VA Health Care: Improved Policies and Oversight Needed for Reviewing and Reporting Providers for Quality and Safety Concerns

Nearly 40,000 providers hold privileges in VHA's 170 VAMCs. VAMCs must identify and review any concerns that arise about the clinical care their providers deliver. Depending on the findings from the review, VAMC officials may take an adverse privileging action against a provider that either limits the care a provider is allowed to deliver at the VAMC or prevents the provider from delivering care altogether.

GAO was asked to review VHA processes for reviewing concerns about providers' clinical care. This report examines, among other things, selected VAMCs' (1) reviews of providers' clinical care after concerns are raised and VHA's oversight of these reviews, and (2) VAMCs' reporting of providers to the NPDB and SLBs and VHA's oversight of reporting. GAO visited a non-generalizable selection of five VAMCs selected for the complexity of services offered and variation in location. GAO reviewed VHA policies and files from the five selected VAMCs, and interviewed VHA, VISN, and VAMC officials. GAO also evaluated VHA's practices using federal internal control standards.

Department of Veterans Affairs (VA) medical center (VAMC) officials are responsible for reviewing the clinical care delivered by their privileged providers—physicians and dentists who are approved to independently perform specific services—after concerns are raised. The five VAMCs GAO selected for review collectively required review of 148 providers from October 2013 through March 2017 after concerns were raised about their clinical care. GAO found that these reviews were not always documented or conducted in a timely manner. GAO identified these providers by reviewing meeting minutes from the committee responsible for requiring these types of reviews at the respective VAMCs, and through interviews with VAMC officials. The selected VAMCs were unable to provide documentation of these reviews for almost half of the 148 providers. Additionally, the VAMCs did not start the reviews of 16 providers for 3 months to multiple years after the concerns were identified. GAO found that VHA policies do not require documentation of all types of clinical care reviews and do not establish timeliness requirements. GAO also found that the Veterans Health Administration (VHA) does not adequately oversee these reviews at VAMCs through its Veterans Integrated Service Networks (VISN), which are responsible for overseeing the VAMCs. Without documentation and timely reviews of providers' clinical care, VAMC officials may lack information needed to reasonably ensure that VA providers are competent to provide safe, high quality care to veterans and to make appropriate decisions about these providers' privileges.

GAO also found that from October 2013 through March 2017, the five selected VAMCs did not report most of the providers who should have been reported to the National Practitioner Data Bank (NPDB) or state licensing boards (SLB) in accordance with VHA policy. The NPDB is an electronic repository for critical information about the professional conduct and competence of providers. GAO found that

selected VAMCs did not report to the NPDB eight of nine providers who had adverse privileging actions taken against them or who resigned during an investigation related to professional competence or conduct, as required by VHA policy, and

none of these nine providers had been reported to SLBs.

GAO found that officials at the selected VAMCs misinterpreted or were not aware of VHA policies and guidance related to NPDB and SLB reporting processes resulting in providers not being reported. GAO also found that VHA and the VISNs do not conduct adequate oversight of NPDB and SLB reporting practices and cannot reasonably ensure appropriate reporting of providers. As a result, VHA's ability to provide safe, high quality care to veterans is hindered because other VAMCs, as well as non-VA health care entities, will be unaware of serious concerns raised about a provider's care. For example, GAO found that after one VAMC failed to report to the NPDB or SLBs a provider who resigned to avoid an adverse privileging action, a non-VA hospital in the same city took an adverse privileging action against that same provider for the same reason 2 years later.

GAO is making four recommendations, including for VA to direct VHA to require VAMCs to document reviews of providers' clinical care after concerns are raised, develop timeliness requirements for these reviews, and ensure proper VISN oversight of such reviews as well as timely VAMC reporting of providers to the NPDB and SLBs. VA concurred with GAO's recommendations and described steps it will take to implement them.

The Department of Veterans Affairs’ (VA) Veterans Health Administration  (VHA) operates one of the largest health care systems in the nation, and  nearly 40,000 providers hold privileges at its 170 VA medical centers  (VAMC). As in all health care delivery settings, VAMCs are responsible  for ensuring that their providers deliver safe care to patients. If a concern  about a provider’s clinical care arises at any point, it is the VAMC’s  responsibility to review the provider’s clinical care. Depending on the  nature of the concern and the findings from their review, VAMC  leadership officials may take adverse privileging actions against providers  that either limit the care they are allowed to deliver at the facility or  prevent the providers from delivering care altogether. VAMC officials are  also required to report the providers they take adverse privileging actions  against to the National Practitioner Data Bank (NPDB), which is used by  other VAMCs, non-VA hospitals, and other health care entities to obtain  information on providers with a history of substandard care and  misconduct. VAMC officials are also required to report providers to state licensing boards (SLB) when there are serious concerns about a  provider’s clinical practice. The SLB can then investigate and determine if  the provider’s license to practice medicine should be suspended,  restricted, or revoked.

Congress and VA have taken recent steps to make the adverse  privileging action process more efficient and more transparent. For  example, the Department of Veterans Affairs Accountability and  Whistleblower Protection Act of 2017 shortens the appeals process  timeframe when a VAMC proposes taking an adverse privileging action.  While these actions may shorten the time period for reviewing and  rendering a decision on taking an adverse privileging action, questions  remain about the extent to which VAMC leadership officials review  providers’ clinical care after concerns are raised and, when appropriate,  take adverse privileging actions against these providers and report them  to the NPDB or SLBs. For example, there have been recent whistleblower  complaints from VAMC providers to the U.S. Office of Special Counsel  alleging that VAMC leadership officials have not adequately reviewed and  addressed issues regarding providers’ clinical care after concerns have  been raised. According to the whistleblowers, specific providers have  delivered care in a manner that is unsafe and inconsistent with industry  standards of care, such as performing unnecessary procedures on  veterans, without adequate reviews and actions taken by VAMC  leadership.

Questions have also been raised about the extent to which VHA gives  performance pay—a component of VA provider compensation—to  providers who have had an adverse privileging action taken against them.  Performance pay is an annual lump sum payment given to providers  based on the extent to which the provider achieves specific goals in a  given fiscal year. In July 2013, we reported that providers who were the  subject of adverse actions, including adverse privileging actions, received  performance pay for the same year the actions were taken.

You asked us to review the processes VHA has in place to review  providers’ clinical care after concerns arise and the extent to which  providers receive performance pay when concerns are confirmed. In this  report, we examine  1.  VAMCs’ reviews of providers’ clinical care after concerns are raised  and VHA’s oversight of these reviews;  2.  VAMCs’ reporting of providers to the NPDB and SLBs and VHA’s  oversight of these processes; and  3.  the extent to which VAMCs give performance pay to providers who  have had an adverse privileging action taken against them.

To examine VAMCs’ reviews of providers’ clinical care after concerns are  raised, we reviewed VHA policies and guidance and interviewed relevant  VHA officials to obtain an understanding of VHA processes for these  reviews. In addition, we identified providers whose clinical care required  a review after concerns were raised at a non-generalizable selection of  five VAMCs from October 2013 through the time we completed our site  visits in March 2017. For these selected providers, we reviewed VAMC  documentation of their reviews. We selected the five VAMCs based on  the complexity of services offered and their geographic distribution. We  identified providers at each VAMC by reviewing documentation of each  VAMC’s credentialing committee meetings from fiscal year 2014 through  fiscal year 2016. During our visits, we interviewed VAMC officials, including chiefs of staff, clinical supervisors known as service chiefs, and  other officials involved in these reviews. We asked the officials to clarify  information about the documentation we received and confirm the  completeness of the list of providers we identified. Based on the  documentation and interviews, we determined the type of reviews the  selected VAMCs conducted and the extent to which the VAMCs took  adverse privileging actions against any of the identified providers. We  assessed the extent to which the selected VAMCs adhered to VHA policy  requirements for clinical care reviews and we compared these VHA  policies and the selected VAMCs’ reviews to federal internal control  standards related to monitoring and documentation. To review VHA’s  oversight of VAMCs’ clinical care reviews and adverse privileging actions,  we reviewed VHA policy for oversight responsibilities and requirements.  We also interviewed relevant VHA officials, as well as officials in VA’s  Veterans Integrated Service Networks (VISN) responsible for each of the  five selected VAMCs, about their oversight activities. We also compared  VHA’s policy and the selected VISNs’ oversight activities with federal  internal control standards related to monitoring.

To examine VAMCs’ reporting of providers to the NPDB and SLBs, we  reviewed VHA’s related policies and evaluated the extent to which the  selected VAMCs adhered to these policies. Specifically, we evaluated  the extent to which providers whose clinical care required a review or  resulted in the VAMC taking adverse privileging actions against them  from October 2013 through the time we completed our site visits in March  2017 were reported to the NPDB and the SLBs when appropriate. Our review of NPDB reporting is limited to NPDB adverse action reports,  which are reports of the adverse privileging actions VAMCs took against  providers and any providers who resigned or retired while under  investigation for a clinical care concern. Our review does not include VHA  reporting of providers for paid medical malpractice settlements or  judgements (tort claims). We reviewed VAMC documentation related to  its reporting of specific providers and interviewed VAMC officials,  including both clinical and administrative officials involved in these  reporting processes. To examine VHA’s oversight of VAMC reporting, we  reviewed VHA policies for overseeing NPDB and SLB reporting and  interviewed relevant VHA officials as well as officials in the VISNs  responsible for each of the five selected VAMCs about VISN oversight  activities. We also compared VHA’s policy for oversight responsibilities  and the selected VISNs’ oversight activities with federal internal control  standards related to monitoring.

