oversight

Internal Revenue Service: IRS' Field Office Restructuring in Michigan

Published by the Government Accountability Office on 1997-07-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting OBice
      Washington, D.C. 20548

      General Government Division

      B-276896

      July 3, 1997

      The Honorable Carl Levin
      United States Senate

      Subject: Internal Revenue Service: IRS’Field Office Restructuring in Michigan

      Dear Senator Levirx

      This letter responds to your request for information on the Internal Revenue
      Service’s (IRS) most recent field office restructuring effort, especially as it
      relates to Michigan. IRS announced in August 1996 that it would eliminate
      more than 1,000 positions in its field offices, including some in Michigan. As
      agreed with your office, we addressed the following questions: (1) How do IRS’
      field restructuring plans affect Michigan? (2) What have been some of the
      impacts in Michigan as IRS transitions to its new structure, and are they likely
      to continue after the consolidation is complete? (3) What savjngs, if any, will
      IRS achieve from its field office restructuring?

      BACKGROUND

      IRS announced in August 1996 that it planned to eliminate more than 1,000
      positions in its field offices. In October 1996, IRS prepared final listings of the
      positions to be eliminated and added in field offices as a result of various
      restructuring initiatives.’ The net loss of positions nationwide was 1,059, which


      ?!he Conference Report on IRS’fiscal year 1997 appropriation called for
      reducing IRS’ Information Systems staffing by over 900. During IRS’ budget
      allocation process, IRS developed a staEing reduction target of 819. A portion
      of the reduction, 70 positions, was allocated to the Detroit Computing Center, 1
      of IRS’ 3 computing centers. Those 70 positions were not included in IRS’
      October 1996 listing of positions to be eliminated. According to IRS officials,
      because of higher-than-expected attrition in IRS’Information Systems fu.nctiona.l
      area, IRS does not plan to eliminate any Information Systems positions at the
      Detroit Computing Center. Currently, it plans to eliminate only certain
      Information Systems positions in district and regional offices, 258 of which
      were included in the October 1996 listing of positions to be eliminated. These
      258 positions are to be offset by 175 positions to be added, for a net reduction
      of 83 positions.
                                     GAOIGGD-97-126RIRS’Field Office Restructuring in Michigan

                                 /-3-87!03
B-276896
includes 2,371 positions that are to be eliminated and 1,312 positions that are to be
added. The added positions were not necessarily new positions requiring new skills,
but they reflected the fact that IRS’existing geographic allocation of staff was not yet
aligned with its revised structure.”

One of IRS’field office restructuring initiatives, which was announced in December
1993, involved consolidating its telephone-based customer service operation from 70
sites to 23 sites. The customer service sites are to absorb the functions of (1) toll-free
taxpayer service (TPS) sites, which answer calls about tax law and procedures,
taxpayer accounts, and notices that taxpayers receive from IRS; (2) automated
collection system (ACS) sites, which contact taxpayers to secure delinquent tax
returns and payments and answer calls from taxpayers who are the subject of
collection actions; and (3) forms distribution centers, which handle requests for tax
forms and publications.

Other field office restructuring mitiatives included centralizing various support
functions that had previously been done by each district office. Specikally, the
Support Services function, which handles personnel, facilities management, and
training, is being reduced from 84 sites in 70 locations to 21 host sites, 1 of which will
be located at the Detroit Computing Center. IRS is also centralizing functions of its
Field Information System Organization @SO) at the regional office. Traditionally,
district office management had oversight over information systems support, which
included technic&l support for computer and telecommunications resources, computer .
security, customer support, and finance and inventory management. The FISO
reorganization, among other things, is to eliminate the district office management
structure for these activities, with one exception. Each district office is to have an on-
site support manager to supervise on-site support staff. The district office on-site
support manager is to report to the customer service support manager in the regional
office.

IRS is also planning to consolidate some of its district office compliance support as a
result of its decision to consolidate its 63 district offices into 33 districts. However,
this district office consolidation will not affect Michigan. Before this consolidation
Michigan had only one district office located in Detroit. Under the 33 district office
structure, Detroit retains its district office status.

