IRS coping with tricky implementation of health care law, auditors say

Though a Supreme Court decision looms on the constitutionality of the 2010 health care law, the Internal Revenue Service is effectively implementing it and maintaining its general tax law enforcement operations despite a shrinking staff, auditors said in a report released Friday. But there are additional cost-savings opportunities to be tapped, according to the Government Accountability Office.

At the request of Senate Appropriations panel member Sen. Dick Durbin, D-Ill., and House Ways and Means Oversight Subcommittee Chairman Charles Boustany, R-La., GAO analyzed President Obama’s February request for an 8 percent hike in the IRS’ budget -- which Republicans in fiscal 2012 successfully pushed to trim by $305 million, or 2.5 percent.

The IRS responded by cutting full-time employees in its enforcement and operations division, and now is requesting 4,500 more.

A review of the text accompanying the fiscal 2013 budget showed that the agency launched seven of its 12 program initiatives with sufficient estimates of the likely return on investments and cost effectiveness, GAO concluded. “We have identified several areas where budget decision-makers lack information that would be helpful in making decisions about resource trade-offs at IRS,” auditors wrote.

The IRS cost estimate for implementing the health care law “partially meets best practices for reliability, but it has not been updated since October 2010,” auditors wrote. “Without a timely, updated cost estimate for [the Affordable Care Act], budget decision-makers will not know the fraction of the multiyear effort being funded in fiscal year 2013 or the subsequent remaining costs.”

GAO criticized the IRS for budget planning based on hiring staff late in the fiscal year, “which could have resulted in funding being used for other purposes that are not described or substantiated in the budget justification.”

For information technology investments, the IRS had implemented 14 of 20 major investments within 10 percent of cost and schedule estimates, though a full analysis of their effectiveness must wait for additional metrics, GAO said.

The review of the 2013 budget request showed that the IRS had implemented five of the nine GAO recommendations for types of information that would make the request easier to analyze.

The IRS largely agreed with GAO recommendations, except for the criticism about counting new staff from their hiring dates. That approach is consistent with Office of Management and Budget practices, the agency said.