To determine the extent to which VAMCs give performance pay to  providers who have had an adverse privileging action taken against them,  we reviewed documentation of performance pay given to providers we  identified with adverse privileging actions at the five selected VAMCs.  Specifically, for each of the providers with an adverse privileging action  who were eligible for performance pay, we reviewed documentation of  performance pay for the fiscal year in which the action was taken and for  the fiscal year prior to the action. Our performance pay analysis does not  include contract providers, because only employed providers are eligible  to receive performance pay. We also reviewed VA policy on  performance pay and interviewed relevant VHA officials, as well as VAMC  officials, about performance pay.

We conducted this performance audit from August 2016 to November  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Identifying Concerns about Providers’ Clinical Care

As part of the credentialing and privileging process, VAMC officials are  responsible for monitoring each provider’s performance on an ongoing  basis and identifying any concerns about clinical care that may warrant  further review. VAMCs can identify concerns about providers’ clinical care  in a variety of ways, including the following:

Ongoing monitoring. VHA requires VAMCs to conduct and  document ongoing monitoring of each provider’s performance at least  twice a year through an ongoing professional practice evaluation.  During this evaluation, a provider’s performance is evaluated against  benchmarks established by VAMC leadership that define acceptable  performance, such as documenting patient visits appropriately and  achieving specific patient outcomes.

Peer review triggers. VHA has a separate process, called peer  review, that VAMCs may use to review adverse events. While  information collected as part of peer review is protected for quality  improvement purposes and may not be used to take action against a  provider, VAMCs can identify concerns about a provider’s clinical care  based on a trend of certain peer review outcomes over a specified  period of time, referred to as triggers. VHA requires VAMCs to  establish peer review triggers. An example of a peer review trigger is  when a provider has two or more episodes of patient care within a 12- month period for which a peer determined that most experienced,  competent providers would have managed the episodes differently.

Complaints or incident reports. Concerns about a provider’s clinical  care can also be identified through complaints and incident reports.  These can come from any individual with a concern, including  patients, providers, or VAMC leadership.

Tort claims. Filed or settled tort claims or malpractice claims can  raise a concern about a provider not identified through ongoing  monitoring or peer review.

Reviewing Concerns about Providers’ Clinical Care and Taking Adverse Privileging Actions

Once a concern about a provider’s clinical care is identified, VHA policy  and guidance establish processes for VAMC officials to use to review the  concern and determine whether an action should be taken against the  provider’s clinical privileges. VHA policy states that if allowing a provider  under review to continue delivering patient care could result in imminent  danger to veterans, VAMC officials should remove the provider from  delivering patient care through a summary suspension of privileges.  VAMC officials have flexibility to determine the most appropriate process  to use to review a provider’s clinical care depending on the specific  concerns and the situation. These processes include the following:

Focused professional practice evaluation (FPPE) for cause. This  is a prospective review of the provider’s care over a specified period  of time, during which the provider has the opportunity to demonstrate  improvement in the specific area of concern. Failure to improve could  result in further review or action.

Retrospective review. This is a review of the provider’s delivery of  patient care focused on a specific period of time in the past, a specific  area of practice, or both, based on an identified concern.

Comprehensive review. This is a more extensive retrospective  review, generally performed by a panel of experts to ensure fairness  and objectivity. In addition to reviewing the provider’s past patient  care, these reviews may also include interviews with the provider,  patients, and staff. These reviews generally result in conclusions  about whether care delivered by the provider met the standard of care  and may include recommendations about the provider’s privileges.

Once a review is completed, VAMC leadership officials and the VAMC  credentialing committee make decisions about next steps, which could  include the following: do nothing, if the review did not substantiate the concerns;  conduct further review (such as an FPPE for cause to allow the  provider an opportunity for improvement or a comprehensive review if  more information is needed); or  take an adverse privileging action, including limiting one or more  privileges (such as prescribing medication or performing a certain  procedure) or revoking all of the provider’s privileges.

If the VAMC’s credentialing committee recommends an adverse  privileging action, it is the VAMC director’s responsibility to weigh all  available information, including recommendations, and take an action.  After a permanent provider is notified of the director’s decision, the  provider can appeal the decision to the Disciplinary Appeals Board as  part of their due process rights. The adverse privileging action is  considered final once the Disciplinary Appeals Board reaches a decision  and the Deputy Under Secretary for Health executes the Board’s  decision. If a permanent provider does not make use of the offered due  process procedures within 7 days, the provider waives his or her right to  due process and the adverse privileging action is considered final.

Reporting Providers to the NPDB and SLBs

VHA policy requires VAMCs to alert certain entities if there are serious  concerns with regard to a provider’s clinical performance. VHA policy  assigns reporting responsibility and authority to the VAMC director, who  generally delegates the task of reporting to other VAMC officials. VHA  makes this information available to other health care entities through two  distinct reporting processes:  NPDB. Under VHA policy, VAMC directors must report to the NPDB any  adverse privileging action the facility takes that 1) affects the clinical  privileges of a provider for a period longer than 30 days and 2) is related  to professional incompetence or professional misconduct. VHA policy  requires VAMCs to submit these NPDB adverse action reports within 15  calendar days of the date the adverse privileging action is made final— that is, when all applicable internal due process procedures have been  completed and the VAMC director has signed off on the action. VAMC  directors are also required to report to the NPDB providers who resign or  retire while under investigation or in return for the VAMC not conducting  such an investigation or proceeding. To avoid any errors in the facts of  the report, the VAMC director must notify any provider who is about to be  reported to the NPDB and give the provider an opportunity to discuss the  content of the report before it is submitted.

SLBs. VHA policy requires VAMC directors to report providers—both  current and former employees—when there are serious concerns about  the providers’ clinical care to any SLB where the providers hold an active  medical license. Specifically, VHA policy requires VAMCs to report  providers who so substantially failed to meet generally accepted  standards of clinical practice as to raise reasonable concern for the safety  of patients. According to VHA policy and guidance, the SLB reporting  process should be initiated as soon as it appears that a provider’s  behavior or clinical practice fails to meet accepted standards. VAMC  officials are directed not to wait to report to SLBs until adverse privileging  actions are taken because an SLB conducts its own investigation of the  provider to determine whether licensure action is warranted. This  reporting process comprises five stages as established in VHA policy,  and VHA policy states that the process should be completed in around  100 days (see figure 1).

Performance pay—a component of VA provider compensation—is an  annual lump sum payment based on the extent to which an individual  provider achieves specific goals. The goals may vary for providers across  VA, at the same VAMC, or within a particular specialty. VA policy  establishes minimum performance pay eligibility criteria, including being  employed by VA from July 1 through September 30 of the fiscal year  being reviewed.

Selected VAMCs’ Reviews of Providers’ Clinical Care Are Not Always Documented or Timely, and VHA Does Not Adequately Oversee These Reviews

Documentation frequently lacking. We found that the five selected  VAMCs collectively required reviews of 148 providers’ clinical care after  concerns were raised from October 2013 through March 2017, but VAMC  officials were unable to provide documentation that almost half of these  reviews were conducted. We found that all five VAMCs lacked at least  some documentation of the reviews they told us they conducted, and in  some cases the required reviews were not conducted at all. We also  found VHA does not adequately oversee these reviews, as discussed  later in this report.

FPPEs for cause. FPPEs for cause accounted for most of the  missing documentation of clinical care reviews, despite VHA policy  requiring VAMCs to document FPPEs for cause in the providers’ files.  Specifically, of the 112 providers for whom the selected VAMCs  required FPPEs for cause from October 2013 through March 2017,  the VAMCs were unable to provide documentation of the FPPEs for  nearly a quarter (26) of the providers. Additionally, VAMC officials  confirmed that FPPEs for cause that were required for another 21  providers were never conducted.

Other reviews. The selected VAMCs were also unable to provide  documentation of some retrospective reviews. Specifically, of the 27  providers for whom the selected VAMCs conducted a retrospective  review, 8 were missing documentation. While VHA guidance  recommends that VAMCs document these reviews, VHA policy does  not require that VAMCs document retrospective or comprehensive  reviews. VHA officials told us that they expected VAMCs to document  these types of reviews so that the information could be used to  support adverse privileging actions, if necessary. Without clearly  stated documentation requirements in VHA policy, VAMC officials  inconsistently document their results, preventing VAMC directors and  VISNs from properly evaluating the effectiveness of its retrospective  and comprehensive reviews, which are used to, among other things,  ensure patient safety. Additionally, we found that key officials from two  VAMCs were not aware of the VHA guidance and that 5 of the 8  missing retrospective reviews were from these two VAMCs.

We also found that one VAMC was missing documentation of clinical  care reviews for 12 providers who met the VAMC’s peer review  trigger. In the absence of this documentation, we were unable to  identify the type of reviews that were missing for these 12 providers.

The selected VAMCs’ failure to document reviews of providers’ clinical  care after concerns were raised is inconsistent with federal internal  control standards for monitoring and documentation, which state that  management should conduct and document separate evaluations, when  necessary. In the absence of VAMC documentation of such separate  evaluations of providers, VAMC leadership officials lack key information  needed to make decisions about whether providers’ privileges are  appropriate, and they also lack reasonable assurance that appropriate  reviews are conducted.

