In 2005, there will be a new face on the
Nation's nickel. It will still be President
Thomas Jefferson, but unlike we have
ever seen him before.

AGENCY-SPECIFIC GOALS

The U.S. Mint (Mint) and the Bureau of Engraving and Printing (BEP) are responsible for ensuring that our Nation continues to produce the world's most accepted coin and currency. At the end of 2005, the Mint will end its highly successful production of nickels in commemoration of the bicentennials of the Louisiana Purchase and the Lewis and Clark expedition. All nickels issued in 2006 will bear the likeness of Thomas Jefferson on one side, and an image of Monticello on the other side. During 2006, the Mint will also roll out the next installment of the popular 50 State quarters program, with quarters for Nevada, Nebraska, Colorado, North Dakota, and South Dakota.

During 2006, BEP will continue to focus its resources on producing the most secure currency for the Nation. BEP will pursue the redesign of the $100 note as part of its current multi-year initiative to implement the most ambitious currency redesign in U.S. history. The planned redesign of the $100 note follows successful redesigns of the $20 and $50 notes with subtle background colors and other counterfeit deterrence features. A redesigned $10 note will be in production and introduced into circulation in 2005.

MAKING GOVERNMENT MORE EFFECTIVE

Treasury is working to reduce duplicative programs and maximize the efficiency of all its bureaus. For example, IRS officials are working to increase the effectiveness of their programs by helping to bring about fairer and more efficient tax compliance at a lower cost. The Budget invests $265 million in new initiatives for these programs. This investment will provide additional audits, collection efforts, and tax fraud enforcement to increase revenue and promote compliance.

To attack tax evasion most effectively, IRS is targeting its enforcement resources high-risk taxpayers such as those potentially involved in abusive trusts or offshore tax evasion schemes. This focus on higher risk taxpayers has resulted in increased audits on higher income individuals and businesses. Audits of high-income taxpayers-those earning $100,000 or more-topped 195,000 in 2004, a 40-percent increase from 2003 and a 74-percent increase from 2002. Audits of the largest businesses-those corporations with assets of $10 million and over-climbed to 9,560, up 34 percent from 2003. One in six of these large corporations were audited in 2004. One sign of the success of this crackdown on

tax evasion is the increase in revenue resulting from enforcement actions, which reached a record $43 billion in 2004 (see accompanying chart).

The American Jobs Creation Act of 2004 included an important new tax enforcement tool. Like many States and other Federal agencies, IRS will now be able to hire private collection contractors to supplement its own collection staff's efforts to ensure that all taxpayers pay what they owe. The legislation ensures contractors respect taxpayer rights. Treasury estimates these contractors will increase delinquent tax collections by at least $1.4 billion over the next 10 years.

IRS has already achieved impressive successes in productivity improvements. Since 2002, IRS has improved its productivity in tax collection (by telephone and mail) and correspondence audits by more than 15 percent. The Budget proposes to streamline IRS' taxpayer service programs by reducing dependence on walk-in service centers and increasing reliance on more efficient telephone and Internet service. This proposal was developed, in part, as a result of a 2004 Program Assessment Rating Tool analysis of taxpayer service.

The Federal Government is working with the States to make filing taxes easier by providing more forms that can be filed electronically. The Budget funds the Modernized E-File Project at an estimated $56 million, which has demonstrated success over the past several years.

Electronic filing also benefits the Government through reduced processing costs. The Budget includes a legislative proposal to increase the Secretary of the Treasury's authority to mandate electronic filing from businesses and tax exempt organizations. This measure will assist the IRS in

moving to its goal of receiving 80 percent of all tax returns electronically. A corresponding decrease in the cost of paper processing is reflected in the Budget. In addition to improving efficiency, access to electronic tax data will improve IRS's ability to track organizations that finance terrorism.

The IRS is also continuing its efforts to improve operations and lower costs by adapting best practices from the private sector. By successfully competing against contractor offers, teams of IRS employees found better and cheaper ways to do their jobs, which will save the Government and taxpayers $185 million over five years.

