Administrative Costs Said to Be 'Far Too High'
By Jonathan Weisman
Washington Post Staff Writer
Friday, April 22, 2005
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.
"It is important that these enforcement investments be fully funded," Snow told a House Appropriations subcommittee.
But for several years, lawmakers have balked at such proposed increases, often arguing the IRS should be more efficient with the budget it has. Treasury officials have been criticized for using IRS agents for protection details, for cost overruns on the IRS's new computer system and for other missteps.
The audit on the tuition program will add more fodder for congressional critics.
"Failing grades involving the use of taxpayers' money are not acceptable," Baucus said.
IRS management did little to dispute the audit's conclusions. IRS officials yesterday referred to a formal response drafted last month by Beverly Ortega Babers, the IRS's chief human capital officer.
"We agree that the Human Resources Investment Fund is not the most cost-effective method of providing tuition assistance to IRS employees," she wrote.
Indeed, record-keeping for the program has been so ineffective that it would be "cost prohibitive" to track down all employees who received tuition aid back to 2000 to see whether they enrolled and passed their courses, the response said. IRS management promised instead to review records back to 2003.
Babers said the agency "will consider" eliminating the program, but she warned that any such move would have to come through contract negotiations with the National Treasury Employees Union, which are not set to begin until June 2006.
Colleen M. Kelley, the union's president, agreed that changes are needed to sharply bring down administrative costs. But she said the union will fight to keep the program, which she said is far more effective than alternative training programs suggested by the inspector general.
"Obviously it's a monitoring and a management failure," she said. "We would resist elimination of the program."