Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) managers' compliance with legislative and policy prohibitions against using enforcement statistics in employee evaluations and the requirement that managers certify each quarter whether violations had occurred, focusing on: (1) the extent to which IRS' certification process identified violations of law and policy; (2) IRS employees' perceptions of the use of tax enforcement results in their annual performance evaluations; (3) supervisors' use of tax enforcement results in written employee performance evaluations; and (4) IRS' efforts to revise the certification process.

GAO noted that: (1) for fiscal years 1996 and 1997, district and service center directors submitted 368 quarterly certifications that reported 11 potential violations; (2) GAO identified several systemic weaknesses that affected the reliability of the certifications; (3) specifically, GAO found: (a) some confusion among IRS officials about what constituted a violation; (b) inadequate guidance about specific actions directors should take to identify violations; (c) a failure to integrate performance evaluations and the certification process; and (d) unclear guidance on sanctions that could be applied against managers for misusing tax enforcement results or submitting false certifications; (4) GAO's survey of a statistically representative sample of examination and collection employees showed a widespread perception that managers considered enforcement results when preparing annual performance evaluations; (5) GAO estimated that 75 percent of front-line employees and 81 percent of group managers perceived that tax enforcement results affected their most recent performance evaluation; (6) about 70 percent of front-line employees said they based their perception in part on information communicated to them verbally in staff meetings or performance feedback sessions with their managers; (7) and about 36 percent of front-line employees indicated tax enforcement results were used in their written performance evaluations; (8) 9 percent of employees received a written evaluation that contained a tax enforcement result and an estimated 69 percent contained narrative that employees could have interpreted as inappropriate references to tax enforcement results but which did not violate IRS guidance; (9) about 41 percent of the evaluations in GAO's sample mentioned process measures dealing with the age of the cases in the employee's workload inventory and the number of cases worked within guidelines established for closing cases; (10) IRS has undertaken several steps to strengthen the certification process; (11) although these actions address some of the weaknesses of the current system, IRS' revised guidance has few examples of the appropriate and inappropriate use of tax enforcement results in written evaluations; (12) the revised guidance does not clearly inform managers about potential sanctions for inappropriate use of tax enforcement results; and (13) IRS' new independent review process is geared toward identifying written violations and not violations communicated verbally.

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