United States General Accounting Office
GAO Report to the Chairman
Committee on Finance
U.S. Senate
May 1999
TAX
ADMINISTRATION
Allegations of IRS
Employee Misconduct
GAO/GGD-99-82
GAO United States
General Accounting Office
Washington, D.C. 20548
General Government Division
B-280651
May 24, 1999
The Honorable William V. Roth, Jr.
Chairman, Committee on Finance
United States Senate
Dear Mr. Chairman:
For years, the Congress has expressed concerns about the Internal
Revenue Service’s (IRS) management and treatment of taxpayers. We, and
others, have chronicled IRS’ struggle to modernize and have made scores
of recommendations to improve IRS’ operations and its service to
1
taxpayers. Congressional concerns led to a June 1997 report by the
National Commission on Restructuring IRS and a series of hearings in 1997
and 1998 that focused on problems at IRS.
In April 1998, the Senate Committee on Finance held hearings on alleged
misconduct by IRS employees in their treatment of other IRS employees
and taxpayers. Witnesses testifying at the hearings alleged that (1) senior
IRS managers did not receive the same level of disciplinary action as line
staff; (2) the Deputy Commissioner of Internal Revenue delayed action on
substantiated cases of employee misconduct until senior managers were
eligible to retire; (3) IRS retaliated against whistleblowers and against
taxpayers and their representatives who were perceived to be
noncooperative; (4) IRS employees zeroed out or reduced proposed tax
assessments for reasons not related to the merits of the cases; and (5) IRS
discriminated against employees in the evaluation process on the basis of
race or national origin in its Midwest District Office, which is
headquartered in Milwaukee, WI.
You asked us to review these allegations and, in particular, to evaluate
both the specific allegations made at the hearings and any underlying
systemic or programmatic problems that needed to be resolved to protect
the rights of taxpayers and IRS employees in these areas. This report
provides information related to specific allegations regarding IRS senior
managers and the Midwest District Office. It also brings together
information bearing on the other allegations from our current and past
work on systemic problems at IRS. Because some of the specific
allegations involve taxpayer data that cannot be publicly disclosed, we are
issuing to you at the same time as this report a separate, restricted letter
1
A Vision for a New IRS, Report of the National Commission on Restructuring the Internal Revenue
Service, June 25, 1997.
Page 1 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
B-280651
that discusses alleged improper zeroing out and retaliation against
taxpayers.
We did our work in Washington, D.C., and Milwaukee between June 1998
and March 1999 in accordance with generally accepted government
auditing standards. A complete description of the objectives, scope, and
methodology for this report appears in appendix I. A summary of IRS’
written comments on a draft of the report appears at the end of this letter.
Available data showed significant differences between Senior Executive
Results in Brief Service (SES) and line staff disciplinary cases in terms of dispositions and
processing times. For example, a much higher percentage of SES cases
than of lower-level cases was cleared or closed without action, and SES
cases tended to take longer to complete. Also, IRS found that actions taken
against lower-level employees more closely conformed to its established
table of penalties than actions taken against higher-graded employees.
However, there was no basis for a more direct comparison of the discipline
imposed on senior managers and lower-level employees because SES and
line staff offenses, as well as their associated mitigating and aggravating
factors, were different. Our ability to make other comparisons between
SES and line staff disciplinary cases was hindered by the lack of detailed
and accurate data in connection with IRS’ disciplinary case database.
Regarding the allegation that the Deputy Commissioner delayed action on
senior manager misconduct cases until the managers were eligible to
retire, we focused on actual retirements and did not reach general
conclusions about eligibility to retire. We found no cases in which an
individual who was ineligible to retire when an allegation was filed, retired
while the case was pending with the Deputy Commissioner. However,
cases we studied in depth were pending for 2 months to 4 years at the
Deputy Commissioner’s level. In addition, we estimated, on the basis of a
random sample of IRS SES disciplinary files, that SES cases averaged
almost a year from the time executive support staff received them until
case closure, compared to a goal of 90 days. To address a variety of
problems, including poor case-tracking procedures, inaccurate and
incomplete records and files, and poor communication, IRS has started to
revamp its entire disciplinary system.
We could not determine the extent of reprisal against whistleblowers
because IRS did not track whistleblowing reprisal cases. The only
systematic data available related to formal complaints filed with two
independent review agencies—the U.S. Office of Special Counsel (OSC)
and the U.S. Merit Systems Protection Board (MSPB). In fiscal years 1995
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through 1997, OSC received 63 IRS whistleblower reprisal matters and
obtained action from IRS favorable to employees in 4 cases. In the same
time period, MSPB decided 45 initial appeals of whistleblowing reprisal
allegations involving IRS, dismissing the majority of them but settling more
than half of the remainder.
Regarding allegations of IRS retaliation against taxpayers, we previously
reported that IRS information systems were not designed to identify,
2
address, and prevent such taxpayer abuse. In reviewing IRS databases for
this report, we again found that IRS information systems provided limited
and incomplete data on alleged revenue agent retaliation against taxpayers
and their representatives.
With respect to allegations of improper zeroing out or reductions of
recommended taxes by IRS managers, we found no evidence to support
the allegations in the eight specific cases referred to us by the IRS
employees who testified at the hearings. On the other hand, IRS did not
systematically collect data on how much additional taxes recommended by
auditors were zeroed out or reduced by IRS employees without a basis in
law or IRS procedure. In particular, IRS had no data on supervisors’
improperly limiting auditors’ recommendations of additional tax before an
audit was closed. Although our results were not a measure of improper
reductions in recommended taxes, we recently reported that the majority
of additional taxes recommended during audits was not assessed. We
attributed this to many factors, including the complexity of the tax code
and the overreliance on additional taxes recommended to measure audit
results.
IRS has acknowledged equal employment opportunity (EEO)-related
problems, including problems in hiring and promotion, in its Midwest
District Office 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. In addition, although a recent outside panel found no
discriminatory hiring or promotion practices, its August 1998 report
contained many recommendations related to several district problem
areas, including the hiring and promotion processes. Since the report was
2
Tax Administration: IRS Can Strengthen Its Efforts to See That Taxpayers Are Treated Properly
(GAO/GGD-95-14, Oct. 26, 1994); Tax Administration: IRS Is Improving Its Controls for Ensuring That
Taxpayers Are Treated Properly (GAO/GGD-96-176, Aug. 30, 1996); and Tax Administration: IRS
Inspection Service and Taxpayer Advocate Roles for Ensuring That Taxpayers Are Treated Properly
(GAO/T-GGD-98-63, Feb. 5, 1998).
Page 3 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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issued, a new District Director was named who has stated her commitment
to overcoming the district’s contentious and long-standing EEO problems.
In general, IRS’ lack of adequate information systems and documentation
in the areas of employee discipline, retaliation against whistleblowers and
taxpayers, and zeroing out of recommended taxes prevented us from doing
a more comprehensive analysis of these issues. This lack of information
hinders both congressional oversight and IRS management from
addressing any problems in these areas. IRS has acknowledged the need
for more complete and accurate program and management information on
these issues.
The IRS Restructuring and Reform Act of 1998 included several provisions
related to employee misconduct, abuse, and retaliation. As a consequence,
IRS has taken steps intended to begin reform of its processes and data
collection in the areas of employee discipline, retaliation, and the tax
assessment process, among other things. We believe that it is important
that IRS maintain adequate information systems and documentation so
that employee and taxpayer complaints, including those related to
retaliation, can be properly reviewed.
Available data showed that case dispositions and processing times in
Disciplinary Actions disciplinary cases during the period of January 1, 1996, through June 30,
for Senior Executive 1998, differed for SES employees and lower-level, or general schedule
Service and Lower- (GS), staff. In addition, a 1997 IRS internal study found that actions taken
against lower-level employees more closely conformed to the IRS table of
Level Staff 3
penalties than actions taken against higher-graded employees. However,
because of dissimilarities in the types of offenses and incomplete case
files, these data do not necessarily prove disparate treatment. Agencies
must consider many factors, such as the nature and seriousness of the
offense; the employee’s job level and type of employment; whether the
offense was intentional, technical, or inadvertent; the employee’s past
disciplinary record; and the notoriety of the offense or its impact upon the
reputation of the agency, in deciding what penalty, if any, should be
imposed in any given case. IRS recognized that problems have hindered
the processing and resolution of employee misconduct cases and has
begun revamping its disciplinary systems.
Background For the period we studied, IRS tracked disciplinary cases for GS and SES
employees in different systems. The Office of Labor Relations (OLR),
which is the personnel office for non-SES staff, handled GS cases. It
3
Guide for Penalty Determinations Report, IRS, Sept. 1997.
Page 4 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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tracked these cases in the Automated Labor and Employee Relations
Tracking System (ALERTS), although IRS officials told us that ALERTS
data were often missing or incomplete. The Office of Executive Support
(OES), which is the personnel office for IRS executives, handled SES
cases. Although ALERTS was supposed to also track SES cases, OES
tracked SES cases by using a log and monthly briefing reports. The
monthly briefing reports were used to inform the Deputy Commissioner
about the status of cases.
We selected the cases for our study of disciplinary actions for SES and
lower-level staff as follows: For GS cases, we used ALERTS data for 22,025
cases received in, or closed by, OLR between January 1, 1996, and June 30,
1998. For SES cases, our information came from two sources: (1) a 70-case
random sample of SES nontax misconduct case files that were active
4
between January 1, 1996, and June 30, 1998; and (2) for the same time
period, 43 other SES nontax cases reported either in the logs or as
5
“overaged” SES cases in the monthly briefing reports. In total, we looked
at 113 cases involving 83 SESers. Unless otherwise noted, all SES statistics
presented in this section are based on the random sample. See appendix I
for more information on how we selected the cases for our study.
