Former acting IRS chief says agency now on right track

Monday - 3/31/2014, 3:26pm EDT

Danny Werfel on "The Federal Drive" with Tom Temin and Emily Kopp

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The former acting chief of the Internal Revenue Service, who led the agency in the aftermath of the political-targeting scandal and who stepped down in December, says he believes the agency is on the right track.

"I think they're moving forward in the right direction," Werfel said in an interview on the Federal Drive with Tom Temin and Emily Kopp. "Obviously, it's a challenging situation and things don't happen overnight, and you have to work through these issues in a kind of deliberative, careful but efficient way. But I think the building blocks are there to put that agency on the right path."

Werfel, the former controller of the Office of Management and Budget, was tasked by the White House with heading the agency last spring following the political uproar over revelations that conservative groups applying for tax-exempt status had been improperly singled out for extra scrutiny. He stepped down in December, after the Senate approved President Barack Obama's permanent pick to lead the agency, former Freddie Mac chairman and "turnaround artist," John Koskinen. Last week, the Boston Consulting Group announced it hired Werfel to be a director in the firm's public-sector practice.

IRS faces number of challenges

Werfel cited strong leadership from Koskinen, whom he called "an extraordinarily strong and talented public management expert," for continuing to drive improvements at the agency.

In addition to the fallout from the political-targeting scandal, the IRS faces many of the challenges that plague other agencies: declining budgets, the need to modernize and an ever-changing complexity to their missions and operations, he said.

"But I have optimism that the right leadership team is in place, that we did a good job laying the foundation for reform, improvement and restoring the public's trust, that John has kind of grabbed that baton and will help move the agency forward," Werfel said.

Danny Werfel

Just last week, Koskinen testified before Congress that as of January, the agency has completed action on all nine inspector general recommendations regarding the handling of tax-exempt applications. The IRS has also reduced a once appreciable backlog of pending tax-exempt applications to virtually nothing.

But not everyone is so quick to give Koskinen high marks for his stewardship of the agency.

The House Oversight and Government Reform Committee has subpoenaed what is likely to be millions of pages of documents. Koskinen, who said the agency has already turned over more than 1.1 million documents to the committee, told committee members it could take years to fully comply with the request since the agency, by law, must remove taxpayer information from documents it provides to the committee.

Committee Chairman Darrell Issa (R-Calif.) told Koskinen if he didn't comply with the requests for more documents it could result in him being held in contempt of Congress.

"You've been more concerned with managing the political fallout than cooperating with Congress," Issa said.

Werfel: Leading IRS 'most challenging assignment'

For his part, Werfel cited his 16 years of experience handling the nitty-gritty of federal financial management served him well when he was thrust into the harsh political spotlight surrounding the IRS last spring.

"It was different in the fact that it was likely the most challenging assignment I've ever had, and obviously the public scrutiny on it was higher than I'd ever experienced," he said. "But at the end of the day, it was a public-sector management challenge."

When he took over, he set about implementing an action plan to address all of the recommendations of the inspector general. Werfel also staffed up, bringing in financial-management power players from other agencies.

"I certainly didn't do it on my own," he said.

He created the role of a chief risk officer and appointed David Fisher, then the chief financial officer of the Government Accountability Office, to the position. Fisher's first assignment was implementing an IRS-wide risk-management system, Werfel said.

For his chief of staff, Werfel appointed Todd Grams, who had done two previous stints at IRS and at the time was the CFO of the Veterans Affairs Department. By the time Werfel stepped down in December, he had also brought on board the Homeland Security Department's CFO, Peggy Sherry, to serve as the IRS deputy commissioner for operations support and the Labor Department's CFO, Jim Taylor, to serve as the senior director for the Affordable Care Act operations.

Werfel said it was "humbling" to be asked by the President and Treasury Secretary Jack Lew to tackle one of the administration's most urgent management challenges.

"There was a federal agency — one that I have deep respect for, one that plays one of the most critical roles in our entire government — and they were in need," Werfel described his thought process when he was offered the job. "The federal employees in that organization, roughly 85,000 to 90,000 employees, were in a moment of need, and there was the opportunity for me to help, so there was a never a question in my mind that I wouldn't step into that type of assignment."

Now in the private sector, Werfel said he wants to continue helping the federal government "achieve management excellence in any way that I can."

Robust partnerships between the public and private sectors are critical to making the federal government more modern and efficient, he said.

Among the biggest challenges the government faces is the growing complexity of its missions

"If you look at a federal agency versus five years ago — versus five years before that — there tends to be more on their plate in terms of the types of things that they're being required and asked to do," Werfel said.

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