CEP's silver anniversary: IRS and taxpayers working together.

Introduction: The Birth of the CEP Program

Several weeks ago, someone brought to my attention an article that appeared in the November 1967 issue of The Journal of Taxation. The article was found while we were looking for historical information to include in activities we are planning for the commemoration of the 25th Anniversary of the Coordinated Examination Program. After reading the article which was more than a quarter of a century old, I felt a renewed enthusiasm for a job I have been working at for nearly 32 years. I would like to share with you, the group that has influenced the success of CEP, my renewed enthusiasm and why I believe the success of CEP will positively influence the future of tax administration.

The title of this article was "Effective Tax Procedures." It was subtitled, "The Large Case Program - How the New Coordinated Examination by the IRS Works." The author was Donald W. Bacon, who was the IRS's Assistant Commissioner for Compliance in 1967. Don subsequently became a member of Tax Executives Institute, and indeed, was awarded TEI's Distinguished Service Award in recognition of his government service.

In his article, he explained how the IRS expected the new coordinated approach to corporate large-case audits to work and the three main changes that would take place in the audit process under the coordinated program. The changes meant that we would now:

* Use a team audit concept instead of the one-agent/

one-case concept.

* Require coordinated case control to expedite case

assignment and closures and to improve managerial

monitoring.

* Encourage pre-audit planning conferences so that all

parties could discuss the audit process and the issues

involved.

Mr. Bacon also wrote that, even though it was only the first year for these changes, they were already having the desired impact, and he predicted even greater future benefits. fits. His prediction was accurate and significant. The changes have produced one of the most successful programs in IRS history ... one that has continued to change and to improve.

Having been involved in Examination as a revenue agent and analyst in the large-case program for a good part of my career, I thought about the elements that make the CEP program such a success. I had reread parts of the article several times when one paragraph caught my attention. It was one that described the high level of optimism among the revenue agents who welcomed the changes made to CEP. It said the agents were especially optimistic about the new emphasis that was being placed on the word coordination,' and they felt it would generate new levels of communication and information exchange throughout the Internal Revenue Service.

It caught my attention because I was one of those optimistic revenue agents back in 1967 who worked large-case in Albany, New York, and shortly afterward became a member of the first group of four large-case analysts at the National Office. I remember being enthusiastic about the new emphasis on coordination and the exchange of information. We all felt it would make our jobs easier and would generate opportunities to learn more about our jobs.

The Key to Success: Communication

Now with 25 more years of experience behind me, I realize that the emphasis on the exchange of information was the single most important element of all the changes made to the audit process back in 1967, and the increase in the exchange of information was the key to the success of the Coordinated Examination Process.

The team audits got agents cooperating, by working together and talking to each other. Coordinated case control got managers and agents talking to each other and coordinating their workload, and pre-audit planning conferences got the agents, managers, and taxpayers all talking and communicating with each other. The pre-audit conference was an important step in placing a face or faces behind the corporate tax return. It added the taxpayer's perspective to a business process and was an important step toward establishing a harmonious effort involving both internal and external stakeholders. In all of the changes were the elements of cooperation, coordination, and communication.

Over the years, the emphasis on the exchange of information spread to other functions within the IRS ... to Appeals, Counsel, and International. It also spread to the tax professionals. Not only were we talking to our customers, but we started listening to them. Before long, we started to hear what our customers were saying. Our real progress began when we started to incorporate some of their ideas, suggestions, and recommendations on how we could meet their needs, break down barriers, and resolve issues more quickly and efficiently.

Not only were we now making progress, but we began to make quality a part of that progress, for what is quality but people delivering services and products that meet the needs and expectations of other people. We identified those needs by talking and listening to each other, by exchanging information, and by communicating.

The successes of the Coordinated Examination Program are many, and all are very important to improving the efficiency and effectiveness of the Corporate Audit Process. But perhaps the most important success of the program is the dynamic example it now provides to our entire organization - an example that changes can be positive and that much can be accomplished when people talk and listen to each other.

This example is particularly important now, for as an organization the IRS is embarking upon some of the most extensive and fundamental changes in its history. This time the changes are even more far reaching since they will affect nearly all aspects of tax administration and all stakeholders in the system.

So why am I even more optimistic than I was 25 years ago? Because as part of the executive management of the IRS, I now see the same opportunities for us to be successful as an entire organization in improving the way we think about and conduct our business. And I see the same potential for the exchange of information inherent in each of the five major strategies the IRS is emphasizing to drive the organizational changes.

Communication, Coordination, and Cooperation are key elements in Tax Systems Modernization, Diversity, Quality, Ethics, and Compliance 2000, which are our strategies for corporate change.

Compliance 2000

I like to refer to Compliance 2000 as our operating philosophy because it affects the way we need to think about our business as well as the way we operate. The philosophy affects the culture of our organization as well as our operations. We need to include the taxpayers'perspective in both. The Compliance 2000 philosophy is that, if we can find ways to meet the taxpayers' needs and reduce their burdens in meeting their tax obligations, we will minimize noncompliance and increase revenue collection through improved voluntary compliance. The results will be a more efficient, effective, and productive tax system that will gain taxpayer support and confidence. Meeting taxpayers' needs and reducing their burdens means that we have to help them better understand the laws and minimize the time, the cost, and the emotional stress they bear in filing the returns and paying the tax.

To accomplish this goal, we need to improve and increase the exchange of information between both our internal and external stakeholders. The emphasis of Compliance 2000 is to meet these needs through training, education, information, and assistance. Under this new philosophy our organizational goal is to get all functions working together to find the root causes of errors and noncompliance and then find ways to prevent them instead of more ways to correct or cure them. It might also be necessary to act as an advocate for the taxpayer to simplify and clarify legislation.

Tax Systems Modernization

Tax Systems Modernization is the basis for an increased exchange of information. It will provide the mechanisms and the technology that will enable us to improve the amount and quality of information we provide to both our internal and external stakeholders. Better systems will enable us to handle the processing workload and improve account maintenance - posting, collecting, storing, or retrieving information that will help us deliver quality products and services to taxpayers.

TSM will also provide better sources of information by which to identify errors, as well as trends in noncompliance, and it will help us to do something we have never really done before: It will allow us to measure our successes in terms of improved compliance instead of merely measuring the increase in dollars collected or assessed or activities performed in pursuing those dollars.

Diversity

Diversity is the strategy that will enable us to make the necessary changes to accommodate the future workforce. Exchanging and understanding information about ethnic and cultural similarities and differences and using the information to work for the organization is the key to dealing with the changing workforce. It is people getting to know and respect one another's differences.

Ethics

Ethics is a system of moral principles and values that governs not only the conduct of individuals, but also the conduct of those individuals as members of a profession. It is the essence and character of these individuals in their professional roles that become the strength and support of an organization. Ethics is probably the strategy that lends itself best to examples of inherent communication elements, because we communicate our ethical standards not only through our words, but through our thoughts and deeds. How we conduct ourselves in our work, how we demonstrate our responsibilities to co-workers and to taxpayers will communicate the integrity and the credibility of our organization.

Quality

And now we come to the last strategy, which is Quality. I have already discussed the role of communication, coordination and cooperation in improving quality in the Coordinated Examination Program. The same principles apply regardless of program; we have to know our customers'needs before we can deliver a quality product or service. We need to talk to them. The elements for successfully implementing organizational changes are there in these strategies. The exchange of information is the key, but only we - the internal and external stakeholders - have the power to make it happen through coordination, cooperation, and communication. Change can only happen when we put the information to good use as has been done in the CEP program. We must simply remember that our actions speak louder than our words.