We were unable to make many meaningful statistical comparisons
between SES and GS employee misconduct cases for three reasons. First,
we were able to collect more detailed data through our SES file review
than from the ALERTS database used for GS cases. This was particularly
true regarding dates on which important events occurred. As a result, we
could not compare average processing time at each phase of the
disciplinary process, although we were able to compare processing times
from case receipt through case closure.
Second, the level of detail and accuracy of ALERTS data varied widely.
Some IRS regions historically took ALERTS data entry more seriously than
others did, according to an IRS memorandum, and cases contained varying
levels of detail about case histories, issues, facts, and analyses. ALERTS
had few built-in system controls to ensure data integrity. Instead, IRS
relied on managers to ensure the accuracy of their subordinates’ work.
Third, some data were missing for the majority of the cases tracked in
ALERTS. For example, we could not analyze the frequency with which
4
We excluded employee tax cases because they were inherently different from the cases and issues
raised during the April 1998 Senate Finance Committee hearings.
5
IRS defined overaged cases as those cases pending in OES for more than 90 days.
Page 5 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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final dispositions were less severe than proposed dispositions because
both pieces of information were available for only about 13 percent of the
ALERTS cases. Because officials said that ALERTS was OLR’s means of
recording information on lower-level disciplinary cases, we used it to the
extent that it had information comparable to what we collected on SES
cases.
Comparisons Between SES Available data showed that processing time and frequency and type of case
dispositions differed for SES and lower-level staff. On average, from OES’
and Lower-Level or OLR’s receipt of a case until case closure, SES cases, on the basis of our
Misconduct Cases 70-case random sample, lasted almost a year (352 days) and lower-level
cases lasted less than 3 months (80 days).
We estimated that the largest difference between SES and GS case
dispositions occurred in the closed without action (CWA) and clearance
categories. As shown in table 1, the dispositions in 73 percent of SES cases
were CWA or clearance, versus 26 percent for GS cases. CWA is to be used
to close a case when the evidence neither proves nor disproves the
allegation(s). A disposition of clearance is to be used when the evidence
clearly establishes that the allegations are false. In practice, neither
disposition results in a penalty. The actual breakdown between the two
dispositions is as follows: for SES cases, 61 percent were CWA and 12
percent were clearance; for GS cases, 24 percent were CWA and 2 percent
were clearance.
Table 1: Percentages of Closed SES and
Lower-Level Misconduct Cases Percentage of Confidence
Receiving Various Dispositions sampled interval for SES Percentage
a b
Disposition SES cases cases of GS cases
Clearance or closed without 73 63.4 - 83.4 26
action
Caution letter 0 0-5 3
Oral or written counseling 9 4.5 - 17.0 13
Reprimand 2 0.4 - 7.9 9
Suspension 0 0-5 9
Removal 0 0-5 5
Retired/Resigned 9 4.5 - 17.0 11
c
Other 7 3.2 -14.8 25
a
The confidence level for these intervals was 95 percent.
b
Does not add to 100 percent due to rounding.
c
For GS cases, “other” includes admonishments, leave restriction, reassignment, alternative discipline,
cases forwarded to Inspection, missing and miscoded cases, and other dispositions. For SES cases,
“other” includes missing and miscoded cases.
Sources: GAO analysis based on sample of SES cases and information from IRS’ ALERTS.
Table 1 outlines in order of severity the frequency with which available
data indicate that various dispositions were imposed for SES and lower-
Page 6 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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level staff. SES data are based on the 56 closed cases in our 70-case
6
sample. GS data are based on 15,656 closed cases in ALERTS. Ninety-five-
percent confidence intervals for the SES data are presented to more
accurately portray our findings. Using these confidence intervals, the rates
of occurrence differed between SES and GS cases for dispositions of
clearance and CWA, reprimand, suspension, and other. However, using 95-
percent confidence intervals and eliminating the CWA or clearance
category from the analysis, the rates of occurrence between SES and GS
cases were similar for all dispositions, except oral or written counseling
and retired/resigned. In any case, we will discuss later in this report that
differences in dispositions of SES and GS cases do not necessarily mean
that the dispositions were inappropriate or that disparate treatment
occurred.
We also analyzed disciplinary actions for an additional 43 SES cases.
Because these cases were not randomly selected, the results may not be
representative. Of the 43 cases, we found 9 in the more serious
categories—6 instances of counseling, 1 reprimand, 1 suspension, and 1
removal.
Factors Affecting Case- As further detailed in the upcoming section of this report on alleged case-
processing delays by the Deputy Commissioner, SES cases took a long
Processing Time and time to close for many reasons. These reasons included poor case-tracking
Dispositions procedures, inadequate file management, and poor communication among
agency officials involved in the disciplinary process. We do not know to
what extent, if any, these difficulties contributed to differences in
processing times between SES and GS cases.
Many factors can affect the discipline imposed in a particular case. These
factors include the nature and seriousness of the offense; the employee’s
job level and type of employment; whether the offense was intentional,
technical, or inadvertent; the employee’s past disciplinary record; and the
notoriety of the offense or its impact upon the reputation of the agency.
Collectively, these factors are components of what is known as the
Douglas Factors, and they must be considered in determining the
7
appropriate penalty in a case. See appendix II for a listing of the Douglas
Factors.
6
Excludes duplicate cases and nondisciplinary dispositions.
7
Douglas v. Veterans Administration, 5 M.S.P.R. 280 (1981).
Page 7 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Not all of the Douglas Factors will be pertinent in every case, and, while
some factors will weigh in the employee’s favor (mitigating factors), others
may weigh against the employee (aggravating factors). IRS officials told us
that lower-level actions tend to be more straightforward than SES actions,
with fewer mitigating factors. Since mitigating factors tend to reduce the
level of discipline imposed, this could partially explain why penalties might
be imposed differently in lower-level cases than in SES cases.
We found that allegations against SES employees were usually reported to
a hotline, the Department of the Treasury’s Office of Inspector General
(OIG), or the IRS Inspection Service. Because complaints against SES
employees can be anonymous, this anonymity can affect IRS’ ability to
follow up on a complaint or investigate it thoroughly. In contrast, IRS
officials told us that GS cases were generally filed by managers about their
subordinates. In these cases, the complainant was known and generally
provided concrete evidence to support the allegation.
Further, typical issues surrounding lower-level cases may be less
complicated or easier to successfully investigate than those involving SES
employees. Table 2 outlines in more detail the most common issues in SES
and lower-level staff cases. SES data are based on our 70-case sample. GS
data are based on 22,025 cases in ALERTS. We subjectively classified the
issues in SES cases, and our classifications may not be precise. Overall, we
found that the most common issue in SES cases was prohibited personnel
8
practices, while time and attendance was the most common issue in GS
cases.
Table 2: Most Frequently Cited Issues
in SES and GS Disciplinary Cases Most common Second most Third most
a
Cases issue common issue common issue
SES sample Prohibited personnel Misuse of Procurement issues;
practices funds/property; fraud, lying/falsifying
waste, and abuse documents; abuse of
position/authority;
preferential treatment
GS Time and attendance Unauthorized Unacceptable job
access to taxpayer performance
information
a
There was a four-way tie among SES cases.
Sources: GAO analysis based on SES case file review and issue data from IRS’ ALERTS.
8
Defined as actions that, by law, may not be taken by any employee who can take, direct others to take,
recommend, or approve any personnel actions. Examples include discrimination, coercion of political
activity, and nepotism. 5 U.S.C. 2302(b).
Page 8 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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IRS Study of Penalty Guide In 1994, in response to an internal IRS study reporting a perception that
managers received preferential treatment in disciplinary matters, IRS
Effects 9
created a table of penalties, the Guide for Penalty Determinations. The
purpose of the guide was to ensure that decisions on substantiated cases
of misconduct were appropriate and consistent throughout IRS. In 1997
and 1998, IRS studied the effect of the guide on GS and SES employees and
found that
• actions taken against lower-graded employees more closely conformed to
the guide than those taken against higher-graded employees (see table 3);
• for GS employees overall, 91 percent of disciplinary actions conformed to
the guide, versus 74 percent for SES employees;
• when disciplinary actions did not conform to the guide, the actions were
below the guide’s prescribed range 93 percent of the time for GS
employees overall, versus 100 percent of the time for GS-13 through GS-15
and SES employees; and
• if admonishments were included as part of reprimands, conformance with
the guide approached 100 percent for GS-13 through GS-15 employees.
Table 3: Degree With Which
Disciplinary Action Conformed to Guide Degree of conformance
for Penalty Determinations, 1994-97 Employee level with the penalty guide
GS-2 through GS-7 92% - 93%
GS-8 through GS-12 88 - 91
GS-13 through GS-15 77 - 87
a
All SES 74
Note: Nonconformance with the penalty guide does not necessarily mean that a particular penalty
was inappropriate.
a
IRS reviewed 164 executive cases. Of these, 43 cases had dispositions that were subject to the
provisions of the guide.
Source: Report of the Employee Complaints Analysis Group, IRS, 1998.
The IRS study and IRS officials agreed that the guide had limitations and
no longer met IRS needs. Specifically, the guide covered all employees but
did not address statutory and regulatory limitations that restricted
management’s ability to impose disciplinary suspensions on SES
employees. IRS officials said that governmentwide, there was no level of
discipline available for SES employees that was more severe than a
10
reprimand but less severe than a suspension of at least 15 days. In
contrast, GS employees could have received suspensions of 14 days or
less. While the guide prescribed a penalty range of “reprimand to
suspension,” the only option for SES employees, because of the statutory
9
Report of the Double Standard Study Group, IRS, May 1992.