RESULTS IN BRIEF

 IRS’current restructuring plans for Michigan would result in fewer positions being
 eliminated in 1997 than originally anticipated, with additional positions scheduled for


 2For example, assume that before consolidating a particular function in one city, IRS had
 five persons performing that function in each of two cities. After consolidating that
 function, IRS would have eliminated the five positions in the losing city but might add
 two positions in the gaining city so that it had enough staff to handle the consolidated
 workload.
 2                                       GAOfGGD-97-126E IRS’Field Office Restructnring in Michigan
B-276896

elimination in 1999. IRS’ October 1996 listing of positions to be eliminated included 90
positions in Michigan, all of which were in Detroit. Of the 90 positions to be
eliminated, 84 were at the TPS site that closed in September 1996. However, 60 of
those employees were transferred to Detroit’s ACS site to fill attrition vacancies. In
addition, Detroit is to gain a total of 29 positions as a result of Support Services and
FISO reorganizations. Thus, the expected result is a loss of 1 position (90 losses
offset by 60 transfers and 29 new positions) in 1997. However, Detroit’s ACS site is
scheduled to close in 1999, which, given staffing levels as of January 1997, may result
in the elimination of 112 positions.

IRS and National Treasury Employees Union (NTEU) officials in Detroit felt that
closing Detroit’s TPS site had not adversely affected Michigan taxpayers, because
telephone calls were being rerouted to other sites as IRS implements its phased
consolidation of telephone-based customer services. Similarly, Michigan taxpayers are
unlikely to notice any change when IRS closes its ACS site in Detroit because of a
networking capability that enables ACS staff anywhere in the country to handle a
taxpayer’s call.

In its March 27, 1997, report to Congress on the restructuring of its field support
functions, IRS said that it expects to save $138 million in personnel costs as a result of
eliminating 1,059 field office jobs. For the most part, IRS’ methodology for computing
the savings is consistent with the methodology that we have used in computing
personnel savings associated with buyouts versus reductions in force.3 Although IRS ’
is projecting savings in personnel costs, it does not intend to reduce its overall staffing
by the net number of field positions it plans to eliminate. Instead, IRS plans to
redirect the $138 million to fund additional front-line customer service and compliance
positions.

We recognize that if (1) the redirection of resources allows IRS to process more front-
line work (e.g., examine more tax returns, collect more delinquent taxes, and answer
more telephone calls) than is currently the case and (2) staff in the headquarters of
consolidated districts can handle all of the consolidated workload without adversely
affecting cycle time or work quality, IRS could achieve some efficiencies from its field
office restructuring. However, it is unclear whether the consolidation might also
involve some operationaI costs, such as increases in cycle time and reductions in work
quality that may offset some of those benefits. Because IRS’staffing levels are likely
to fluctuate from their current levels, without a baseline ratio of front-line compliance
and customer service staff to support staff before field office restructuring, it will be
difficult to attribute changes in outputs to IRS’field office restructuring. Without
information on the operational costs of restructuring and a baseline ratio of front-line
staff to support staff, it will be difficult to fully assess the net costs and benefits of
IRS’ field office restructuring.



3Federal Downsizing: The Costs and Savings of Buvouts Versus Reductions in Force
(GAO/GGD-9663, May 14, 1996).
3                                       GAOIGGD-97-126EIRS’Field Office Restructuring in Michigan
B-276896

MICHIGAN IS SCHEDULED TO LOSE
1 POSITION IN 1997 BUT MAY LOSE
ABOUT 112 POSITIONS IN 1999

Michigan is now scheduled to lose only one position in 1997. IRS’October 1996 listing
of positions to be eliminated included 90 positions for Michigan. That loss is being
offset by (1) IRS’ decision to transfer 60 TPS staff to its ACS site; and (2) the Support
Services and F’ISO consolidations, which are scheduled to result in a gain of 29
positions. However, further cutbacks are expected when the ACS site closes-
currently scheduled for 1999.

