This audit was performed as part of the Treasury Inspector General for Tax Administration’s overall strategy to assess the reliability of the Internal Revenue Service’s (IRS) customer satisfaction performance measures as they relate to the Government Performance and Results Act of 1993 (GPRA). The GPRA is intended to improve agency performance and to provide objective information to congressional and executive branch decision-makers to assist them in appropriating and allocating federal funds. The law requires federal agencies to prepare multi-year strategic plans, annual performance plans, and performance reports on prior year accomplishments.

The IRS established balanced performance measures to support achievement of the IRS’ strategic goals: provide quality service to each taxpayer, serve all taxpayers, and be productive through a quality work environment. Achievement of these goals is measured through customer satisfaction, employee satisfaction, and business results. Taxpayers who receive specific kinds of services from the IRS might be asked to rate the service. These survey results are summarized by a vendor and will be used by the IRS to evaluate the overall satisfaction with the IRS’ service.

The survey results will also be used to set goals and expectations for the GPRA. The intent of the GPRA is that the Congress will use the performance measurement results to help evaluate the IRS budget appropriation. Therefore, it is essential that the IRS accurately measure its success in meeting the performance goals.

The overall objective of this review was to evaluate the reliability of the information used to measure customer satisfaction with the IRS Appeals process. The Appeals function has the authority to consider and negotiate settlements of internal revenue controversies. Appeals’ responsibility includes, but is not limited to, the determination of liability for taxes, penalties, and interest.

The present results of the Appeals Customer Satisfaction Survey should not be used to satisfy all requirements of the GPRA, unless appropriately qualified. The original purpose of the Appeals Customer Satisfaction Survey was not for GPRA reporting but to measure the overall trend of taxpayer satisfaction with the Appeals function’s service. While the Survey may be an effective marketing tool to gauge taxpayers’ satisfaction with the services provided by Appeals offices, a higher standard is required when these results are used for GPRA reporting purposes.

IRS executives have not established an adequate process to ensure the Survey is conducted appropriately and that the data are reliable, valid, and verifiable. Without reliable information, the IRS cannot provide a basis for comparing program results with the established performance goals as intended by the Congress when it established the GPRA.

The controls over the automated case control system used to identify the Survey population for the Appeals Customer Satisfaction Survey were largely in place. The controls were sufficient to preclude the existence of a significant number of uncontrolled Appeals cases, which would have had an adverse effect on the validity of the Survey population.

However, there are limitations with the Appeals Customer Satisfaction Survey process that result in an increased risk that the data are not reliable to report measures for the GPRA.

• Controls over the transmission of Appeals closed case listings to the vendor are not adequate to ensure the data are complete and protected. The vendor contracted by the IRS to conduct the Survey uses closed case listings to select samples of taxpayers to participate in the Appeals Survey. The listings are transmitted from the IRS to the vendor monthly on an unsecured telecommunications network. This could result in lost, incomplete, or inaccurate data. It could also result in unauthorized access to the data.
• The current response rate to the Appeals Customer Satisfaction Survey is low; only 44 percent of the taxpayers who were sent a survey form in 1998 responded to the Appeals Survey. A low response rate increases the risk that the Survey results are not reliable and may not be representative of the Survey population.

Until the data transmitted to the vendor are adequately protected and a higher response rate is achieved, the IRS should clearly disclose the limitations of the Appeals Survey’s data and the reliability of the results if used for GPRA purposes in reporting the level of satisfaction customers have with the Appeals function’s service.

To ensure that the IRS accurately measures the level of satisfaction customers receive from the Appeals function’s services, additional actions are needed. We recommend that the Deputy Chief Financial Officer for Strategic Planning and Budgeting, in conjunction with the National Chief Appeals and the Director, Office of Program Evaluation and Risk Analysis, improve the process to oversee the Appeals Customer Satisfaction Survey. This will help ensure that the data used to report the Survey results are reliable, valid, and verifiable.

Management’s Response: Appeals management agreed with our recommendation that the data transmitted to the vendor be encrypted and that the limitations of the Survey be disclosed for purposes of the GPRA. However, Appeals management stated that the National Chief Appeals, working in conjunction with the Director, Office of Program Evaluation and Risk Analysis, is responsible for the Appeals Customer Satisfaction Survey, not the Deputy Chief Financial Officer, Strategic Planning and Budgeting.