10
5 U.S.C. 7542 and 5 C.F.R. 752.601(b).
Page 9 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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limitations against suspensions of less than 15 days, was a reprimand if
management wished to impose a penalty, but not the harshest available
penalty. IRS officials also told us that in certain cases, they might have
imposed discipline in between a reprimand and a 15-day suspension had
they had the option to do so. According to IRS officials, IRS’ 1995 attempt
to have the Office of Personnel Management deal with this issue was
unsuccessful. Statutory and regulatory requirements could partially
explain why reprimands might have been imposed when a harsher
disciplinary action might have seemed more appropriate.
Applying to employees at different levels, the IRS penalty guide was
constructed with very broad recommended discipline ranges to provide for
management discretion. However, one IRS study pointed out that, in some
instances, this rendered the guide useless (e.g., when the penalty range
11
was “reprimand to removal”).
IRS Is Making Changes to IRS created a disciplinary review team in September 1998. Among other
things, the team was to
Its Complaint System
• develop an action plan that addressed case handling, complaint systems,
and employee awareness;
• review and revise IRS’ Guide for Penalty Determinations; and
• develop a process to review and monitor complaints.
As of March 1999, the team was proposing a new integrated IRS complaint
process. Its intent was to overcome problems with complaint processing
systems’ not (1) communicating or coordinating with each other, (2)
capturing the universe of complaints, (3) specifically tracking or
accurately measuring complaints, and (4) following up on complaints to
ensure that appropriate corrective action had been taken. The team was
proposing a 26-person Commissioner’s Review Group to, among other
things, manage and analyze complaints sent to the Commissioner of
Internal Revenue, monitor other IRS complaint systems, and coordinate
with the systems’ representatives. The team was also redesigning the
penalty guide.
11
For the 51 offenses listed in the penalty guide, 15 offenses (or 29 percent) had a range of “reprimand
to removal” or “admonishment to removal.”
Page 10 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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On the basis of our review of SES cases, we did not find a case in which an
Alleged Delays by IRS individual who was ineligible to retire at the time an allegation was filed,
Deputy Commissioner retired while the case was pending with the Deputy Commissioner.
on Senior Executive However, we found cases that spent up to 4 years at this stage in the
disciplinary process and cases that stalled at various points throughout the
Service Misconduct process. Although OES’ goal for closing an SES case was 90 days, on the
Cases basis of our random sample, cases averaged almost 1 year for OES to
close. Further, IRS had poor case-tracking procedures, inadequate file
management, missing and incomplete files, and poor communication
among officials involved in the disciplinary process.
Background Because IRS’ 1990 and 1994 written SES case-handling procedures were
12
out of date, IRS officials described the operable procedures to us. During
the period covered by our review, OES handled SES misconduct cases. Its
goal for closing a case was 90 days from its receipt of a case. Once OES
received a case, it was to enter it into ALERTS, although it did not always
do this, and prepare a case analysis. The case analysis and supporting
documents were then to be forwarded to the appropriate Regional
Commissioner, Chief, or Executive Officer for Service Center Operations,
who was to act as the “recommending official.” Within 30 days, the
recommending official was to review the case with the help of local labor
relations experts, develop any additional facts deemed appropriate, and
return a case report to OES, including a recommendation for disposition.
If OES disagreed with the report for any reason, it was to include a
“statement of differences” in its case analysis. OES was to forward the
field report and the OES analysis to the Deputy Commissioner’s office for
concurrence or disapproval. If the Deputy Commissioner concurred with
the proposed disposition, the recommending official could take action. If
the Deputy Commissioner did not approve, he could impose a lesser
13
disposition or return the case to OES for further development. IRS
executive case-handling procedures did not define a time period within
which the Deputy Commissioner was to act on case dispositions.
We collected information on SES cases from two sources: (1) the five
specific cases mentioned during the April 1998 Senate Finance hearings,
and (2) a 70-case random sample of the SES misconduct case files as
previously described, plus 43 more cases from OES tracking logs and
12
Offices and positions in existence when the procedures were written had changed or disappeared but
were still official links in the processing chain.
13
IRS officials told us that, procedurally, it would be difficult for the deciding official to impose a more
severe penalty than what was proposed.
Page 11 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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monthly briefing reports, for a total of 113 cases. These 113 cases involved
83 individuals. Again, see appendix I for more details on how we selected
the cases to study.
No Cases Showing Of the 113 SES cases we reviewed, we did not find a single instance in
which an individual who was ineligible to retire at the time the allegation
Retirement Linked to was filed, retired while the case was pending with the Deputy
Deputy Commissioner Commissioner. Overall, of the 83 individuals involved in the 113 cases, 25
Delays in Case Processing people, or 30 percent, had retired from IRS by December 31, 1998. Of
14
these 25 people, 13 retired before their cases were closed or the cases
were closed because the individuals retired. At the time of retirement,
cases for 2 of the 13 people were pending in the Deputy Commissioner’s
office, but both of these individuals had been eligible to retire at the time
the complaints against them were originally filed. Cases for the remaining
11 of the 13 people either were still being investigated or were pending in
OES, that is, they had not yet reached the Deputy Commissioner’s office.
In doing our analyses, we focused on actual retirements and did not reach
general conclusions about eligibility to retire.
As table 4 shows, of the five executive cases mentioned during the April
1998 hearings, two of the executives were already eligible to retire when
the allegations against them were filed. We refer to the executives in the
five cases as Executives A through E. One of the two eligible executives—
Executive B—was still an IRS employee as of September 30, 1998. The
other—Executive D—retired while, in OES’ view, his case was pending in
15
the Deputy Commissioner’s office. Of the three individuals who were not
eligible to retire when the allegations against them were filed, one retired
16 months after his case was closed. The other two executives, one of
whom was not found culpable, were still employed by IRS as of September
30, 1998.
14
The 25 individuals do not include people for whom specific retirement dates were unavailable or
individuals whose cases were received in OES after they had retired.
15
Executive D was transferred about 7 months after the Inspection investigation was completed. The
Deputy Commissioner considered the case closed with the individual’s transfer, but OES was unaware
of the Deputy Commissioner’s view and did not formally close the case until 3 months after Executive
D retired, or 35 months after the transfer.
Page 12 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Table 4: Information on the Five
Misconduct Cases Cited at the April Employment
1998 Senate Finance Committee status Case pending
Hearings at our Retirement with Deputy
September 30, status at time Commissioner
SESer 1998, cutoff date of allegation (months) Case outcome
a
A IRS employee Not eligible to Not found to be
retire culpable for
violation
B IRS employee Eligible to 2 Counseled,
retire confirmed in writing
C Retired Not eligible to 18 Counseled
retire
a
D Retired Eligible to Transferred
retire
E IRS employee Not eligible to 48 Counseled,
retire confirmed in writing
a
Disciplinary file did not document the duration of the Deputy Commissioner’s review.
Sources: GAO analysis based on IRS misconduct case files and retirement eligibility information.
IRS records showed that the misconduct cases spent from 2 months to 4
years at the Deputy Commissioner level. See appendix III for more details
about the five cases.
Case Processing Not Timely As shown in table 5, on the basis of our random sample, the total
processing time for SES misconduct cases averaged 471 days (almost 16
months) from the date the complaint was filed until the case was closed.
Most of this time involved OES case analysis and referral to the
recommending official for inquiry (214 days, or about 7 months) and
investigation by the recommending official (124 days, or more than 4
months). These averages exceeded IRS’ most recent, written case-
processing time guidelines, which were 14 and 30 days, respectively. The
average total time from OES’ receipt of a case to the case’s closure was
352 days, compared to a goal of 90 days. As previously mentioned, there
was no targeted time frame for the Deputy Commissioner’s review.
However, on average, cases spent 42 days at this level.
Page 13 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Table 5: Processing Time at Selected
Stages in the Disciplinary Process for Percentage of
SES Misconduct Cases sample cases Median Mean Required
with number number number Range
a
Stages of process information of days of days of days of days
Complaint filed to 21 41 60 10-15 0 - 280
OIG/Inspection
beginning
investigation
Complaint filed to 66 40 57 10-15 0 - 306
OIG/Inspection
declining to
investigate
OIG/Inspection 21 123 130 No standard 7 - 355
starting investigation
to referral to IRS
OES receipt to 60 161 214 14 43 - 690
transmittal to
recommending official
(RO)
RO’s receipt of case 56 99 124 30 13 - 514
to RO’s completion of
inquiry
OES transmittal to 57 30 42 No standard 2 - 143
deciding official (DO)
to DO’s decision
DO’s decision to case 57 0 12 No standard 0 - 202
closure
OES receipt to case 79 252 352 90 13 - 1,275
closure
Overall time: 79 390 471 No standard 104 - 1,467
complaint filed to
case closure
Note: Ninety-five-percent confidence intervals surrounding the mean number of days for all
processing stages were less than plus or minus 10 percent.
a
Some percentages were relatively low because not all cases went through every phase, case files
did not always include all dates, and open cases still had processing phases to go through.
Sources: GAO analysis based on IRS misconduct case data and executive case-handling
procedures.
In addition, we found that some cases took a particularly long time to be
resolved. For example, in our sample cases, from the date the complaint
was filed to the date the case was closed, 8 cases took at least 2 years, an
additional case took more than 3 years, and still another case took longer
than 4 years.
