Audit Urges End of IRS's Employee Tuition Plan

Administrative Costs Said to Be 'Far Too High'

The Internal Revenue Service's employee tuition assistance program has spent more than 60 percent of its funds -- or $4.4 million in two years -- on administrative costs, employing the equivalent of 30 full-time workers while turning away hundreds of employees for lack of funds, an inspector general audit has found.

The audit, which will be released today, suggests the IRS's Human Resources Investment Fund should be abandoned. Its findings come as Treasury Secretary John W. Snow pleads to Congress for more funding for the nation's tax collection agency.

"In a program intended for employee development, administrative costs exceeded tuition paid by almost two to one," said Max Baucus (Mont.), the ranking Democrat on the Senate Finance Committee, which oversees the IRS. "As Congress considers the IRS budget for the upcoming year, we must be confident that the IRS is using its money responsibly."

The tuition plan was established as part of the IRS reorganization of 1998 to promote career development and improve employees' skills. Course subjects include accounting, computers and foreign languages.

But in 2002 and 2003, only $2.8 million of the program's $7.2 million budget went to tuition assistance. The remainder was swallowed by administrative costs and the salaries of more than 80 employees detailed to the project, most of them part time. During that time, 1,680 employees were rejected for tuition assistance for lack of funds.

"We believe the cost to administer the HRIF program is far too high," the Treasury inspector general for tax administration wrote.

Under the program, employees who accept assistance but fail to enroll or pass their courses are supposed to reimburse the government.

But the IRS's official "pass rate" of 95 percent is "inaccurate and misleading," the audit found, because employees in 57 percent of the program's courses failed to report their grades or even whether they had enrolled.

"The HRIF Program does not appear to be a cost-effective method to distribute tuition assistance," the inspector general's audit concluded. "We believe that the IRS should consider eliminating the HRIF program."

The agency could save $10.7 million over five years if the program is replaced with a more cost-effective tuition assistance effort, the inspector general estimated.

The report arrives at a delicate time for the administration. The White House has proposed an 8 percent increase in the IRS's enforcement budget, to $6.9 billion. That money would be used to close the estimated $300 billion gap between taxes owed and taxes paid.

Snow took the unusual step yesterday of asking Congress to treat the enforcement budget request as an emergency, ensuring that any budget cuts come from some other federal function under the purview of the Appropriations subcommittees that oversee Treasury.