TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

 

 

Workforce Planning Efforts Are Hindered by a Lack of Comprehensive Information on Employee Skills Levels

 

 

 

February 24, 2009

 

Reference Number: 2009-10-041

 

 

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.

 

Phone Number   |  202-622-6500

Email Address   |  inquiries@tigta.treas.gov

Web Site           |  http://www.tigta.gov

 

February 24, 2009

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT
                                         DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT

 

FROM:                            Michael R. Phillips /s/ Michael R. Phillips

Deputy Inspector General for Audit

 

SUBJECT:                    Final Audit Report – Workforce Planning Efforts Are Hindered by a Lack of Comprehensive Information on Employee Skills Levels (Audit # 200710042)

 

This report presents the results of our review of the Internal Revenue Service’s (IRS) efforts to evaluate employee skills levels.  The overall objective of this review was to evaluate the IRS’ progress in developing a methodology to evaluate whether its workforce possesses the skills and competencies (hereafter collectively referred to as skills) necessary to meet current and future challenges.  This review was part of the Treasury Inspector General for Tax Administration Fiscal Year 2008 Annual Audit Plan coverage under the major management challenge of Human Capital[1] and is one of a series of audits planned to assess how the IRS is addressing the Human Capital management challenge. 

Impact on the Taxpayer

The potential loss of a large number of its most experienced technical employees within the next several years, coupled with the continually increasing complexity of the work performed by these employees, necessitate that the IRS conduct effective workforce planning.  However, the IRS lacks the comprehensive, agency-wide information on mission critical employee skills it needs to effectively perform this planning.  Because the IRS does not have a methodology in place to fully measure its workforce against current and future skills, it is missing the opportunity to reshape its workforce to meet future challenges, which could adversely affect the quality of service provided to taxpayers.

Synopsis

The work performed by IRS employees continually requires enhanced and more diverse skills, as manual systems used to support tax administration become computer based, the Tax Code becomes more complex, and American taxpayers and tax practitioners expect higher levels of service.  However, the IRS lacks the comprehensive, agency-wide information on mission critical employee skills it needs to effectively assess its workforce needs. 

The lack of employee skills information we identified is primarily attributable to the absence of a corporate process for the uniform collection, compilation, and analyses of skills data across the agency.  In addition, the IRS Human Capital Office (HCO) has not provided sufficient guidance to support the uniform collection of these data at the business unit and operating division levels.  However, the IRS HCO has begun to develop a methodology to identify and assess employee skills gaps agency-wide.  Until the IRS implements a consistent methodology for assessing the skills needed and possessed by all employees in mission critical occupations,[2] it will be unable to fully plan for future training and recruitment needs.

The IRS HCO informed us that it is evaluating the feasibility of partnering with the Office of Appeals to develop a process for performing skills gaps assessments of mission critical occupations.  This process would use the Enterprise Learning Management System[3] as a platform to collect information regarding critical skills needed and to document the results of skills assessments.  This platform would also allow for the preparation of development plans tailored to address any skills gaps identified and would include an automated link between the skills gaps assessment process and available training courses.  A key objective of this effort is the development of a skills assessment process that could ultimately be used agency-wide.

While we believe that the current approach by the IRS HCO is reasonable, improvements are needed to ensure accountability and maintain progress as the IRS moves forward with its efforts to develop a skills gaps assessment process.  Specifically, the IRS HCO has not developed a detailed plan to guide the agency’s overall efforts and coordinate the multifunctional actions necessary to ensure the success of this effort.

Recommendations

We recommended that the IRS Human Capital Officer continue with efforts to partner with one or more business units/operating divisions to develop a workable corporate process for skills gaps assessments.  We also recommended that the Deputy Commissioner for Operations Support and the Deputy Commissioner for Services and Enforcement develop a detailed plan to guide the IRS’ overall skills gaps assessment effort and coordinate the multifunctional participation necessary to ensure the success of this effort.  This plan should be developed in coordination with the IRS business units and operating divisions, identify periodic milestones, and assign accountability for specific actions.  

Response

IRS management agreed with all of our recommendations.  The IRS HCO in partnership with the Office of Appeals has initiated a pilot for assessing the competencies of tax compliance specialists, a mission critical occupation.  A successful pilot will demonstrate the feasibility of implementing these automated processes throughout the Office of Appeals.  The pilot will also be evaluated for expansion to other business units/operating divisions.  In addition, under the auspices of the IRS Workforce of Tomorrow’s[4] “Planning a Dynamic People Strategy,” the task force will work with subject matter experts from the IRS HCO and the business units to develop a competency management system.  This group will identify the skills and competencies to be tracked across the IRS as well as the process for tracking skills and compiling the data.  Once the process is established, the system will be populated with skills and competencies information for each employee.  Finally, when the system is fully populated with skills and competencies data, it will be fed back into the IRS-wide attrition and workload models to enable strategic analysis of skills gaps and needs.  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 affected by the report recommendations.  Please contact me at (202) 622-6510 if you have any questions or Nancy A. Nakamura, Assistant Inspector General for Audit (Management Services and Exempt Organizations), at (202) 622-8500.

