Tax Administration: EEO Issues in IRS' Midwest District Office

Published by the Government Accountability Office on 1999-06-24.

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

United States General Accounting Office                                                               General Government Division
Washington, D.C. 20548


                 June 24, 1999

                 The Honorable Russell Feingold
                 United States Senate

                 The Honorable Herb Kohl
                 United States Senate

                 The Honorable Tom Barrett
                 House of Representatives

                 The Honorable Gerald Kleczka
                 House of Representatives

                 Subject: Tax Administration: EEO Issues in IRS’ Midwest District Office

                 As you know, the Conference Report on the Internal Revenue Service (IRS) Restructuring
                                       1                                  2
                 and Reform Act of 1998 mandated that we review a report dealing with IRS equal
                 employment opportunity (EEO) issues. That report was produced by an independent review
                 team that IRS commissioned to study these issues in IRS’ Midwest District Office, which is
                 headquartered in Milwaukee, WI.

                 In May 1998, which was a month before the Conference Report, the Chairman, Senate
                 Committee on Finance, asked us to review allegations of misconduct by IRS employees that
                 were raised at the Committee’s April 1998 hearings. Some of those allegations involved
                 discrimination in the Midwest District Office. In addressing the concerns of the Committee,
                 we planned our work to also respond to the mandate contained in the Conference Report.
                 Accordingly, one of our objectives in our recently issued report on the various allegations
                 was to describe EEO issues in IRS offices in the Milwaukee metropolitan area. This letter
                 provides you with information that focuses only on that objective.

                     H. Rept. 105-599.
                 The Status of the Equal Employment Opportunity Program, Internal Revenue Service, Milwaukee District Office, Milwaukee,
                 Wisconsin, Independent Review Team, Aug. 1998.
                     Tax Administration: Allegations of IRS Employee Misconduct (GAO/GGD-99-82, May 24, 1999).

                 Page 1                                                     GAO/GGD-99-122R EEO Issues in IRS’ Midwest District Office
To describe the EEO issues, we examined the report of the independent team studying the
EEO program and the documents that the team accumulated in doing its work, including an
IRS internal EEO climate assessment study. We also interviewed key study participants and
affected parties in Washington, D.C., and Milwaukee to better understand (1) what the EEO
climate in the area was, (2) how the study report was done, and (3) what had happened since
the report was finished.

We did our work in Washington and Milwaukee between June 1998 and March 1999 in
accordance with generally accepted government auditing standards.

Results in Brief
IRS has acknowledged EEO-related problems in its Midwest District Office, including
problems in hiring and promotion, and has begun addressing them. After an Equal
Employment Opportunity Commission administrative judge’s finding that an IRS employee
was a victim of discrimination, the district produced a climate assessment report noting that
a lack of trust and goodwill pervaded the work environment. In addition, although the recent
independent team did not find discriminatory hiring or promotion practices, its August 1998
report contained many recommendations related to several district problem areas it
identified, including the hiring and promotion processes. Since the independent team’s report
was issued, a new District Director has been named who has stated her commitment to
overcoming the district’s contentious and long-standing EEO problems.

Problems with the EEO climate in IRS’ Midwest District Office date back several years. In
1995, the Department of the Treasury agreed with an Equal Employment Opportunity
Commission administrative judge who found that a district employee was the victim of
discrimination and retaliation. In addition, certain of your offices received EEO-related
complaints from IRS employees, and internal and external groups were critical of district
EEO matters. According to the former District Director, who arrived in early 1996, the district
was perceived to run on “good-old-boy” connections. Also, the district, which was created in
1996 through the merger of three smaller districts, was facing possible layoffs, which further
contributed to tense labor-management relations.

Two Studies of the EEO Climate Made Numerous
IRS Climate Assessment Team
To better identify some of the underlying causes of the problems in IRS Milwaukee area
offices, the former District Director commissioned an IRS team in April 1996 to assess the
EEO climate and make recommendations for corrective actions. As part of its review, the
assessment team distributed a survey to all Milwaukee area district employees to gather EEO-
related perceptions.

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On the basis of its review of the survey results and other data, the assessment team reported
in December 1997 that a lack of trust and goodwill pervaded the work environment. The
survey revealed that people in all groups (e.g., males, females, nonminority whites, African
Americans, and Hispanics) believed they were less likely than people in other groups to
receive promotions, significant work assignments, training opportunities, and formal
recognition or rewards. Specific problems cited in the report included little recent diversity
training, a belief by certain minority employees that stereotypes negatively affected their
treatment, difficulties in widely disseminating information, gaps in EEO communication, no
formal mentoring program, and much dissatisfaction with how employees were selected for

On the basis of its findings, the assessment team made 53 recommendations in 4 categories.
The categories covered creating a supportive culture, creating a greater understanding of
issues, preparing employees for promotion, and examining ways that employees were
selected for promotion. In a 5 category—examining the representation of minorities in the
district—the team made 21 additional recommendations that, at that time, were expected to
be suspended pending an IRS analysis of the ramifications of certain court cases.

