"IRS's comparative study of the PDC program was not soundly designed to support its decision on whether to continue contracting out debt collection," the report states, adding that the "study was not originally intended or designed as primary support for the decision."
The GAO determined that the study used by the IRS had a narrow objective of comparing results for IRS working the same cases as PCAs (private collection agencies) and, as a result, the study did not consider other factors recommended by the Office of Management and Budget and other agencies on conducting program analysis.
Senate Finance Committee ranking member Chuck Grassley (R-Iowa) criticized the IRS for not following the guidance it was provided to determine if PDCs were a worthwhile investment.
"According to this report, the IRS used a flawed study to justify ending its contracts with private agencies to collect owed taxes that the IRS wasn't collecting on its own," Grassley said in prepared remarks. "The IRS knows the study was flawed because the GAO told the IRS how to do the study. But the IRS didn't implement the GAO's recommendations to fix the study even though it agreed with them. The IRS used the results from the defective cost-effectiveness study to defend its decision to terminate the use of private collection agencies, even though that wasn't the primary purpose of the study."
Grassley pointed out that unpaid tax debts totaled $328.1 billion that private agencies could have been used to collect.
The GAO recommends that the IRS establish guidance on analyses to support program decisions; establish a policy requiring documentation of program studies; and ensure that PCA-type case results are considered for the IRS's new case-selection model. The IRS agreed with the first two recommendations and agreed in principle with the third.