Reviews not always timely. We found that the five selected VAMCs’  reviews of providers’ clinical care were not always conducted in a timely  manner after concerns were raised. Specifically, of the 148 providers, the  VAMCs’ initiation of reviews of 16 providers’ clinical care was delayed by  more than 3 months, and in some cases for multiple years, after the  concern was raised. At one VAMC, service chiefs were not instructed to  conduct reviews of 14 providers until 4 to 13 months after these providers  met the VAMC’s peer review trigger. Before the service chiefs were  notified of the concerns, 3 of these providers had at least one additional  concerning episode of care—that peer reviewers judged would have been  handled differently by most experienced providers—identified through the  peer review process. As pointed out in VHA guidance, earlier  intervention could prevent additional patients from receiving substandard  care. Officials from another VAMC did not conduct retrospective reviews  on 2 providers until we requested documentation of the reviews,  approximately 3 and a half years after the credentialing committee had  initially requested a review.

While VHA officials told us that clinical care reviews should be conducted  as expeditiously as reasonably possible, VHA policy does not specify a  timeliness requirement. Allowing more time to elapse before a clinical  care review is initiated weakens the intended purpose behind clinical care  reviews and further increases risk to patient safety. Federal internal  control standards for monitoring state that management should evaluate  issues and remediate identified deficiencies in a timely manner. A  clinical care concern could represent a potential deficiency in providing  medical care, and as a result, VHA increases its risk further without  establishing a policy that sets timeframes for conducting clinical care  reviews.

VHA oversight is inadequate. We also found that VHA does not  adequately oversee VAMC reviews of providers’ clinical care after  concerns have been raised, including ensuring that these reviews are  completed and documented in a timely manner. Under VHA policy, VISNs  are responsible for overseeing the credentialing and privileging processes  at their respective VAMCs. While reviews of providers’ clinical care after  concerns are raised are a component of credentialing and privileging, we  found that the VISNs with responsibility for overseeing the selected  VAMCs through routine audits do not include these reviews in their  audits. While the standardized tool VHA requires the VISNs to use for  these audits instructs the VISNs to identify and review providers who  were on an FPPE for cause, none of the VISN officials we spoke with  described any routine oversight of FPPEs or any other reviews of  identified clinical care concerns. This may be in part because some  VISN officials are not using VHA’s standardized audit tool as required.  Officials from one VISN said they had developed their own audit tool and  officials from another VISN said that they were not conducting the audits  due to multiple instances of turnover in a key position at the VISN.  Further, VHA’s standardized audit tool does not direct the VISN to  oversee any other types of reviews of clinical care concerns, such as  retrospective or comprehensive reviews. The tool also does not require  VISN officials to look at documentation of the FPPEs for cause; instead, it  calls for reviewing credentialing committee meeting minutes. Without  reviewing documentation, VISN officials would be unable to identify the  incomplete documentation that we identified in our review. Both VHA and  VISN officials described instances of assisting VAMC officials with  reviews of providers’ clinical care after concerns had been raised, but  VHA and VISN officials told us that their involvement in these reviews is  typically consultative and not routine. (For example, the VISN may assist  by identifying providers outside of the VAMC to conduct the review.) As a  result, VHA and the VISNs are not conducting routine oversight to ensure  that VAMC reviews of providers’ clinical care after concerns are raised  are conducted appropriately, including adequately ensuring that the  reviews are completed and documented in a timely manner, in  accordance with VHA policy.

The lack of routine VHA oversight, through the VISNs, of VAMC reviews  of providers’ clinical care after concerns are raised is inconsistent with  federal internal control standards for monitoring, which state that  management should establish and operate monitoring activities. In the  absence of routine monitoring of VAMCs’ evaluations of providers after  concerns have been raised, VHA lacks reasonable assurance that  VAMCs adequately review all identified concerns about providers’ clinical  care and take appropriate privileging actions to ensure that VA is  providing safe, high quality care for veterans.

Selected VAMCs Did Not Always Report Providers to the NPDB and SLBs in Accordance with VHA Policy, and VHA Does Not Adequately Oversee This Reporting

NPDB and SLB reporting not completed. We found that the five  selected VAMCs did not report the majority of providers who should have  been reported to the NPDB or SLBs in accordance with VHA policy. Our  analysis shows that from October 2013 through March 2017, of the 148  providers whose clinical care required a review, the VAMCs took adverse  privileging actions against 5 providers, and another 4 providers resigned  or retired while under review but before an adverse privileging action  could be taken. However, at the time of our review, we found that the five  selected VAMCs had only reported 1 of these 9 providers to the NPDB  and none of these providers to the SLBs. Furthermore, the 1 provider  who was reported to the NPDB for an adverse privileging action was  reported 136 days after all internal VA appeals were complete, far beyond  the 15 day reporting requirement.

In addition to these nine providers, one of the selected VAMCs terminated  the services of four contract providers based on deficiencies in the  providers’ clinical performance, effectively revoking their clinical  privileges. For example, the VAMC documented that one contractor’s  services were terminated for cause related to patient abuse after only 2  weeks of work at the VAMC. A VAMC leadership official told us there was  no further documentation of whether reporting was considered or whether  any comprehensive review was conducted, despite the fact that the  VAMC credentialing committee recommended both. While VHA policy  identifies the requirements, steps, and limited fair hearing process for  reporting contract providers, these required steps were not followed, and  none of these providers were reported to the NPDB or SLB.

As a result of our audit work, in August 2017, one of the VAMCs reported  to the NPDB three of the providers who resigned or retired while under  investigation but before an adverse privileging action could be taken.

These reports were completed between 11 months and over 3 and a half  years after the providers resigned or retired. VAMC officials could not  confirm that they sent the required copies of the NPDB reports to the  appropriate SLBs.

The five selected VAMCs did report two providers to their respective  SLBs for reasons other than adverse privileging actions. In accordance  with VHA policy, these SLB reports were made after VAMC officials  determined that the providers’ behavior or clinical practice so substantially  failed to meet generally accepted standards of clinical practice as to raise  reasonable concern for the safety of patients—the standard for SLB  reporting. One of these providers could not have an adverse privileging  action taken against them because VAMC officials unintentionally allowed  the provider’s privileges to expire during a comprehensive review of the  provider’s care. The other provider reported to the SLBs was considered  for an adverse privileging action, but VAMC officials suspended the  provider instead. The provider demonstrated improvement after the  suspension.

SLB reporting not always timely. While two of the selected VAMCs had  each reported a provider, we found that in these cases the SLB reporting  process took significantly longer than the 100 day timeframe suggested in  VHA policy. Specifically, it took over 500 days for each of the two  completed reports to pass initial and comprehensive review at the VAMC,  receive concurrence from the VISN, and be submitted to the SLB. For  example, one of the two providers self-reported to the SLB the concerning  episode of care at the VAMC. However, before the VAMC submitted its  SLB report 328 days later, the SLB had completed its investigation of the  provider’s self-report and put in place an agreement that placed  restrictions and requirements on the provider’s medical license.  Subsequently, the provider successfully met the requirements of the  agreement and had all restrictions on the license removed. Officials at  two VAMCs told us the SLB reporting is more tedious or cumbersome  than the NPDB reporting process, making it difficult to complete in a  timely manner. One VAMC official commented that while completing the  process in less than a year seems reasonable, the typical timeframe for  submitting a SLB report is at least 2 years.

At the five selected VAMCs, we found that providers were not reported to  the NPDB and relevant SLBs as required because officials were generally  not familiar with or misinterpreted related VHA policies. VHA officials  commented that adverse privileging actions and clinical care concerns  rising to the level of reporting are infrequent, with officials at two VISNs  estimating that only a few occur across the facilities within their network  each year. Staff at three VAMCs commented that there has been turnover  in positions that have been delegated tasks related to reporting and one  VAMC official told us that turnover in these positions is a barrier to timely  reporting. For example, at one facility, we found that officials failed to report six providers to  the NPDB because the officials were unaware that they had been  delegated responsibility for NPDB reporting.

Officials at two of the selected VAMCs told us that VHA cannot report  contract providers to the NPDB. This assertion is inconsistent with  VHA policy.

Officials at two of the selected VAMCs were waiting to start the SLB  reporting process for providers until after all appeals had been  exhausted. This approach is inconsistent with VHA policy, which  states that the process should start within 7 days of when the  reporting standard is met. For example, for one provider who was  reported, VAMC officials unnecessarily waited 7 months for the  completion of the appeals process before they resumed the reporting  process, which ultimately took 547 days.

Officials at one VAMC did not report a provider to the NPDB or SLB  following an adverse privileging action because the SLB had found  out about the issue independently. This is inconsistent with VHA  policy for NPDB and SLB reporting, and the SLBs in other states  where the provider held a license were not alerted of concerns about  the provider’s clinical practice.

VHA oversight is inadequate. We also found that VHA and the VISNs  do not adequately oversee NPDB and SLB reporting and they cannot  ensure that VAMCs are reporting providers when required to do so by  VHA policy. While the VISNs are responsible for overseeing the  credentialing and privileging at their respective VAMCs under VHA policy,  VHA policy does not require the VISNs to oversee whether VAMCs are  reporting providers to the NPDB or SLB when warranted. As a result,  VISN officials were unaware of situations in which VAMC directors failed  to report providers to the NPDB, as evidenced by our review. In the case  of reporting processes for SLBs, VISN officials told us that they review the  evidence files to ensure, among other things, that the files are in  compliance with privacy laws. However, officials told us that the VISNs do  not oversee the reporting process to ensure that VAMC directors are  reporting all providers to the SLB who should be reported. Additionally,  VHA officials told us that they are not aware of the number of cases that  have been initiated for SLB reporting.