In 1992, IRS acknowledged that the best way to prevent employees from
16
retiring before their cases closed was to improve timeliness. Although we
found no cases in which individuals ineligible to retire when allegations
16
IRS’ Program to Combat Senior-Level Misconduct: Getting Stronger but Still a Long Way to Go, Forty-
First Report by the Committee on Government Operations, Nov. 23, 1992.
Page 14 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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were made retired with the case pending before the Deputy Commissioner,
the longer it takes to close cases, the more likely that individuals would
retire or resign while their cases were open.
Problems With the SES Our review and a recent IRS task force report identified numerous
17
problems with the executive misconduct case-handling process. These
Misconduct Case-Handling problems included inadequate staffing, poor communication, inaccurate
Process and incomplete records and files, outdated procedures, conflicts over
proposed case dispositions, and internal disagreement about case
investigations. These problems contributed to the lengthy case-processing
times in the available data and case files.
Lack of IRS Staff Resources According to IRS officials, IRS’ downsizing a few years ago significantly
affected OES and field staff resources. From late 1996 through early 1998,
OES devoted only one staff year to executive misconduct cases. The staff
year was divided between the Director and one employee. In mid-1998, the
Director moved to Labor Relations, and the employee retired, leaving OES
with no resident expertise. Previously, four or five case experts handled
executive cases. In total, according to an IRS official, the office was
understaffed for about 18 months, which caused a case backlog. However,
the new Chief of OES was able to bring the staffing level up to eight,
including two individuals with employee relations backgrounds to act as
team leaders. She also used detailees and a technical contractor to reduce
the case backlog.
The understaffing issue also extended to the labor relations functions in
the regions. These functions supplied the staff that recommending officials
used to investigate misconduct cases. When the regional offices were
consolidated several years ago, they lost their labor relations functions as
well as a central repository for program administration and expertise.
IRS did not enter executive misconduct cases into ALERTS from late 1996
through early 1998. IRS officials told us they did not have enough labor
relations experts to properly track cases on ALERTS because the system
required significant detail about each case. Instead, it tracked these cases
using logs and monthly briefing reports. OES also used the briefing reports
to inform the Deputy Commissioner of case status. IRS officials
acknowledged that these independent systems often disagreed with each
other about the details and status of the cases.
17
Task Force to Review Handling of Executive, Grade 15 and Inspector General Referrals and
Investigations, IRS, July 28, 1998.
Page 15 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Poor Communication Our review found that poor communication among IRS support staff, the
Deputy Commissioner’s office, IRS Inspection, and OIG contributed to
case-processing delays. As previously mentioned, the Deputy
Commissioner considered one case to be closed with the transfer of the
individual, but OES was not told to formally close the case. In another
instance, the Deputy Commissioner told us that he inadvertently allowed a
case to be lost in the system. Case information in the ALERTS, OES, and
IRS Inspection tracking systems was also found to be inconsistent and
inaccurate in many instances. For example, according to IRS officials,
cases recorded as “overaged” in the IRS Inspection system were recorded
as “closed” by the field offices, leading to confusion among officials as to
whether a case was open or closed and where a particular case was
pending at a given time.
An internal IRS study found that many cases had timeliness problems,
especially cases that had been referred to IRS from OIG. In certain
instances, cases stayed at a particular phase in the process for months
before an OES employee inquired about their status. In one instance, for
nearly 2 years, OES did not follow up on the status of an OIG investigation.
IRS officials told us that these problems occurred primarily because IRS
had no contact person for OIG cases before early 1997, and because OES
lacked staff resources to properly monitor cases.
Administrative Practices That Our review identified several concerns surrounding IRS’ files, records, and
Raised Concerns miscellaneous procedures for executive misconduct cases. Examples
included the following:
• Poor filing. Executive misconduct cases were to be filed alphabetically.
Several times, we happened upon misfiled cases only because we went
through all of the files to draw our sample. Also, in one instance, a closing
letter addressed to the executive involved in a case was filed instead of
being mailed to the individual. It took nearly 5 months for the error to be
discovered and rectified.
• Missing files and records. We requested eight case files for our review that
IRS could not provide, even after more than 4 months.
• Incomplete files. In some cases, the case files did not document important
information, such as dates, transmittal memorandums, and final case
dispositions. In one instance, the case file consisted of a single E-mail
message. The case was serious enough to warrant suspending the
individual.
Page 16 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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• Noncompliance with procedures. In several instances, field staff imposed
discipline before the Deputy Commissioner had concurred with the
proposed action. Several files contained memorandums to the field staff,
reminding them not to impose discipline or close a case until the Deputy
Commissioner had indicated his approval. Further, as mentioned in
appendix III, a premature disposition occurred in one of our case studies.
Outdated Procedures According to two 1998 IRS internal studies, outdated procedures led to
inefficient case handling and confusion as to who was responsible for
what. Because of regional and district consolidations and a national office
restructuring, the written, 1994 case-handling procedures no longer
accurately depicted the proper flow of cases. Although procedures were
informally adjusted and work kept moving, it was not efficient. As a result,
ad hoc procedures were developed in each region, leading to
communication problems between the regions and the national office. IRS
recognized this problem in March 1998 and completed a draft of new case
procedures in July 1998. During that time, the Internal Revenue Service
18
Reform and Restructuring Act of 1998 established the Treasury Inspector
General for Tax Administration (TIGTA), and procedures were again
revised to accurately depict TIGTA’s role. According to IRS officials, draft
procedures were sent to IRS field offices for comment in mid-March 1999.
Internal Disagreements Another factor contributing to case-processing delays was internal
disagreement surrounding the proper level of discipline to impose in
particular cases. In our case studies, we noted instances in which internal
19
disputes significantly lengthened case-processing times. OES officials
told us that this situation occurred much more frequently in the past.
However, over the past few years, IRS has made a concerted effort to
resolve disputes below the Deputy Commissioner level.
As shown in table 6, in the cases involving Executives C and D,
disagreements were serious. In fact, they warranted formal statements of
differences. In each of these two cases, OES endorsed a stronger level of
discipline than that suggested by the recommending official. In the case of
18
P.L. 105-206.
19
See appendix III for information on these disagreements.
Page 17 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Executive E, IRS officials disagreed among themselves over the facts of
the case. Although an IRS Internal Security investigation confirmed the
allegations, the Deputy Commissioner was not comfortable with the
allegations’ correctness. However, he eventually agreed that the
allegations had some merit. The Deputy Commissioner issued a letter of
counseling 5-½ years after the complaint was filed, which was more than 4
years after he received the case.
Table 6: Disputes Surrounding Case
Dispositions in Three Executive Recommending OES’ original
Misconduct Cases official’s proposed proposed
SESer disposition disposition Final disposition
a
C Close without action Letter of reprimand Closed without action,
but employee was
counseled
D Counseling 15-day suspension Transferred, according
and consideration of to Deputy
transferring the Commissioner;
employee according to OES,
closed without action
“administratively” due
b
to retirement
c
E Letter of reprimand Letter of reprimand Letter of counseling
a
OES subsequently changed its position and recommended a disposition of “close without action.”
b
See footnote 15 of this report.
c
The proposed disposition was later changed to “letter of reprimand or letter of counseling.”
Source: GAO analysis based on IRS misconduct case files.
Recent IRS Actions As of March 1999, an IRS disciplinary review team was proposing changes
to overcome problems with complaints processing. One of the units of its
proposed Commissioner’s Review Group was to provide labor relations
support for SES and other cases. This unit would have 11 employees. In
addition, the Commissioner’s Review Group would have a contractor
available to supplement it and support field investigations when
management believed help was needed. As previously mentioned, the
group would also be responsible for overcoming communication and
coordination problems among complaint-processing systems.
Page 18 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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IRS did not comprehensively collect and analyze information on reprisals
Number of against IRS employee whistleblowers or on IRS retaliation against
Whistleblowing taxpayers. Some information was available on the number of IRS-related
Reprisal Cases and whistleblowing reprisal cases resolved by the two agencies responsible for
considering such cases. For example, one of the agencies, OSC, received
Extent of Information 63 IRS whistleblower reprisal matters over the fiscal years 1995 through
on Alleged IRS 1997 and obtained action from IRS favorable to employees in 4 cases.
Retaliation Against Concerning allegations of IRS retaliation against taxpayers, we reported in
Taxpayers 1996 and 1998 that IRS did not systematically capture information needed
to identify, address, and prevent such taxpayer abuse. During this review,
we also found limited and incomplete IRS information of past revenue
agent retaliation against taxpayers.
The IRS Restructuring and Reform Act of 1998 included several provisions
related to abuse or retaliation against taxpayers, their representatives, or
IRS employees. As of March 1999, the IRS disciplinary review team was
proposing how data needed to fulfill the act’s requirements would be
assembled.
Reprisals Against It is against the law to take a personnel action as a reprisal against a
20
whistleblower. More specifically, an employee with personnel authority is
Whistleblowers not allowed to take, fail to take, or threaten a personnel action against an
employee because the employee made a protected disclosure of
information. Protected disclosures include disclosures that an employee
reasonably believes show a violation of law, rule, or regulation; gross
mismanagement; gross waste of funds; or an abuse of authority.
If federal employees believe they have been subject to reprisal, they may
pursue their complaint through the agency where they work. Alternatively,
they may direct their complaint to OSC or MSPB.
We could not determine the extent of reprisal against whistleblowers
because IRS did not track information on whistleblower claims of reprisal.
According to a knowledgeable IRS official, until recently, the ALERTS
database did not have a code to capture information on retaliation
associated with individuals, including reprisal against whistleblowers.