Of the 90 positions scheduled for elimination, 84 were at Detroit’s TPS site that closed
in September 1996.* In December 1993, IRS announced that it was consolidating its
telephone-based customer service operation from 70 sites to 23 sites. Detroit had two
sites (a TPS site and an ACS site) before IRS announced this consolidation. Enclosure
I shows the locations where customer service sites have closed as of June 18, 1997,
are to close, and are to continue operating. Enclosure II describes the process IRS
used to identify the number of customer service sites it would need and their
geographic locations. As described in that enclosure, IRS decided on having 23 sites
and the locations for those sites through use of (1) a model that factored in primarily
 cost and quality/productivity data, (2) certain self-imposed constraints, and (3)
management discretion. Use of the cost and quality/productivity data alone would
have placed Detroit among the 23 locations; however, Detroit was not selected,           ’
because IRS decided that it had to maintain an employment presence at each of its 10
 service centers. As a result, IRS selected the Andover, MA, and Brookhaven, NY,
 Service Centers in lieu of two district offices (Detroit and Chicago) that had placed
 higher in the rankings.

Initially, both Detroit call sites were scheduled to close in October 1999. According to
district officials, however, extensive attrition at both sites necessitated closing the TPS
site in September 1996. After IRS accelerated the closure of the TPS site, the district
director proposed filling 60 vacant ACS jobs with displaced TPS staff.

This strategy was different from the one the regional office had proposed. Initially,
the regional office had directed the district to 5ll the ACS vacancies with higher
graded revenue officers, because ACS staff generate more revenue per staff year than




?I’he six other positions scheduled to be eliminated included five in procurement and one
in Support Services located at the Detroit Computing Center.
 4                                       GAOIGGD-97-126EIRS’Field Office Resirwmring in Michigan
B-276896
revenue officers.” However, the district director’s proposal was premised on the fact
that the displaced TPS staff were already experienced in dealing with tsxpayers via
the telephone and could generate additional ACS revenue without IRS having to
transfer revenue officers. The regional office accepted the director’s proposal, and 60
of the TPS staff were transferred to the ACS site.6 However, that site is scheduled to
close in October 1999, so those 60 positions, and another 52 positions that were
occupied as of January 1997, may eventually be eliminated.

In addition to being able to fill the 60 attrition vacancies for the ACS site, Michigan is
scheduled to gain 6 FISO staff and 23 Support Services staff. Thus, the expected net
result in Michigan in 1997 is a loss of 1 position (90 losses offset by 60 transfers and
29 new positions).

MICHIGAN TAXPAYERS ARE NOT LIKELY TO
NOTICE ANY IMPACT FROM THE CONSOLIDATION
OF CUSTOMER SERVICE CALL SITES

District and local NTEU officials felt that services to Michigan taxpayers had not
declined with the loss of Detroit’s TPS call site. Given that IRS telephone accessibility
levels increased during the 1997 filing season-after the Detroit TPS site was closed-
Michigan taxpayers were unlikely,to have experienced any deterioration in service,
because their calls were to be rerouted to other call sites.7 In fact, they may have     .
noticed an improvement.

Furthermore, once IRS closes the Detroit ACS site, it is unlikely that Michigan
taxpayers will find it more difficult to resolve account issues. Jn 1995, IRS
implemented a networking capability so that IRS customer service representatives
could access certain taxpayer account information nationwide. As a result, taxpayers


5The collection of delinquent taxes is a three-stage process, with a different organizational
unit responsible for each stage. At the first stage, the taxpayer receives a series of
notices from one of IRS’ 10 service centers. If the case is not resolved at this stage, it is
sent to ACS. If the case is still not resolved after ACS action and meets a certain dollar
threshold, it is transferred to a revenue officer in one of IRS’ district offices. Revenue
officers make personal visits to attempt to collect delinquent taxes.

60f the 60 employees transferred from the TPS site to the ACS site, 54 were assigned to
answer the telephone-generally a GS-7 position. Of those 54 employees, 17 were higher
graded than a GS-7 and were involuntarily reassigned to answer the telephone; they will
be eligible for priority placement in other jobs at their prior grade level. The remaining
six transferees were assigned to other jobs.
7From January 1 through April 26, 1997, IRS had answered 51.2 percent of the calls made
nationwide to its toll-free telephone assistance lines compared with 20.5 percent for the
same time period in 1996. However, we could not determine the accessibility for
Michigan taxpayers, because IRS does not track accessibility by state.
5                                       GAO/GGD-97-l26E IRS’Field Office Restructuring in Michigan
B-276896
no longer need to reach a local IRS customer service representative to handle account
issues.

