WASHINGTON - The Internal Revenue Service (IRS) has improved its use of

recruitment and retention incentives, but it needs better controls to ensure compliance

with all legal requirements and guidelines, according to a new study by the Treasury

Inspector General for Tax Administration (TIGTA).

Like other Federal agencies, the IRS has the flexibility to use payment compensation in

the form of recruitment and retention incentives to attract and retain a high-quality

workforce. Specifically, the IRS can offer recruitment incentives to attract new

employees for positions that are difficult to fill, and retention incentives to retain

employees with unusually high or unique qualifications.

TIGTA's audit reviewed whether the IRS properly administers recruitment and retention

incentives. TIGTA found that IRS management improved its administration of the use of

recruitment and retention incentives; however, procedures were not adequate to ensure

that all Federal and internal guidelines were met. Because IRS management relied on

manual controls and did not always review incentives to ensure compliance with legal

requirements until after the incentives were approved, TIGTA found that some controls

were bypassed or not followed.

This resulted in some recruitment and retention incentives not being processed in

accordance with IRS guidelines between January 2006 and February 2010. For example,

seven (25.9 percent) of the 27 retention incentives reviewed did not contain adequate

documentation to support that employees would likely leave the IRS in the absence of the

incentive, which presents a risk that the incentives may not have been justified. In

addition, the IRS has not fully incorporated the use of recruitment and retention

incentives into the IRS's strategic workforce planning because IRS management does not

assess the impact of the use of incentives on their planning goals.

"IRS management must identify a method to assess the impact of the use of incentives on

overall workforce planning goals," said J. Russell George, Treasury Inspector General for

Tax Administration. "Without this information, it is impossible to ensure that incentives

are used to help the IRS achieve its workforce planning goals of having the right people

in the right place and at the right time."

TIGTA recommended that IRS officials strengthen manual controls to ensure that Federal

and internal guidelines are met, and that they develop a methodology to assess the impact

of the use of recruitment and retention incentives in helping IRS management meet longterm

workforce planning goals.

The IRS agreed with TIGTA's recommendations.