However, OSC and MSPB provided the number of complaints filed with
them.
Office of Special Counsel Cases Under the Whistleblower Protection Act of 1989, OSC’s main role is to
protect federal employees, especially whistleblowers, from prohibited
20
5 U.S.C. 2302(b)(8).
Page 19 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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personnel practices. In this role, OSC is to act in the interests of the
employees by investigating their complaints of whistleblower reprisal and
initiating appropriate actions. Whistleblowing employees may file a
complaint with OSC for most personnel actions that are allegedly based on
whistleblowing.
As shown in table 7, between fiscal years 1995 and 1997, OSC received 63
whistleblowing reprisal matters related to IRS, compared to 2,092 for the
federal government as a whole. However, OSC concluded that a much
smaller number of IRS and governmentwide reprisal matters involved
potentially valid statutory claims and therefore warranted more extensive
investigation. OSC closed cases without further action for many reasons,
including lack of jurisdiction over an agency or employee, absence of an
element needed to establish a violation, and insufficient evidence.
Table 7: OSC Whistleblower Reprisal
Matters for Fiscal Years 1995-97 Category IRS Governmentwide
Matters received 63 2,092
Matters referred for field 13 621
investigation
Actions favorable to employees 4 237
Source: OSC.
Since IRS had about 100,000 employees during this period, the ratio of
matters received to the number of employees was less than a tenth of 1
percent. Similarly, although OSC received whistleblowing reprisal matters
from throughout the federal government, the number of matters received
was an extremely small percentage of the civilian employee federal
workforce that numbered almost 2 million people.
As table 7 further shows, at times both IRS and the federal government
took “favorable actions” as a result of OSC investigations. In general,
favorable actions are those that may directly benefit the complaining
employee, punish the supervisor involved, or systematically prevent future
questionable personnel actions. Agencies take these actions after receiving
a request from OSC or with knowledge of a pending OSC investigation. The
four favorable actions taken by IRS between fiscal years 1995 and 1997
entailed removing disciplinary letters from a personnel file, correcting an
employee’s pay level, presenting a performance award, and promoting an
employee retroactively and providing back pay.
Merit Systems Protection Board Employee complaints of whistleblowing reprisal may reach MSPB in two
Cases ways. First, if employees do not obtain relief through OSC, they may
appeal to MSPB. Second, employees may appeal directly to MSPB without
Page 20 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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first going through OSC. They may do this for actions including adverse
actions, performance-based removals or reductions in grade, denials of
within-grade salary increases, reduction-in-force actions, and denials of
restoration or reemployment rights. MSPB categorizes both types of
appeals as “initial appeals.”
MSPB administrative judges throughout the country decide initial appeals.
The judges either dismiss the cases or decide them on their merits.
Common reasons for dismissing cases are that they do not raise appealable
matters within MSPB’s jurisdiction or that they are not filed within the
required time limit. The parties to the dispute also may enter into a
voluntary settlement, sometimes with assistance from the judge. Cases not
dismissed or settled are adjudicated on their merits. Possible outcomes are
that the agency action may be affirmed or reversed or the agency penalty
may be mitigated or otherwise modified.
A party dissatisfied with a case decision may file a “petition for review” by
MSPB’s three-member board. The board may grant a petition if it
determines that the initial decision was based on an erroneous
interpretation of law or regulation or if new and material evidence became
available. It may dismiss a petition that is untimely, withdrawn by the
parties, or moot. Petitions may also be denied or settled.
As with OSC, the number of whistleblowing reprisal decisions issued by
MSPB was very small compared to the size of the IRS and federal
workforces. As shown in table 8, for fiscal years 1995 through 1997, MSPB
decided 45 initial appeals of whistleblowing reprisal allegations involving
IRS. Similar to MSPB’s rulings involving the rest of the federal government,
MSPB dismissed the majority of initial appeals involving IRS and denied
the majority of petitions for review. However, settlements occurred in
more than half of the initial appeals that were not dismissed, which could
mean that employees were getting some relief. MSPB also occasionally
remanded petitions for review, that is, sent them back for further
consideration. MSPB ordered IRS corrective action (canceling an
employee’s removal and mandating back pay) in one initial appeal case
when due process measures unrelated to reprisal were not followed. To
our knowledge, except for this case, MSPB did not reverse any IRS actions
regarding alleged whistleblower reprisal matters over the 3-year period.
For government initial appeals as a whole, MSPB ordered agency
Page 21 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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corrective action 11 times and otherwise reversed agency actions in 24
21
instances.
Table 8: Number of MSPB Decisions
Covering Whistleblower Disclosures for Decision IRS Treasury Governmentwide
Fiscal Years 1995-97 Initial appeals
Dismissed 27 63 882
Corrective action not ordered 1 6 70
Corrective action ordered 1 3 11
Settled 11 22 324
Affirmed 4 11 127
Reversed 0 0 24
Modified/Mitigated 1 4 21
Total 45 109 1,459
Petitions for review
Dismissed 1 1 23
Settled 0 2 14
Denied 13 23 229
Denied then reopened 0 3 26
Granted - affirmed 0 2 10
Granted - reversed 0 0 7
Granted - remanded 3 5 32
Granted - mitigated 0 1 1
Granted - other 1 1 4
Other 0 0 3
Total 18 38 349
Sources: Information compiled by GAO from MSPB, IRS, and the Internet.
Extent of Information on Before the IRS Reform and Restructuring Act of 1998, IRS did not
systematically collect information on retaliation against taxpayers. As we
IRS Retaliation Against 22
have previously reported, IRS information systems were designed for
Taxpayers tracking disciplinary and investigative cases or correspondence and not for
identifying, addressing, or preventing retaliation against taxpayers. The
systems contained data elements that encompassed broad categories of
employee misconduct, taxpayer problems, and legal action. Information in
the systems related to allegations of taxpayer abuse was not easily
distinguishable from information on allegations not involving taxpayers.
21
Although we did not have any governmentwide statistics for 1998, we did have 1998 information for
IRS. The only decisions in these cases that could have been construed to be favorable to the original
complainants were 6 settlements out of the 25-case total.
22
GAO/GGD-95-14, GAO/GGD-96-176, and GAO/T-GGD-98-63.
Page 22 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Consequently, we found limited information on potential taxpayer abuse in
23
IRS information systems, as shown in table 9.
Table 9: IRS Information on Retaliation
Against Taxpayers Database Results of GAO queries
Internal Security Management IRS found information on two cases of confirmed
Information System retaliation in 4 years but said coding in database
could not ensure comprehensiveness.
Automated Labor and Employee Until recently, database did not include a code for
Relations Tracking System retaliation for cases associated with individuals.
Problem Resolution Office Database did not include a code for retaliation.
Management Information System
Executive Control Management IRS case summaries described four cases as
System taxpayer retaliation during 1 year for this system, in
existence since mid-1997. According to IRS, the
system’s coding was becoming more specific.
Source: GAO analysis of various IRS databases.
Restructuring Act Reporting Recent changes in the law and IRS’ progress on information systems are
intended to improve IRS’ ability to determine the extent to which its
Requirements employees might have retaliated against taxpayers or employees for
whistleblowing. Enacted in July 1998, the IRS Restructuring and Reform
Act of 1998 included several provisions related to abuse or retaliation
against taxpayers, their representatives, or IRS employees.
Section 1203 of the act provided for firing IRS employees who commit any
1 of 10 acts. For example, the act required the Commissioner of Internal
Revenue to fire any IRS employee for
“violations of the Internal Revenue Code of 1986, Department of Treasury regulations, or
policies of the Internal Revenue Service (including the Internal Revenue Manual) for the
purpose of retaliating against, or harassing, a taxpayer, taxpayer representative, or other
employee of the Internal Revenue Service” …or ... “threatening to audit a taxpayer for the
purpose of extracting personal gain or benefit.”
The act also required the Treasury Inspector General for Tax
Administration to include in its annual report summary information about
any termination under section 1203 or about any termination that would
have occurred had the Commissioner not determined there were
mitigating factors. In March 1999, the disciplinary review team previously
described was proposing that the Commissioner’s Review Group report
these data to the Inspector General as well as broader data on the number
of taxpayer complaints and the number of taxpayer abuse and employee
23
For information on specific allegations of retaliation against taxpayers, see Tax Administration:
Investigation of Allegations of Taxpayer Abuse and Employee Misconduct Raised at Senate Finance
Committee’s IRS Oversight Hearings (GAO/OSI-99-9R, May 24, 1999).
Page 23 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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misconduct allegations. The group would collect, consolidate, and validate
data from existing systems and obtain supplemental information to fill
gaps. However, according to the team, the group would have to qualify the
initial reports to the Inspector General, waiting for data reliability to be
established.
With respect to allegations of improper zeroing out or reductions of
Alleged Improper recommended tax by IRS managers, we found no evidence to support the
Zeroing Out or allegations in the eight specific cases referred to us by the IRS employees
Reduction of who testified at the hearings. On the other hand, IRS does not
systematically collect data on the extent to which additional taxes
Recommended Tax recommended by IRS auditors are zeroed out or reduced without a basis in
law or IRS procedure. While there are no data on improper reductions,
there are data on IRS recommendations of additional tax that were not
ultimately assessed. On the basis of such data, we recently reported that
the majority of recommended additional taxes was not assessed. We
attributed this result to a variety of factors, including the complexity of the
tax code and the overreliance on taxes recommended as a measure of
audit results.