 

 

Table of Contents

 

Background

Results of Review

Efforts to Develop a Comprehensive Methodology to Assess Employee Skills Need to Be Better Coordinated

Recommendation 1:

Recommendation 2:

Appendices

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

 

 

Abbreviations

 

HCO

Human Capital Office

IRS

Internal Revenue Service

MCO

Mission Critical Occupation

 

 

Background

 

The mission of the Internal Revenue Service (IRS) is to provide America’s taxpayers with top-quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.  The IRS cannot achieve this mission without a workforce that possesses the skills and competencies (hereafter collectively referred to as skills) necessary to meet current and future challenges.  However, the abilities of the IRS to both maintain and expand the skills of its workforce are being challenged by the increasingly complex skills required of IRS employees and the potential that a large number of experienced employees will retire in the near future.  The work performed by IRS employees continually requires enhanced and more diverse skills, as manual systems used to support tax administration become computer based, the Tax Code becomes more complex, and American taxpayers and tax practitioners expect higher levels of service.

An IRS mission critical occupation (MCO) is a position critical to front-line enforcement or in direct support to front-line operations needed to meet stated program goals.  Many MCOs within the IRS, such as the revenue agent[5] and revenue officer[6] positions, continuously require greater expertise and updated skills as the Tax Code becomes more intricate and attempts by taxpayers and tax practitioners to evade compliance with the Tax Code become increasingly more sophisticated.  Other challenges facing the IRS include an increasing number of taxpayers with complex financial holdings, increased complexity of examinations, growing impact of international tax law issues, expanded technology skills sets, and the impact of significant tax law changes.  Finally, the Office of Personnel Management projects that more than 550,000 Federal employees–almost one-third of the entire full-time permanent workforce–will leave the Federal Government by the end of 2012 (the majority through retirement).  The Office of Personnel Management further projects that nearly 40 percent of all current Federal Government employees will retire by the end of 2016.[7]

To assist Federal Government agencies in addressing these issues, the Office of Personnel Management was charged with designing systems and setting standards, including appropriate measures for assessing the management of human capital[8] by Federal agencies.  In 2002, the Office of Personnel Management issued the Human Capital Assessment and Accountability Framework, which provides guidance to Federal Government agencies and requires workforce planning strategies, identification of competencies needed to fulfill the agency’s mission, and analyses of any gaps.  Sharing this responsibility within the IRS are the IRS Human Capital Office (HCO) and the individual business units and operating divisions, with their embedded human capital staff.  The IRS created its IRS HCO in 2004 to provide human capital strategies and tools for recruiting, hiring, and retaining a highly skilled and high-performing workforce.

This review was performed in the IRS HCO, Office of Appeals, Large and Mid-Size Business Division, and Tax Exempt and Government Entities Division in Washington, D.C.; the Small Business/Self-Employed Division in New Carrollton, Maryland; and the Wage and Investment Division in Atlanta, Georgia, during the period September 2007 through September 2008.  We conducted this performance audit in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective.  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.  Detailed information on our audit objective, scope, and methodology is presented in Appendix I.  Major contributors to the report are listed in Appendix II.

 

 

Results of Review

 

Overall, the IRS lacks the comprehensive, agency-wide information on the skills of its employees in MCOs required to effectively assess its current and future workforce needs.  The lack of employee skills information we identified is primarily attributable to the absence of a corporate process for the uniform collection, compilation, and analyses of skills data across the agency.  Because the IRS does not yet have a comprehensive, agency-wide methodology in place to fully measure its workforce against current and future skills, it is missing the opportunity to reshape its workforce to meet future challenges as experienced workers retire, which could adversely affect the quality of service provided to taxpayers.

The IRS HCO has begun to develop a methodology to identify and assess employee skills gaps at the agency level, although significant work remains.  For example, the IRS HCO informed us that it plans to include questions regarding future skills needs and potential competencies gaps as part of a workforce projection survey of senior managers in selected business units and operating divisions scheduled to be initiated in January 2009.  The IRS HCO also informed us that it is evaluating the feasibility of partnering with the Office of Appeals to pilot a process to support the performance of skills gaps assessments of employees in MCOs.  Although these efforts represent forward progress, the IRS still faces a significant challenge in implementing a process to gather the uniform, agency-wide information on the skills of its employees in the MCOs. 

