and this information was entered on the system. An individual district confident about its entry data could rely on the information printout for its own office.

However, the Council had to rely implicitly on the data from each of the IRS districts. If one or two districts were entering erroneous data on the system, the aggregate figures at the Council would be wrong. Incorrect district data did hurt the quality of some of the CLC reports.

SCREENING: As with the Price Commission, the next step was to send the filing to one of the analysts. If it was a prenotification, the analyst first had to decide whether this submission was to go to the CLC for a decision or whether it was within the IRS's jurisdiction. In many cases this screening had been done earlier by the validator. Submissions to be sent to the CLC included: filings involving requested dollar increases of $10 million or more on a single product line, requests having major precedent implications regardless of dollar amount, and requests from certain sensitive industries which included steel, rubber, paper, zinc, aluminum, automobiles, and copper regardless of dollar amount. When the analyst decided that a filing should be processed by CLC, he used the facsimile transmission equipment, available at each IRS office, to send copies of the CLC-22 and supporting schedules to the CLC and the IRS National Office. This procedure caused a certain amount of trouble for large IRS offices because "faxing" was a slow process and there was often a great volume of material to submit.

After "faxing" the key documents, the entire file of the firm, whose application the CLC was to process, was mailed to the Council. There was no problems with the files of the companies which were classified as sensitive industries, because the CLC had exclusive jurisdiction in these cases and the files were maintained at the Council. Yet 268 firms out of the 1055 which prenotified price increases in Phase IV had some of their prenotifications analyzed by the IRS and others by the CLC. This happened when certain filings had product line increases of more than $10 million and were sent to the Council, and other filings had smaller increases and were retained by the IRS. A system had to be set up so that the files on these companies would be available to both organizations.

The procedure called for the CLC to return the file to the IRS District Office after a specified period, eventually set at 60 days. This arrangement was to give the CLC a chance to have the files available in the event that the application for reconsideration was made. Yet the IRS was never really confident that the files would be returned at all since the CLC people might keep them in anticiation of future filings. The astute IRS branch thus made an educated

guess as to whether it was appropriate to send the actual file forward or to send a copy and keep the original file for its own use. When the IRS did not keep a copy of the file and the company submitted a small prenotification, the IRS could not process the case until it received the file back from the Council.

This policy of having the IRS handle one submission and the CLC handle others from the same company caused problems beyond the physical handling of the files. Rarely, if ever, would both organizations interpret each aspect of a submission in the same way. A particular cost element would, in some cases, be allowed by one organization and disallowed by the other. Companies who had small filings analysed by the IRS and large filings analysed by the CLC. established contacts in both organizations. Communication between IRS or CLC analysts and companies to obtain additional data, or clarification, led to these contacts. When IRS made an adverse decision, companies familiar with both organizations had a tendency to go directly to the CLC for relief. In some cases the CLC would tell the company that IRS's interpretation of the regulations was incorrect, and the company would report this to the IRS. Even though this did not happen very often, it was greatly resented by the IRS staff.

The IRS felt that this sort of activity undermined their authority in the field, and that it gave an unfair advantage to the large firms which were in direct contact with Washington. Finally, Ed Preston told his men in the field to ignore any company's statements about what the CLC had told them. He also complained to the CLC about this activity. The Council was able to relieve the problem substantially by directing its staff not to intervene in IRS cases.

There was a dilemma here because the CLC wanted to control the significant increases that were occurring in the economy without getting bogged down with the smaller ones. Perhaps it would have been better if the CLC had taken exclusive jurisdiction over all firms whose prenotifications were likely to be in the $10 million range. This would have eliminated the problems that arose when analysts from both organizations had to make judgments about the same firm.

When the IRS analyst determined that a case was within his jurisdiction, he acted in much the same way as the analysts at the Council. He had to check to determine that costs which were being passed through were allowable, that firms had not exceeded their base period profit margin, etc. The difference between CLC and IRS analysts was not in the procedures they followed but the accessibility to information. Because CLC analysts had been hanIdling the Price Commission forms in Phase II, the transition to

the CLC-22's was not very difficult. They also had policy people in the same building to whom they could turn when trying to determine which way to interpret a regulation. IRS analysts, on the other hand, had not processed prenotifications or quarterly reports before Phase IV and were very far removed from the policy people in Washington.