The former District Director who commissioned the climate assessment report praised it and
the process by which it was produced. During his tenure, many actions were taken to address
the district’s EEO problems. For example, (1) policy statements were issued stating that IRS
tolerates no discriminatory behavior, (2) minority representation in the Director’s and EEO
offices was increased, (3) the EEO office was given a more private location, (4) baselines
were set to measure the impact of any improved hiring or promotion policies, (5) minorities
were promoted to positions of authority, and (6) training was provided. Goals were also set to
open communications with individual employees, employee and community groups, and the
media; treat individual performance cases fairly; and not debate emotionally charged
personnel issues in the press.

Independent Review Team
In spite of the climate assessment team’s efforts and the various changes made or planned,
the district’s EEO problems persisted. Consequently, IRS and the four of you agreed that
another team should independently review the situation. To try to preserve its independence,
the team purposefully had no representation from IRS. Also for this reason, the independent
team did not solicit IRS comments on its draft report.

The independent team interviewed more than 100 people and examined over 130 records and
files, although it did not scientifically select interviewees or broadly survey all district
employees. Team members told us that they tried to ensure broad coverage by talking to
many people and to all sides of general issues. Moreover, they relied on IRS’ climate
assessment survey to summarize the perceptions of employees. They also, however, relied
extensively on anecdotal information without determining its objectivity or accuracy.

In August 1998, the independent team reported, among other things, that (1) many employees
did not have confidence in the EEO process and feared retaliation if they filed complaints or
participated in a way considered adversarial to management, (2) separating EEO functions

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into outreach and traditional EEO/counseling components was not working effectively, (3)
the counseling program was in disarray, and (4) confusion existed over the role of Treasury’s
Regional Complaint Center in the formal EEO complaint process. Also, although anecdotes
collected by the team did not support a sweeping indictment of Milwaukee IRS management
practices, the report concluded that, intentionally or not, some practices perpetuated a work
environment that was historically insensitive to the concerns of female and minority

On the basis of its review, the independent team made recommendations in different areas.
For instance, many recommendations dealt with the team’s findings related to the district’s
EEO process for resolving issues in a precomplaint stage and its relationship to Treasury’s
formal complaint process. The team also made recommendations relating to hiring and
promotions even though it did not find discriminatory patterns or practices in promoting or
hiring minorities or women. The report noted that African Americans in IRS’ Milwaukee and
Waukesha, WI, offices appeared underrepresented when compared to the Milwaukee civilian
labor force.

Although district managers and representatives of employee groups disagreed with many of
the issues and assertions in the report, there was general agreement with many of the
recommendations. For instance, the head of the diversity office at the time of the study
informed us that he agreed with the substance of, had actually taken action related to, or
would favor forwarding to Treasury many of the report’s recommendations.

After the report was released, IRS initiated several significant actions to address the
problems identified. Chief among these actions was that IRS appointed a new District
Director who arrived in the district in mid-November 1998 with a stated commitment to
overcome past problems. In that regard, she described to us her intent to open
communication channels and deal with disrespect, nastiness, and mean-spiritedness at all
levels. She emphasized her themes of communication, responsibility, and accountability and
told us that on her second day in the district she discussed these themes at an off-site meeting
with top managers and union, EEO, and diversity officials.

The new District Director also expressed to us her commitment to work with various interest
groups. In addition, she combined the district’s EEO and diversity functions, made EEO
positions permanent instead of rotational, and invited a union representative to be present for
interviews for a new EEO officer.

The new District Director stated that these actions were on the right track, but because of the
long and contentious history of EEO problems in the district, improvements and success will
take time. She also noted that better communication and cooperation among IRS and the
various internal and external stakeholders will be extremely important in dealing with the
district’s long-standing problems.

 The head of the independent team acknowledged that the proper statistical comparison was with the local qualified labor force,
not the civilian labor force. However, according to another team member, the relevant qualified labor force statistics were not

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Agency Comments
We obtained comments from IRS on a draft of the May 1999 report that we prepared for the
Chairman, Senate Committee on Finance. Although that draft contained the material
presented in this letter, IRS’ comments did not address EEO issues.

                                    -   -   -   -   -

We are sending copies of this letter to Senator William V. Roth, Chairman, and Senator Daniel
Patrick Moynihan, Ranking Minority Member, Senate Committee on Finance; Representative
Bill Archer, Chairman, and Representative Charles B. Rangel, Ranking Minority Member,
House Committee on Ways and Means; and the Honorable Charles O. Rossotti, the
Commissioner of Internal Revenue. We will also make copies available to others on request.

If you have any questions regarding this letter, you may contact me on (202) 512-9110. Key
contributors to this letter were Joseph E. Jozefczyk, Lawrence M. Korb, Anthony P. Lofaro,
and Jacqueline M. Nowicki.

James R. White
Director, Tax Policy and
 Administration Issues

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