Efforts to Develop a Comprehensive Methodology to Assess Employee Skills Need to Be Better Coordinated

The IRS designated 19 occupations (e.g., the revenue agent and revenue officer positions) as critical to front-line enforcement or in direct support of front-line operations.  As of September 30, 2007, 65,195 (64 percent) of the IRS’ 101,464 employees occupied 1 of these 19 MCOs.  Federal Government agencies are required by Office of Personnel Management standards to periodically identify gaps between competencies needed and possessed by employees in MCOs and take actions as needed to close these gaps.

Overall, the IRS lacks comprehensive, agency-wide information on the skills of the employees in its MCOs.  Our March 2008 survey of 18 IRS business units and operating divisions identified 4 instances in which at least some steps had been taken toward implementing a skills gaps assessment.  However, these four efforts were in different stages of development, and each used or planned to use a significantly different method for assessing skills and compiling results.  Until the IRS develops and implements a consistent methodology for assessing the skills needed and possessed by all employees in MCOs, it will be unable to fully plan for future training and recruitment needs.

The overall lack of comprehensive employee skills information is primarily attributable to the absence of a corporate process for the uniform collection, compilation, and analyses of skills data across the agency.  In addition, the IRS HCO has not provided sufficient guidance to support the uniform collection of these data at the business unit and operating division levels.  However, the IRS HCO has begun to develop a methodology to identify and assess employee skills gaps agency-wide.  Specifically, the IRS HCO informed us that it is evaluating the feasibility of partnering with the Office of Appeals to develop a process for performing skills gaps assessments of MCOs.  The Office of Appeals has significant recent experience in the performance of skills gaps analyses.  In 2007, the Office of Appeals analyzed the skills necessary for all of its positions and surveyed 138 managers and executives regarding the current overall level of technical competency of its staff. 

The proposed IRS skills assessments process would use the Enterprise Learning Management System[9] as a platform to collect information regarding critical skills needed and to document the results of skills assessments.  This platform would also allow for the preparation of development plans tailored to address any skills gaps identified and would include an automated link between the skills gaps assessment process and available training courses.  A key objective of this effort is the development of a skills assessment process that could ultimately be used agency-wide.  Previously, the IRS HCO primarily concentrated on providing technical support on skills gaps assessment efforts focused on employees in a specific business unit or operating division.

While we believe that the current approach by the IRS HCO is reasonable, improvements are needed to ensure accountability and maintain progress as the IRS moves forward with its efforts to develop a skills gaps assessment process.  Specifically, the IRS HCO has not developed a detailed plan to guide the agency’s overall efforts and coordinate the multifunctional actions necessary to ensure the success of this effort. 

Until it has comprehensive information regarding the extent of its skills gaps, the IRS will continue to miss an important opportunity to reshape its workforce to match its future needs.  In addition, the IRS’ lack of skills gaps information severely limits its ability to maximize the return on its current skills improvement efforts.  Finally, by not assessing and identifying skills gaps on an ongoing basis, the IRS is increasing and perpetuating its risk that the skills currently possessed by MCO employees will not keep pace with the skills needed to adequately perform their jobs in the future.

Recommendations

Recommendation 1:  The IRS Human Capital Officer should continue with efforts to partner with one or more business units/operating divisions to develop a workable process that can be used for the agency-wide skills gaps assessment of MCOs.

Management’s Response:  The IRS agreed with this recommendation.  The IRS HCO in partnership with the Office of Appeals has initiated a pilot for assessing the competencies of tax compliance specialists, a mission critical occupation.  A successful pilot will demonstrate the feasibility of implementing these automated processes throughout the Office of Appeals.  The pilot will also be evaluated for expansion to other business units/operating divisions.

Recommendation 2:  The Deputy Commissioner for Operations Support and Deputy Commissioner for Services and Enforcement should develop a detailed plan to guide the IRS’ overall skills gaps assessment effort and coordinate the multifunctional participation necessary to ensure the success of the effort.  This plan should be developed in coordination with the IRS business units and operating divisions, identify periodic milestones, and assign accountability for specific actions.  The plan should address the following three elements:

  1. Development of a process and sufficient guidelines to support consistent collection, compilation, and analyses of skills data across the IRS on an ongoing basis.  This process should include identification of anticipated future challenges and the skills needed to address these challenges.

Management’s Response:  The IRS agreed with this recommendation.  Under the auspices of the IRS Workforce of Tomorrow’s[10] “Planning a Dynamic People Strategy,” the task force will work with subject matter experts from the IRS HCO and the business units to develop a competency management system.  This group will identify the skills and competencies to be tracked across the IRS as well as the process for tracking skills and compiling the data.

  1. Implementation of this process by the business units and operating divisions in coordination with the IRS HCO.

Management’s Response:  The IRS agreed with this recommendation.  Once the process is established, the system will be populated with skills and competencies information for each employee.