CASE ANALYSIS AND REVIEW: In the first weeks of Phase IV, there was no procedural manual on case processing for the IRS analysts to follow, nor was there much formal training conducted by the CLC. Some CLC analysts were sent to field offices as instructors but were so needed in Washington that they were unable to spend much time at each office. Therefore, IRS District Offices had to improvise and use the information they had until the first manuals were issued at the beginning of September. In addition to the Phase IV regulations, the IRS had the filing instructions which accompanied the forms. The IRS analysts could refer to these instructions to ensure that the company had filled out the forms properly.

Of greater benefit, was the familarity with the Price Commission form used during Phase II. The IRS had handled inquiries from the public on the Phase II forms. They had studied the Phase II regulations, rulings, and Questions and Answers in order to be able to answer companies' questions about cost justification, allowable costs, etc. Since the Phase IV forms asked for similar information, this knowledge was still relevant. Once the first manuals were received, they could be adapted to the local operation and used in training.* Meetings between CLC analysts and IRS analysts were another source of information. These took place only when the CLC analysts' specialty was of particular interest to a certain IRS district. For example, textile firms accounted for a large percentage of the cases at the Greensboro, North Carolina, District Office. A meeting between the CLC textile analysts and the Greensboro IRS analysts was very successful.

IRS National Office groups which visited the IRS District Offices were also a source of information. One of these, the National Office Review Program, often included CLC participants and the IRS internal audit. Such groups were able to make the IRS district staff aware of the Program's goals. They also listened to district problems and checked their internal procedures to make sure they were consistent with those used in other IRS offices. However, they were not equipped to answer all the technical questions about the regulations which the branches asked. For example, the Atlanta District Office spent a great deal of time trying to find out how a retailer,

* The manual entitled Phase IV Guidebook would be an essential source for anyone needing a more detailed knowledge of IRS case handling operations.

in reporting quarterly, should calculate his customary initial percentage markup. Should he use the first price at which he sold the product during the quarter, the average price for the quarter, or something else? Getting the answers to these more technical questions was one of the major problems that the IRS field personnel encountered during Phase IV. The IRS districts felt that they handled the general training of their personnel quite well. District personnel did not feel that their operations suffered, despite the paucity of formal training from Washington. The IRS staff was also confident of their ability to deal with firms, most of whom they knew from their tax dealings. They did, however, express a particular need for a direct communication channel to get specific questions answered.

Initially, this channel was the Communications Center * at the CLC which was set up during the second freeze to answer Freeze inquiries from the IRS. In order to help the IRS do an effective and timely job in processing cases, the Center attempted to respond to all inquiries within 24 hours. This group was composed of two full-time staff people and six law students. The law students were used because the Center was used first during the second Freeze. Since the Freeze occurred during the summer, students were a natural choice for a temporary Communications Center. Additionally, they were able to quickly grasp and handle problems with 2-3 day old regulations. They stayed on through the first month of Phase IV. Questions were answered by referring to the published regulations, Questions and Answers, and policy statements. These publications originated in various CLC offices to provide information for both the public and the IRS. Later, these documents were compiled by the IRS National Office and distributed to the IRS District Offices in looseleaf form entitled "Stabilization Program Guidelines." When the Communications Center staff was unable to answer questions using the published material, they had to find someone in the appropriate functional area, such as the food division or basic materials division, who could answer the question. After the initial months of Phase IV, all of the straight forward questions were answered and only the more complex questions, which generally needed consultation, remained. The Communications Center was disbanded in favor of an institutionalized liaison between the IRS and the people in the appropriate CLC offices or divisions who could answer questions.

The arrangement called for all IRS inquiries on case handling to go to the Technical Programs Divison of the IRS National Office. Inquiries which could not be answered there were channeled to the

*For further discussion on the Communications Center, see the chapter on Public Information.