Background IRS’ process for doing audits of taxpayers’ returns and closing related
disputes over additional recommended taxes has several steps. In an audit,
an IRS auditor usually reviews the taxpayer’s books and records to
determine compliance with tax laws and identify whether the proper
amount of tax has been reported. To close an audit, the auditor may
recommend increasing, decreasing, or not changing the tax reported. If a
taxpayer disagrees with the recommendation at the close of the
examination, the taxpayer may request an immediate review by the
auditor’s supervisor.
If the taxpayer agrees with the recommended additional tax or does not
respond to IRS’ notices of examination results, IRS assesses the tax. With
an assessment notice, IRS formally notifies the taxpayer that the specified
amount of tax is owed and that interest and penalties may accrue if the tax
is not paid by a certain date. The assessed amount, not the amount an
auditor recommends at the end of the audit, establishes the taxpayer’s
liability.
If the taxpayer disagrees with an examination’s recommendation, the
recommendation may be protested to IRS’ Office of Appeals or the dispute
24
can be taken to court. The Office of Appeals settles most of these
24
Taxpayers may appeal to Tax Court without paying the tax or pay the tax and claim a refund in the
U.S. Court of Federal Claims or a federal district court.
Page 24 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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disputes, and the remainder are docketed for trial. Agreements made in
settlements and court decisions determine the assessed part of the
disputed tax.
The issue of reductions in recommended tax was raised in the Committee’s
hearing by IRS auditors who alleged that some supervisors “zeroed out” or
reduced the results of audits—that is, the audits were closed with no or
reduced recommended additional tax, without a basis in law or IRS
procedure. The witnesses further alleged that the reasons for zeroing out
included retaliating against auditors to diminish their chances for
promotion, favoring former IRS employees in private practice, and
25
exchanging zeroing out for bribes and gratuities from taxpayers.
Data Collected by IRS IRS has not systematically collected data on the extent to which additional
taxes recommended by auditors have been zeroed out or reduced without
a basis in law or IRS procedure. In particular, IRS had no data on
supervisors’ improperly limiting auditors’ recommendations of additional
tax before an audit was closed. However, IRS collects data on the amounts
of recommended taxes that were not assessed and the number of
examinations closed with no change in tax liability.
One of our recent reports illustrates the lack of data on the extent to which
26
supervisors improperly limit auditors’ recommendations of additional tax.
We found that an estimated 94 percent of IRS workpapers lacked
documentation that the group manager reviewed either the support for
adjustments or the report communicating the adjustments to the taxpayer.
IRS managers acknowledged that because of competing priorities, they
could not thoroughly review workpapers for all audits. IRS officials
commented that supervisory reviews were usually completed through
other processes, such as reviewing time spent on an audit, conducting on-
the-job visits, and discussing cases with auditors. We recommended that
the IRS Commissioner require all audit supervisors to document their
review of all workpapers to help ensure the quality of all examinations.
In another recent report, we found that most additional taxes
recommended by IRS auditors were not assessed. Table 10 shows taxes
recommended by IRS auditors and the percentage of these amounts
assessed for audits closed in fiscal years 1992 through 1997. During these
25
Further information on these issues is in GAO/OSI-99-9R.
26
IRS Audits: Workpapers Lack Documentation of Supervisory Review (GAO/GGD-98-98, Apr. 15, 1998).
Page 25 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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years, at most, 41 percent of the additional taxes recommended during
audits were assessed.
Table 10: Status of Additional Amounts
Recommended for Individual, Corporate, Dollars in billions
and Other Audits Closed in Fiscal Years Recommended Percentage
1992-97, as of September 27, 1997 Fiscal year amount assessed
1992 $24.8 34
1993 22.0 40
1994 22.6 41
1995 27.2 40
1996 30.8 36
1997 31.7 38
Note: Dollars are in current dollars.
Source: Tax Administration: IRS Measures Could Provide a More Balanced Picture of Audit Results
and Costs (GAO/GGD-98-128, June 23, 1998).
Other IRS data showed that many examinations were concluded with no
recommended additional tax. For example, according to IRS’ Fiscal Year
1997 Data Book, 24 percent of the corporate examinations completed
during fiscal year 1997 were closed with no proposed tax change.
Reasons for Reducing Our previous work identified several factors that, in part, explained why
recommended additional taxes were not assessed after audits were
Recommended Tax 27
closed. Factors like these could also explain some actions by supervisors
to zero out or reduce recommended tax amounts prior to audits being
closed. However, IRS does not collect data on the extent to which these
factors, or others, contribute to supervisors’ decisions prior to audits being
closed.
We reported that the complexity and vagueness of the tax code was one
explanation for recommended taxes not being assessed after a corporate
audit was closed. Because of the complexity and vagueness of the tax
code, IRS revenue agents had to spend many audit hours to find the
necessary evidence to clearly support any additional recommended taxes.
In addition, differing interpretations in applying the tax code to underlying
transactions increased the likelihood of tax disputes. Because corporate
representatives usually prevailed in Appeals or the courts, additional taxes
recommended were often not actually assessed.
We also reported that aspects of the corporate audit process for large
corporations also made it difficult for revenue agents to develop enough
support to recommend tax changes that could survive a taxpayer appeal.
27
Tax Administration: Factors Affecting Results From Audits of Large Corporations (GAO/GGD-97-62,
Apr. 17, 1997).
Page 26 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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For example, revenue agents worked alone on complex, large corporation
audits with little direct assistance from district counsel or their group
managers. In addition, when selecting returns for audit, the agents had
little information on previously audited corporations or industry issues to
serve as guideposts. Finally, the agents had difficulty obtaining relevant
information from large corporations in a timely manner.
28
IRS Internal Audit recently cited several factors that contributed to low
productivity, as partially manifested by high no-change rates, in the
Manhattan District Office. IRS acknowledged that in 1995, it took
aggressive action to close old examinations. Also, audit group managers in
Manhattan and two other districts did not have enough time to perform
workload reviews to ensure quality examinations. Manhattan was below
the IRS regional average in complying with IRS audit standards for such
things as depth of examinations and workpaper support for conclusions.
We also reported that relying too heavily on additional taxes
recommended as a measure of audit results might create undesirable
incentives for auditors. We found that audits of large corporations raised
concerns that relying on recommended taxes as a performance indicator
might encourage auditors to recommend taxes that would be unlikely to
29
withstand taxpayer challenges and thus not be assessed. Supervisors on
guard against this incentive, which might have also influenced them, might
have been accused of improper zeroing out. In this connection, we recently
reported that IRS examination and collection employees perceived that
managers considered enforcement results when preparing annual
30
performance evaluations.
IRS is increasing its efforts to ensure that enforcement statistics are not
used to evaluate its employees. In commenting on our report on
enforcement statistics, the Commissioner stated that IRS was taking
several actions to ensure that all employees comply with its policies on the
proper use of enforcement statistics. These actions included redrafting
applicable sections of the Internal Revenue Manual, establishing a panel
responsible for answering all questions IRS received on enforcement
statistics, and establishing an independent review panel to monitor
compliance with restrictions on using enforcement statistics. In addition,
28
Productivity of the General Examination Program in the Manhattan District, IRS Internal Audit
Report, Reference No. 680904, Jan. 30, 1998.
29
GAO/GGD-98-128.
30
IRS Personnel Administration: Use of Enforcement Statistics in Employee Evaluations (GAO/GGD-99-
11, Nov. 30, 1998).
Page 27 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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in January 1999, IRS proposed establishing a balanced system of
organizational measures focusing on quality and production measures, but
not including tax enforcement results.
Witness Allegations of Several of the individual allegations made by IRS employees that we
reviewed involved the issue of improper zeroing out of additional taxes by
Improper Zeroing Out IRS managers. The eight specific cases in question involved large
organizations, and the issues generally related to complex financial
transactions.
We found no evidence to support the allegations that IRS managers’
decisions to zero out or reduce proposed additional taxes were improper.
Instead, we found that the managers acted within their discretion and
openly discussed relevant issues with involved IRS agents, technical
advisors, and senior management. Ultimately, the decisions were approved
by appropriate individuals and were documented in the files.
Several of the cases demonstrated some of the concerns and issues we
have raised in our prior work concerning audits of large corporations. For
example, the complexity and vagueness of the tax code create legitimate
differences in interpretation and administering the tax system creates a
tension in seeking a proper balance between the tax administrator’s need
for supporting documentation and the taxpayer’s burden in providing such
information.
IRS has acknowledged problems related to the EEO climate in its
Equal Employment Milwaukee, WI, area offices and over the last few years has moved to
Opportunity Issues in address them. After a finding of discrimination in 1995 in the case of one
IRS’ Midwest District employee, a new district director initiated an internal review, and,
afterwards, IRS appointed an outside review team to study the EEO
Office situation. The internal study made 53 recommendations in broad
categories related to creating a supportive work culture, understanding
issues, preparing employees for promotion, and examining the promotion
process. The outside study found no discriminatory hiring or promotion
practices, but it did make recommendations related to hiring and
promotions, among other things.
Background Problems with the EEO climate in IRS’ Midwest District Office, which is
headquartered in Milwaukee, date back several years. In 1995, Treasury
agreed with an Equal Employment Opportunity Commission
administrative judge who found that a district employee was the victim of
discrimination and retaliation. Also, Wisconsin congressional offices
received EEO-related complaints from IRS employees, and internal and
Page 28 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
B-280651
external groups were critical of district EEO matters. According to the
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, further contributing to tense labor-management relations.
Two Studies of the EEO To try to better identify some of the underlying causes of the problems in
IRS Milwaukee area offices, the District Director commissioned an IRS
Climate Made Numerous team in April 1996 to assess the EEO climate and make recommendations
Recommendations for corrective action. As part of its review, the team distributed a survey to
all Milwaukee area district employees to gather EEO-related perceptions.