Although IRS’restructuring should have no negative impact on IRS’service to
Michigan taxpayers, local NTEU officials expressed some concern that Support
Services had reduced service to IRS employees in field offices. The NTEU officials
said that after the Support Services consolidation, support staff were not as timely in
responding to requests for services as they were when they reported directly to the
district office. The Regional Director of Support Services agreed that staff may see a
decline in the level of service. However, he said that IRS management decided to
provide a slightly lower, but adequate, level of service in order to achieve staff
savings. Local NTEU officials did not express any concerns about the response time
of FISO support.

DETERMINING THE AMOUNT OF NET
SAVINGS FROM IRS’FIELD OFFICE
RESTRUCTURING WILL BE DIFFICULT

Congress directed IRS, in its fiscal year 1997 appropriation  act, to report to the House
and Senate Committees on Appropriations, no earlier than      March 1, 1997, on the
impact of its reorganization including, among other things, the overall costs and
benefits of the proposed field office restructuring. In its report, which was delivered
on March 27, 1997, IRS said that the restructuring would generate personnel cost          .
savings of $138 million from fiscal years 1997 through 2001. As shown in table 1, the
reported savings are the net of (1) salary savings from eliminating 2,371 positions; (2)
costs associated with filling 1,312 needed positions; and (3) transition costs, such as
buyouts, associated with the reorganization.




 6                                      GAOIGGD-97-126RIRS’Field Office Restructuring in Michigan
B-276896
Table 1: IRS’Estimate of Savings From Field Office Restrucixuinq

(Dollars in millions)




                                                                 costs of         Salary savings
I                                    Transition        filling 1,312 new        from eliminating
1 Fiscal year                            costsa                positionsb         2,371 positions     Net savings
    1997                                  ($33.8)                   ($24.0)                 $38.3          ($19.5)
~ 1998                                    ( 10.2)                     (49.9)                   90.8          30.7

’ 1999                                           0                    (53.6)                   97.0          43.4

    2000                                         0                    (54.7)                   97.0          42.3

’ 2001                                           0                   (55.9)                    97.0          41 .I

    Total                 I               ($44.0)                  ($238.1)               $420.1           $138.0

%ansition costs include the costs of buyouts, moves, and reductions in force.
bathecost of new positions includes salaries and training costs.

Source: Reoort On the Internal Revenue Service Field Sueoort Reoraanization, March 27, 1997.



IRS’methodology for estimating the costs and benefits of its field office restructuring
was generally consistent with the methodology that we have used in estimating the
costs and savings of buyouts versus reductions in force.* In cases where IRS’
methodology differed from our methodology, we determined that those differences
would tend to overstate the costs of IRS’restructuring and thus understate the
potential savings.

Although IRS is projecting savings in personnel costs, it does not intend to reduce its
overall stafiing by the net number of field positions it plans to eliminate. Instead, as
noted in its report, IRS plans to redirect these resources to front-line customer service
and compliance operations in the field offices. Therefore, IRS will not be achieving
any personnel cost savings as a result of field office restructuring. IRS’report states
that the redirection of resources will enable it to main&     stable levels of service and
compliance in fiscal year 1998 and help compensate for out-year budget projections
through 2002 that are essentially flat.

IRS’Chief Management and Administration said IRS fully expects to achieve
operational efficiencies as a result of IRS’field office restructuring. Specifically, he
said that by redirecting resources from support positions to front-line compliance and
customer service positions, there will be a higher ratio of tiont-line staff to support


*GAO/GGD-96-63.
7                                                         GAO/GGD-97-126X2
                                                                         IRS’Field Office Restructuring in Michigan
B-276896
staff than is currently the case. As a result, he expects that IRS will be able to answer
more calls from taxpayers and collect more revenue than would have been the case
without the reorganization. He said that IRS did not develop any estimates about
these expected benefits for its report to Congress, because the appropriation language
did not require IRS to do so.

