The overall objective of our review was to evaluate the Internal Revenue Service’s (IRS) strategic planning process relative to the goals and requirements set forth by the Government Performance and Results Act, Pub. L. No. 103-62, 107 Stat. 285 (1993) (referred to as GPRA). The GPRA is intended to improve quality and delivery of service by holding Federal agencies accountable, through the budget appropriation process, for program results by emphasizing goal setting, customer satisfaction, and results measurement. The scope of our review consisted of reviewing the information presented in the Fiscal Year (FY) 2000 Annual Performance Plan and the associated strategic plan for compliance with the GPRA requirements. In order to understand and evaluate the strategic planning process, we met with the IRS Budget Office management, the Executive over the Office of Organizational Performance Management (Measures Executive), and representatives from the Department of the Treasury and the Office of Management and Budget (OMB).

Without a centralized process, the IRS is at risk of not achieving the benefits intended by the Congress. Specifically, responsibilities and authorities need to be established for planning, directing, coordinating, and controlling the many activities required by the GPRA. Much of the information that is required by the GPRA could be developed through coordinating the activities of the IRS functions involved.

Historically, the IRS has had a strategic planning process. The IRS produced its first strategic plan under the GPRA in 1997. The current strategic plan does provide insight into how the IRS plans to operate in the future. The IRS’ new mission statement, strategic goals, and objectives adequately cover the major functions and operations of the IRS. Additionally, the strategic plan contains a brief description of how the goals and objectives are to be achieved. Similarly, the annual performance plan (which is combined with the IRS’ budget submission) clearly links performance measures to the funding and resources requested for each program and associated business activity. This practice has received praise from some reviewers of the annual budget justification.

Nevertheless, the IRS’ strategic plan and the FY 2000 Annual Performance Plan are not in complete compliance with GPRA, OMB, and Department of the Treasury guidelines. The IRS’ strategic plan does not:

• Fully explain how the performance measures and strategic goals relate to each other.
• Address external factors that impact its mission and strategic goals.
• Describe program and system evaluations.

In addition, the IRS issued an interim update to the strategic plan with its FY 2000 budget submission instead of issuing a revised strategic plan to the Congress. This resulted in the IRS bypassing an OMB guideline that the IRS summarize, in transmittal letters to members of the Congress, any contrary views received regarding changes in strategic plans.

The IRS’ annual performance plan does not consistently describe the:

• Measures for each program activity.
• Goals for all measures.
• Means used to verify and validate performance data.

While the IRS does have a strategic planning process in place, its current emphasis is on addressing the transition issues related to the IRS Restructuring and Reform Act, Pub. L. No. 105-206, 112 Stat. 685 (1998) (referred to as RRA 98) and the IRS’ Concept for Modernization. These activities require a significant investment by the IRS in time, and human and financial resources.

The IRS can improve its process to ensure that all the GPRA requirements are fully satisfied. The IRS should designate an executive office that will be responsible for coordinating and ensuring each function develops the performance measures and systems to capture and validate data needed to fully comply with the GPRA. Without such executive oversight, there is a high risk that much of the work that has been done on the measures and plans could be lost during the IRS reorganization. This loss could further delay the IRS’ ability to produce the GPRA-compliant measures, plans, and the related performance report, and weaken the support data needed for budget justifications.

Management’s Response: Management agreed to our recommendation and will have the Director for Strategic Planning and Budgeting be responsible for overseeing and coordinating the implementation of all the GRPA-related activity while developing a new strategic planning process. This office will work collaboratively with the Office of Organizational Performance Management, the Office of Program Evaluation and Risk Analysis, and other offices in the implementation of the GPRA.