Further, by failing to report providers as required, VHA facilitates  providers who provide substandard care obtaining privileges at another  VAMC or a hospital outside of VA’s health care system without an  indication on their record that an adverse privileging action was taken  against them or that they resigned or retired while under investigation. For  example, we found that  two of the four contract providers whose privileges were revoked and  were not reported to the NPDB or SLBs by one VAMC continue to be  able to provide care to veterans outside of that VAMC. Specifically,  one provider whose services were terminated related to patient abuse  subsequently held privileges at another VAMC, while the other  provider belongs to a network of providers that provides care for  veterans in the community.

Seven of the 12 providers who were not reported to the NPDB or  SLBs after their privileges were revoked—through adverse privileging  actions or the termination of services on a contract—or who resigned  or retired while under investigation have current Medicare enrollment  records, indicating that they are likely practicing outside of VA and  may still be receiving federal dollars by billing for services provided to  Medicare beneficiaries.

We also identified one case where a VAMC director did not report a  provider to the NPDB or SLB after an agreement was reached that the  provider would resign, though the VAMC credentialing committee  recommended the provider’s privileges be revoked. We found that the  provider’s privileges were also revoked from a non-VA hospital in the  same city for the same reason 2 years later. The director’s decision  not to report the provider as required left patients in that community  vulnerable to adverse outcomes because problems with the provider’s  performance were not disclosed. There was no documentation of the  reasons why the VAMC director did not report the provider to the  NPDB or SLBs.

This lack of routine oversight from VHA through the VISNs of VAMCs’  reporting of providers to the NPDB and SLBs is inconsistent with federal  internal control standards for monitoring. The standards state that  management should establish and operate monitoring activities to monitor  the internal control system and appropriately remediate deficiencies on a  timely basis. Without routine monitoring of the reporting process, VHA  lacks reasonable assurance that all providers who should be reported to  the NPDB and SLBs are reported.

At Selected VAMCs, Providers with Adverse Privileging Actions Were Ineligible for Performance Pay the Year the Actions Were Taken

None of the five providers who had an adverse privileging action taken  against them in the period we reviewed received performance pay for the  fiscal year the action was taken because they were ineligible, per VA  policy. This is because VA policy requires providers to be employed  through the end of the fiscal year to be eligible for performance pay, and  none of the five providers we reviewed were still employed by the VAMCs  at the end of the fiscal year in which the actions were taken.

All five of the adverse privileging actions resulted from concerns about the  providers’ clinical care in previous fiscal years. Among the five providers,  two providers received performance pay in the fiscal year before their  privileges were revoked, and three providers did not. For example, one  provider’s privileges were revoked in 2015 due to concerns raised in 2014  regarding the provider’s failure to complete necessary documentation of  patient care in a timely manner. This provider did not receive credit for the  performance pay goal directly related to timely completion of  documentation, and ultimately the provider received half of the maximum  amount of performance pay for fiscal year 2014. In the case of another  provider who did not receive any performance pay for the fiscal year  before the adverse privileging action was taken, VAMC officials noted that  the provider had been removed from practice for a portion of the fiscal  year while they were reviewing the clinical care concern and thus was  unable to meet performance pay goals.

VHA is responsible for ensuring that providers at its VAMCs deliver safe  care to veterans and that concerns that may arise about providers’ clinical  care are reviewed and addressed at VHA’s 170 VAMCs. However, our  work shows that at our five selected VAMCs, reviews of concerns about  providers’ clinical care were not always documented or conducted in a  timely manner and VAMCs had not reported the majority of providers they  should have reported to the NPDB or SLBs. This is concerning for several  reasons. First, without documentation of the reviews of these concerns  about providers’ clinical care, VAMC leadership officials may not have the  information they need to make decisions about whether a provider’s  privileges at the VAMC are appropriate. Second, if VAMCs do not  document that they have reviewed provider’s clinical care after concerns  have been raised, VHA lacks reasonable assurance that the VAMCs are  adequately addressing such concerns or that VAMCs are limiting or  revoking providers’ privileges when necessary. Third, if these reviews are  not conducted in a timely manner and providers continue to deliver  potentially substandard care, VHA may be increasing the risk that  veterans will receive unsafe care at VAMCs. Finally, VAMCs’ failure to  report providers to the NPDB and SLBs, as required under VHA policy,  makes it possible for providers to obtain privileges at other VAMCs or  non-VA health care entities without disclosing the problems with their past  performance. In effect, this can help shield the providers from  professional accountability outside of VA’s health care system.

Further, VHA’s inadequate oversight of these processes calls into  question the extent to which VAMCs are held accountable for ensuring  that veterans receive safe, high quality care. As our review shows, the  VISNs responsible for overseeing the five selected VAMCs do not  routinely oversee VAMC reviews of providers’ clinical care after concerns  are raised to ensure that these reviews are completed in accordance with  VHA policies; nor do the VISNs oversee the VAMCs to ensure that all  providers that should be reported are reported to the NPDB and SLBs.  Until VHA strengthens its oversight of these processes, veterans may be  at increased risk of receiving unsafe care through the VA health care  system.

We are making the following four recommendations to VA:  The Under Secretary for Health should specify in VHA policy that reviews  of providers’ clinical care after concerns have been raised should be  documented, including retrospective and comprehensive reviews.  (Recommendation 1)

The Under Secretary for Health should specify in VHA policy a timeliness  requirement for initiating reviews of providers’ clinical care after a concern  has been raised. (Recommendation 2)

The Under Secretary for Health should require VISN officials to oversee  VAMC reviews of providers’ clinical care after concerns have been raised,  including retrospective and comprehensive reviews, and ensure that  VISN officials are conducting such oversight with the required  standardized audit tool. This oversight should include reviewing  documentation in order to ensure that these reviews are documented  appropriately and conducted in a timely manner. (Recommendation 3)

The Under Secretary for Health should require VISN officials to establish  a process for overseeing VAMCs to ensure that they are reporting  providers to the NPDB and SLBs, and are reporting in a timely manner.  (Recommendation 4)

We provided a draft of this report to VA for comment. In its written  comments, which are reproduced in Appendix I, VA agreed with our  conclusions and concurred with our recommendations. In its comments,  VA stated that VHA plans to revise existing policy to require  documentation of reviews of providers’ clinical care after concerns have  been raised and to establish expected timeframes for completing such  reviews. VA estimates that it will complete these actions by September  2018. VA also stated that VHA will update the standardized audit tool  used by the VISNs so that it directs them to oversee reviews of providers’  clinical care after concerns have been raised and to ensure timely  reporting to the NPDB and SLBs. According to VA, the revised tool will  also facilitate aggregate reporting by VISNs to identify trends and issues.  VA estimates that it will complete these actions by October 2018.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Veterans Affairs, and the  Under Secretary for Health. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  Sharon M. Silas at (202) 512-7114 or silass@gao.gov or Randall B.  Williamson at (202) 512-7114 or williamsonr@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs can be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II.

Appendix I: Comments from the Department of Veterans Affairs

Appendix II: GAO Contacts and Staff Acknowledgments

In addition to the contact named above, Marcia A. Mann (Assistant  Director), Kaitlin M. McConnell (Analyst-in-Charge), and Summar C.  Corley made major contributions to this report. Also contributing were  Krister Friday, Jacquelyn Hamilton, Vikki Porter, and Brienne Tierney.

The Department of Veterans Affairs requires its medical centers to review a doctor’s care if quality or safety concerns arise. If VA medical center officials decide a doctor should no longer provide care to veterans, they are required to inform hospitals and other health care entities by reporting to a national database and to the states where the doctor is licensed.

However, at the 5 VA medical centers we reviewed, we found that these reviews were not always timely. We also found that VA officials did not report 8 of the 9 doctors who should have been reported.

We recommended VA improve oversight of clinical care reviews and reporting.


Tax Administration: Opportunities Exist to Improve IRS's Management of International Tax Dispute Resolution

With increasing globalization, multinational corporations can take advantage of differences in countries' corporate tax systems to reduce their overall tax liabilities. However, globalization can also lead to disputes about the correct tax liability for U.S. MNCs in different countries. GAO was asked to review how the United States administers the process for resolving international tax disputes when a U.S. MNC disagrees with a tax determination of another country.

This report (1) describes IRS's dispute resolution process, (2) assesses the information IRS provides to taxpayers about the process, and (3) assesses the extent to which IRS evaluates its management of dispute resolutions cases. GAO reviewed IRS guidance on the MAP process, interviewed IRS officials and compared IRS actions to federal standards for internal control and GAO's criteria for a good tax system. GAO analyzed MAP data for cases closed from 2013 to 2017 as well as a stratified random sample of MAP case files.

A U.S. multinational corporation (MNC) operating in a foreign country is subject to taxes in that country as well as in the United States. The U.S. MNC's tax return may be audited by the United States or the other country. Such audits can result in an adjustment to the U.S. MNC's taxable income that may result in income being subject to tax in both countries. If the U.S. MNC disagrees with the adjustment, it can ask the United States Competent Authority (USCA) within the Internal Revenue Service (IRS) to help resolve the dispute through the mutual agreement procedure (MAP). Generally, disputes are resolved by one country withdrawing some or all of the adjustment and the other country providing other relief to the MNC to address double taxation of income. The following figure provides an overview of the dispute resolution process.