We recognize that if (1) the redirection of resources allows IRS to process more front-
line work (e.g., examine more tax returns, collect more delinquent taxes, and answer
more telephone calls) than is currently the case; and (2) staff in the headquarters of
consolidated districts can handle all of the consolidated workload without adversely
affecting cycle time or work quality, IRS could achieve some efficiencies from its field
office restructuring. However, it is unclear whether the consolidation might also
involve some operational costs, such as increases in cycle time and reductions in work
quality, that may offset some of those benefits. Given that IRS’ st&ing levels are
likely to fluctuate from their current levels, without a baseline ratio of front-line
compliance and customer service staff to support staff before field office
restructuring, it will be difficult to attribute changes in outputs to IRS’ field office
restructuring. Without information on the operational costs of restructuring and a
 baseline ratio of front-line staff to support staff, it will be difficult to fully assess the
 net costs and benefits of IRS’field office restructuring.

AGENCY COMMENTS AND OUR EVALUATION

We requested comments on a draft of this letter from the Acting Commissioner of
Internal Revenue or his designee. On June 18, 1997, we obtained comments from the
Chief Management and Administration. He generally agreed with the facts and
provided some technical clarifications and updated information, which we considered
and made changes where appropriate. However, he disagreed with our assessment of
the likelihood of savings from IRS’field office restructuring.

Our letter states that IRS may achieve some efficiencies, whereas he believes IRS will
in fact achieve savings from field office restructuring. We revised the letter in an
attempt to recognize IRS’overall expectations, but, as we note in that revision, there
are factors that will make it difficult to quantify net savings from the restructuring.

The Chief Management and Administration also asked that we point out that IRS’total
stafEng has declined from 112,069 full-time equivalents in fiscal year 1995 to an
estimated 102,926full-time equivalents in fiscal year 1997. During this time, while IRS
base-level stafl%nghas declined, IRS has been redirecting resources that were doing
non-front-line work to front-line compliance and customer service work. One example
he cited was the elimination of positions in three regiona offices that closed in
October 1995. According to the Chief Management and Administration, some of those
staff have been redirected to front-line compliance or customer service work.




 8                                        GAOIGGD-97-126EIRS’Field Office Restmct&ng in Michigan
B-276896
SCOPE AND METHODOLOGY

To determine how IRS’field office restructuring plans affected Michigan, we used IRS’
October 1996 listings of jobs that were to be eliminated and to be added. We used
those listings to identify the functional areas that were to experience significant
changes in staffing levels, and we met with those functional area officials in the
Michigan District Office. We also reviewed the documentation supporting IRS’
customer service site selection decisions. We met with IRS’ Chief Management and
Administration, other IRS National Office officials, the President of NTEU, and NTEU
representatives in Detroit.

The information regarding the operational impacts of IRS’restructuring in Michigan is
based primarily on interviews with Michigan District Office officials and NTEU
representatives. However, we also used information from our ongoing review of the
1997 filing season to help assess the likely effect of consolidating telephone operations
into 23 customer service sites.

To evaluate the methodology that IRS used to calculate the costs and benefits of its
field restructuring, we compared that methodology with one we have used to assess
the cost and benefits of buyouts versus reductions in force.g

We conducted our work from January 1997 to April 1997 in accordance with generally
accepted government auditing standards.



We are sending copies of this letter to the other members of the Michigan
congressional delegation, the Secretary of the Treasury, the Commissioner of Internal
Revenue, and other interested parties. We will make copies available to others on
request.

Major contributors to this letter are listed in enclosure III. If you or your staff have
any questions about the information in this letter, please contact me on (202) 512-9110
or David Attianese, Assistant Director, on (202) 512-9029.

