Long-Term Strategy and Return on Investment Data Needed to Better Manage Budget Uncertainty and Set Priorities
GAO Report to Congress I June 2014
Since fiscal year 2010, the Internal Revenue Service (IRS) budget has declined by about $900 million. As a result, funding is below fiscal year 2009 levels. In addition, Staffing has also declined by about 10,000 full-time equivalents since fiscal year 2010, and performance has been uneven. For example, between fiscal years 2009 and 2013, the percentage of callers seeking live assistance and receiving it fluctuated between 61 percent and 74 percent. IRS has taken some steps to address budget cuts, such as reduced travel and training.
The GAO made two main recommendations for the IRS.
(1) develop a long-term strategy to manage uncertain budgets, and
(2) calculate actual ROI for implemented initiatives, compare actual ROI to projected ROI, and use the data to inform resource decisions.
IRS agreed with GAO’s recommendations, noting that it initiated a review of its base budget to ensure resources are aligned with its strategic plan and ROI is one of several factors relevant to making resource allocation decisions.
IRS’s strategic plan does not include a plan for managing budget uncertainty, even though there are indicators that funding will continue to be limited in the future. The Office of Management and Budget (OMB), in May 2014, required a 2% decrease in budgets across agencies for 2016. OBM also states that agencies need to have strategies for operating in uncertain budget environments. The IRS points to the recent executive leadership turnover as a reason for the lack of long-term planning.
For fiscal year 2015, IRS calculated projected return on investment (ROI) for most of its enforcement initiatives. However, due to limitations—such as estimating the indirect effect coverage has on voluntary compliance—IRS does not calculate actual ROI or use it for resource decisions. These limitations are important, which is why GAO recommended in 2012 that IRS explore developing such estimates. Given that these limitations could take time to address, GAO demonstrated how IRS could use existing ROI data to review disparities across different enforcement program s to inform resource allocation decisions. Comparing projected and actual ROI is consistent with OMB guidance. While not the only factor in making resource decisions, actual ROI could provide useful in sights on the productivity of a program.
Read the full report here.