Dispute resolution assistance is available to U.S.MNCs that need it and USCA provides comprehensive technical information on its website on how to request assistance. However, because USCA's website does not provide an overview or plain language guidance on the MAP process U.S. MNCs may not have clear information on how to navigate the process.

USCA has taken a number of steps to ensure efficient management of MAP cases including assigning staff with requisite background and skills to cases according to their complexity and organizing staff into teams that specialize by countries. However, GAO identified a number of weaknesses that impact USCA's management of MAP cases. These include the following

key data are not tracked and existing data are not used to assess the effective allocation of resources for the program,

few controls have been established to monitor and ensure the reliability of the data in the case management database, and

lack of trend analyses on dispute case characteristics that could help inform management decision making and the more efficient operation of the program.

GAO is making a total of eight recommendations, including that IRS improve the clarity of information on the dispute resolution process, track and use dispute resolution case data, ensure the quality of case data, and analyze trends in dispute case characteristics. IRS agreed with GAO's recommendations and said it will provide detailed corrective action plans.

As countries have become more globally interconnected, multinational  corporations (MNC) are relying more on tax planning strategies that take  advantage of differences among countries’ corporate tax systems to  reduce their overall tax liabilities. These strategies have led to concerns  about the erosion of countries’ corporate tax bases through the shifting of  profits from one jurisdiction to another. In addition, globalization can  complicate tax administration by resulting in disputes about the correct  tax liability in different countries. U.S. MNC activity can result in audits  conducted by the countries in which they are operating where U.S. MNCs  disagree with the adjustment made to their taxable income.

In 2015, the Organisation for Economic Co-operation and Development  (OECD) released a report with 15 action items addressing a variety of  issues related to tax base erosion and profit shifting. In 2017, we reported  on two of these actions: (1) revisions of the transfer pricing guidelines and  new transfer pricing documentation; and (2) country-by-country  reporting. The OECD report also included an action item addressing  ways to improve mechanisms for resolving international tax disputes.

These disputed adjustments can potentially lead to double taxation of a  U.S. MNC’s income. These disputes can be resolved through the mutual  agreement procedure (MAP). MAP is administered through the Advance  Pricing and Mutual Agreement Program (APMA) in the office of the U.S.  Competent Authority (USCA) within the Internal Revenue Service (IRS).  The designated USCA is the Deputy Commissioner of the Large Business  and International Division of IRS.

You asked us to review how the United States is administering the  process for resolving international tax disputes. In this report, we (1)  describe the MAP dispute resolution process for U.S. MNCs, (2) assess  the information IRS provides to taxpayers about the MAP process, and  (3) assess to what extent IRS evaluates management of dispute  resolution cases.

To describe the dispute resolution process, we reviewed documents and  interviewed officials in IRS’s USCA, the office responsible for  administering the MAP process. To assess the information IRS provides  taxpayers, we reviewed USCA guidance on how the process works and  interviewed USCA officials on how they communicate with taxpayers. To  assess how IRS evaluates its administration of dispute resolution cases,  we compared USCA’s processes with standards for internal controls and  characteristics of a good tax system: efficiency, equity, and  administrability. Specifically, we interviewed USCA officials on their  process for ensuring efficient management. We also reviewed MAP case  data, including analyzing both the full inventory management database of  tracked dispute cases as well as a generalizable random sample of  dispute resolution case files. For more information on our methodology,  see appendix I.

We conducted this performance audit from April 2017 to March 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

U.S. taxpayers who earn income abroad may be subject to U.S. taxes on  that income. Firms incorporated in the United States can earn income  from their own foreign activities or through their ownership of foreign  subsidiaries. In such cases, income is subject to tax in both the country  where it was earned and in the United States. In this report, we focus on  U.S. corporations with operations in foreign countries.

Countries have generally adopted one of two alternative approaches to  taxing corporations’ foreign income. Prior to the enactment of Public Law  115-97—commonly referred to by the President and many administrative  documents as the Tax Cuts and Jobs Act of 2017 (TCJA)—the U.S.  government taxed U.S. corporations largely on a worldwide basis,  meaning that the United States taxed both the domestic and foreign  earned income of corporations. Most other countries, including most  OECD member countries, use a largely territorial approach that taxes  income earned within their borders, and exempts certain foreign-earned  income of their resident corporations from taxation.

However, under both a worldwide and a territorial system, income earned  by foreign entities from operations within a country is taxed by that  country. As such, the corporation or its subsidiary must file a tax return in  that country, and the country’s tax authority can audit the tax return and  adjust taxable income and taxes due.

Countries have adopted measures to limit the potential for double  taxation, which occurs when two or more countries levy taxes on the  same income due to differences in the tax jurisdictions and tax systems.  To avoid double taxation, countries—including the United States—that tax  on a worldwide basis provide a credit for foreign taxes paid that reduces  the MNC’s domestic tax liability. In addition, countries maintain tax  treaties with each other that cover a wide range of tax issues but have  two primary purposes: (1) avoiding double taxation, and (2) preventing tax  evasion.

Despite these efforts to limit disputes, a U.S. MNC may disagree with an  adjustment made to its taxable income. In such cases, an MNC can go  directly to the country’s tax authority to try to resolve the dispute.  According to tax experts we spoke with, if, however, a U.S. MNC views  this process as unlikely to be successful or if it was unsuccessful and  believes the adjustment would result in double taxation, the corporation  can ask USCA for assistance in resolving the dispute.

In the United States, the designated USCA is the commissioner of the  Large Business and International Division of the IRS. The USCA office is  made up of two groups: the Advance Pricing and Mutual Agreement  Program (APMA) and the Treaty Assistance and Interpretation Team.  According to USCA officials, most disputes involving U.S. MNCs—the  focus of this report—are resolved through APMA.

TJCA significantly changed the way in which the United States taxes  MNC’s income but some experts have pointed out that the law is unlikely  to end profit shifting. The Congressional Budget Office estimated in April  2018 that TCJA would reduce profit shifting by about $65 billion per year  out of an estimated $300 billion of profit shifting per year prior to the act.  For U.S. corporations earning income directly through foreign  subsidiaries, the act moved the United States from a system that  generally taxed worldwide income and provided a credit for taxes paid  abroad to a system that generally does not tax foreign-sourced income.  However, the new ‘territorial’ system created by the act included a  number of provisions designed to protect the United States’ corporate tax  base by taxing some foreign income. It included (1) a lower worldwide tax  on global intangible low-taxed income, and (2) a corresponding tax on  intangible income earned abroad based on assets in the United States  (foreign-derived intangible income). The act also added a corporate tax  base erosion and antiabuse tax. It is not clear how these provisions will  affect corporations’ allocation of profits and business activity.

MAP Has Multiple Stages and Potential Resolution Paths

The process of resolving a dispute through MAP usually begins when a  U.S. MNC requests assistance from USCA to resolve disputes over an  adjustment in either its foreign-filed or its U.S. tax return. According to  IRS, the number of active MAP cases, as of October 2017, was 686 and  covered $26 billion of income subject to potential double taxation. It  should be noted that a single U.S. taxpayer can be involved in multiple  MAP cases because disputes are resolved bi-laterally. For example, if a  U.S. MNC had a dispute involving the allocation of overhead costs across multiple subsidiaries in different countries, then there would be separate  dispute cases for each country involved. According to IRS data, the  number of MAP cases filed each year has been growing, more than  doubling in 5 years from 100 in 2010 to 286 in 2014.

As noted earlier, when a U.S. MNC disputes a foreign tax authority’s  adjustment to a tax return, the U.S. MNC can try to resolve the issue  through the appeals process within the taxing jurisdiction. However,  according to tax experts we spoke with, if the U.S. MNC is unsuccessful  or if the U.S. MNC believes the local appeal will be less successful than  the MAP process, it can request assistance from USCA.

Once a taxpayer has requested assistance through MAP, USCA conducts  an initial review to determine if it will accept the request. For example,  USCA analysts would ensure that the request involves potential double  taxation and that the foreign country was a treaty partner.

If USCA accepts the MAP request for assistance, it reviews the technical  facts of the dispute and prepares its position prior to negotiating on a  resolution with the foreign competent authority. When IRS, rather than the  foreign tax authority, initiates the adjustment, USCA will discuss the facts  of the case with the IRS examiner who proposed the adjustment, but  determines on its own how much of the adjustment is justified. In the case  of foreign-initiated adjustments, USCA will contact the foreign competent  authority while developing its position to provide updates and obtain any  needed information. According to USCA officials, based on its review, the  USCA determines whether it considers the adjustment valid and the  amount of the adjustment that should be withdrawn by the initiating tax  authority, and what amount of relief USCA may provide. USCA can also  unilaterally decide to fully withdraw the IRS adjustment or provide full  correlative relief for a foreign-initiated adjustment that USCA considers  valid.

USCA resolves disputes brought to it by MNCs according to MAP  specified in the tax treaties. Under the treaties, international tax disputes  that may result in double taxation can be resolved in the following five  ways:

The country that initiated the adjustment to taxable income can fully  withdraw the adjustment, leaving the taxpayer’s reportable taxable  income unchanged.

USCA can provide correlative relief to the MNC. This relief usually  takes the form of a corresponding adjustment, which relieves double  taxation caused by the other country’s adjustment.

