator
interpreted procedures differently from the others by qualifying all cases for
the SCP if only 1 year was involved.
Other Examinations Program coordinators had not set standards for this
decision and stated that cases are individually evaluated based on the facts.
Using the CCC to
resolve inconsistencies
EP function management established
the CCC to resolve any inconsistent application of EPCRS procedures. The first issue of establishing EPCRS fees
and sanctions requires the EP function to coordinate the activities of the
Examinations, Determination, and VC functions to reasonably ensure that
customers are receiving consistent treatment.
The second issue of deciding the significance of an operational failure
during an examination involves only the Examinations function.
These two issues have been
discussed by the CCC. The CCC decided
to establish a fixed-fee structure for VCP cases but did not decide on the
appropriate range for ACAP cases. For
the decision on whether an operational failure is significant and qualifies for
self-correction, the drafted procedures state the decision should be based on
the suggested elements of the case.
However, based on our discussions with the Examinations Program
coordinators, the procedures need to be more clearly defined to ensure more
consistent determinations of the level of significance of plan failures.
EP function management needs to
develop standard procedures along with processes that will ensure the EPCRS
procedures are consistently applied, both within the three EP functions and
across functional lines. The existing
process does not provide reasonable assurance that coordinators are applying
the EPCRS in a consistent manner. As a
result, similar plan sponsors with the same types of plan failures may be
assessed different sanctions because they operate in different geographic
areas. In addition, some plan sponsors
may have to use ACAP procedures and pay a sanction to correct operational
failures that other plan sponsors are allowed to self-correct.
3.
The Director, EP function, should implement standardized
procedures for determining ACAP sanctions and the significance of plan
failures. Also, a process should be
developed to ensure these procedures are consistently applied.
Management’s
Response: During
FY 2004, EP function management will test three ACAP sanction structure
proposals to determine the impact on compliance and consistency. Also, the area coordinators are developing a
peer review process to review cases closed under the SCP and ACAP in an effort
to promote consistency. In addition,
the VC organization is developing a webpage that will provide tools to assist
in the consistent application of the EPCRS, such as closing agreement
templates, a catalog of issues addressed by the CCC, and answers to questions
received from taxpayers.
The TE/GE Division has not
established appropriate goals and measures for the EPCRS in the annual EP
Examinations Program operating plan. As
a consequence, no accountability exists for achieving improvements expected
from the VC organization. For example,
one of the expectations of reorganizing the EP voluntary correction programs
was to simplify administration and facilitate end-to-end accountability. Since March 2002, VC organization management
has been responsible for working all of the new VCP cases from beginning to end
and is in the process of implementing a centralized inventory system to control
these cases, as well as the ACAP and SCP cases. While the centralized inventory system will facilitate
administration of EP voluntary correction programs, the VC organization still
does not have control over the Examinations function, which works all of the
ACAP and SCP cases.
The CCC, along with VC organization management, provides guidance
to EP Examinations function employees working SCP and ACAP cases. However, the Examinations and Determination
Programs do not have established goals for the EPCRS in their work plans. This creates a risk that the EPCRS programs
may not be given the proper priority.
One such risk was recorded in the minutes of a VCC meeting. EP function management stated that
operational reviews had identified cases where some Examinations function
employees incorrectly allowed plan sponsors to self-correct operational
failures and closed the cases as “no change” instead of using SCP
procedures.
While EP function management was unsure why the cases were closed
in this manner, they suspect that using the “no change” closing procedures
assisted in meeting cycle time goals for the Examinations Program. When using SCP procedures, employees are
required to verify that the plan sponsor has appropriately corrected the
failure before closing the case.
Verifying the correction requires more work and, consequently, increases
the amount of time needed to close the case.
Because EP Examinations function employees may not be properly
recording these SCP cases, EP function management is not getting an accurate
assessment of their efforts to increase compliance. This could also affect the EP Examinations function’s Risk
Assessment Program if plans requiring self-correction are closed as a “no
change.” If there are sufficient
numbers of these incorrect closures, the applicable market segments could
reflect an overstated level of compliance.
