IRS Firings for Employee Misconduct Reach 11-Year Low

June 6 (Bloomberg) -- U.S. Representative John Mica, a Florida Republican, talks about immigration policy and congressional hearings on the Internal Revenue Service's spending practices and tax-exempt application review process. Mica speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

The Internal Revenue Service, under a congressional microscope for conference spending and improper scrutiny of small-government groups, has fired fewer workers for misconduct this year than at any time since 2002.

The IRS fired half as many people as it did three years ago for such misconduct as unauthorized access to taxpayer information, according to data compiled by Bloomberg. The data indicate the tax agency may have been focusing too much on employee satisfaction, said former commissioner Mark W. Everson.

“In the last several years one of the overriding objectives was to make the IRS a better place to work,” Everson, who led the agency from 2003 to 2007, said in an interview. “That, to some degree, gave rise to excessive spending on conferences and maybe changing disciplinary procedures.”

The IRS terminated 74 workers for misconduct in the six months that ended March 31, or less than 0.1 percent of the tax agency’s approximately 90,000-person workforce, according to government data. Firings of IRS employees for any reason declined by 46 percent from fiscal 2008 through 2012 and are on pace for another decline this year.

Some lawmakers on the six congressional panels probing the IRS have asked the agency to speed up discipline for workers as a new acting commissioner promises internal changes to restore public trust. Separately, the Department of Justice is conducting a criminal investigation.

Photographer: Andrew Harrer/Bloomberg

The Internal Revenue Service headquarters stands in Washington, D.C. Close

The Internal Revenue Service headquarters stands in Washington, D.C.

Close
Open
Photographer: Andrew Harrer/Bloomberg

The Internal Revenue Service headquarters stands in Washington, D.C.

Semiannual Reports

The data on misconduct are included in semiannual reports of the Treasury Inspector General for Tax Administration, including the latest one released June 6. The data on firings come from the U.S. Office of Personnel Management.

The 74 terminations for misconduct represent the smallest number since the six-month period ending March 31, 2002, when 62 employees were fired. The IRS workforce is 9 percent smaller than it was in 2002. Adjusted for workforce size, this year’s percentage of workers fired for misconduct is the lowest in 10 years, not 11 years.

The number of IRS employees fired for any reason declined to 450 in fiscal 2012, which ended Sept. 30, 2012. That’s down from 658 in 2011 and 838 in 2008. Through the first quarter of 2013, the IRS has fired 76 people, on pace for 304.

The IRS said in a June 7 statement that during the past 10 years it has fired more than 3,000 employees for misconduct and removed another 5,000 during their one-year probationary period.

‘Relatively Small’

Fewer hirings in the past several years “may account for a recent and relatively small decrease in disciplinary actions,” the IRS said.

The IRS fires employees more frequently than other federal agencies do, said Max Stier, president of the Partnership for Public Service, a Washington-based nonprofit group that promotes government service and compiled the OPM data.

The agency had about 4.5 percent of civilian executive-branch workers and accounted for about 7.5 percent of terminations between fiscal 2008 and 2012, Stier said.

That’s in part because of the so-called 10 deadly sins, the IRS-specific violations that can lead to termination. They include threatening an audit for personal gain and failing to file one’s own tax returns. Congress set those rules in 1998 as part of a law that restructured the agency.

“IRS employees consistently have a higher tax compliance rate than the general population or most other government agencies,” the IRS statement said.

Slower Hiring

One probable reason for the decline in IRS firings is that the agency has slowed hiring in recent years. Many terminations come in the first year of federal work, Stier said, when employees are on probation.

“Terminations are going down,” he said. “That’s because hiring’s going down.”

Other data on IRS discipline also show a decline this year. The agency issued 366 suspensions for misconduct, the lowest total since the period ending March 31, 2005. Another 160 employees with misconduct allegations resigned or retired, the lowest total in 11 years.

Colleen Kelley, president of the National Treasury Employees Union, said in an e-mailed statement that the decline in disciplinary actions may be because the IRS workforce has dropped by 10,000 over the last two years. The NTEU represents approximately 80,000 employees at the IRS. It doesn’t represent managers.

‘Strict’ Approach

“For frontline employees, IRS has a very strict, formal approach to disciplinary issues,” Kelley said.

Steven Miller, who was forced out as acting commissioner, was in charge of the agency from November 2012 through May 21. An e-mail to his attorney, William Burck, wasn’t returned.

Douglas Shulman, IRS commissioner from 2008 through November 2012, didn’t respond to an e-mailed request for comment. Shulman is a guest scholar at the Brookings Institution in Washington, where his biography cites the IRS’s move to third from eighth on a ranking of best government agencies for employees.

The data on firings are incomplete because they don’t consider the pool of potential cases, said Robert Tobias, director of Key Executive Leadership Programs at American University in Washington.

“They don’t tell you anything unless you were able to see whether there were other charges initiated and then not followed through,” said Tobias, who was president of the union that represents IRS employees from 1983 through 1999 and is now a member of the IRS Oversight Board.

Lois Lerner

Soon after he became acting commissioner on May 22, Danny Werfel placed Lois Lerner, director of exempt organizations, on administrative leave. Lerner is at the center of the controversy involving scrutiny of tax-exempt groups; an inspector general’s report found that she learned of the improper scrutiny in June 2011 and was unable to stop it. The IRS said June 7 that it was replacing Holly Paz, who was in charge of rulings and agreements under Lerner.

Werfel also said last week that he started the process of firing two employees who allegedly took free food and other items at a 2010 conference.

“When I came to IRS, part of my job was to hold people accountable,” he said in a statement June 5 announcing those moves. “There was clearly inappropriate behavior involved in this situation, and immediate action is needed.”

At a House committee hearing June 6, Werfel said he would work with lawmakers who are considering changes to personnel rules that would give managers more freedom.

Accountability ‘Timeliness’

“How do we improve timeliness of accountability?” Werfel said.

The inspector general’s most recent report includes several examples of IRS employees prosecuted for violations, such as falsifying work hours and stealing checks sent to the IRS by altering the payee’s name.

Everson, now vice chairman of Alliantgroup LP, said government procedures for firing employees can be time-consuming and involve procedural hurdles such as working with the workers’ union representatives.

The process requires managers to give employees a letter and 30 days to respond. Employees can appeal to the U.S. Merit Systems Protection Board or seek arbitration if they are represented by a union.

Those potential obstacles shouldn’t dissuade public-sector managers, Everson said.

“You’re trying to set a very strong message that people are accountable,” he said.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.