In addition to easing the filing burden on taxpayers, the Department of the Treasury is improving its payments and collections processes and moving toward an "all-electronic Treasury." Treasury administers the Government's payments and collections systems through the Financial Management Service (FMS). In 2004, FMS issued over 705 million electronic payments and 235 million paper checks. FMS annually issues over 940 million non-Defense payments, valued at $1.5 trillion, including Social Security benefits, tax refunds, and veterans' benefits. Streamlining the payments and collections processes and continually investing in state-of-the-art technology is integral in processing these payments and collections accurately, timely, and more safely and securely for the taxpayer.

MAKING GOVERNMENT MORE EFFECTIVE-Continued

The Budget provides funding for FMS' electronic initiatives, such as: Pay.gov, which is a Government-wide web portal to collect non-tax revenue electronically; Paper Check Conversion, which converts checks into electronic debits thereby moving funds more quickly; and Stored Value Cards, which directly support military operations overseas. FMS also collects the Government's non-tax delinquent debt such as: loans owed to the Government, fines or penalties assessed by an agency, and overpayments made by Federal agencies. FMS collected $3 billion in non-tax delinquent debt in 2004.

In 2006, The Bureau of Public Debt (BPD) will continue its efforts to improve the efficiency of the securities services it offers to retail investors. The cornerstone of this effort is BPD's new TreasuryDirect system, which, when fully implemented, will enable investors to purchase and manage all of their Treasury securities holdings online through a single portfolio account. The system currently offers both Series I and EE savings bonds in electronic form and holds more than $1.3 billion in more than 250,000 accounts.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for the regulation of the alcohol and tobacco industries, and the collection of approximately $15 billion annually in alcohol, tobacco, firearms, and ammunition excise taxes. TTB protects the consumer by ensuring that alcohol beverages are labeled, advertised, and marketed in accordance with the law, facilitates the import and export trade in beverage and industrial alcohols, promotes voluntary tax compliance, and enforces the provisions of the Federal Alcohol Administration Act. In 2006, TTB anticipates receiving and screening more than 100,000 label applications, more than 400,000 tax returns and operational reports, and more than 4,000 applications for permits to enter the alcohol and tobacco industries. In 2006, TTB will process an estimated 16 percent of its label applications electronically, up from just three percent in 2003. The Budget proposes to establish user fees to cover the costs of TTB's regulatory functions under its Protect the Public line-of-business. The new user fees include filing fees for Certificate of Label Approvals, proposed formulas, and permit applications. The industry should pay for the benefits it receives from TTB's regulatory efforts.

The 2006 Budget proposes to consolidate the Community Development Financial Institutions Fund into a new economic and community development program to be administered by the Department of Commerce. The new program would be designed to achieve greater results and focus on communities most in need of assistance. Treasury will continue to oversee the New Markets Tax Credit program.

Update on the President's Management Agenda

The table below provides an update on the Department of the Treasury's implementation of the President's Management Agenda as of December 31, 2004.

Arrow indicates change in status since evaluation on September 30, 2004.

Treasury has strengthened its management and is working to achieve results at all its bureaus. Treasury implemented a new Department-wide comprehensive human capital strategic plan and accountability system, setting the stage for continued progress in narrowing skills gaps, establishing leadership succession strategies, and ensuring that employees are held accountable for results. As a result of competitive sourcing studies, the Treasury Department anticipates savings of $185 million over the next five years. IRS employees developed an efficient organization plan. The Department has a strong competitive sourcing plan to generate more savings over the next year. In financial performance, Treasury received a clean audit opinion on its financial statements for the fifth year in a row, performed monthly three-day closes, and for the past three years, completed its accountability report in just 45 days after the end of the fiscal year. In addition, the Department has improved the security of its information technology systems and is improving its capital planning process. This year the Department will focus its efforts on developing an Enterprise Architecture and ensuring that its information technology projects are within 10 percent of cost, schedule, and performance goals. Finally, the Department improved its budgeting by reporting the full cost of program performance.

Eliminating Improper Payments

Initiative

Status

Progress

In 2005, an estimated 22 million families will receive $39 billion in Earned Income Tax Credit (EITC) payments to reward work and lift them out of poverty. Unfortunately, due to mistakes and fraud, more than one EITC dollar in four is paid in error. The IRS is piloting new strategies, such as qualifying child certification, to target the most significant causes of error. (Because this is the first quarter that agency efforts in the Eliminating Improper Payments Initiative were rated, progress scores were not given.)