Sincerely yours,



Lynda D. Willis
Director, Tax Policy and
   Administration Issues




‘GAO/GGD-96-63.
9                                      GAOIGGD-97-126EIRS’Field Office Restructuring in Michigan
ENCLOSURE I                                                                                        ENCLOSURE I
LOCATIONS WHERE TELEPHONE CALL SITES HAD CLOSED AS OF JUNE 18.1997,
WERE TO CLOSE LATER, AND ARE TO CONTINUE AS CUSTOMER SERVICE SITES

 3osed as of 6/18/97                          Closing                                       Continuing

 dnchorage,      AK                           Chicago, ILa                                 Andover, MAb
 3rooklyn, NY                                 Boston, MA                                   Atlanta, GAb
 Dklahoma City, OK                            Detroit, MI”                                 Austin, TXb
 ‘hoenix,   AZ                                Houston, TXa                                 Baltimore, MD
 El Monte, CA                                 Oakland, CA                                   Brookhaven, NYb
 Honolulu, HI                                 Bloomington,     IL                           Buffalo, NY
 Kearny Mesa, CA                              Sacramento,      CA                           Covington, KYb
 Laguna Niguel, CA                                                                          Cleveland, OH
 Manhattan, NY                                                                              Dallas, TX
 Newark, NJ                                                                                 Denver, CO
 Des Moines, IA                                                                             Fresno, CAb
 Milwaukee, WI                                                                              Indianapolis, IN
 Omaha, NE                                                                                  Jacksonville, FL
 St. Paul, MN                                                                               Kansas City, MOb
                                                                                            Memphis, TN’
                                                                                            Nashville, TN
                                                                                            Ogden, UTb
                                                                                            Philadelphia, PAb
                                                                                            Pittsburgh, PA
                                                                                            Portland, OR
                                                                                            Richmond, VA
                                                                                            St. Louis, MO
                                                                                            Seattle, WA

Note: San Juan, PR, a present call site, is not considered 1 of the 23 continuing customer senrice sites, nor does IRS plan to
discontinue its telephone operations. It is to be considered a specialized call site working on international tax matters. Although
Martinsburg was included as one of IRS’70 telephone sites, it is not listed above because it will continue to operate as a
computing center, not as a customer setvice site.

%hicago, Detroit, and Houston all had two telephone sites, but one’has closed at each location. The respective closing dates for
the remaining sites in Chicago, Detroit, and Houston are October 1997, October 1993, and October 1999.

bOne of IRS’ 10 service centers.

Source: IRS.




 10                                                       GAO/GGD-97-126RIRS’Field Office Restructuring in Michigan
ENCLOSURE II                                                               ENCLOSURE II
                IRS’METHODOLOGY FOR SELECTING THE NUMBER
                  AND LOCATION OF CUSTOMER SERVICE SITES

In December 1993, IRS announced the locations of the 23 customer service sites. To
determine the appropriate number of customer service sites, IRS compared its
customer service operations with those of the corporations it visited (Citicorp,
American Airlines, and Delta Airlines) and analyzed anticipated future workloads. On
the basis of these visits and analyses, IRS determined that it could handle its future
workload with fewer employees and fewer than 70 sites. However, IRS established
two constraints in making consolidation decisions: (1) it needed to follow Policy
Statement P-O-112,which stated that “Where employees’jobs will be substantially
impacted by the introduction of new technology, it is the policy of IRS to provide all
career and career conditional employees appropriate retraining and continued
employment which give them the opportunity to maintain their grades”;l’ and (2) it
decided to maintain some level of employment at each of the 10 service centers (see
enc. I for the location of those 10 centers).

IRS considered several possible numbers of customer service sites, ranging from 10 to
44. The decision to maintain some employment presence at the service centers led
IRS to establish a lower limit of 10 sites. IRS’workload model indicated that IRS      .
would require fewer staff in the future due to technological advances. The need for
fewer staff, coupled with IRS’decision to minimize staff relocation in accordance with
Policy Statement
P-O-112,led IRS to decide that only current IRS field locations should be selected as
customer service sites. Because the 70 existing sites were located in 44 locations, an
upper limit of 44 sites was established.‘” Knowing that most corporations handled
their customer service operations with fewer sites than the upper limit IRS was
considering, coupled with IRS’ desire to make use of some of the experienced staff at
ACS and TPS sites, IRS determined that the number of sites should be in the 20 to 30
range.