Including EPCRS measures in the Examinations Program plan would
establish accountability for achieving EPCRS program goals in addition to
Examinations Program goals.
4.
The Director, EP function, should establish appropriate
measures to incorporate EPCRS goals into the EP Examinations Program so
Examinations function employees are accountable for both EPCRS and Examinations
Program goals.
Management’s
Response:
EP function management does not believe that the incidence of
plan errors can be predicted and does not want to create a situation in which the establishment of program goals may affect either
the examination selection process or the outcome of any case. Instead, the Director, EP Examinations, is
proposing adding a commitment to each area manager’s Performance Management
System for FY 2004 to evaluate ACAP and SCP training needs, communicate the
requirement to use procedures outlined in Revenue Procedure 2003-44, and
identify and address barriers.
Office of Audit Comment: While this proposed action may bring
accountability to the area managers, it does not provide EP function management
with assurance that the EP function staff are correctly closing cases
consistently nationwide. Also, if EP
function management decides not to include this in the Performance Management
System, alternative actions will still be needed.
5. The Director, EP function, should reemphasize the proper Examinations Program closing procedures for operational failures corrected using the SCP.
Management’s
Response: EP function management is proposing adding a commitment to each area manager’s
Performance Management System for FY 2004 to evaluate ACAP and SCP training
needs, communicate the requirement to use procedures outlined in Revenue Procedure
2003-44, and identify and address barriers.
Office of Audit Comment: While this proposed action may improve the
accuracy of ACAP and SCP cases, it does not provide EP management with the
assurance that closing procedures are consistently communicated nationwide. Consistency may be improved by having the
Director, EP Examinations, communicate the requirements.
Appendix I
The
overall objective of this review was to determine whether the Tax Exempt and
Government Entities (TE/GE) Division implemented the processes for the Employee
Plans Compliance Resolution System (EPCRS) programs
to accomplish its program goals and consistently apply the EPCRS
guidelines. Specifically, we:
I.
Determined whether TE/GE Division management had
established measurable EPCRS goals and processes for
accomplishing those goals.
A.
Identified the measurable
EPCRS goals for each of the three Employee Plans (EP) components that were
included in the EP function’s Fiscal Year 2002 Annual Work Plan.
B. Evaluated the EP function processes to determine if the necessary information was captured to measure the EPCRS program goals.
II. Determined whether TE/GE Division management had established the necessary processes to ensure all EPCRS cases that are reported to the Internal Revenue Service (IRS) are controlled and monitored.
A. Identified the processes the EP function used to ensure the EPCRS cases reported to the IRS are controlled.
B. Evaluated the EPCRS inventory system to determine if the system will provide TE/GE Division management with the information necessary to monitor the EPCRS program goals.
III. Determined whether TE/GE Division management had established the necessary processes to coordinate the efforts among the three different EP function components to ensure EPCRS procedures are applied in a consistent manner.
A.
Identified the processes the
EP function used to ensure the EPCRS procedures were applied in a consistent
manner by the three EP function components.
B.
Interviewed all of the EPCRS
field coordinators to evaluate whether their involvement would ensure EPCRS
guidelines were applied in a consistent manner.
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs)
Nancy Nakamura, Director
James Westcott, Audit Manager
Robert
Nicely, Senior Auditor
Michael
Van Nevel, Senior Auditor
Marjorie Stephenson, Auditor
Appendix III
Commissioner N:C
Deputy Commissioner for Services and Enforcement
N:SE
Deputy Commissioner, Tax Exempt and Government Entities
Division SE:T
Director, Employee Plans, Tax Exempt and Government
Entities Division SE:T:EP
Director, Employee Plans Examinations, Tax Exempt and Government
Entities Division SE:T:EP:E
Chief Counsel CC
National Taxpayer Advocate
TA
Director, Office of 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, Communications and Liaison, Tax Exempt and Government Entities Division T:CL
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.