The Internal Revenue Service & Quality

The Internal Revenue Service's Ogden Service Center's winning of the President's Award for Quality represents only the third such award since the program began five years ago. While the award may be given each year, it has been given only twice before. Although two such awards can be given each year, the IRS service center is the only federal organization honored this year. The IRS is the first civilian federal organization to win the award, which is to federal organizations what the Malcolm Baldridge Award is to the private sector.

Organizations applying for the President's Award for Quality must have quality improvement efforts that have been producing results for three to five years and must have earlier received the Quality Improvement Prototype Award. Both the Ogden and Fresno centers won prototype awards in 1989. These service centers were two of only six finalist organizations selected from among 57 agencies for prototype awards. The Fresno Service Center was also the only other finalist for this year's President's Award.

The Federal Quality Institute cited the service center for going the extra mile in "solving taxpayers' concerns in an enthusiastic, proactive and prompt manner." At Ogden's customer service desk, as of June 1991, 88 percent of walk-in and 92 percent of telephone inquiries were immediately resolved, giving taxpayers one-stop service and saving them from responding to multiple notices and calling back for help. During the 1991 filing season, Ogden had a quality rate of 96.2 percent for data entry of Forms 1040, meaning that taxpayers' returns were processed and refunds issued quickly, without delays. Further, the center's productivity and quality enhancements have saved more than $11 million over the last five years. For example, a quality improvement team identified eight problems with processing taxpayers' payments. The team's recommendations resulted in a net savings of $297,000 -- and far fewer taxpayer complaints.

The Ogden Service Center, largest of IRS' data processing centers with 6300 employees, serves 14 states and three regional IRS offices. During fiscal year 1991 the center processed over 26 million individual and business federal tax returns, collecting $100 billion and issuing $9 billion in tax refunds.

Several important phases of IRS' massive tax systems modernization project have been tested at Ogden, most notably the automated underreporter system and the totally integrated examination system. The automated underreporter analyzes differences between the amount of income taxpayers report and amounts payers report having paid. Automated underreporter can do this work in minutes. Before this advance this work was done by hand, which took hours of hand sorting of paper documents. This system also prints personalized notices to taxpayers -- replacing generic "If this box is checked ..." letters. Taxpayers save interest on additional tax owed because of the prompt action made possible by this system.

The totally integrated examination system, scheduled for testing at Ogden this year, makes the information from tax returns immediately available to technicians. At the same time, it establishes a control record for maintenance and in-process inventory reports. The computer is programmed to make various mathematical computations and produce audit reports. The reports are reviewed immediately on screen by the technicians as they are produced, allowing the technicians to respond to taxpayers' questions on the spot. Under the old system, it took 11-22 days to produce these reports and an average of 9.3 days to answer questions. Estimated annual savings from this system are $3.4 million.

The quality movement began at the Internal Revenue Service in the mid 1980s. It was formalized in 1987, when the IRS and the National Treasury Employees Union signed an agreement initiating the IRS/NTEU Joint Quality Improvement Process. Since that time, 100,000 IRS employees have been trained in quality improvement methods and practices, and thousands of quality improvement team members have completed improvement studies, resulting in savings of $27 million. Problem-solving techniques learned from these studies have been integrated into the workplace, solving root problems rather than fixing symptoms over and over again.

Here are some examples of quality improvements at the IRS. A team in the Cincinnati District created a reference guide for correctly completing a form used for electronic filing. The error rate for these forms dropped from 21 percent to three percent during the 1990 filing season and helped eliminate delays for taxpayers anxiously waiting for their tax refunds. A team in the Houston District recommended solutions which significantly reduced administrative taxes owed by taxpayers under bankruptcy.

A Nashville District team projects savings of $175,000 from their recommendations for responding to various taxpayer inquiries. They project that 30,000 more taxpayers will receive responses to their questions during their first telephone contact, as opposed to waiting for up to ten days for written responses.

The IRS is committed to being a total quality organization. The Service's strategic business plan identifies being a total quality organization as one of five major strategies the agency is using to guide change.

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