USCA and the foreign country can agree to a combination of  withdrawing some of the adjustment to taxable income and providing  relief for the remaining adjustment to provide full relief of double  taxation to the taxpayer.

USCA and the foreign country can agree on some combination of  withdrawal and relief that results in partial relief to the taxpayer.

Figure 1 provides an overview of the basic process of a MAP request for  assistance. Appendix III provides illustrative examples of dispute  resolution cases and resolutions.

Once USCA has determined its position, it begins negotiating with the  foreign competent authority to resolve the dispute. These cases can take  several years to resolve with some taking much longer than the average,  particularly if there is a fundamental disagreement. For example, USCA’s  APMA inventory data from 2013 to 2017 indicate the average processing  time was around 2 years, but cases ranged from as little as a few months  to 5 years to resolve, with a few cases taking even longer. In addition, the  inventory data show that disputes are generally over taxable income from  prior years. For example, a MAP case resolved in 2017 could have been  filed in 2008 for a dispute over 2005 taxable income. However, cases  may be shorter when the tax treaties include provisions for binding  arbitration. The United States has treaties with four counties that include  provisions for binding arbitration. If the two countries are unable to  resolve the dispute within 2 years, the taxpayer can request that the case  go to arbitration for a decision.

Throughout the entire process, the taxpayer has a right to withdraw the  request and accept the tax authority’s adjustment which may entail  double taxation. According to tax experts that we interviewed, if the  adjustment is small, a taxpayer may prefer to accept the double taxation  rather than incur the cost of going through the MAP process. These costs  can include direct costs of retaining tax advisors as well as the indirect  costs of listing the amount of funds that are in dispute on their financial  statement as an unresolved tax issue. The taxpayer can also refuse the  negotiated or arbitrated resolution and appeal the case to the IRS office  of appeals or foreign tax authority.

Available Information about MAP is Limited and Highly Technical USCA Provides Information Needed for Requesting MAP Assistance, but the Information has Limited Accessibility

USCA provides information about the MAP process through an IRS web  page on competent authority assistance. The webpage includes contact  information for USCA offices and a link to a document that describes the  process for requesting assistance. The document is in the form of a  Revenue Procedure—an official statement of a procedure based on the  Internal Revenue Code, related statutes, tax treaties, and regulations.  Our analysis of the information on the website found a number of issues  that limit its accessibility:

The website does not include an overview or high-level description of  the MAP process.

The website lacked elements such as frequently asked questions or  fact sheets that IRS has developed for similar processes that help  promote understanding of complex tax issues.

The website does not explain in clear language what constitutes a tax  dispute eligible for the MAP resolution process. Other IRS websites  provide more detailed information for other issues relevant to U.S.  MNCs. For example, the IRS website for country-by-country reporting  provides a detailed page explaining the new reporting guidance with  multiple links for additional guidance.

In addition, USCA’s guidance for requesting MAP assistance is an 87- page revenue procedure. While this document is complete, it is highly  technical and may not be easily understood by taxpayers seeking  relief from double taxation.

IRS requires information for taxpayers to be clear and accessible. IRS’s  Taxpayer Bill of Rights states that taxpayers have the right to clear  explanations of tax laws and IRS procedures. In addition, the federal  internal control standards, the Plain Writing Act of 2010, and Office of  Management and Budget plain writing guidance state that agencies  should, for example, communicate the necessary quality information  externally. Moreover, accessibility is consistent with the criteria we have  previously identified for a good tax system. IRS’s Strategic Plan for  Fiscal Years 2018-2022 notes that the agency faces a business  environment that is becoming more global, dynamic, and digital, further  underscoring the importance of taxpayers having accessible, plain  language guidance on MAP.

The Organisation for Economic Co-operation and Development (OECD)  also assessed the accessibility of USCA’s guidance and found that it met  OECD’s minimum standards. As part of its base erosion and profit-shifting  project, the OECD has been reviewing countries’ administrations of the  mutual agreement processes. In its review of the United States’ process,  the OECD concluded that while U.S. MAP guidance is comprehensive  and available, and fully met the OECD’s minimum standards, some  further clarity could be provided.

The OECD review offered examples of how other countries provide  taxpayers with overview information they can use before accessing more  detailed technical guidance. For example, Canada publishes an annual  MAP Program Report on its website that includes background information  on its process, as well as general information on the steps in the process  and high-level information on timeframes. Singapore’s MAP web page  includes basic information on the MAP process, an example of a case  that would be suitable for MAP, and a link for users to provide feedback  on the usefulness of the information.

USCA officials said that they have not improved the information provided  on their website because they believe the current guidance to be  sufficient. However, USCA officials told us that they are engaged in some  efforts that may improve the information they provide to taxpayers. USCA  officials stated that USCA is close to finalizing a “practice unit” explaining  the competent authority process. According to USCA officials, this unit  uses plain language to walk taxpayers step by step through MAP and the  competent authority process. The unit also highlights the roles and  responsibilities of all the stakeholders in the process, including the  taxpayers. USCA officials said they intend to make the practice unit  available on USCA’s public website and the United States’ OECD MAP  Profile.

APMA officials also said they expect that the additional information on the  requirements of MAP and Revenue Procedure 2015-40 will be useful to  those unfamiliar with the processes. USCA officials did not provide a date  for when this practice unit would be completed.

Providing taxpayers with a clear overview and accessible guidance on the  MAP process would help ensure that taxpayers who might benefit from  entering the MAP process are aware of the process, know how to  navigate it, and understand the general time frames for relief. Providing  information that helps facilitate this process could help reduce taxpayer  burden.

USCA Does Not Document Contacts with Taxpayers

USCA may contact taxpayers about their cases for various reasons.  Officials in the APMA office stated that they send acknowledgement  letters when the MAP request is accepted, and routinely gather additional  information from taxpayers to fully develop a MAP case. They said that an  analyst generally will communicate with a taxpayer before and after  APMA has substantive discussions with its foreign counterparts regarding  the taxpayer’s case. While officials stated they provide regular contact,  they do not have a process to systematically record or track these  contacts, other than in the case file.

Regular contact with taxpayers may help make the process more  transparent and help ensure that they are informed about their cases.

One of the criteria we have previously identified for a good tax system is  transparency. A transparent tax system reduces uncertainty for  taxpayers, allowing them to better plan their decisions about employment  and investment.

According to IRS officials, APMA provides general guidance on when a  taxpayer should be notified of developments in the case or its status.  APMA officials stated that contact will vary depending on the facts and  circumstances of the case such as its complexity and frequency of  communications with the foreign competent authority. However, the  guidance is focused on taxpayer expectations and does not address any  requirements of officials to track or record contacts.

Contacts with taxpayers could affect perceptions of the transparency and  fairness of the MAP process. Tracking and recording contact with  taxpayers would help provide APMA with assurance that taxpayers are  being kept aware of the status of their MAP case in a timely manner.  Monitoring such information would help APMA to evaluate the  transparency and fairness of its MAP administration. It would also help  assure APMA there is consistency in contacting taxpayers.

USCA Does Not Track Key Data nor Use Existing Data to Assess Management of MAP Cases USCA Does Not Track Hours Worked or Key Milestones for MAP Cases

APMA maintains an inventory database that tracks some information on  MAP cases. These data include how many months it took to resolve the  case, the analyst assigned to the case, and whether an economist was  assigned. According to APMA officials, each MAP case is assigned an  analyst and, for complex cases, an economist. APMA groups analysts  into teams that work on MAP cases from different geographic regions.  Three teams consist of economists that are assigned to cases managed  by other teams. APMA data on how staff are deployed are shown in table  1.

While these data provide some information on workload, they do not  provide information on how many hours or staff days are associated with  a particular case. This information would be useful to know because it  could provide insight about the resources needed for different cases  based on differences in complexity and other factors. Standards for  internal control state that management should establish and operate  monitoring activities that can be used to evaluate results and ensure that  objectives are met with minimum wasted resources. However, according  to APMA officials, their tracking system is not set up to track hours or staff  days spent on each case.

Instead, according to APMA officials, their staffing process accounts for  differences in complexity in other ways. Officials explained that when  APMA receives a MAP request, it ranks the request according to  complexity using a scale that runs from 1 to 5. The more complex cases,  those ranked 3 or higher, are assigned an economist which can increase  the cost of working the more complex cases.

APMA Does Not Have Controls to Ensure the Quality of its Case Data

In our review of a generalizable sample of MAP case files we found a  number of inconsistencies between the amount of adjustment recorded in  APMA’s inventory database, the amount recorded in the original MAP  request, and the amount recorded in the resolution letter provided to  taxpayers and the foreign competent authority. We also found  inconsistencies between the request letter and the resolution letter  amounts. On the basis of our sample, we estimate that about 30 percent  of the entries in the inventory database had these types of discrepancies.

The cause of some of these discrepancies was relatively easy to identify  and correct, such as transcription errors, which could have been detected  if APMA had a more robust inventory management system in place. Other  inconsistencies in the data were more difficult to resolve. According to  IRS officials, some discrepancies could be explained by changes in  exchange rates over time. However other inconsistencies could be not be  as easily explained.

These inconsistencies exist because APMA does not have controls in  place to systematically and routinely evaluate the quality of the data in its  inventory of cases. As a result, the accuracy of program measures that  USCA might develop based on these data may be uncertain.

