The Internal Revenue Service is making progress in the management of its employees but faces continued challenges, according to a new report.

The report on the IRS’s human capital efforts, publicly released Wednesday, by the Treasury Inspector General for Tax Administration, noted that since fiscal year 2002, TIGTA has designated human capital as one of the major management challenges facing the IRS. 

TIGTA reviewed the status of actions the IRS has taken in response to recommendations on human capital issues made by TIGTA in a series of audit reports issued since fiscal 2009. TIGTA also reviewed the status of the IRS’s implementation of the recommendations of an IRS-led task force.

TIGTA’s new report found that the IRS has made progress in addressing human capital issues.  For example, the IRS developed an agency-wide recruitment strategy that should place it in a better position to identify and attract qualified candidates. IRS documentation shows that it has completed corrective actions for 78 percent of the 46 TIGTA recommendations and 91 percent of the 58 recommendations made by the IRS task force formed to address serious workforce issues.

Despite this progress, however, continued focus by IRS executive management on human capital is important because the IRS’s workforce has decreased by about 10,000 full-time equivalents in the last two fiscal years, the report noted. In addition, many of the IRS’s experienced leaders and employees will be eligible to retire in the next five years.

At the same time, significant Tax Code changes, such as those implementing the Patient Protection and Affordable Care Act, are on the horizon, and the IRS needs to make improvements to stop billions of dollars in fraudulent or improper tax refunds resulting from identity theft and erroneous claims for tax credits.

“The IRS’s continued focus is needed to provide reasonable assurance that the right people will be in the right place at the right time to provide taxpayers with top-quality service and to enforce the law with integrity and fairness to all,” said TIGTA Inspector General J. Russell George in a statement.

TIGTA made no recommendations in this report; however, key IRS management officials reviewed it prior to issuance.

In a related report issued last week, TIGTA found that the IRS is hiring new employees more quickly. While in June 2009, the IRS took more than five months to hire employees from outside the government, some of its divisions, like the Information Technology organization, are now close to meeting the federal government’s goal of 80 calendar days, TIGTA’s auditors found.

At the request of the IRS, TIGTA audited the actions taken by the IRS divisions to monitor and improve the efficiency of hiring new employees. Hiring quality employees quickly is important to the IRS, as it hires a large number of employees each year.  For example, the IRS hired approximately 19,000 employees in fiscal year 2011.

TIGTA found that IRS divisions and the Human Capital Office have taken action to reduce hiring timelines, but need to continue to focus on keeping hiring timelines low and making additional improvements. For example, the Information Technology organization has cut the time it takes to hire new employees from 218 calendar days in November 2009 to an average of 90 calendar days at the end of March 2012.  As a result, Information Technology is close to meeting the Office of Personnel Management 80-calendar-day hiring goal. Similarly, the Wage and Investment Division has taken action to reduce hiring timelines and is also close to meeting the hiring goal.

However, the Small Business/Self-Employed Division uses a hiring process that is based on bringing large groups of employees on board at the same time for training and orientation purposes. While this may result in efficient training and orientation programs for enforcement personnel, it can take up to 200 calendar days to hire employees, which results in not meeting the hiring goal.

TIGTA made several recommendations for improvement such as deactivating certificates with lists of job applicants that are not used, providing guidance to employment offices for selecting the correct certificates, and correcting computer report-writing programming to ensure the correct date was used in calculating hiring timelines. The IRS agreed with TIGTA’s recommendations and implemented corrective actions.