On the basis of its review of the survey results and other data, in December
1997, the team reported 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 promotion.
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
th
selected for promotion. In a 5 category—examining the representation of
minorities in the district—the team made 21 more recommendations that
were expected to be suspended pending an IRS analysis of the
ramifications of certain court cases.
The District Director who commissioned the climate assessment report
praised it and the process that produced it. During his tenure, many
actions were taken to address the district’s EEO problems. For example,
(1) policy statements were issued tolerating no discriminatory behavior,
(2) minority representation in the Director’s and EEO offices was
increased, (3) the EEO office was given more privacy, (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
Page 29 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
B-280651
employees, employee and community groups, and the media; treat
individual performance cases fairly; and not debate emotionally charged
personnel issues in the press.
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 certain members of the Wisconsin congressional delegation agreed
31
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, it solicited no IRS comments
on its draft report.
The 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 they tried to
ensure broad coverage by talking to many people and to all sides of
general issues. Moreover, they relied on the climate assessment survey to
summarize perceptions. They also, however, relied extensively on
anecdotal information without determining its objectivity or accuracy.
In August 1998, the team reported, among other things, that (1) many
employees had no 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 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 employees.
On the basis of its review, the 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 in
spite of finding no discriminatory pattern or practice in promoting or
31
Members of the congressional delegation were Senators Russell Feingold and Herb Kohl and
Representatives Tom Barrett and Gerald Kleczka.
Page 30 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
B-280651
hiring minorities or women. The report noted that African Americans in
IRS’ Milwaukee and Waukesha, WI, offices appeared underrepresented
32
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 problems identified. Chief among these was appointing 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 as opposed to
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.
In commenting on a draft of this report, the Commissioner of Internal
Agency Comments Revenue described IRS actions on the issues we noted. For instance, he
shared our concern that IRS needed to improve how it managed executive
misconduct cases. He noted that the recently created Commissioner’s
32
The head of the study team acknowledged that the proper statistical comparison was with the local
qualified labor force, not the civilian labor force. However, according to another study team member,
the relevant qualified labor force statistics were not available.
Page 31 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
B-280651
Complaint Processing and Analysis Group, proposed as the
Commissioner’s Review Group, will coordinate IRS’ efforts to improve
complaint information, especially relating to alleged reprisal against
whistleblowers, so that complaints will be promptly and fairly resolved.
IRS will also share more information with employees and the public on
responses to reprisals and other complaints to highlight a message that all
employees will be held accountable for their actions. The full text of the
Commissioner’s comments is reprinted in appendix IV.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from the
date of this letter. At that time, we will send copies to Senator Daniel
Patrick Moynihan, the Ranking Minority Member of the Senate Committee
on Finance; the Honorable Charles O. Rossotti, Commissioner of Internal
Revenue; other interested congressional committees; and other interested
parties.
This work was done under the direction of Joseph E. Jozefczyk, Assistant
Director for Tax Policy and Administration Issues. Other major
contributors are listed in appendix V. If you have questions, you may
contact me on (202) 512-9110.
Sincerely yours,
James R. White
Director, Tax Policy
and Administration Issues
Page 32 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Page 33 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Contents
Letter 1
Appendix I 36
Disciplinary Actions for Senior Executive Service and 36
Objectives, Scope, and Lower-Level Staff
Methodology Alleged Delays by IRS Deputy Commissioner on SES 37
Misconduct Cases
Number of Whistleblowing Reprisal Cases and Extent of 38
Information on IRS Retaliation Against Taxpayers
Alleged Improper Zeroing Out or Reduction of 38
Recommended Tax
EEO Issues in IRS’ Midwest District Office 38
Appendix II 40
The Douglas Factors
Appendix III 41
Executive A Allegations 41
Summaries of Alleged Executive B Allegations 41
Senior-Level Executive C Allegations 41
Executive D Allegations 42
Misconduct Cases Executive E Allegations 43
Appendix IV 44
Comments From the
Internal Revenue
Service
Appendix V 46
Major Contributors to
This Report
Page 34 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Contents
Abbreviations
ALERTS Automated Labor and Employee Relations Tracking System
CWA closed without action
DO deciding official
EEO equal employment opportunity
GS general schedule
IRS Internal Revenue Service
MSPB Merit Systems Protection Board
OES Office of Executive Support
OIG Office of Inspector General
OLR Office of Labor Relations
OSC Office of Special Counsel
RO recommending official
SES Senior Executive Service
TIGTA Treasury Inspector General for Tax Administration
Page 35 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix I
Objectives, Scope, and Methodology
We organized our work to bring together information bearing on the five
issues contained in your May 21, 1998, request letter. Accordingly, our
objectives were to
(1) determine if senior Internal Revenue Service (IRS) managers received
the same level of disciplinary action as line staff;
(2) determine to what extent, if any, the IRS Deputy Commissioner might
have delayed action on substantiated cases of employee misconduct until
senior managers were eligible to retire;
(3) ascertain the extent to which IRS employees might have retaliated
against whistleblowers and against taxpayers or their representatives who
were perceived as uncooperative;
(4) determine the extent to which IRS employees might have zeroed out or
reduced the additional tax recommended from examinations for reasons
not related to the merits of the examinations; and
(5) describe equal employment opportunity (EEO) issues in IRS offices in
the Milwaukee metropolitan area.
Our scope and methodology related to each of these objectives follow.
To compare disciplinary experiences of Senior Executive Service (SES)
Disciplinary Actions and lower-level employees, we matched data accumulated by sampling
for Senior Executive senior executives’ misconduct cases against data for lower-level
Service and Lower- employees extracted from IRS’ broader disciplinary database, the
Automated Labor and Employee Relations Tracking System (ALERTS). We
Level Staff compiled general statistics on how long senior executive cases took by
collecting information from every second nontax SES case file in IRS’
Office of Executive Support (OES) that was active sometime between
1
January 1, 1996, and June 30, 1998. Our sample included 70 cases.
For each case in our sample, we extracted and recorded data from the
relevant case file. These data included issues involved, processing dates,
information on whether allegations were substantiated by investigators,
disciplinary actions proposed and adopted, and information related to
retirement.
1
We excluded cases related to employees’ tax compliance because they were different in nature from
the cases raised at the April 1998 Senate Finance Committee hearings.
Page 36 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix I
Objectives, Scope, and Methodology
For lower-level employees, that is, general schedule (GS) employees, we
obtained selected parts of the ALERTS database from IRS. We ran our
statistical analyses on ALERTS cases that IRS’ Office of Labor Relations
received between January 1, 1996, and June 30, 1998, and on cases that
were closed within that period. More specifically, we focused on
administrative and IRS Inspection Service cases within ALERTS because
they were the categories in which conduct matters were found. Although
we did not audit ALERTS, IRS officials told us that this data system had
over the years had flaws, but they also told us it was better than it used to
be. Because ALERTS was the only source of information available on
lower-level disciplinary actions, we used it to the extent that it had
information comparable to what we collected on senior-level cases.
We also reviewed recent internal IRS and independent studies of IRS’
disciplinary systems and interviewed IRS officials about their plans for
revamping the systems. One IRS study we reviewed used the lower-level
disciplinary database to assess the effect of IRS’ using a guide to determine
appropriate disciplinary action. We also became familiar with the Douglas
Factors, shown in appendix II, governing disciplinary actions imposed and
asked IRS officials about the differences, if any, they perceived between
SES and lower-level cases.
We examined the question of alleged delays in dealing with cases of
Alleged Delays by IRS alleged misconduct by senior executives by taking several steps. First, we
Deputy Commissioner studied in depth the five specific cases mentioned in the April 1998
on SES Misconduct hearings. This involved examining investigative and personnel files as well
as files maintained by OES. In addition, we interviewed various IRS
Cases officials, including the Deputy Commissioner, about these cases.
In addition, we used the 70-case sample of senior executive cases
previously described to obtain more broad-based information about any
possible delays. Although most of our analyses were based on this sample,
to learn more about the cases that took the most time, we also examined
every case file IRS could find that appeared on lists of cases awaiting
action at OES for at least 90 days during the January 1, 1996, through June
30, 1998, period we were studying. We also examined cases that appeared
on logs that IRS kept so we could better ensure we were not overlooking
cases we did not otherwise encounter for the period. In all, we examined
the 70 cases in our sample plus 43 more cases on lists and logs for a total
of 113 cases. Because some individuals were involved in more than 1 case,
the 113 cases we analyzed covered 83 senior executives. We extracted the
same type of information from each of the case files that we extracted
Page 37 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix I
Objectives, Scope, and Methodology
from the sampled case files. Examining lists, logs, and files allowed us to
see if recordkeeping practices might have contributed to any delays.
To examine the relationship between case-processing and retirement
dates, we analyzed where in the case-processing sequence the retirement
dates provided us by OES fell. In instances in which OES was also able to
readily provide retirement eligibility dates, we considered them in
examining processing timeliness as well.
To tabulate the number of whistleblowing reprisal cases, we obtained
Number of information from the Office of Special Counsel (OSC) and the Merit
Whistleblowing Systems Protection Board (MSPB). We did this for the number of cases
Reprisal Cases and involving IRS employees, and for contextual purposes, for cases from
throughout the federal government.
Extent of Information
on IRS Retaliation For governmentwide data, we used either information already published or
Against Taxpayers data generated specifically for us. For IRS data, the agencies did special
searches of their databases. We did not audit the OSC or MSPB data
systems. Because in the MSPB data system not all IRS cases could be
isolated, we examined actual case rulings that MSPB gathered for us or
that we located on the Internet, looking for Department of the Treasury
cases that were really IRS cases. For Treasury cases for which MSPB was
not able to give us timely information and information was not on the
Internet, we asked IRS to identify whether they involved IRS employees.