Having controls in place to ensure the accuracy of data in the inventory  database would also help APMA meet OECD’s minimum standards. The  OECD has called for countries to provide MAP case statistics by country  and published these statistics for the first time in 2018. According to  APMA officials, APMA is currently working on implementing an upgraded  inventory management system that should help APMA meet this goal.  Development and full implementation of this project has been underway  for 4 years.

APMA Does Not Analyze Currently Available Data to Inform Its Operations and Management Decisions

APMA’s inventory data-base includes data on both pending and resolved  MAP cases that can help management monitor program operations and  potentially identify areas to improve the management of MAP cases.  However, APMA does not systematically analyze data to identify areas for  improvement. For example, analysis of trends and comparisons of certain  case characteristics—such as the country initiating the adjustment, the  elapsed time on the case, whether an economist was assigned to the  case, and the negotiated outcome—can help to identify how these  characteristics may be related. According to APMA officials they do not  undertake this kind of data analysis because they use the data as needed  to manage current resources and to achieve their primary goal of  satisfying the OECD’s minimum standards. These minimum standards  include such goals as countries ensuring that adequate resources are  provided to the MAP function and ensuring that both competent  authorities should be made aware of MAP requests and given an  opportunity to share their views on whether the request should be  accepted.

According to federal internal control standards, management should  design information systems to provide information to meet the entity’s  objectives and respond to risks. Information and analysis that helps  APMA understand changes in international environment and complexity  of U.S. MNCs would better enable it to identify future resource needs by  evaluating trends in case characteristics.

In the absence of quantifiable analysis conducted by APMA, we used  information from its existing inventory data to illustrate the types of  analysis that may be possible. For example, figure 2 shows that the  volume of cases can vary greatly by country over time. The figure shows  that the number of cases resulting from an adjustment by IRS ranged  from a low of 22 in 2015 to high of 85 in 2017. Conducting similar analysis  of trends in volume may help APMA better plan for allocating its limited  resources to different teams in anticipation of increased case volume. In  addition, because APMA allocates staff across teams that focus on  particular countries, tracking trends in case load by country could help  USCA prepare to anticipate spikes in cases and allocate resources more  effectively across country teams. By conducting regular trend analyses,  APMA could also identify areas for further analysis to determine what  may be driving variations in case load by country.

Similarly, figure 3 shows our analysis of the average time to resolve a  case. Average case time ranged between 15 and 40 months, with the  average case time exceeding the OECD-recommended 24-month period  for a number of countries and years. By conducting similar analysis of the  trends and differences in processing time across MAP cases, APMA  would be better able to identify areas meriting additional review for ways  to improve timeliness.

We also used inventory data to analyze outcomes in terms of the  determinations reached through MAP negotiations. One analysis included  an examination of the share of cases in which the United States provided  some relief to the taxpayer. As can be seen in figure 4, most foreign  cases in most years resulted in relief being shared between the two  countries involved in a dispute. As shown in figure 4, in 2017,  approximately two-thirds of all foreign cases were resolved with both  countries providing some relief compared to less than 10 percent of U.S.  cases.

However, as shown in figure 5, USCA in most years fully withdrew a large  percentage of adjustments made by IRS. In 2017, 74 percent of IRS  adjustments were withdrawn. The data show that U.S.-initiated cases  were more often resolved entirely by the United States than with the  foreign country providing some of the relief.

However, these data on case resolutions need to be interpreted with  caution. For example, as pointed out by IRS officials, a measure like the  percent withdrawn may be misinterpreted if it concerns a small number of  large MNCs with operations in many countries, and the adjustments are  small unless this information is provided as context. Nonetheless, the  case resolution data can be useful for guiding further analysis by helping  to identify areas that would merit further analysis of the reasons for  withdrawing cases or the reasons IRS examiners are making adjustments  that are not upheld by USCA. Analyzing trends in outcomes would help to  ensure that APMA is not missing opportunities to protect the U.S.  corporate tax base and that IRS examiners are cognizant of tax treaty  treatment of foreign source income of U.S. MNCs. Additional examples of  MAP case data analysis are provided in appendix IV.

While APMA must work all MAP cases, developing quality data on MAP  cases would help to ensure effective management of the program.  Analyzing trends in case data could help identify and manage evolving  demands and priorities—such as the challenges present in a changing  global tax environment. According to federal internal control standards, as  a part of management controls, management should design information  systems to obtain and process information to meet operational needs.

Because APMA cannot alter its workload, it is all the more important to  effectively manage staff and time. Reliable information systems are  essential for effective management. Without assessing APMAs’ current  and past performance, APMA may be less able to identify areas for  improvement. Conducting analysis and improving the quality of data could  help inform APMA’s allocation of resources and inform other parts of the  agency concerning international tax issues. For example, IRS exams may  be better able to judge the appropriateness of its tax adjustments when it  is informed about how USCA has viewed similar adjustments governed  by tax treaties.

APMA Does Not Record the Disputed Tax Issues in Its Inventory Database, Which Limits the Usefulness of Data

The APMA inventory database contains select characteristics of resolved  cases, such as the time it took to resolve the case and the country that  initiated the adjustment in dispute. However, it does not contain  information on the tax issue that was in dispute. Without tracking the tax  issue in dispute, APMA is unable to analyze trends in tax issues which  could be used to determine if there are systemic issues that could be  solved through means such as changes in IRS regulations, treaty, or  statute.

USCA officials told us that there are additional costs to tracking tax issues  and that defining the type of tax issue involved in complex international  tax cases could be difficult. However, IRS tracks issues in other similar  areas. For example, IRS’s Office of Appeals, which handles a wide range  of tax controversies covering both international and domestic issues,  tracks the tax issue in dispute.

Furthermore, APMA includes categories of tax transactions in its annual  statutory reports. The categories are used in Advanced Pricing  Agreements (APA) to distinguish between a U.S. entity and non-U.S.  entity, and to determine whether a transaction covered by an agreement  involved the sale of tangible property, use of intangible property or the  provision of services. APAs are agreements between IRS and MNCs on  how transactions among related entities of the MNC should be priced.  APAs can prevent potential disputes by having agreement on the  transaction prior to filing a tax return with IRS. These categories or  alternative categories that APMA has already developed could be added  to the inventory database to provide additional information on the tax  issue in dispute.

To illustrate how the additional information on tax issues can help inform  management decisions, we categorized the tax issues in our sample of  MAP cases using APA categories. As shown in figures 6 and 7, we  compared the estimated percentage of certain tax issues in all MAP  cases between 2015 and 2017 with those in APA cases in 2014. We also  compared tax issues with other characteristics of the MAP cases. As  figure 6 shows, an estimated 37 percent of MAP cases involved disputes  over a tax adjustment related to services provided by a non-US entity  such as a foreign corporation. Figure 6 also shows that disputes  concerning the provision of services (both U.S. and non-U.S.) are  estimated to account for 61 percent of cases, which far exceeded  disputes over the use of intangible property, at 17 percent or the sale of  tangible property at 15 percent. Conducting similar reviews of this type  of information could help APMA better match its resources in terms of  experience with different types of tax issues.

We also compared tax issues identified in MAP cases with the  transactions covered in APAs. The results illustrate how tracking tax  issues could be useful for improving the administration of both programs.  For example, as shown in figure 7, 23 percent of APA transactions  covered sales of tangible property into the United States in 2014. Our  categorization of MAP cases reported in figure 6 shows sales of tangible  property into the United States as a disputed issue in only an estimated 8  percent of those cases. This difference in relative frequencies may  suggest a connection between the programs, as tax practitioners have  suggested increasing the use of APAs as a way of reducing international  tax disputes. However, some of the differences in percentages between  figure 6 and 7 could arise from differences in years covered and in  categorization of tax issues.

We also categorized the information to illustrate how tracking tax issues  and other characteristics, such as location and the outcomes of the  dispute resolution process could help with administration. For example,  as shown in table 2, the tax issue with the largest estimated share of  foreign MAP cases (67 percent) involved the provision of services. U.S.  MAP cases, in contrast, were spread more evenly across tax issues, with  no single tax category having an estimated share greater than 50 percent.  Conducting a similar review of this type of information could help APMA  match its resource allocations in terms of staff experience with different  types of tax issues within its country-focused teams.

Additionally, table 3 shows when we tracked outcomes of the dispute  resolution process, we found that an estimated 69 percent of cases  resolved by a combination of withdrawal and correlative relief involved the  provision of services. For other outcomes, this tax issue of provision of  services is estimated to occur 49 percent of the time. Further research  on how outcomes and tax issues may be related could also inform how  APMA trains and assigns staff.

Other analyses could examine the tax issue and whether an economist  was assigned or the average processing time. These statistics may help  identify insights into complex cases. Undertaking similar reviews across  tax issues may help identify areas for increased scrutiny to ensure  effective administration.

Federal internal controls standards state that as part of an effective  internal control system, management should establish activities to monitor  program performance. Reliable information on program operations  requires the collection of quality data. Collecting key characteristics and  conducting relevant analyses would help ensure effective internal control  and could help improve USCA’s management of MAP cases.

In a world with a growing number of international transactions, the United  States needs an efficient and effective dispute resolution process to  ensure that it is protecting the U.S. taxpayer and the U.S. corporate tax  base. The MAP processes adopted by countries—including the United  States—in their tax treaties are in place to prevent double taxation and  ensure the accurate application of treaty provisions.

