TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
MANAGEMENT ADVISORY REPORT: ACTIONS TO IMPROVE THE AUTOMATED COLLECTION SYSTEM SHOULD BE TAKEN WITHIN A SOUND STRATEGIC FRAMEWORK
Reference No. 2000-30-122
The Automated Collection System (ACS) is an integral part of the Internal Revenue Service’s (IRS) process for collecting unpaid taxes and securing unfiled tax returns from both individual and business taxpayers. When taxpayers do not comply with the IRS’ computer-generated notices, ACS tax examiners attempt to contact them by telephone to secure payments or unfiled returns. The ACS is the computer system that assigns these cases to the individual tax examiners.
Recent Congressional, senior IRS executive, and media attention have been focused on the increasing delinquent account inventory and the declining resources applied to work the delinquent cases. Business results have also declined. From Fiscal Years (FY) 1997 to 1999, for example, the enforcement revenue collected by the ACS declined by $1.2 billion. Some stakeholders are also concerned about whether taxpayer compliance may suffer when traditional enforcement staffing is shifted to taxpayer education efforts. In fact, in February 2000, Congressional hearings were held which questioned the soundness of the IRS’ strategy for ensuring compliance with the tax laws. The overall objectives of this audit were to evaluate the performance of the ACS and to determine whether the IRS has developed effective management strategies for improving the ACS.
Since FY 1997, ACS resources have steadily declined, while the number of ACS employees reassigned to customer service duties during the filing season has been increasing. The implementation of the IRS Restructuring and Reform Act of 1998 (RRA 98), with its emphasis on taxpayer rights protections, has profoundly impacted ACS employees’ ability to take enforcement actions. For example, the use of liens and levies both dropped by 87 percent from FYs 1997 to 1999. As a result of these factors, ACS business results have significantly declined.
The IRS has recognized the need to restore and maintain adequate ACS staffing levels in its FY 2001 budget request. In addition, the IRS is currently implementing or studying various initiatives to improve the ACS’ effectiveness and efficiency and to address its growing inventory levels. These initiatives need to be integrated and managed within a sound strategic framework that includes a master work plan for improving the ACS, a clarification of the ACS mission, and an executive process owner for the ACS Program.
Fewer Resources Have Been Applied to the Automated Collection System
From FYs 1997 to 1999, the Full Time Equivalents (FTE) used by the ACS declined by more than 20 percent, from 2,661 to 2,123. During the same period, the number of ACS employees reassigned to the toll-free telephone operations during the filing season steadily increased. During FY 1999, for example, IRS records show that at least 163 FTEs were reassigned from the ACS to the toll-free operations. The actual FTEs reassigned to toll-free operations could be in excess of that figure since the exact figure cannot be determined because the process used for reporting time was not consistently followed by all ACS sites.
Recently, the IRS has recognized the need to increase ACS resources. The IRS’ budget for FY 2001 will include an additional 225 FTEs for the ACS.
Automated Collection System Performance Has Significantly Declined
The number of delinquent accounts and delinquent return investigations assigned to the ACS increased by nearly 588,000 from FYs 1997 to 1999; however, ACS tax examiners contacted fewer taxpayers about their delinquent accounts and/or delinquent returns. Other key business results have declined substantially from FY 1997 to 1999:
Likewise, the number of enforcement actions taken has dramatically declined since the implementation of the RRA 98. From FYs 1997 to 1999, the number of liens and levies filed by ACS tax examiners decreased by 87 percent.
The declining ACS performance has contributed to the growth of the active ACS inventories as well as the growth of the Queue, which is an automated holding file of unresolved cases. From FYs 1997 to 1999, the ACS’ delinquent accounts inventory grew by 26 percent. During the same time period, the number of delinquent accounts assigned to the Queue increased by 21 percent.
The increase in the Queue inventory is also due in part to the systemic removal of cases from the ACS inventory based on certain age and risk factors. According to a Customer Service analyst, an estimated 1.6 million cases had been systemically removed from the ACS inventory as of January 2000. Many of these cases were removed from the ACS inventory without filing a lien and without taking the normal investigative actions. The assumption behind the systemic removal was that the cases that remained in inventory would have a greater opportunity to be collected.
The Internal Revenue Service Is Redesigning the Automated Collection System to Address Increased Inventory and Productivity Concerns
IRS management has begun several initiatives that are designed to improve ACS performance levels. For example, the use of a single 1-800-number is designed to improve the efficiency of the ACS and better serve the taxpayer. An ACS Improvement Task Force was started in January 2000 to improve both ACS systems and procedures in the RRA 98 environment and the quality and efficiency of ACS case processing, with an emphasis on the timely use of liens and levies when enforcement actions are appropriate.
The Internal Revenue Service’s Actions to Improve the Automated Collection System Need to Be Planned, Implemented, and Managed Within a Sound Strategic Framework
The various initiatives that are being implemented or planned are a positive sign that the IRS recognizes the need to take actions to improve the effectiveness of the ACS. However, these initiatives have not been integrated into a consolidated master work plan and are not being centrally coordinated and controlled by an IRS executive with total authority and responsibility for the ACS. In addition, the IRS has not clearly established and communicated the role that the ACS is expected to serve within the new organizational structure, the new IRS mission statement, and the new taxpayer rights protections provided by the RRA 98.
Summary of Recommendations
IRS management needs to stabilize the ACS workforce, improve controls over reporting time diverted to the toll-free operations, and re-emphasize the appropriate use of liens and levies within the confines of the RRA 98. The IRS also needs to take a totally integrated approach to ensure that the actions for improving the ACS are effectively planned, implemented, and managed within a sound strategic framework. This includes developing and using a comprehensive organizational master work plan for improving the ACS, clarifying and articulating the ACS mission, and appointing an executive to serve as the ACS system or process owner.
Management’s response was due on August 17, 2000. As of August 18, 2000, management had not responded to this draft report.