In looking for information on IRS employees who might have retaliated
against taxpayers or their representatives who were perceived to be
uncooperative, we studied our reports on taxpayer abuse. In addition, we
interviewed IRS officials and investigated entries under specific codes in
various databases to see if relevant issues appeared. Finally, we discussed
with IRS officials changes to the information systems that might be coming
in the future.
Concerning information on the improper zeroing out or reduction of
Alleged Improper additional tax recommended, we studied our and Inspection Service
Zeroing Out or reports dealing with examination issues related to audit results. We
Reduction of specifically considered our and IRS information on the extent to which IRS
audit recommendations were actually assessed and the factors that could
Recommended Tax explain the results.
To describe EEO issues in the Milwaukee area, we examined the report of
EEO Issues in IRS’ an outside team studying the program and the documents that the team
Midwest District Office accumulated in doing its work, including an IRS internal EEO climate
Page 38 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix I
Objectives, Scope, and Methodology
assessment study. We also interviewed key study participants and affected
parties in Washington, D.C., and Milwaukee to better understand what the
EEO climate in the area was, how the study report was done, and what had
happened since the report was finished.
In addition to addressing the concerns of the Senate Committee on
Finance, we planned our work to respond to a mandate in the Conference
Report on the IRS Restructuring and Reform Act of 1998. The conferees
intended for us to review the study team report.
We did our work in Washington, D.C., and Milwaukee between June 1998
and March 1999 in accordance with generally accepted government
auditing standards.
Page 39 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix II
The Douglas Factors
1
The Douglas Factors are as follows:
• The nature and seriousness of the offense, and its relation to the
employee’s duties, position, and responsibilities, including whether the
offense was intentional or technical or inadvertent, or was committed
maliciously or for gain, or was frequently repeated;
• the employee’s job level and type of employment, including supervisory or
fiduciary role, contacts with the public, and prominence of the position;
• the employee’s past disciplinary record;
• the employee’s past work record, including length of service, performance
on the job, ability to get along with fellow workers, and dependability;
• the effect of the offense upon the employee’s ability to perform at a
satisfactory level and its effect upon supervisors’ confidence in the
employee’s ability to perform assigned duties;
• consistency of penalty with those imposed upon other employees for the
same or similar offenses;
• consistency of the penalty with the applicable agency table of penalties;
• the notoriety of the offense or its impact on the reputation of the agency;
• the clarity with which the employee was on notice of any rules that were
violated in committing the offense, or had been warned about the conduct
in question;
• potential for employee’s rehabilitation;
• mitigating circumstances surrounding the offense such as unusual job
tensions, personality problems, mental impairment, harassment, or bad
faith, malice or provocation on the part of others involved in the matter;
and
• the adequacy and effectiveness of alternative sanctions to deter such
conduct in the future by the employee or others.
1
Douglas v. Veterans Administration, 5 M.S.P.R. 280 (1981).
Page 40 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix III
Summaries of Alleged Senior-Level
Misconduct Cases
This appendix summarizes information about the five senior-level
misconduct allegations cited in the April 1998 Senate Finance Committee
hearings. The summaries include information about when the executives
were eligible to retire and about whether their eligibility dates might have
related to how their cases were processed. We refer to the executives in
these five cases as Executives A through E.
An IRS employee filed a complaint that Executive A and two other IRS
Executive A employees violated IRS ethics rules. The IRS employee also alleged that
Allegations Executive A and the two other employees retaliated against her for
reporting the ethics violations. The alleged violations included
manipulating a rating system, giving an improper award, falsifying records,
and not reporting time card fraud, although Executive A was only alleged
to be involved in the last violation. Treasury’s Office of Inspector General
(OIG) did not find that Executive A was culpable for ethics violations but
found that the other two employees were culpable. IRS attorneys
reviewing the case concluded that the information in the OIG report did
not demonstrate misconduct on Executive A’s part.
Executive A was not eligible for retirement when the allegation was made
or when the OIG investigation was closed.
This case started when the OIG received an anonymous allegation that
Executive B 1
Executive B abused travel authority. IRS officials reviewed the allegation
Allegations and found that Executive B had authorized unjustified travel expenditures.
Local management then counseled Executive B that all expenditures
needed to be authorized according to IRS procedures. This counseling was
confirmed in writing. However, contrary to IRS policy, the counseling took
place before the Deputy Commissioner concurred with the proposed case
resolution.
Executive B was already eligible for retirement at the time the allegation
was made.
The OIG received an anonymous complaint that Executive C was abusing
Executive C official travel. The OIG report concluded that Executive C made personal
Allegations use of some travel benefits earned on government travel.
The offices considering the case disagreed among themselves over the
facts, the adequacy of the investigation, and the steps to be taken next. The
1
The allegation included two other issues that were immediately closed because they had been
previously reviewed.
Page 41 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix III
Summaries of Alleged Senior-Level Misconduct Cases
Director of IRS’ Human Resources Division, which was involved in
executive misconduct cases earlier in the 1990s, advocated a reprimand,
but the recommending official thought that significant circumstances
mitigated any disciplinary action. OES prepared a statement of differences
2
and recommended a reprimand. A few months later, the recommending
official, finding no abuse and unclear IRS guidance in the area,
recommended closing the case without action but cautioning the
executive. The next month, the OES official who previously recommended
a reprimand sent the case to the Deputy Commissioner, this time agreeing
with the recommending official’s position. A few months after that, the
OIG reminded the Deputy Commissioner of the previous year’s report and
requested appropriate action. Later, OIG officials told OES that they
disagreed with OES’ recommendation to close the case without action.
Finally, OES wrote the Deputy Commissioner reaffirming the
recommendation for closure without action but with cautioning.
The Deputy Commissioner counseled the executive 5-½ years after the
case began and 18 months after receiving the case. When we asked the
Deputy Commissioner why the final stage of case processing took so long,
he had no explanation.
Executive C was not eligible for retirement at the time the allegation was
made or at the time he was counseled.
The IRS sexual harassment hotline received an anonymous allegation that
Executive D Executive D might have harassed a staff member. During the Inspection
Allegations Service investigation, Executive D refused to answer a question he
believed was irrelevant. In its report, the Inspection Service summarized
the facts of the investigation and did not conclude whether there was a
violation of IRS ethical standards.
OES and the recommending official disagreed in their analyses of the
report and their resulting recommendations. OES concluded that a 15-day
suspension was warranted for the refusal to answer a question even
though IRS counsel was not sure a violation really occurred. OES also
raised the possibility of reassigning Executive D. The recommending
official believed that, in this case, refusal to answer a question did not
violate ethics rules, but that counseling was warranted.
2
OES was previously known as the Office of Ethics and Business Conduct, but in this section only the
designation OES will be used.
Page 42 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix III
Summaries of Alleged Senior-Level Misconduct Cases
About 39 months after OES prepared a statement of differences, an
Inspection Service case-tracking entry indicated that IRS management
planned no action on the case. The next year, OES closed the case
“administratively” due to the employee’s retirement.
The Deputy Commissioner told us that, several years before its
administrative close, the case was “de facto closed” with Executive D’s
transfer. He stated that the transfer was the appropriate disciplinary action
because Executive D was too familiar with local employees.
OES did not close the case until the individual retired several years after
the transfer. It did not realize that the Deputy Commissioner considered it
closed earlier. Also, IRS officials we asked could not find the case file for
at least a few months.
Executive D was eligible for retirement at the time the allegation was
made.
The Inspection Service began an investigation after an anonymous caller
Executive E reported to Internal Security that Executive E abused her authority. More
Allegations than a year later, the investigation confirmed the allegation, and the
Director of the Human Resources Division recommended that a letter of
reprimand be issued. More than 4 years after that, OES recommended
sending a letter of reprimand or a letter confirming counseling. The Deputy
Commissioner sent Executive E a letter of counseling 5-½ years after the
original complaint and more than 4 years after receiving the case.
The Deputy Commissioner explained to us that he had not been
comfortable with the allegations’ correctness, but that he eventually
agreed that the allegations had some merit. He added that the delay in
closing the case occurred because he allowed the case to be lost in the
system. He did not, he said, cover up for Executive E. Specifically, he
stated that reduced OES staffing and a poor information system were
contributing factors to the case being delayed without a disposition.
Executive E was not eligible for retirement at the time the allegation was
made or at the time the counseling letter was sent.
Page 43 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Appendix IV
Comments From the Internal Revenue Service
Page 44
Appendix IV
Comments From the Internal Revenue Service
Page 45
Appendix V
Major Contributors to This Report
Lawrence M. Korb, Evaluator-in-Charge, Tax Policy and Administration
General Government Issues
Division, Washington, Leon H. Green, Senior Evaluator
D.C. Deborah A. Knorr, Senior Evaluator
Anthony P. Lofaro, Senior Evaluator
Jacqueline M. Nowicki, Evaluator
Patricia H. McGuire, Assistant Director
MacDonald R. Phillips, Senior Computer Specialist
James J. Ungvarsky, Senior Computer Specialist
Eric B. Hall, Computer Technician
Page 46 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Page 47 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
Page 48 GAO/GGD-99-82 Allegations of IRS Employee Misconduct
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Address Correction Requested
268857
Tax Administration: Allegations of IRS Employee Misconduct
Published by the Government Accountability Office on 1999-05-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)