  1. Development of measures and goals to allow for an ongoing assessment of agency progress in closing any gaps identified in the skills of the workforce.

Management’s Response:  The IRS agreed with this recommendation.  When the system is fully populated with skills and competencies data, it will be fed back into the IRS-wide attrition and workload models to enable strategic analysis of skills gaps and needs.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to evaluate the IRS’ progress in developing a methodology to evaluate whether its workforce possesses the skills and competencies (hereafter collectively referred to as skills) necessary to meet current and future challenges.  To accomplish our overall objective, we:

I.                    Determined how the IRS HCO works with the operating divisions and business units to assess and then potentially close any skills gaps among MCOs.

A.     Determined the level of interaction the IRS HCO has with the operating divisions and business units to assess and address skills gaps.

B.     Determined the level of oversight and support the IRS HCO is providing to the operating divisions and business units to assess and address skills gaps.

C.     Evaluated the status of any ongoing or planned efforts by the IRS HCO and/or the operating divisions and business units to develop a methodology for evaluating employee skills.

II.                 Determined whether the operating divisions and business units were assessing and addressing skills gaps within their primary MCOs.

A.     Determined how the IRS identified its MCOs and evaluated the criteria used in making these determinations.

B.     Provided a questionnaire to each of the 18 operating divisions and business units responsible for the IRS’ 19 MCOs to determine whether and when any skills analyses were conducted.

III.               Reviewed the Office of Personnel Management guidance for Federal Government agencies on assessing and addressing skills gaps in the Federal Government workforce.

In order to determine the overall number of IRS employees and the number of employees in MCOs as of September 30, 2007, we relied on Treasury Integrated Management Information System reports provided to us by the IRS.  We assessed the reliability of these data by independently conducting online queries of the Treasury Integrated Management Information System database and comparing the results to the reports we received.  We found the Treasury Integrated Management Information System data to be reliable for the purposes of the audit and performed no other data validity tests.  The Treasury Integrated Management Information System is the IRS’ official automated personnel and payroll system.

 

Appendix II

 

Major Contributors to This Report

 

Nancy A. Nakamura, Assistant Inspector General for Audit (Management Services and Exempt Organizations)

Alicia P. Mrozowski, Director

Anthony J. Choma, Audit Manager

Kevin P. Riley, Audit Manager

Gene A. Luevano, Lead Auditor

Tom J. Cypert, Senior Auditor

Kenneth E. Henderson, Senior Auditor

Nikki M. Thomas, Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn: Chief of Staff  C

Commissioner, Large and Mid-Size Business Division  SE:LM

Commissioner, Small Business/Self-Employed Division  SE:S

Commissioner, Tax Exempt and Government Entities Division  SE:T

Commissioner, Wage and Investment Division  SE:W

Chief, Appeals  AP

IRS Chief Human Capital Officer  OS:HC

Chief Counsel  CC

National Taxpayer Advocate  TA

Director, Office of Legislative Affairs  CL:LA

Director, Office of Program Evaluation and Risk Analysis  RAS:O

Office of Internal Control  OS:CFO:CPIC:IC

Audit Liaisons:

Commissioner, Large and Mid-Size Business Division  SE:LM

Commissioner, Small Business/Self-Employed Division  SE:S

Chief, Appeals  AP

IRS Chief Human Capital Officer  OS:HC

Director, Communications and Liaison, Tax Exempt and Government Entities Division  SE:T:CL

Senior Operations Advisor, Wage and Investment Division  SE:W:S

 

Appendix IV

 

Management’s Response to the Draft Report

 

The response was removed due to its size.  To see the response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.



[1] The term “human capital” is used to describe the skills, abilities, and contributions of the people in an agency.

[2] Mission critical occupations are those positions critical to front-line enforcement or in direct support to front-line operations needed to meet the stated IRS goals.

[3] The Enterprise Learning Management System is used for managing and documenting employee training.

[4] The Workforce of Tomorrow task force was established by the Commissioner to ensure that 5 years from now the IRS has the leadership and workforce ready for the next 15 years.

[5] Revenue agents examine and audit the financial records of corporate and individual taxpayers, helping to ensure that these taxpayers pay the appropriate taxes and comply with Federal tax laws.

[6] Revenue officers are responsible for collecting delinquent taxes and tax returns.

[7] The Office of Personnel Management projections were based on full-time permanent Federal Government employees on rolls as of October 1, 2006.

[8] The term “human capital” is used to describe the skills, abilities, and contributions of the people in an agency.

[9] The Enterprise Learning Management System is used for managing and documenting employee training.

[10] The Workforce of Tomorrow task force was established by the Commissioner to ensure that 5 years from now the IRS has the leadership and workforce ready for the next 15 years.