 ‘“Although Policy Statement P-O-112has not been officially rescinded, IRS, on August 23,
 1996, terminated its understanding with NTEU that outlined the procedures that gave IRS
 employees whose jobs were designated as obsolete the opportunity to transfer into new
jobs.

‘lIRS’ site selection documents state that IRS considered 44 geographic locations as an
upper limit for the number of customer service sites. However, data that IRS provided
for enclosure I showed 46 locations-those we listed, San Juan and Martinsburg.
According to IRS officials, some of the sites in enclosure I are in close proximity and may
have been combined to reach a total of 44 sites. However, documentation was not
available to indicate which locations those were.
11                                    GAOIGGD-97-126RIRS’Field Office Restructuring   in Michigaa
ENCLOSURE It                                                               ENCLOSURE II
Decisions on the exact number of sites and their locations were primarily based on (1)
a model that factored in primarily cost and quality/productivity data and (2)
management discretion. IRS examined more than 100 different scenarios based on
various combinations of data on cost and quality/productivity. Cost data used in every
scenario included costs of labor, office space rent, training, and telecommunications.
Cost data for labor, office space rent, and telecommunications were collected for each
existing field location and projected to the year 2001. Historic attrition patterns were
used to project differences in Wining costs for each location. The quality/productivity
data IRS used varied depending on the type of site-service center, TPS site, or ACS
site. The quality data also factored in a site’s ability to recruit based on data obtained
from the American Chamber of Commerce and the Bureau of the Census on housing,
annual salaries, and cost of living.

The final ranking process gave cost data a 75 percent weight and quality/productivity
data a 25 percent weight. Under the final ranking process, a constraint was added
that only sites with at least 175 employees could be considered. According to IRS
officials, because call site telephone equipment, specifically the Automated Call
Distributors, are designed for use by blocks of about 200 employees, IRS decided that
175 employees represented a minimum for a viable customer service site in order to
properly utilize the equipment. IRS did not want to consider sites that had less than           .
175 employees because, according to IRS officials, if such a site were selected, it
would have to hire staff to achieve the 175-em$loyee minimum while other sites would
be reducing staff.

IRS developed an estimate of the number of telephone calls it expected to receive by
area code in 2001. IRS’ cost model allocated the telephone calls to the most cost-
efficient site (i.e., the site that could handle a specific area code at the least cost.)
Additional calls would then be routed to the next most cost-efficient site, with
overflows going to the next site and the next until aU the calls had been handled. The
model could allocate calls to up to 25 sites. IRS officials said this was done so that
IRS could determine the relative difference between the selected sites and the top
nonselected sites.

The fjnal run included 25 sites and showed that 2 nonselected district offices (Detroit
and Chicago) outranked the Andover, MA, and Brookhaven, NY, Service Centers.
According to IRS officials, the decision to have 23 sites was made before this last run.
The former Modernization Executive said that the final number was a management
decision made by the Executive Committee. Given that IRS had decided to maintain
an employment presence at each of the 10 service centers, the Andover, MA, and
Brookhaven, NY, Service Centers were placed ahead of the 2 districts in the ranking.
When IRS ran the workload model under this scenario, the model distributed all the


 12                                     GAO/GGD-97-I26E IRS’Field Office Restructuring in Michigan
ENCLOSUREII                                                               ENCLOSURE II

customer service work before getting to Detroit. As a result, IRS did not select
Detroit as a customer service site.




13                                    GAO/GGD-97-l26E IRS’Field Office Restructuring in Michigan
ENCLOSURE III                                                                ENCLOSURE IX

                    MAJOR CONTRIBUTORS TO THIS REPORT

GENERAL GOVERNMENT DMSION. WASHINGTON. D.C.

David Attianese, Assistant Director, Tax Policy and Administration Issues
Sherrie Russ, Senior Evaluator
Bryan Gordon, Senior Evaluator

ATLANTA FIELD OFFICE

Robert V. Arcenia, Evaluator-in-Charge
Ronald J. Heisterkamp, Evaluator




 (268801)

 14                                      GAO/GGD-9%126R   IRS’   Field Office Restructming in   Mi~higa.n
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