USCA plays a key role in resolving disputes over double taxation but the  agency has weaknesses in its processes that hamper its efforts. First,  USCA has not provided clear guidance to taxpayers on how the MAP  process works. As a result, taxpayers may be unaware of the process  and not fully understand what to expect when they undergo it.  Furthermore, USCA does not record when and for what reason there is  contact between the taxpayer and USCA, therefore making it difficult for  USCA to ensure that taxpayers are informed about the progress of their  case.

Second, USCA does not track the hours that analysts spend on cases  and the milestones of cases. As a result, USCA does not have a full  understanding of the efficiency of the MAP process, including ways to  improve it. It also does not have processes to ensure the quality of the  data it collects, therefore cannot ensure accurate performance  measurement. While APMA aims to meet the minimum standards of the  OECD, it does not analyze the data to identify areas for improvement.

Analyses of USCA’s data could more fully inform its management  decisions. A number of potential analyses are available of how cases are  resolved. By forgoing these types of analyses, USCA may be unaware of  certain trends, possible explanations for them, or any need to adjust  guidance or resources to address these issues.

Finally, many of APMA’s tasks depend on factors beyond its control (for  example, the volume of taxpayer requests), but management of the  processes could benefit from the collection and analysis of well-defined  measures and quality data.

We are making the following eight recommendations to the IRS.

The Commissioner of Internal Revenue should direct USCA to provide an  overview of the MAP process that is more accessible and transparent  than the Revenue Procedure. (Recommendation 1)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA staff record and track contact with taxpayers.  (Recommendation 2)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA staff record and track the hours they spend on MAP cases.  (Recommendation 3)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA identify and record the dates of key milestones throughout  MAP case resolutions. (Recommendation 4)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA puts procedures in place to review the quality of inventory  data. (Recommendation 5)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA records the dollar amounts of MAP case outcomes in its  database. (Recommendation 6)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA analyzes trends in case characteristics as part of routine  program management activities. (Recommendation 7)

The Commissioner of Internal Revenue should direct USCA to ensure  that APMA identify and record categories of the tax issue relevant in the  dispute. (Recommendation 8)

We provided a draft of this report to the Commissioner of Internal  Revenue for review and comment. In its written comments, reprinted in  appendix II, IRS agreed with our eight recommendations and will provide  detailed corrective action plans in its 60-day letter response to Congress.  IRS also provided technical comments, which we incorporated where  appropriate.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of the  Treasury, the Commissioner of Internal Revenue, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Objectives Scope and Methodology

As noted earlier, to assess the extent to which the Internal Revenue  Service (IRS) evaluates management of dispute resolution cases, we  interview IRS officials. Having determined that the Advanced Pricing  Mutual Agreement Program (APMA) does not conduct analysis of mutual  agreement procedure (MAP) case data, we used information from its  existing inventory data to illustrate the types of analysis that may be  possible. The inventory database APMA provided us contained all MAP  cases that were closed from 2013 to 2017, as well as the current stock of  open MAP cases. Because of a change in the method of recording the  outcome variable between 2013 and 2014, we restricted our analysis of  outcomes to 2014 to 2017.

The inventory database did not include a variable for the tax issue in  dispute. To illustrate the type of analysis that could be conducted if the  tax issue were recorded we collected a sample of MAP case files. To  estimate features such as tax issue and outcome for the inventory  database, we selected a generalizable random sample of 84 cases that  was proportionally allocated across four strata described in table 4. The  strata included wither the initiating country was U.S. or Non-U.S. and  whether an Economist was involved. This sample was selected from the  population frame that consists of all files from APMA 2013-2017 Resolved  and 2017 Pending inventory for cases resolved in years 2015 to 2017.  Overall, this sample was designed to produce 95 percent confidence  intervals for percentage estimates that are within approximately +/- 10  percentage points. The sample is not designed to provide estimates for  other reporting groups at the same level of precision, and all margins of  error are reported along with estimates.

To create a tax issue variable, we reviewed the summary of competent  authority issues required by Rev.Proc. 2015-40 to be included in the MAP  request letter. We then allocated the tax issue described in the narrative  to APMA’s advanced pricing agreement transaction categories. Some  case files included multiple tax issues, but these cases accounted for less  than 18 percent of the sample. The illustrations provided rely on the first  tax issue noted in the narrative. Table 5 provides the estimates and  margins of error for the categories.

Appendix II: Comments from the Internal Revenue Service

Appendix III: Illustrative Examples of Dispute Resolutions

The following tables illustrate how a resolution can be reached in different  types of disputes. Table 6 provides a hypothetical example of U.S.- initiated adjustment to a transfer price and a resolution that provides full  relief from double taxation through a combination of partial withdrawal  and correlative relief. In this example, the U.S. multinational corporation  (MNC) parent sells a product to its subsidiary incorporated in a foreign  country for $1,000. The U.S. parent is taxed on the income of $1,000 from  the sale and the subsidiary is able to deduct that payment.

The U.S. tax authority audits the parent’s return and determines that the  price the parent sold the product for was too low and adjusts to price up  from $1,000 to $2,000, resulting in an increase in taxable income. The  U.S. MNC parent disputes the adjustment and requests assistance from  the U.S. Competent Authority (USCA). The new adjusted transfer price  results in $1,000 that is subject to double taxation because the foreign  subsidiary has not deducted the additional $1,000 as the price paid to the  U.S. parent, while the U.S. tax authority is now considering that income  taxable.

USCA negotiates with the foreign competent authority and the two parties  agree on a revised transfer price of $1,600. The negotiated resolution  results in USCA agreeing to withdraw $400 of the original adjusted  amount of the transfer price. In turn, the foreign competent authority  agrees to correlative relief in the form of an increased deduction of $600  of the additional price that the foreign subsidiary will pay the U.S. parent.  The taxpayer receives full relief from double taxation since the total of the  withdrawal and the correlative relief erases the $1,000 of double-taxed  income that resulted from the increased adjustment.

Alternatively, foreign tax authorities can make adjustments that affect a  U.S. taxpayer. Table 7 provides a hypothetical example of a foreign  initiated adjustment to a cost-sharing arrangement, and a resolution that  provides full relief from double taxation, again, through a combination of  partial withdrawal and correlative relief.

In this scenario, the U.S. parent and its foreign subsidiary agree to share  the costs of developing a product that will yield income of $10,000. As  part of the agreement, the subsidiary will receive 10 percent of the  income yield while the parent will receive 90 percent.

The foreign tax authority audits the subsidiary’s tax return and determines  that the amount of income assigned to the subsidiary is too low. It then  adjusts the percentage to 50 percent, increasing the income allocated to  the subsidiary from $1,000 to $5,000. This adjustment results in a  potential $4,000 of income that is now subject to double taxation. The  subsidiary decides that resolving this dispute locally is unlikely and  through the U.S. parent requests assistance from USCA.

USCA and the foreign competent authority negotiate a new allocation of  35 percent resulting in new income allocated to the subsidiary of $3,500.  This resolution results in a combination of withdrawal and correlative  relief. The competent authority agrees to withdraw $1,500 of the  adjustment as income to the subsidiary, and the U.S. competent authority  agrees to reduce the amount taxable to the parent by $2,500. The  taxpayer receives full relief from double taxation since the total of the  withdrawal and the correlative relief erases the $4,000 of double-taxed  income that resulted from the increased adjustment.

Appendix IV: Examples of Analysis that Advanced Pricing and Mutual Agreement Program Could Do with Current Available Data

All mutual agreement procedure (MAP) cases are not the same in terms  of complexity. One possible indicator of complexity is whether an  economist was assigned to a case. United States Competent Authority  (USCA) ranks the cases in order of complexity and assigns economists to  the more complex cases. Our analysis of Advanced Pricing and Mutual  Agreement Program (APMA) data in figure 8 shows how the use of  economists varies by source of MAP cases. For most years, APMA  assigned economists to a higher percentage of cases that involved U.S.  than Canadian initiated adjustments. For most years, the share of  economists assigned to foreign initiated cases was similar to U.S. initiated  cases. However, in 2015 and 2016 the share of U.S. cases receiving an  economist was more than double that of all foreign initiated cases. For  most years, an economist was assigned to less than a quarter of foreign  and U.S. MAP cases.

We also analyzed USCA inventory data to compare the percentage of  cases that were assigned an economist and the average time it took to  resolve cases. As figure 9 shows, the average time a case was in  processing tends to decrease when the percentage of cases that are  assigned an economist increases. This relationship suggests that  assigning economists to a case may reduce the time it takes to resolve it  despite the greater complexity of the case. However, there may be many  other factors that could influence processing time. APMA officials noted  that many these factors include the readiness of the foreign competent  authority to discuss the case in a timely fashion. Further analysis would  be necessary to isolate the effects of specific resource allocation changes  on process efficiency.

Appendix V: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Kevin Daly (Assistant Director),  Jennifer G. Stratton (Analyst-in-Charge), Bertha Dong, Dawn Bidne,  Michael Bechetti, Sonya Vartivarian, Ed Nannenhorn, David Dornisch,  and A.J. Stephens made significant contributions to this report.

U.S. firms that earn income from foreign activities or foreign subsidiaries are subject to taxes at home and abroad. Double taxation may occur when two or more countries with different tax approaches levy taxes on the same income.

The IRS' U.S. Competent Authority (USCA) helps U.S. multinationals resolve disputes over double taxation with foreign authorities and the IRS. However, taxpayers may have a hard time understanding the process. USCA's website, for example, provides highly technical guidance and lacks clear explanations.

We made 8 recommendations, including that USCA provide better procedure guidance.