IRS 'took reasonable steps' to implement sequestration cuts

Friday - 6/20/2014, 10:53am EDT

By Dena Levitz
Federal News Radio

Although the IRS generally planned well for required sequestration spending cuts last fiscal year, the agency's ability to effectively deliver its priority program areas was hampered a bit, according to a new audit report.

The Treasury Inspector General for Tax Administration performed the audit, which came out this month, to evaluate the IRS' process in allocating sequestration reductions in its budget.

Sequestration essentially amounted to a process in which the government was required to make grand, across-the-board spending reductions in order to enforce budget policy goals. The sequestration order was issued by President Barack Obama on March 1, 2013, as a means of reducing the federal budget deficit.

"The IRS did achieve the overall savings of $618 million required by the sequestration as well as the total savings it planned in each of its operating appropriations," the audit states.

The savings were accomplished by developing a modified budget with reduced spending divided between its four operating appropriations.

The IRS saved $276 million in personnel costs, mainly due to a reduction in performance awards, implementing three furlough days, and a hiring freeze. It also saved $92 million in travel costs through the use of more virtual training courses and reducing managers' travel to field offices. In addition, the agency saved $50 million in equipment costs "by delaying infrastructure and other acquisitions such as servers, routers, and cell phones."

Auditors also commended the IRS for submitting an operating plan to deal with sequestration within 30 days of enactment of the plan and for carefully monitoring the reductions as they happened.

The one area for improvement cited in the report, however, was related to the delivery of priorities such as customer service and enforcement.

For instance, IRS customer service representatives provided a level of service to taxpayers of 61 percent in FY 2013. Comparatively, the level of service the previous fiscal year was higher, at 68 percent.

In terms of its enforcement abilities, the agency reportedly collected $53.3 billion in enforcement revenue in FY 2013 versus $50.2 billion in enforcement revenue collected in FY 2012. The higher total, however, is a bit deceiving since the IRS explained that $2.6 billion of the FY 2013 amount pertained to cases worked in prior years.

With some of these program delivery issues it wasn't just sequestration cuts that were to blame. The audit also called "a trend of lower budgets, reduced staffing, and the loss of supplementary funding" contributing factors.

The four largest cost areas the IRS had planned to reduce as a result of sequestration were: contractor advisory and assistance services ($231 million), employee compensation and awards ($216 million), travel ($49 million), and equipment ($41 million), which, combined, accounted for approximately $537 million (87 percent) of the $618 million.

Adjustments came along the way to reach the $618 million sum. For one, the IRS reduced its planned furlough days from seven to three.

As a result of the findings in the audit, the IG didn't make any specific recommendation. Yet IRS leaders reviewed the report before it was released and concurred with the conclusions and aspects presented.

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